-----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, IqM/nOU583ueXAawnAKqo1zrAEi0NoTxEyiBY56uP8Ee+f8VyUxsqeGYFIbIuEwB LlK3ezQqksIPLVpLfwZV1g== 0001047469-99-037088.txt : 19991227 0001047469-99-037088.hdr.sgml : 19991227 ACCESSION NUMBER: 0001047469-99-037088 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990928 EFFECTIVENESS DATE: 19990928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STI CLASSIC FUNDS CENTRAL INDEX KEY: 0000883939 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-45671 FILM NUMBER: 99718964 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-06557 FILM NUMBER: 99718965 BUSINESS ADDRESS: STREET 1: 2 OLIVER STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6109896602 MAIL ADDRESS: STREET 1: 530 E SWEDESFORD ROAD CITY: WAYNE STATE: PA ZIP: 19087-1693 485BPOS 1 FORM 485BPOS AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1999 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. 32 /X/ AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / / AMENDMENT NO. 34 /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 DRIVE 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 1701 MARKET STREET 1701 MARKET STREET PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19103 Title of Securities Being Registered...............Units of Beneficial Interest It is proposed that this filing will become effective (check appropriate box) X Immediately upon filing pursuant to paragraph (b), or --- On pursuant to paragraph (b), or --- ----------- 60 days after filing pursuant to paragraph (a) or --- 75 days after filing pursuant to paragraph (a) or --- On pursuant to paragraph (a) of Rule 485. --- ------- STI CLASSIC FUNDS INSTITUTIONAL SHARES PROSPECTUS OCTOBER 1, 1999 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND INVESTMENT ADVISER TO THE FUNDS TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Institutional Shares of the Classic Institutional Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
Page CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND............................................ 2 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND............................................ 4 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND............................................ 6 MORE INFORMATION ABOUT RISK...................................... 8 EACH FUND'S OTHER INVESTMENTS.................................... 8 THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS.................... 8 PURCHASING AND SELLING FUND SHARES............................... 9 DIVIDENDS AND DISTRIBUTIONS...................................... 10 TAXES............................................................ 11 FINANCIAL HIGHLIGHTS............................................. 12 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS............................................Back Cover
[INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL As high a level of current income as is consistent with preservation of capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk INVESTOR PROFILE Conservative investors seeking current income through a liquid investment INVESTMENT STRATEGY The STI Classic Institutional Cash Management Money Market Fund invests in high quality U.S. dollar-denominated money market instruments. The Fund invests in obligations of (i) the U.S. Treasury, (ii) agencies and instrumentalities of U.S. and foreign governments, (iii) domestic and foreign banks, (iv) domestic and foreign corporate issuers, and (v) supranational entities, as well as repurchase agreements. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing maturity, yields, market sectors and credit risk. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or the agency's own resources. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR.* 1996 5.47% 1997 5.63% 1998 5.52% BEST QUARTER WORST QUARTER 1.41% 1.29% (12/31/97) (12/31/98) * The performance information shown above is based on a calendar year. The Fund's total return from 1/1/99 to 6/30/99 was 2.41%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS-ONLY AVERAGE.
INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------------------ CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND 5.52% 5.57%* IBC/FINANCIAL DATA FIRST TIER INSTITUTIONS-ONLY AVERAGE 5.33% 5.33%**
* Since 10/25/95 ** Since 10/31/95 To obtain information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data First Tier Institutions-Only Average is a widely-recognized composite of money market funds which invest in securities rated Prime-1 by Moody's or A-1 by Standard & Poor's. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INSTITUTIONAL SHARES - ----------------------------------------------------------------------------------- Investment Advisory Fees 0.20% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.30%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $31 $97 $169 $381
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES, OTHER EXPENSES AND TOTAL OPERATING EXPENSES ARE 0.17%, 0.08% AND 0.25%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income to the extent consistent with the preservation of capital and the maintenance of liquidity INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields INVESTOR PROFILE Conservative investors seeking current income through a liquid investment INVESTMENT STRATEGY The STI Classic Institutional U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury obligations, obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government, repurchase agreements involving these securities, and shares of registered money market funds that invest in the foregoing. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of a portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR.* 1995 5.89% 1996 5.31% 1997 5.50% 1998 5.36% BEST QUARTER WORST QUARTER 1.49% 1.23% (6/30/95) (12/31/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.37%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA GOVERNMENT-ONLY INSTITUTIONS-ONLY AVERAGE.
INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------------------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 5.36% 5.46%* IBC/FINANCIAL DATA GOVERNMENT-ONLY INSTITUTIONS-ONLY AVERAGE 5.10% 5.21%**
* Since 8/1/94 ** Since 8/31/94 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data Government-Only Institutions-Only Average is a widely-recognized composite of money market funds which invest in U.S. Treasury Bills, repurchase agreements, or agencies of the U.S. Government. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INSTITUTIONAL SHARES - -------------------------------------------------------------------------------------------- Investment Advisory Fees 0.20% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.30%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $31 $97 $169 $381
FUND EXPENSES Every mutual fund has operating expenses to pay for professional Advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES, OTHER EXPENSES AND TOTAL OPERATING EXPENSES ARE 0.17%, 0.08% AND 0.25%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL As high a level of current income as is consistent with preservation of capital and liquidity INVESTMENT FOCUS U.S. Treasury securities and repurchase agreements PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields INVESTOR PROFILE Conservative investors seeking current income through a liquid investment INVESTMENT STRATEGY The STI Classic Institutional U.S. Treasury Securities Money Market Fund invests exclusively in U.S. Treasury bills, notes, bonds and components of these securities, and repurchase agreements collateralized by these securities. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (AAA by Standard & Poor's). In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields for various maturities. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR.* 1997 5.44% 1998 5.30% BEST QUARTER WORST QUARTER 1.37% 1.20% (9/30/97) (12/31/98) * The performance information shown above is based on a calendar year. The Fund's total return from 1/1/99 to 6/30/99 was 2.27%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND 5.30% 5.37%* IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE 4.81% 4.85%**
* Since 12/12/96 ** Since 12/31/96 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INSTITUTIONAL SHARES - -------------------------------------------------------------------------------------------- Investment Advisory Fees 0.20% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.32%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $33 $103 $180 $406
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES, OTHER EXPENSES AND TOTAL OPERATING EXPENSES ARE 0.15%, 0.10% AND 0.25%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." MORE INFORMATION ABOUT RISK YEAR 2000 RISK-- The Funds depend on the smooth All Funds functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business. EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). INVESTMENT ADVISER The Investment Adviser makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND 0.17% CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.17% CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND 0.15% The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Robert S. Bowman, CFA, has served as Vice President of Trusco since January 1999. He has managed the Classic Institutional Cash Management Money Market Fund (formally the Arbor Prime Obligations Fund) since it began operating in October 1995, and has managed the Classic Institutional U.S. Government Securities Money Market Fund (formerly the Arbor U.S. Government Securities Money Fund) since 1995. He has more than 5 years of investment experience. Prior to joining Trusco, Mr. Bowman served as assistant trader from 1994 to 1995, and Vice President since 1995 of Crestar Asset Management Company. David Yealy has served as Vice President of Trusco since 1993. He has managed the Classic Institutional U.S. Treasury Securities Money Market Fund since it began operating in December 1996. He has more than 13 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy and sell (sometimes called "redeem") Institutional Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Institutional Shares primarily to various institutional investors, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. Shares are sold without a sales charge, although institutions may charge their customers for services provided in connection with the purchase of shares. Institutional shares will be held of record by (in the name of) your institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Institutional Shares. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interest of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange and the Federal Reserve are open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Funds must generally receive your order before 3:00 p.m. Eastern time and federal funds (readily available funds) before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES AND OTHER INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO YOUR INSTITUTION, INCLUDING SUBSIDIARIES OF SUNTRUST AND ITS AFFILIATES, AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS YOUR INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, the Funds generally value their investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If this method is determined to be unreliable during certain market conditions or for other reasons, a Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest at least $10,000,000. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting the Funds. If you are a customer of SunTrust or another institution, you must contact that institution directly for information about how to sell your shares including any specific cut-off times required. Redemption orders must be sent to the Funds by the institutional investor as the record owner of shares. If you own Institutional Shares through an institution, you may sell shares by following the procedures established when you opened your account or accounts with your institution. Redemption orders must be received by the Funds on a Business Day before 3:00 p.m. Eastern time. Orders received after 3:00 p.m. Eastern time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) a Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund declares dividends daily and distributes its income monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow present performance information about Institutional Shares of each Classic Institutional Money Market Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The financial highlights for each Fund for the period ended May 31, 1999 and the financial highlights for the Classic Institutional U.S. Treasury Securities Money Market Fund for the periods from inception through May 31, 1999 have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Classic Institutional Cash Management Money Market Fund (successor to the Prime Obligations Fund, a series of The Arbor Fund) and the Classic Institutional U.S. Government Securities Money Market Fund (formerly U.S. Government Securities Money Fund, a series of The Arbor Fund) for the periods from inception through January 31, 1999 have been audited by PricewaterhouseCoopers LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual reports that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-241-0901. FINANCIAL HIGHLIGHTS STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND JANUARY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET ASSET VALUE NET DISTRIBUTIONS FROM NET ASSET NET ASSETS BEGINNING OF INVESTMENT NET INVESTMENT VALUE END TOTAL END OF PERIOD INCOME INCOME OF PERIOD RETURN+ PERIOD (000) CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND (A) Institutional Shares 1999* $1.00 0.02 (0.02) $1.00 1.58% $1,888,483 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.46% 884,490 1998 1.00 0.06 (0.06) 1.00 5.66% 740,837 1997 1.00 0.05 (0.05) 1.00 5.45% 477,435 1996(B) 1.00 0.02 (0.02) 1.00 5.82% 382,632 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (C) Institutional Shares 1999* $1.00 0.02 (0.02) $1.00 1.56% $ 617,089 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.30% 688,031 1998 1.00 0.05 (0.05) 1.00 5.52% 789,410 1997 1.00 0.05 (0.05) 1.00 5.29% 586,731 1996 1.00 0.06 (0.06) 1.00 5.88% 514,870 1995(D) 1.00 0.03 (0.03) 1.00 4.98% 579,422 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 1999 $1.00 0.05 (0.05) $1.00 4.97% $ 283,525 1998 1.00 0.05 (0.05) 1.00 5.50% 140,334 1997(E) 1.00 0.02 (0.02) 1.00 2.46% 20,238 RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS RATIO OF INCOME TO (EXCLUDING (EXCLUDING EXPENSES TO AVERAGE NET WAIVERS AND WAIVERS AND AVERAGE NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND (A) Institutional Shares 1999* 0.25% 4.79% 0.35% 4.69% For the years ended January 31: 1999 0.23 5.31 0.35 5.19 1998 0.20 5.52 0.36 5.36 1997 0.20 5.33 0.38 5.15 1996(B) 0.20 5.61 0.40 5.41 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (C) Institutional Shares 1999* 0.25% 4.73% 0.36% 4.62% For the years ended January 31: 1999 0.23% 5.18% 0.36% 5.05% 1998 0.20% 5.39% 0.37% 5.22% 1997 0.20% 5.17% 0.37% 5.00% 1996 0.20% 5.72% 0.37% 5.55% 1995(D) 0.20% 4.98% 0.38% 4.80% CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 1999 0.20% 4.83% 0.47% 4.56% 1998 0.18 5.34 0.38 5.14 1997(E) 0.09 5.27 0.51 4.85
(a) On May 17, 1999, The Arbor Prime Obligations Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional Cash Management Money Market Fund. The Arbor Prime Obligations Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 17, 1999 have been carried forward in these financial highlights. (b) Commenced operations on October 25, 1995. All ratios for the period have been annualized. (c) On May 24, 1999, the Arbor U.S. Government Securities Money Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional U.S. Government Securities Money Market Fund. The Arbor U.S. Government Securities Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. (d) Commenced operations on August 1, 1994. All ratios for the period have been annualized. (e) Commenced operations on December 12, 1996. All ratios for the period have been annualized. + Returns are for the period indicated and have not been annualized. * For the period February 1, 1999 to May 31, 1999. All ratios for the period have been annualized. STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, PA 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Institutional Money Market Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-241-0901 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS PROSPECTUS CORPORATE TRUST SHARES CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND OCTOBER 1, 1999 INVESTMENT ADVISER TO THE FUND: TRUSCO CAPITAL MANAGEMENT, INC. (THE "ADVISER") THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios which have individual investment goals and strategies. This prospectus gives you important information about the Corporate Trust Shares of the Classic Institutional U.S. Treasury Securities Money Market Fund (Fund) that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED INFORMATION ABOUT THE FUND, PLEASE SEE:
PAGE PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE INFORMATION AND EXPENSES.............................2 MORE INFORMATION ABOUT RISK......................................4 THE FUND'S OTHER INVESTMENTS.....................................4 THE INVESTMENT ADVISER AND PORTFOLIO MANAGER.....................4 PURCHASING AND SELLING FUND SHARES...............................5 DIVIDENDS AND DISTRIBUTIONS .....................................6 TAXES............................................................6 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS................................................Back Cover
[INSERT ICONS HERE] RISK/RETURN INFORMATION The Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. The Fund has an investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in the Fund involves risk and there is no guarantee that the Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL As high a level of current income as is consistent with preservation of capital and liquidity INVESTMENT FOCUS U.S. Treasury securities and repurchase agreements PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields INVESTOR PROFILE Conservative investors seeking current income through a liquid investment INVESTMENT STRATEGY The STI Classic Institutional U.S. Treasury Securities Money Market Fund invests exclusively in U.S. Treasury bills, notes, bonds and components of these securities and repurchase agreements collateralized by these securities. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (AAA by Standard & Poor's). In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields for various maturities. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR FOR THE PAST TWO YEARS. SINCE INSTITUTIONAL SHARES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES, RETURNS FOR CORPORATE TRUST SHARES WILL BE SUBSTANTIALLY SIMILAR TO THOSE OF THE INSTITUTIONAL SHARES, SHOWN HERE, AND WILL DIFFER ONLY TO THE EXTENT THAT EACH CLASS HAS DIFFERENT EXPENSES. * 1997 5.44% 1998 5.30% BEST QUARTER WORST QUARTER 1.37% 1.20% (9/30/97) (12/31/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.27%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998 TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION - --------------------------------------------------------------------------- -------------- ----------------- Classic Institutional U.S. Treasury Securities Money Market Fund 5.30% 5.37%* IBC/Financial Data U.S. Treasury & Repo Average 4.81% 4.85%**
* SINCE 12/12/96 ** SINCE 12/31/96 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
CORPORATE TRUST SHARES -------------------------------------------------- ------------------------ Investment Advisory Fees 0.20% Other Expenses* 0.32% ----- Total Annual Fund Operating Expenses 0.52%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $53 $167 $291 $653
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses will be lower because the Adviser is voluntarily waiving a portion of its fees. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES, OTHER EXPENSES AND TOTAL OPERATING EXPENSES ARE 0.15%, 0.30% AND 0.45%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." MORE INFORMATION ABOUT RISK YEAR 2000 RISK -- The Fund depends on the smooth functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Fund 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 Fund has asked its mission critical service providers computer systems adjusted for the year 2000 transition, and has sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Fund. While such assurances have been received, the Fund 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 Fund does business. THE FUND'S OTHER INVESTMENTS This prospectus describes the Fund's primary strategies, and the Fund will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, the Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). INVESTMENT ADVISER The Investment Adviser makes investment decisions for the Fund and continuously reviews, supervises and administers its Fund's investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management (Trusco) 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. The Corporate Trust Shares of the Classic Institutional U.S. Treasury Securities Money Market Fund had not commenced operations as of May 31, 1999. The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGER David Yealy has served as Vice President of Trusco since 1993. He has managed the Classic Institutional U.S. Treasury Securities Money Market Fund since it began operating in December 1996. He has more than 13 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy and sell (sometimes called "redeem") Corporate Trust Shares of the Fund. HOW TO PURCHASE FUND SHARES The Fund offers Corporate Trust Shares only to accounts of various banking subsidiaries of SunTrust Banks, Inc. which are administered by the Corporate Trust Division (SunTrust). Shares are sold without a sales charge. Corporate Trust Shares will be held of record by (in the name of) SunTrust. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Corporate Trust Shares. The Fund may reject any purchase order if it is determined that accepting the order would not be in the best interest of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange and the Federal Reserve are open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Fund receives the purchase order. The Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to be eligible to receive dividends declared on the day that purchase order is submitted, the Fund must generally receive that order before 3:00 p.m. Eastern time and federal funds (readily available funds) before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST AT AN EARLIER TIME THAN THOSE LISTED ABOVE FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS SUNTRUST TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR THE TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOVE HOW TO PURCHASE OR SELL FUND SHARES THROUGH YOUR ACCOUNT, INCLUDING SPECIFIC INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT SUNTRUST DIRECTLY. HOW THE FUND CALCULATES NAV In calculating NAV, the Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If this method is determined to be unreliable during certain market conditions or for other reasons, the Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") on any Business Day by contacting SunTrust. SunTrust will provide information about how to sell your shares including any specific cut-off times required. Redemption orders must be sent to the Fund by SunTrust as the record owner of shares. If you own Corporate Trust Shares through a subsidiary of SunTrust you may sell shares by following the procedures established when you opened your account or accounts. Redemption orders must be received by the Fund on a Business Day before 3:00 p.m. Eastern time. Orders received after 3:00 p.m. Eastern time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Fund will send your sale proceeds within five Business Days after the Fund receives your request, but it may take up to seven days. REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES The Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes its income monthly. The Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax issues that affect the Fund and its shareholders. This summary is based on current tax laws, which may change. The Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Fund is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Institutional Money Market Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list the Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Fund. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-241-0901 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS FOR THE SUNTRUST 401(K) PLAN PROSPECTUS OCTOBER 1, 1999 CAPITAL APPRECIATION FUND (FORMERLY CAPITAL GROWTH FUND) GROWTH AND INCOME FUND INVESTMENT GRADE BOND FUND PRIME QUALITY MONEY MARKET FUND SHORT-TERM BOND FUND SMALL CAP GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISERS TO THE FUNDS STI CAPITAL MANAGEMENT TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: PAGE CAPITAL APPRECIATION FUND.......................................2 GROWTH AND INCOME FUND..........................................4 INVESTMENT GRADE BOND FUND......................................6 PRIME QUALITY MONEY MARKET FUND.................................8 SHORT-TERM BOND FUND............................................10 SMALL CAP GROWTH STOCK FUND.....................................12 VALUE INCOME STOCK FUND.........................................14 MORE INFORMATION ABOUT RISK.....................................16 EACH FUND'S OTHER INVESTMENTS...................................18 ADVISERS AND PORTFOLIO MANAGERS.................................18 PURCHASING AND SELLING FUND SHARES..............................19 DIVIDENDS AND DISTRIBUTIONS.....................................24 TAXES...........................................................25 FINANCIAL HIGHLIGHTS............................................26 HOW TO OBTAIN MORE INFORMATION ABOUT STI CLASSIC FUNDS...........................................Back Cover [INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund (other than a money market fund) is based on the market value of the securities a Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. CAPITAL APPRECIATION FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment INVESTMENT STRATEGY The Capital Appreciation Fund invest primarily in U.S. common stocks and other equity securities that the Adviser believes are undervalued by the stock market. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser rotates the Fund's investments among various market sectors based on the Adviser's research of business cycles. The Adviser's strategy focuses on large cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13% 1998 28.06% BEST QUARTER WORST QUARTER 22.93% -11.16% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 10.45%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------- CAPITAL APPRECIATION FUND 28.06% 19.66% 18.64%* S&P 500 INDEX 28.60% 24.05% 20.82%**
* Since 7/1/92 ** Since 7/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES ----------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $128 $400 $692 $1,523
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.06% AND 1.17%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." GROWTH AND INCOME FUND FUND SUMMARY INVESTMENT FOCUS PRIMARY Long-term capital appreciation SECONDARY Current income INVESTMENT FOCUS Equity securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average earnings momentum relative either to their sectors or the market sectors as a whole INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole INVESTMENT STRATEGY The Growth and Income Fund invests primarily equity securities, including common stock and listed American Depository Receipts (ADR's), of domestic and common stock of companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio manager team selects stocks of companies with strong financial quality and above average earnings momentum are selected to secure the best relative values in each economic sector. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1993 10.20% 1994 -0.81% 1995 29.38% 1996 19.06% 1997 27.69% 1998 18.20% BEST QUARTER WORST QUARTER 17.38% -10.36% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 12.76%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------- GROWTH AND INCOME FUND 18.20% 18.19% 17.26%* S&P 500 INDEX 28.60% 24.05% 21.60%**
* Since 9/25/92 ** Since 9/30/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 0.90% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.01%
* Expense information in the table has been restated to reflect current fees. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $103 $322 $558 $1,236
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers Government/Corporate Bond Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1993 10.84% 1994 -3.32% 1995 17.80% 1996 2.34% 1997 9.08% 1998 9.19% BEST QUARTER WORST QUARTER 6.11% -2.67% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.83%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------- INVESTMENT GRADE BOND FUND 9.19% 6.78% 7.30%* LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.30% 7.77%**
* Since 7/16/92 ** Since 7/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 0.74% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.85%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $87 $271 $471 $1,049
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.66% AND 0.77%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." PRIME QUALITY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off INVESTOR PROFILE Conservative investors who want to receive current income INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1993 2.77% 1994 3.77% 1995 5.47% 1996 4.99% 1997 5.15% 1998 5.10% BEST QUARTER WORST QUARTER 1.37% 0.68% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.24%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------- PRIME QUALITY MONEY MARKET FUND 5.10% 4.89% 4.40%* IBC/FINANCIAL DATA FIRST TIER AVERAGE 4.96% 4.79% 4.31%**
* Since 6/8/92 ** Since 6/30/92 To obtain information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two of the five recognized rating agencies. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.48% AND 0.60%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day to day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1994 -0.07% 1995 11.77% 1996 3.90% 1997 6.78% 1998 6.84% BEST QUARTER WORST QUARTER 3.76% -0.58% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -0.20%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX AND THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------------------------------------ Short-Term Bond Fund 6.84% 5.77% 5.68%* Salomon One Year Treasury Benchmark On-the-Run Index 5.89% 5.66% 5.38%** Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 6.95% 6.00% 5.79%**
* Since 3/15/93 ** Since 3/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon One Year Treasury Benchmark On-the-Run Index is a widely-recognized index of U.S. Treasury securities. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the index have maturities 1 year or greater and less than 3 years. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.55% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." SMALL CAP GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS U.S. small cap common stocks of growth companies SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion. The Adviser selects companies that demonstrate above average earnings and sales growth potential. The selected companies tend to have an established operating history and a solid balance sheet. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The Small Cap Growth Stock Fund commenced operations on October 8, 1998, and therefore does not have a performance history for a full calendar year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses* 0.34% ----- Total Annual Fund Operating Expenses 1.49%
* Other Expenses are based on estimated amounts for the current year. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $152 $471 $813 $1,779
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.86% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify high dividend- paying, undervalued stocks INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08% 1998 10.58% BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 13.51%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P/BARRA VALUE INDEX AND THE LIPPER EQUITY INCOME INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------- VALUE INCOME STOCK FUND 10.58% 18.76% 17.21%* S&P/BARRA VALUE INDEX 14.68% 19.88% 15.76%* LIPPER EQUITY INCOME INDEX 11.78% 16.62% 13.53%*
* Since 10/31/89 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price to book ratios. The Lipper Equity Income Fund Index is an equally weighted index of typically the 30 largest funds that seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 0.80% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.92%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $94 $293 $509 $1,131
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." MORE INFORMATION ABOUT RISK EQUITY RISK-- Equity securities include public and privately issued equity CAPITAL APPRECIATION FUND securities, common and preferred stocks, warrants, rights to subscribe to GROWTH AND INCOME FUND common stock and convertible securities, as well as instruments that SMALL CAP GROWTH STOCK FUND attempt to track the price movement of equity indices. Investments in VALUE INCOME STOCK FUND equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK -- The market value of fixed income investments change in INVESTMENT GRADE BOND FUND response to interest rate changes and other factors. During periods of SHORT-TERM BOND FUND falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK -- The possibility that an issuer will be unable to make INVESTMENT GRADE BOND FUND timely payments of either principal or interest. SHORT-TERM BOND FUND FOREIGN SECURITY RISKS-- Investments in securities of foreign companies or GROWTH AND INCOME FUND governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio.
YEAR 2000 RISK-- The Funds depend on the smooth functioning of computer ALL FUNDS systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business. Furthermore, many foreign countries are not as prepared as the U.S. for the year 2000 transition. As a result, computer difficulties in foreign markets and with foreign institutions as a result of the year 2000 may add to the possibility of losses to the Funds and their shareholders.
EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Adviser uses under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund (except the Prime Quality Money Market Fund) may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Investment Grade Bond and Short-Term Bond Funds each may shorten its average weighted maturity to as little as 90 days. A Fund (other than the Prime Quality Money Market Fund) will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENTS ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A., (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Capital Appreciation Fund, Investment Grade Bond Fund and Value Income Stock Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of: CAPITAL APPRECIATION FUND 1.06% INVESTMENT GRADE BOND FUND 0.66% VALUE INCOME STOCK FUND 0.80%
Trusco Capital Management (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Growth and Income Fund, Prime Quality Money Market Fund, Short-Term Bond Fund and Small Cap Growth Stock Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: PRIME QUALITY MONEY MARKET FUND 0.48% SHORT-TERM BOND FUND 0.55%
The Small Cap Growth Stock Fund had not commenced a full fiscal year as of May 31, 1999. Prior to May 24, 1999, Crestar Asset Management Company served as the Adviser to the predecessor of the Growth and Income Fund. For the period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of 0.75% for the Growth and Income Fund. The Advisers may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. Anthony R. Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has managed the Capital Appreciation Fund since it began operating in June 1992. He has more than 30 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as lead portfolio manager of the Growth and Income Fund since it began operating in September 1992. Since 1992, he has served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999. Mr. Markunas has more than 17 years of investment experience. The Investment Grade Bond Fund is co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has co-managed the Investment Grade Bond Fund since it began operating in June 1992. He has more than 20 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. He has more than 13 years of investment experience. Mr. West also co-manages the Investment Grade Bond Fund with Mr. Denney. Mr. David Yealy has served as Vice President of Trusco since 1993. He has managed the Prime Quality Money Market Fund since it began operating in June 1992. He has more than 13 years of investment experience. Ms. Agnes Pampush, CFA, has served as Vice President of Trusco since 1988. She has managed the Short-Term Bond Fund since February 1999. She has more than 16 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. Prior to joining Trusco, Mr. Garfinkel served as a portfolio manager with SunTrust Banks. He has more than 10 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. He has more than 17 years of investment experience. Mr. Lewis has served as a Portfolio Manager of STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 7 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy or sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions 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. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). But you may not do so for shares of the Prime Quality Money Market Fund on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after the funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund (except the Prime Quality Money Market Fund), generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. The Prime Quality Money Market Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Prime Quality Money Market Fund must generally receive your order before 3:00 p.m. Eastern time and federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as the Prime Quality Money Market Fund receives federal funds before calculating its NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund (except the Prime Quality Money Market Fund) generally values its investment portfolio at market price. In calculating NAV for the Prime Quality Money Market Fund, the Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If market prices are unavailable or a Fund thinks that the market price or amortized cost valuation method is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. The Prime Quality Money Market Fund expects its NAV to remain constant at $1.00 per share, although the Fund cannot guarantee this. The Growth and Income Fund holds securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Fund does not calculate NAV. As a result, the market value of the Fund's investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. Redemption orders must be received by the Prime Quality Money Market Fund on a Business Day before 3:00 p.m. Eastern time. Orders received after 3:00 p.m. Eastern time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: Declared Daily and Distributed Monthly Quarterly - -------------------------------------- --------- Investment Grade Bond Fund Capital Appreciation Prime Quality Money Market Fund Growth and Income Fund Short-Term Bond Fund Small Cap Growth Stock Fund Value Income Stock Fund Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receive your written notice. To cancel your election, simply send the Funds written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow present performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund except the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual reports, which contains more performance information, at no charge by calling 1-800-874-4770. FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOS RETURN+ - ---------------------------------------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND TRUST SHARES 1999 $16.48 $ 0.05 $ 2.70 $(0.06) $ (2.55) $16.62 17.83% 1998 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1997 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 1995 11.99 0.16 0.57 (0.14) (0.40) 12.18 6.63 GROWTH AND INCOME FUND (A) TRUST SHARES 1999(1) $15.10 $ 0.04 $ 1.97 $(0.02) $ (1.00) $16.09 14.24% FOR THE YEARS ENDED NOVEMBER 30: 1998 16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64% 1997 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 1996 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68 1995 10.73 0.24 2.62 (0.26) (1.73) 11.60 28.76 1994 11.38 0.20 (0.24) (0.19) (0.42) 10.73 (0.49) INVESTMENT GRADE BOND FUND TRUST SHARES 1999 $10.65 $ 0.56 $(0.11) $(0.56) $(0.18) $10.36 4.25% 1998 10.16 0.60 0.49 (0.60) -- 10.65 10.92 1997 10.07 0.60 0.09 (0.60) -- 10.16 6.99 1996 10.26 0.60 (0.19) (0.60) -- 10.07 4.02 1995 9.89 0.61 0.37 (0.61) -- 10.26 10.39 PRIME QUALITY MONEY MARKET FUND TRUST SHARES 1999 $1.00 $ 0.05 $ -- $(0.05) $ -- $1.00 4.83% 1998 1.00 0.05 -- (0.05) -- 1.00 5.22% 1997 1.00 0.05 -- (0.05) -- 1.00 5.01% 1996 1.00 0.05 -- (0.05) -- 1.00 5.25% 1995 1.00 0.05 -- (0.05) -- 1.00 4.79% RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ---------------------------------------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND TRUST SHARES 1999 $1,966,842 1.17% 0.29% 1.26% 0.20% 147% 1998 1,532,587 1.16 0.61 1.27 0.50 194 1997 1,085,128 1.15 0.83 1.25 0.73 141 1996 981,498 1.15 0.90 1.27 0.78 156 1995 984,205 1.15 1.38 1.28 1.25 128 GROWTH AND INCOME FUND (A) TRUST SHARES 1999(1) $ 634,279 1.14% 0.49% 1.43% 0.20% 31% FOR THE YEARS ENDED NOVEMBER 30: 1998 577,042 1.03% 0.63% 1.21 0.45% 71% 1997 590,824 1.02 0.92 1.17 0.77 100 1996 553,648 1.02 1.38 1.17 1.23 82 1995 220,386 1.02 2.16 1.17 2.01 175 1994 166,713 1.01 1.82 1.01 1.82 116 INVESTMENT GRADE BOND FUND TRUST SHARES 1999 $1,149,068 0.77% 5.25% 0.85% 5.17% 221% 1998 793,488 0.76 5.67 0.86 5.57 109 1997 633,646 0.75 5.89 0.85 5.79 298 1996 599,514 0.75 5.81 0.87 5.69 184 1995 543,308 0.75 6.22 0.88 6.09 238 PRIME QUALITY MONEY MARKET FUND TRUST SHARES 1999 $3,903,232 0.60% 4.69% 0.77% 4.52% 1998 1,880,229 0.59% 5.10% 0.77% 4.92% 1997 1,086,555 0.58% 4.90% 0.76% 4.72% 1996 1,050,800 0.58% 5.11% 0.78% 4.91% 1995 799,189 0.58% 4.77% 0.79% 4.56%
+ Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The Crestar Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "-" are either $0 or round to $0. FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN+ - ---------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM BOND FUND TRUST SHARES 1999 $10.05 $ 0.51 $(0.10) $(0.52) $(0.03) $ 9.91 4.06% 1998 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 1997 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45 1995 9.79 0.53 0.19 (0.53) -- 9.98 7.60 SMALL CAP GROWTH STOCK FUND TRUST SHARES 1999(1) $10.00 $(0.05) $ 4.62 $ -- $(0.02) $14.55 45.70% VALUE INCOME STOCK FUND TRUST SHARES 1999 $13.90 $ 0.24 $ 1.02 $(0.24) $(2.07) $12.85 11.13% 1998 13.71 0.26 2.62 (0.27) (2.42) 13.90 23.10 1997 13.15 0.30 2.32 (0.30) (1.76) 13.71 22.18 1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91 1995 10.54 0.32 1.56 (0.32) (0.51) 11.59 19.06 RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ---------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM BOND FUND TRUST SHARES 1999 $ 209,904 0.67% 5.12% 0.77% 5.02% 108% 1998 120,422 0.66 5.47 0.79 5.34 87 1997 89,701 0.65 5.37 0.78 5.24 118 1996 91,156 0.65 5.39 0.81 5.23 163 1995 60,952 0.65 5.49 0.85 5.29 200 SMALL CAP GROWTH STOCK FUND TRUST SHARES 1999(2) $ 152,290 1.20% (0.48)% 1.49% (0.77)% 75% VALUE INCOME STOCK FUND TRUST SHARES 1999 $1,589,951 0.92% 1.91% 0.92% 1.91% 69% 1998 1,725,418 0.92 1.85 0.92 1.85 99 1997 1,488,062 0.91 2.40 0.91 2.40 105 1996 1,244,399 0.92 2.86 0.92 2.86 134 1995 991,977 0.95 3.16 0.95 3.16 126
+ Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on October 8, 1998. All ratios for the period have been annualized. STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 Trusco Capital Management., Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 MONEY MARKET FUNDS INVESTOR AND FLEX SHARES PROSPECTUS OCTOBER 1, 1999 PRIME QUALITY MONEY MARKET FUND TAX-EXEMPT MONEY MARKET FUND TAX-FREE MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND INVESTMENT ADVISER TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor and Flex Shares of the Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
PAGE PRIME QUALITY MONEY MARKET FUND............................. 2 TAX-EXEMPT MONEY MARKET FUND................................ 4 TAX-FREE MONEY MARKET FUND.................................. 6 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND................ 8 MORE INFORMATION ABOUT RISK................................. 10 EACH FUND'S OTHER INVESTMENTS............................... 10 THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS............... 11 PURCHASING, SELLING AND EXCHANGING FUND SHARES.............. 11 DIVIDENDS AND DISTRIBUTIONS................................. 15 TAXES....................................................... 15 FINANCIAL HIGHLIGHTS........................................ 16 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS.......................................Back Cover
[INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that the Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. PRIME QUALITY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off INVESTOR PROFILE Conservative investors who want to receive current income from their investment
INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* 1993 2.60% 1994 3.60% 1995 5.30% 1996 4.82% 1997 4.97% 1998 4.92%
BEST QUARTER WORST QUARTER 1.33% 0.64% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.15%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER AVERAGE.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------- PRIME QUALITY MONEY MARKET FUND 4.92% 4.72% 4.23%* IBC/FINANCIAL DATA FIRST TIER AVERAGE 4.96% 4.79% 4.31%**
* Since 6/8/92 ** Since 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two of the five recognized rating agencies. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) INVESTOR SHARES FLEX SHARES - --------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* None None
* This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) INVESTOR SHARES FLEX SHARES - --------------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.20% 0.75% Other Expenses 0.12% 0.27% ----- ----- Total Annual Fund Operating Expenses 0.97% 1.67%
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 $99 $309 $536 $1,190 FLEX SHARES $270 $526 $907 $1,976
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $99 $309 $536 $1,190 FLEX SHARES $170 $526 $907 $1,976
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 0.48%, 0.17 AND 0.77%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.48%, 0.75% AND 1.50% RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 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 STRATEGY Attempts to increase income without added risk by analyzing credit quality INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment
INVESTMENT STRATEGY The Tax-Exempt Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal income taxes. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* 1993 1.90% 1994 2.37% 1995 3.36% 1996 2.94% 1997 3.11% 1998 2.90%
BEST QUARTER WORST QUARTER 0.89% 0.42% (6/30/95) (3/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 1.24%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------------------- TAX-EXEMPT MONEY MARKET FUND 2.90% 2.94% 2.71%* IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE 2.92% 2.92% 2.72%**
* Since 6/8/92 ** Since 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from Federal taxation. FUND FEES AND EXPENSES This table describes the fund's fees and expenses that you may pay if you buy and hold fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES - -------------------------------------------------------------------------------------------- Investment Advisory Fees 0.55% Distribution and Service (12b-1) Fees 0.15% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.82%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $84 $262 $455 $1,014
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 0.41%, 0.11% AND 0.64%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." TAX-FREE MONEY MARKET FUND FUND SUMMARY *** INVESTMENT GOAL High current income exempt from federal income tax, while preserving capital and liquidity INVESTMENT FOCUS Municipal money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without added risk by analyzing credit quality INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment
*** INVESTMENT STRATEGY *** The Tax-Free Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal income taxes. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. The Fund may invest more than 25% of its assets in money market instruments issued by issuers located in one or more of the following states: Arizona, California, Maryland, New Jersey, New York and Pennsylvania and will invest more than 25% of its assets in money market instruments issued by issuers located in Virginia. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. *** WHAT THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. The Fund's concentration of investments in securities of issuers located in a single state subjects the Fund to economic and government policies of that state. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund's Investor Shares from year to year.* 1994 2.11% 1995 3.27% 1996 3.10% 1997 3.07% 1998 2.92%
BEST QUARTER WORST QUARTER 0.91% 0.37% (3/31/96) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 1.26%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------- ----------------------------------- TAX-FREE MONEY MARKET FUND 2.92% 2.89% 2.73%* IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE 2.92% 2.92% 2.82%**
* Since 5/5/93 ** Since 5/31/93 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from Federal taxation. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
INVESTORS SHARES - -------------------------------------------------------------------------------------------- Investment Advisory Fees 0.40% Distribution and Service (12b-1) Fees 0.40% Other Expenses 0.31% ----- Total Annual Fund Operating Expenses 1.11%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $113 $353 $612 $1,352
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 0.40%, 0.00% AND 0.67%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 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 STRATEGY Attempts to increase income without adding undue risk by analyzing yields 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 that are backed by the full faith and credit of the U.S. government, and repurchase agreements involving these securities. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. *** WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* 1993 2.52% 1994 3.48% 1995 5.25% 1996 4.66% 1997 4.85% 1998 4.73%
BEST QUARTER WORST QUARTER 1.32% 0.61% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.01%. This table compares the Fund's average annual total returns for the periods ended December 31, 1998, to those of the IBC/Financial Data U.S. Treasury & Repo average.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------------------------ U.S. Government Securities Money Market Fund 4.73% 4.59% 4.11%* IBC/Financial Data U.S. Treasury & Repo Average 4.81% 4.66% 4.19%**
* Since 6/8/92 ** Since 6/30/92 TO OBTAIN MORE INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES - -------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 0.17% Other Expenses 0.16% ----- Total Annual Fund Operating Expenses 0.98%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $100 $312 $542 $1,201
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 0.52%, 0.09% AND 0.77%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." MORE INFORMATION ABOUT RISK FIXED INCOME RISK-- The market value of fixed TAX-EXEMPT MONEY MARKET FUND income investments change in response to TAX-FREE MONEY MARKET FUND interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: MUNICIPAL ISSUER RISK-- There may be economic TAX-EXEMPT MONEY MARKET FUND or political changes that impact the ability of TAX-FREE MONEY MARKET FUND municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states. YEAR 2000 RISK-- The Funds depend on the smooth ALL FUNDS functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds 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 Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business. EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISER *** The Investment Adviser makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: PRIME QUALITY MONEY MARKET FUND 0.48% TAX-EXEMPT MONEY MARKET FUND 0.51% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.52%
Crestar Asset Management Company served as the Adviser to the predecessor of the Tax-Free Money Market Fund. For the period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of 0.40% for the Tax-Free Money Market Fund. The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. David Yealy has served as Vice President of Trusco since 1993. He has managed the Prime Quality Money Market Fund and the U.S. Government Securities Money Market Fund since they began operating in June 1992. He has more than 13 years of investment experience. Ms. Mary Cernilli, CFA, has served as Vice President of Trusco since 1993. She has managed the Tax-Exempt Money Market Fund since June 1993. She has more than 8 years of investment experience. Mr. Robert S. Bowman, CFA, has served as Vice President of Trusco since January 1999. He has managed the Tax-Free Money Market Fund since 1995. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995, and Vice President since 1995 of Crestar Asset Management Company. Mr. Bowman has more than 5 years of investment experience. PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to buy, sell (sometimes called "redeem") or exchange Investor Shares and Flex Shares of the Funds. Flex Shares of the Prime Quality Money Market Fund are available only through exchanges of Flex Shares of other STI Classic Funds or, potentially, in the future, Flex Shares of the Prime Quality Money Market Fund may be used to set up a systematic exchange program to purchase Flex Shares of other STI Classic Funds. Currently no such exchange program is available. Flex Shares of the Prime Quality Money Market Funds (i) are subject to a 2% contingent deferred sales charge if you redeem your shares within one year of the date you purchased the original STI Classic Fund Flex Share; and (ii) have higher annual expenses than Investor Shares of the Prime Quality Money Market Fund. HOW TO PURCHASE FUND SHARES *** A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your securities account is established, you may transact business with the Funds by: - - Mail - - Telephone (1-800-874-4770) - - Wire - - Automated Clearing House (ACH) You may also buy shares through investment representatives of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place transactions in Fund shares for their customers. Please contact your financial institution directly. Your institution may charge a fee for its services, in addition to the fees charged by a Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. *** WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange and the Federal Reserve are open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time.) So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Funds must generally receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, before 12:00 p.m. Eastern time for the Tax-Free Money Market Fund or before 3:00 p.m. Eastern time for the Prime Quality Money Market Fund and U.S. Government Securities Money Market Fund. Also each Fund must receive federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as each Fund receives federal funds before the Funds calculate their NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If this method is determined to be unreliable during certain market conditions or for other reasons, a Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund Share is the value of that Share's portion of all the net assets in the Fund. MINIMUM PURCHASES *** To purchase shares for the first time, you must invest at least $2,000 in any Fund. Your subsequent investments in any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. A Fund may accept investments of smaller amounts at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call the Funds at 1-800-428-6970 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 Investor Shares automatically through regular deductions from your account. With a $500 minimum initial investment, you may begin regularly-scheduled investments from $50 up to $100,000 once or twice a month. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. SALES CHARGES CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: o to make certain withdrawals from a retirement plan (not including IRAs); o because of death or disability; or o for certain payments under the Systematic Withdrawal Plan (which is discussed later). OFFERING PRICE OF FUND SHARES The offering price of Investor and Flex Shares is the NAV next calculated after the transfer agent receives your request. Less, in the case of Flex Shares of the Prime Quality Money Market Fund, any applicable sales charge. HOW TO SELL YOUR FUND SHARES If you own your shares directly, you may sell (sometimes called "redeem") your shares on any Business Day by contacting the Fund directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request. Redemption orders must be received by the Funds on a Business Day before 11:00 a.m. Eastern Time for the Tax-Exempt Money Market Fund, 12:00 p.m. Eastern Time for the Tax-Free Money Market Fund or 3:00 p.m. Eastern time for the Prime Quality Money Market Fund and U.S. Government Securities Money Market Fund. Orders received after these times will be executed the following Business Day. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Fund receives your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required $2,000 because of redemptions you may be required to sell your shares. But, the Funds will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting the Funds 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 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be changed or canceled at any time upon 60 days notice. EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange request. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DISTRIBUTION OF FUND SHARES Each Fund has adopted a distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets are as follows:
For Investor Shares Prime Quality Money Market Fund 0.20% Tax-Exempt Money Market Fund 0.15% Tax-Free Money Market Fund 0.40% U.S. Government Securities Money Market Fund 0.17%
For Flex Shares of the Prime Quality Money Market Fund, the maximum distribution fee is 1.00% of the average daily net assets of the Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide incentives, in the form of cash or other compensation, including merchandise, airline vouchers, trips and vacation packages, to dealers selling shares of a Fund. DIVIDENDS AND DISTRIBUTIONS Each Fund declares dividends daily and pays these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE IS A TAXABLE EVENT. The Tax-Exempt Money Market Fund and Tax-Free Money Market Fund intend to distribute federally tax-exempt income. The 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 the Funds may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund except the Tax-Free Money Market Fund for the periods ended prior to May 31, 1999 have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Tax-Free Money Market Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4770. STI Classic Funds financial highlights for the periods ended May 31, and November 30, for a share outstanding throughout the period
DISTRIBUTIONS NET ASSET VALUE NET FROM NET NET ASSET BEGINNING OF INVESTMENT INVESTMENT VALUE END TOTAL PERIOD INCOME INCOME OF PERIOD RETURN(+) - ------------------------------------------------------------------------------ PRIME QUALITY MONEY MARKET FUND INVESTOR SHARES 1999 $1.00 $0.05 $(0.05) $1.00 4.66% 1998 1.00 0.05 (0.05) 1.00 5.04% 1997 1.00 0.05 (0.05) 1.00 4.84% 1996 1.00 0.05 (0.05) 1.00 5.08% 1995 1.00 0.05 (0.05) 1.00 4.62% TAX-EXEMPT MONEY MARKET FUND INVESTOR SHARES 1999 $1.00 $0.03 $(0.03) $1.00 2.69% 1998 1.00 0.03 (0.03) 1.00 3.09% 1997 1.00 0.03 (0.03) 1.00 2.97% 1996 1.00 0.03 (0.03) 1.00 3.16% 1995 1.00 0.03 (0.03) 1.00 3.00% TAX-FREE MONEY MARKET FUND (A) INVESTOR SHARES 1999* $1.00 $0.01 $(0.01) $1.00 1.27% FOR THE YEAR ENDED NOVEMBER 30: 1998 1.00 0.03 $(0.03) 1.00 2.96% 1997 1.00 0.03 (0.03) 1.00 3.05% 1996 1.00 0.03 (0.03) 1.00 3.13% 1995 1.00 0.03 (0.03) 1.00 3.25% 1994 1.00 0.02 (0.02) 1.00 1.98%
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME TO NET EXPENSES NET AVERAGE NET AVERAGE NET ASSETS TO INVESTMENT ASSETS ASSETS END OF AVERAGE INCOME TO (EXCLUDING (EXCLUDING PERIOD NET AVERAGE WAIVERS AND WAIVERS AND (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) - -------------------------------------------------------------------------------------------------------- PRIME QUALITY MONEY MARKET FUND INVESTOR SHARES 1999 $918,100 0.77% 4.52% 0.97% 4.32% 1998 411,821 0.76% 4.93% 0.98% 4.71% 1997 283,544 0.75% 4.74% 0.97% 4.52% 1996 215,696 0.75% 4.94% 1.00% 4.69% 1995 157,616 0.75% 4.55% 1.01% 4.29% TAX-EXEMPT MONEY MARKET FUND INVESTOR SHARES 1999 $128,854 0.64% 2.66% 0.82% 2.48% 1998 134,538 0.62% 3.04% 0.83% 2.83% 1997 102,013 0.62% 2.92% 0.83% 2.71% 1996 95,223 0.62% 3.10% 0.85% 2.87% 1995 87,647 0.55% 3.00% 0.87% 2.68% TAX-FREE MONEY MARKET FUND (A) INVESTOR SHARES 1999* $5,955 0.67% 2.52% 1.06% 2.13% FOR THE YEAR ENDED NOVEMBER 30: 1998 8,851 0.67% 2.92% 1.07% 2.52% 1997 7,634 0.68% 3.42% 1.08% 3.02% 1996 2,994 0.67% 2.86% 1.07% 2.46% 1995 1,627 0.67% 3.16% 1.07% 2.76% 1994 757 0.76% 1.97% 1.44% 1.29%
* ANNUALIZED. (+) TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. (A) ON MAY 24, 1999, THE CRESTAR TAX FREE MONEY FUND, EXCHANGED ALL OF ITS ASSETS AND CERTAIN LIABILITIES FOR SHARES OF THE TAX-FREE MONEY MARKET FUND. THE CRESTAR TAX-FREE MONEY FUND IS THE ACCOUNTING SURVIVOR IN THIS TRANSACTION, AND AS A RESULT, ITS BASIS OF ACCOUNTING FOR ASSETS AND LIABILITIES AND ITS OPERATING RESULTS FOR THE PERIODS PRIOR TO MAY 24, 1999 HAVE BEEN CARRIED FORWARD IN THESE FINANCIAL HIGHLIGHTS. STI CLASSIC FUNDS FINANCIAL HIGHLIGHTS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
RATIO OF RATIO OF RATIO OF NET INVESTMENT RATIO OF NET EXPENSES TO INCOME TO DISTRIBUTIONS EXPENSES INVESTMENT AVERAGE NET AVERAGE NET NET ASSET FROM NET TO INCOME TO ASSETS ASSETS VALUE NET NET NET ASSET ASSETS AVERAGE AVERAGE (EXCLUDING (EXCLUDING BEGINNING INVESTMENT INVESTMENT VALUE END TOTAL END OF NET NET ASSETS WAIVERS AND WAIVERS AND OF PERIOD INCOME INCOME OF PERIOD RETURN+ PERIOD (000) ASSETS REIMBURSEMENTS) REIMBURSEMENTS) - ---------------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND INVESTOR SHARES 1999 $1.00 $ 0.04 $(0.04) $1.00 4.41% $ 61,472 0.77% 4.32% 0.98% 4.11% 1998 1.00 0.05 (0.05) 1.00 4.90% 58,753 0.76% 4.79% 0.96% 4.59% 1997 1.00 0.05 (0.05) 1.00 4.69% 63,178 0.75% 4.59% 0.96% 4.38% 1996 1.00 0.05 (0.05) 1.00 4.99% 58,608 0.75% 4.88% 0.99% 4.64% 1995 1.00 0.04 (0.04) 1.00 4.51% 46,639 0.75% 4.51% 1.02% 4.24%
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS TO THE FUNDS: FOR PARTICIPANTS OF SUNTRUST BANKS SPONSORED RETIREMENT PLANS PROSPECTUS OCTOBER 1, 1999 BALANCED FUND CAPITAL APPRECIATION FUND (FORMERLY CAPITAL GROWTH FUND) CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND INVESTMENT GRADE BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MID-CAP EQUITY FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND U.S. GOVERNMENT SECURITIES FUND VALUE INCOME STOCK FUND PRIME QUALITY MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND U.S. TREASURY MONEY MARKET FUND LIFE VISION BALANCED PORTFOLIO LIFE VISION GROWTH AND INCOME PORTFOLIO LIFE VISION MAXIMUM GROWTH PORTFOLIO INVESTMENT ADVISERS TO THE FUNDS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Equity Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
PAGE BALANCED FUND................................................2 CAPITAL APPRECIATION FUND....................................4 CORE EQUITY FUND.............................................6 E-COMMERCE OPPORTUNITY FUND..................................8 GROWTH AND INCOME FUND......................................10 INTERNATIONAL EQUITY FUND...................................12 INTERNATIONAL EQUITY INDEX FUND.............................14 INVESTMENT GRADE BOND FUND..................................16 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND...............18 MID-CAP EQUITY FUND.........................................20 SHORT-TERM BOND FUND........................................22 SHORT-TERM U.S. TREASURY SECURITIES FUND....................24 SMALL CAP EQUITY FUND.......................................26 SMALL CAP GROWTH STOCK FUND.................................28 TAX SENSITIVE GROWTH STOCK FUND.............................30 U.S. GOVERNMENT SECURITIES FUND.............................32 VALUE INCOME STOCK FUND.....................................34 PRIME QUALITY MONEY MARKET FUND.............................36 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND................38 U.S. TREASURY MONEY MARKET FUND.............................40 LIFE VISION BALANCED PORTFOLIO..............................44 LIFE VISION GROWTH AND INCOME PORTFOLIO.....................46 LIFE VISION MAXIMUM GROWTH PORTFOLIO........................48 MORE INFORMATION ABOUT RISK.................................50 EACH FUND'S OTHER INVESTMENTS...............................51 THE INVESTMENT ADVISERS AND PORTFOLIO MANAGERS..........................................51 PURCHASING AND SELLING FUND SHARES..........................54 DIVIDENDS AND DISTRIBUTIONS.................................56 TAXES.......................................................57 FINANCIAL HIGHLIGHTS........................................58 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS.......................................66
[INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund (other than a money market fund) is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. BALANCED FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation and current income INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 25.51% 1996 12.13% 1997 21.14% 1998 19.55%
BEST QUARTER WORST QUARTER 12.57% -5.70% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 5.39%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND THE S&P 500 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - --------------------------------------------------------------------------------------- Balanced Fund 19.55% 14.30%* Lehman Government/Corporate Bond Index 9.47% 7.11%** S&P 500 Index 28.60% 23.66%**
* SINCE 1/3/94 ** SINCE 1/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.95% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.06%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $108 $337 $585 $1,294
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.86% AND 0.97%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." CAPITAL APPRECIATION FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment INVESTMENT STRATEGY The Capital Appreciation Fund invests primarily in U.S. common stocks and other equity securities that the Adviser believes are undervalued by the stock market. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser rotates the Fund's investment among various market sectors based on the Adviser's research of business cycles. The Adviser's strategy focuses on large cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13% 1998 28.06%
BEST QUARTER WORST QUARTER 22.93% -11.16% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 10.45%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------------ Capital Appreciation Fund 28.06% 19.66% 18.64%* S&P 500 Index 28.60% 24.05% 20.82%**
* SINCE 7/1/92 ** SINCE 7/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------ Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $128 $400 $692 $1,523
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.06% AND 1.17%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." CORE EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth INVESTMENT FOCUS Common stocks of mid-to large-cap companies SHARE PRICE VOLATILITY Moderate to high PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with superior earnings trends INVESTOR PROFILE Investors seeking long-term growth of capital without regard to income who are willing to accept more volatility for the possibility of higher returns INVESTMENT STRATEGY The Core Equity Fund invests primarily in common stocks of U.S. companies with market capitalizations of more than $1 billion. In selecting stocks for the Fund, the Adviser attempts to capture superior growth prospects based on earnings potential, profitability and other measures. These measures include growth characteristics such as whether a company makes significant investments in research and product development or whether a company is participating in rapidly expanding industries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. In addition, the Fund is subject to the risk that its principal market segment, mid- to large-capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. PERFORMANCE INFORMATION As of September 30, 1999, the Core Equity Fund had not commenced operations, and did not have a performance history. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------------ Investment Advisory Fees 1.10% Other Expenses* 0.20% ----- Total Annual Fund Operating Expenses 1.30%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS $132 $412
Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses are expected to be lower because the Adviser is voluntarily waiving a portion of its fees. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." E-COMMERCE OPPORTUNITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth INVESTMENT FOCUS Common stocks of companies participating in multiple electronic commerce market segments SHARE PRICE VOLATILITY Very high PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies utilizing electronic commerce opportunities to achieve above average growth INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept significant volatility for the possibility of higher returns INVESTMENT STRATEGY The E-Commerce Opportunity Fund invests primarily in common stocks of U.S. companies that are expected to benefit substantially from electronic commerce and achieve above average growth. The Fund defines electronic commerce, or e-commerce, as conducting business through the use of computers, the Internet, telecommunication lines and other electronic means of information transfer. The Fund's holdings are generally diversified across three market segments. The first segment is comprised of recently established corporations that are implementing pioneering electronic commerce strategies. The second segment consists of technology companies that provide the infrastructure to support electronic commerce. The third segment includes conventional corporations that are leveraging electronic commerce opportunities to improve their competitive advantage. In selecting investments for the Fund, the Adviser focuses on a "bottom-up" analysis that evaluates the competitive advantages and market sustainability of individual companies. The Fund invests primarily in companies with market capitalizations over $1 billion, but may invest a portion of its assets in smaller companies. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. Due to the focus of the Fund, many holdings share similar risk factors. Many companies in the portfolio have limited operating histories, function in rapidly changing business environments and trade at valuations which are significantly higher than average. As a result, the Fund's NAV may be more volatile than other, broadly diversified equity funds. PERFORMANCE INFORMATION As of September 30, 1999, the E-Commerce Opportunity Fund had not commenced operations, and did not have a performance history. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.10% Other Expenses* 0.20% ----- Total Annual Fund Operating Expenses 1.30%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS $132 $412
Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses are expected to be lower because the Adviser is voluntarily waiving a portion of its fees. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." GROWTH AND INCOME FUND FUND SUMMARY INVESTMENT GOALS PRIMARY Long-term capital appreciation SECONDARY Current income INVESTMENT FOCUS Equity securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average momentum relative either to their sectors or the market as a whole INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole INVESTMENT STRATEGY The Growth and Income Fund invests primarily in equity securities, including common stock and listed American Depository Receipts (ADR's), of domestic and foreign companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio management team selects stocks of companies with strong financial quality and above average earnings momentum to secure the best relative values in each economic sector. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 10.20% 1994 -0.81% 1995 29.38% 1996 19.06% 1997 27.69% 1998 18.20%
BEST QUARTER WORST QUARTER 17.38% -10.36% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 12.76%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------- Growth and Income Fund 18.20% 18.19% 17.26%* S&P 500 Index 28.60% 24.05% 21.60%**
* SINCE 9/25/92 ** SINCE 9/30/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - --------------------------------------------------------------------------- Investment Advisory Fees 0.90% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.01%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $103 $322 $558 $1,236
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." INTERNATIONAL EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Foreign common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued companies with 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 INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. In selecting investments for the Fund, the Adviser diversifies 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. The Adviser's "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. The Adviser's goal is to find companies with top management, quality products and sound financial positions, that are trading at a discount. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, foreign common stocks, may underperform other equity market segments or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1995, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1996 22.08% 1997 13.35% 1998 11.22%
BEST QUARTER WORST QUARTER 16.88% -18.28% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.91%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- International Equity Fund 11.22% 21.28%* MSCI EAFE Index 20.00% 10.87%*
* SINCE 1/31/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 1.25% Other Expenses 0.28% ----- Total Annual Fund Operating Expenses 1.53%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $156 $483 $834 $1,824
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.20% AND 1.48%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." INTERNATIONAL EQUITY INDEX FUND FUND SUMMARY INVESTMENT GOAL 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 STRATEGY Statistical analysis to track the Index INVESTOR PROFILE Aggressive investors who want exposure to foreign markets and are willing to accept the increased risks of foreign investing for the possibility of higher returns INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, the Adviser chooses companies included in the MSCI EAFE-GDP Index, an index of equity securities of companies located in Europe, Australasia and the Far East. While the Fund is structured to have overall investment characteristics similar to those of the Index, it selects a sample of stocks within the Index using a statistical process. So, the Fund will not hold all stocks included in the Index. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, foreign common stocks, may underperform other equity market segments or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. In addition to the above mentioned risks, the Adviser may not be able to match the performance of the Fund's benchmark. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 10.73% 1996 6.04% 1997 8.99% 1998 30.02%
BEST QUARTER WORST QUARTER 21.26% -12.98% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 6.23%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST-GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- International Equity Index Fund 30.02% 11.15%* MSCI EAFE-GDP Weighted Index 25.12% 9.42%**
* SINCE 6/6/94 ** SINCE 6/30/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Weighted Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The index is weighted by the gross domestic product of the various countries in the index. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.90% Other Expenses 0.28% ----- Total Annual Fund Operating Expenses 1.18%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $120 $375 $649 $1,432
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.79% AND 1.07%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers Government/Corporate Bond Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 10.84% 1994 -3.32% 1995 17.80% 1996 2.34% 1997 9.08% 1998 9.19%
BEST QUARTER WORST QUARTER 6.11% -2.67% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.83%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------------------- Investment Grade Bond Fund 9.19% 6.78% 7.30%* Lehman Brothers Government/Corporate Bond Index 9.47% 7.30% 7.77%**
* SINCE 7/16/92 ** SINCE 7/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------- Investment Advisory Fees 0.74% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.85%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $87 $271 $471 $1,049
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.66% AND 0.77%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital INVESTMENT FOCUS Mortgage-backed securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that are less prone to prepayment risk INVESTOR PROFILE Conservative investors who want to receive income from their investment INVESTMENT STRATEGY The Limited-Term Federal Mortgage Securities Fund invests primarily in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA and collateralized mortgage obligations. These securities typically have an effective maturity from 1 to 5 years. In selecting investments for the Fund, the Adviser tries to identify securities that the Adviser expects to perform well in rising and falling markets. The Adviser also attempts to reduce the risk that the underlying mortgages are prepaid by focusing on securities that the Adviser believes are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for prepayment, but few have occurred. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, mortgage-backed securities, may underperform other fixed income market segments or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 12.14% 1996 4.53% 1997 6.74% 1998 6.90%
BEST QUARTER WORST QUARTER 4.05% -0.32% (3/31/95) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 0.32%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S. TREASURY INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S. GOVERNMENTS, INTERMEDIATE-TERM INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ----------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 6.90% 6.64%* Merrill Lynch 1-5 Year U.S. Treasury Index 7.74% 7.24%** Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index 7.67% 7.24%**
* SINCE 6/6/94 * SINCE 6/30/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year U.S. Treasury Index is a widely-recognized, capitalization-weighted index of U.S. Treasury securities with maturities 1 year or greater and no more than 5 years. The Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index is a widely-recognized, capitalization weighted index including all U.S. Treasuries, and agency securities with maturities of 1 year or greater but less than 5 years from maturity. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.55% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify companies with above average growth potential at an attractive price INVESTOR PROFILE Investors who want the value of their investment to grow and who are willing to accept more volatility for the possibility of higher returns INVESTMENT STRATEGY The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have small- to mid-sized market capitalizations (i.e., companies with market capitalizations of $500 million to $10 billion and companies in the S&P MidCap 400 Index) and that have above average growth potential at attractive prices. The Adviser evaluates companies based on their industry sectors and the market in general. The Fund maintains holdings in the industries that appear to perform best during a given business cycle. The Adviser analyzes companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. The Adviser does not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, mid-cap common stocks, may underperform other equity market segments or the equity markets as a whole. The small- to mid-sized capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap and mid-cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 31.22% 1996 15.42% 1997 21.23% 1998 6.48%
BEST QUARTER WORST QUARTER 24.73% -19.96 (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 6.51%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P MIDCAP 400 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------------------------------------- Mid-Cap Equity Fund 6.48% 14.25%* S&P MidCap 400 Index 19.12% 19.34%**
* SINCE 2/24/94 ** SINCE 2/28/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P MidCap 400 Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 1.28%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $130 $406 $702 $1,545
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04% AND 1.17%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR. 1994 -0.07% 1995 11.77% 1996 3.90% 1997 6.78% 1998 6.84%
BEST QUARTER WORST QUARTER 3.76% -0.58% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -0.20%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX AND THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund 6.84% 5.77% 5.68%* Salomon One Year Treasury Benchmark On-the-Run Index 5.89% 5.66% 5.38%** Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 6.95% 6.00% 5.79%**
* SINCE 3/15/93 ** SINCE 3/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon One Year Treasury Benchmark On-the-Run Index is a widely-recognized index of U.S. Treasury securities. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the index have maturities 1 year or greater and less than 3 years. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - --------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.55% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT STRATEGY Attempts to identify Treasury securities with maturities that offer a comparably better return potential and yield than either shorter maturity or longer maturity securities for a given level of interest rate risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of 3 years or less). The Fund intends to maintain an average weighted maturity from 1 to 2 years. The Fund offers investors the opportunity to capture the advantage of investing in short-term bonds over money market instruments. Generally, short-term bonds offer a comparably better return than money market instruments, with a modest increase in interest rate risk. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view toward maximizing returns and yield. The Adviser tries to select those U.S. Treasury securities that offer the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, short-term U.S. Treasury securities, may underperform other fixed income market segments or the fixed income markets as a whole. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1994 1.41% 1995 8.58% 1996 4.52% 1997 5.86% 1998 6.24%
BEST QUARTER WORST QUARTER 2.61% -0.10% (3/31/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 0.91%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------------ Short-Term U.S. Treasury Securities Fund 6.24% 5.30% 5.06%* Salomon 1-3 Year Treasury Index 6.98% 5.95% 5.73%** Salomon 6 Month Treasury Bill Index 5.27% 5.24% 4.98%**
* SINCE 3/15/93 ** SINCE 3/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury Index is a widely-recognized index of U.S. Treasury securities with maturities 1 year or greater and less than 3 years. The Salomon 6 Month Treasury Bill Index is a widely-recognized index of the 6 month U.S. Treasury bills. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 0.78%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $80 $249 $433 $966
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.54% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." SMALL CAP EQUITY FUND FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income INVESTMENT FOCUS U.S. small cap common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap stocks INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment INVESTMENT STRATEGY The Small Cap Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, the Adviser chooses common stocks of small sized companies (i.e., companies with market capitalizations under $1 billion) that it believes are undervalued in the market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization common stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 30.99% 1996 34.25% 1997 32.59% 1998 -13.45%
BEST QUARTER WORST QUARTER 14.95% -21.99% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 3.88%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------ Small Cap Equity Fund -13.45% 17.77%* Frank Russell 2000 Small Stock Index -2.55% 13.71%*
* SINCE 8/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 1.27%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $129 $403 $697 $1,534
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.10% AND 1.22%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." SMALL CAP GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS U.S. small cap common stocks of growth companies SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion. The Adviser selects companies that demonstrate above average earnings and sales growth potential. The selected companies tend to have an established operating history and a solid balance sheet. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The Small Cap Growth Stock Fund commenced operations on October 8, 1998, and therefore does not have a performance history for a full calendar year. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.34% ----- Total Annual Fund Operating Expenses 1.49%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $152 $471 $813 $1,779
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.86% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." TAX SENSITIVE GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth with nominal dividend income INVESTMENT FOCUS U.S. common stocks of growth companies SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have above-average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions INVESTOR PROFILE Investors who want to increase the value of their investment while minimizing taxable capital gains distributions INVESTMENT STRATEGY The Tax Sensitive Growth Stock Fund invests primarily in a diversified portfolio of common stocks of financially strong U.S. growth companies. Many of these companies have a history of stable or rising dividend payout policies. The Adviser attempts to minimize the impact of capital gains taxes on investment returns by using a low turnover rate (generally 50% or less) strategy, in conjunction with other tax management strategies. These strategies may lead to lower capital gains distributions and, therefore, lower capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, common stocks of U.S. growth companies, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1998, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1996 21.04% 1997 28.76% 1998 31.73%
BEST QUARTER WORST QUARTER 27.74% -9.96% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 17.56%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF S&P 500 INDEX AND THE LIPPER GROWTH AND INCOME FUNDS INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund 31.73% 27.15%* S&P 500 Index 28.60% 28.23%* Lipper Growth and Income Funds Index 13.58% 20.25%*
* SINCE 12/31/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Lipper Growth and Income Funds Index is a widely-recognized composite of mutual funds that have growth-of-earnings orientations and income requirements for level and/or rising dividends. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.19% ----- Total Annual Fund Operating Expenses 1.34%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $136 $425 $734 $1,613
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.01% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 moderate PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk INVESTOR PROFILE Conservative investors who want to receive income from their investment INVESTMENT STRATEGY The U.S. Government Securities Fund invests primarily in U.S. government debt securities, such as mortgage-backed securities and U.S. Treasury obligations. In an attempt to provide a consistently high dividend without adding undue risk, the Fund focuses its investments in mortgage-backed securities. The average maturity of the Fund's portfolio will typically range from 7 to 14 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, U.S. government debt securities, may underperform other fixed income market segments or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 17.33% 1996 2.55% 1997 8.94% 1998 8.16%
BEST QUARTER WORST QUARTER 5.89% -2.24% (6/30/95) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.47%. THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX. PREVIOUSLY THE FUND'S RETURNS HAD BEEN COMPARED TO THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX, BUT THE ADVISER BELIEVES THAT THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON MORTGAGE-BACKED SECURITIES, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------- U.S. Government Securities Fund 8.16% 7.82%* Merrill Lynch Government/Mortgage Index 8.91% 8.83%** Lehman Brothers Intermediate Government Bond Index 8.47% 7.69%**
* SINCE 8/1/94 ** SINCE 8/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Lehman Brothers Intermediate Government Bond Index, is a widely-recognized index of U.S. Treasury securities and government agency securities with maturities ranging from 1 to 10 years. The Merrill Lynch Government/Mortgage Index is a synthetic index created by combining, at their respective market weights; (i) the Merrill Lynch Government Master Index which is a widely-recognized index comprised of U.S. Treasury securities and U.S. government agency securities with a maturity of at least 1 year; and (ii) the Merrill Lynch Mortgage Master Index which is a widely-recognized index comprised of mortgage- backed securities including 15 and 30 year single family mortgages in addition to aggregated pooled mortgages. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.74% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 0.88%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $90 $281 $488 $1,084
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.63% AND 0.77%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." VALUE INCOME STOCK FUND FUND SUMMARY INVESTMENT GOAL PRIMARY Current income SECONDARY Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend-paying, undervalued stocks INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08% 1998 10.58%
BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 13.51%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1998, TO THOSE OF THE S&P/BARRA VALUE INDEX AND THE LIPPER EQUITY INCOME FUND INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------- Value Income Stock Fund 10.58% 18.76% 17.21%* S&P/Barra Value Index 14.68% 19.88% 15.76%* Lipper Equity Income Fund Index 11.78% 16.62% 13.53%*
* SINCE 10/31/89 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price to book ratios. The Lipper Equity Income Fund Index is an equally weighted index of typically the 30 largest funds that seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.80% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.92%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $94 $293 $509 $1,131
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." PRIME QUALITY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/ return trade-off INVESTOR PROFILE Conservative investors who want to receive current income INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 2.77% 1994 3.77% 1995 5.47% 1996 4.99% 1997 5.15% 1998 5.10%
BEST QUARTER WORST QUARTER 1.37% 0.68% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.24%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------- Prime Quality Money Market Fund 5.10% 4.89% 4.40%* IBC/Financial Data First Tier Average 4.96% 4.79% 4.31%**
* SINCE 6/8/92 ** SINCE 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data First Tier Average is a widely-recognized composite of money market fund which invest in securities rated in the highest category by at least two of the five recognized rating agencies. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.48% AND 0.60%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to increase income without adding undue risk by analyzing yields 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 that are backed by the full faith and credit of the U.S. government and repurchase agreements involving these securities. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 2.67% 1994 3.64% 1995 5.39% 1996 4.81% 1997 4.99% 1998 4.88%
BEST QUARTER WORST QUARTER 1.36% 0.65% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.08%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------------------------------------------------------- U.S. Government Securities Money Market Fund 4.88% 4.74% 4.26%* IBC/Financial Data U.S. Treasury & Repo Average 4.81% 4.66% 4.19%**
* SINCE 6/8/92 ** SINCE 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.76%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $78 $243 $422 $942
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.52% AND 0.63%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." U.S. TREASURY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while maintaining liquidity INVESTMENT FOCUS Money market instruments issued and guaranteed by the U.S. Treasury PRINCIPAL INVESTMENT STRATEGY Investing in U.S. Treasury obligations and repurchase agreements INVESTOR PROFILE Conservative investors who want to receive current income from their investment INVESTMENT STRATEGY The U.S. Treasury Money Market Fund invests solely in U.S. Treasury obligations and repurchase agreements that are collateralized by obligations issued or guaranteed by the U.S. Treasury. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (Standard and Poor's Corporation, AAA). The Fund will maintain an average maturity of 90 days or less, and will only acquire securities that have a remaining maturity of 397 days or less. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1989 8.84% 1990 7.86% 1991 5.75% 1992 3.40% 1993 2.51% 1994 3.50% 1995 5.33% 1996 4.77% 1997 4.93% 1998 4.82%
BEST QUARTER WORST QUARTER 2.25% 0.61% (6/30/89) (12/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.05%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------------------------- U.S. Treasury Money Market Fund 4.82% 4.67% 5.15% 5.38%* IBC/Financial Data U.S. Treasury & Repo Average 4.81% 4.66%** N/A N/A
* SINCE 2/18/87 ** SINCE 12/31/93 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.75%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $77 $240 $417 $930
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.53% AND 0.63%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." RISK/RETURN INFORMATION COMMON TO THE PORTFOLIOS Each Portfolio, and each underlying Fund in which it invests 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 Portfolio is based on the market prices of the securities the underlying Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, will vary depending on the types of securities the underlying Fund owns and the markets where these securities trade. The effect on a Portfolio of a change in the value of a single security will depend on how widely the Portfolio and the underlying Funds diversify their holdings. Like other investments, you could lose money on your investment in a Portfolio. Your investment in a Portfolio is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. The Portfolios provide investors with the opportunity to purchase three distinct asset allocations strategies implemented through investments in Trust Class Shares of selected Funds. By investing in the Portfolios, investors have the opportunity to diversify and allocate their assets among the broad range of Funds in STI Classic Funds. The assets of each Portfolio will be allocated among underlying Funds in accordance with its investment objective, the Adviser's outlook for the economy, the financial markets and the relative market valuations of the underlying Funds. Each Portfolio has the ability to invest its assets allocated to a particular asset class in one or more of the underlying Funds, which have different investment objectives, policies and risk characteristics. Although the Portfolios currently expect to invest in one or more of the underlying Funds, the Adviser has the discretion to change the particular Funds used as underlying investments for the Portfolios. If determined to be in the best interest of the Portfolios, the Adviser reserves the right to substitute or include other underlying Funds, including Funds that do not currently exist. A Portfolio's goal may be changed without shareholder approval. Before investing, make sure that the Portfolio's goal matches your own. LIFE VISION BALANCED PORTFOLIO PORTFOLIO SUMMARY INVESTMENT GOAL Capital appreciation and current income INVESTMENT FOCUS Equity and bond funds SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT STRATEGY Investing pursuant to an asset allocation strategy in a combination of STI Classic Equity and Bond Funds INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value, and are willing to be subject to the risks of equity securities INVESTMENT STRATEGY The Life Vision Balanced Portfolio principally invests in STI Classic Funds that invest primarily in equity securities, but invest at least 25% of the Portfolio's total assets in STI Classic Funds that invest primarily in fixed income securities. The Portfolio's remaining assets may be invested in shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. Government, its agencies or instrumentalities, repurchase agreements and short-term paper. In selecting a diversified portfolio of underlying STI Classic Funds, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total return, volatility and expenses. THE PORTFOLIO CURRENTLY PLANS TO INVEST IN SHARES OF THE FOLLOWING UNDERLYING STI CLASSIC FUNDS WITHIN THE PERCENTAGE RANGES INDICATED:
INVESTMENT RANGE (PERCENTAGE OF THE LIFE VISION BALANCED ASSET CLASS PORTFOLIO'S ASSETS) - ------------------------------------------------------------------------------- Equity Funds 40-70% Growth and Income Fund Capital Appreciation Fund Small Cap Equity Fund Small Cap Stock Growth Fund Bond Funds 30-60% Short-Term Bond Fund Investment Grade Bond Fund U.S. Government Securities Fund Money Market Funds 0-20% Prime Quality Money Market Fund
Other STI Classic Funds may be utilized in the future. Due to its investment strategy, the Portfolio holds STI Classic Funds that 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 PORTFOLIO? The value of an investment in the Fund is based primarily on the performance of the underlying Funds and the allocation of the Fund's assets among them. Since it purchases equity funds, the Portfolio is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of an underlying Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Portfolio. The prices of an underlying Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, an underlying Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Portfolio is also subject to the risk that the Adviser's asset allocation decisions will not anticipate market trends successfully. For example, weighting common stocks too heavily during a stock market decline may result in a failure to preserve capital. Conversely, investing too heavily in fixed income securities during a period of stock market appreciation may result in lower total return. The risks associated with investing in the Portfolio will vary depending upon how the assets are allocated among the underlying STI Classic Funds. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Portfolio. Of course, the Portfolio'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 PORTFOLIO'S TRUST SHARES FROM YEAR TO YEAR.* 1993 9.26% 1994 -2.97% 1995 20.52% 1996 10.51% 1997 16.41% 1998 11.15%
BEST QUARTER WORST QUARTER 11.24% -7.99% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 5.21%. THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX, THE LEHMAN BROTHERS AGGREGATE BOND INDEX , THE S&P 500 INDEX AND THE SALOMON 3 MONTH TREASURY BILL INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------------------------------------------------- Life Vision Balanced Portfolio 11.15% 10.83% 10.56%* Frank Russell 2000 Small Stock Index -2.55% 11.87% 13.01%* Lehman Brothers Aggregate Bond Index 8.67% 7.27% 7.68%* S&P 500 Index 28.60% 24.05% 21.60%* Salomon 3 Month Treasury Bill Index 5.05% 5.10% 4.76%*
* SINCE 12/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 smallest companies. The Lehman Brothers Aggregate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. government obligations, corporate debt securities, and AAA mortgage-backed securities. All securities in the index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Salomon 3 Month Treasury Bill Index is a widely-recognized index of U.S. Treasury bills. PORTFOLIO FEES AND EXPENSES This table describes the portfolio's fees and expenses that you may pay if you buy and hold portfolio shares. The table does not reflect any of the operating costs and investment advisory fees of the underlying STI Classic Funds. The portfolio and its shareholders will indirectly bear a pro rata share of the expenses of the underlying STI Classic Funds. ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.25% Other Expenses 0.13% ----- Total Annual Portfolio Operating Expenses 0.38%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Portfolio expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Portfolio would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $143 $443 $766 $1,680
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.12% AND 0.25%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." LIFE VISION GROWTH AND INCOME PORTFOLIO PORTFOLIO SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Equity and bond funds SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Investing pursuant to an asset allocation strategy in a combination of STI Classic Equity and, to a lesser extent, Bond Funds INVESTOR PROFILE Investors who want their assets to grow, but want to moderate the risks of equity securities through investment of a portion of their assets in bonds INVESTMENT STRATEGY The Life Vision Growth and Income Portfolio invests at least 80% of the Portfolio's total assets in STI Classic Funds that invest primarily in either equity securities or fixed income securities. The Portfolio's remaining assets may be invested in shares of underlying STI Classic Money Market Funds, securities issued by the U.S. Government, its agencies or instrumentalities, repurchase agreements and short-term paper. In selecting a diversified portfolio of underlying STI Classic Funds, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total return, volatility and expenses. THE PORTFOLIO CURRENTLY PLANS TO INVEST IN SHARES OF THE FOLLOWING UNDERLYING STI CLASSIC FUNDS WITHIN THE PERCENTAGE RANGES INDICATED:
INVESTMENT RANGE (PERCENTAGE OF THE LIFE VISION GROWTH AND INCOME ASSET CLASS PORTFOLIO'S ASSETS) - ------------------------------------------------------------------------------- Equity Funds 40-70% Growth and Income Fund Capital Appreciation Fund Small Cap Equity Fund Small Cap Stock Growth Fund Bond Funds 30-60% Short-Term Bond Fund Investment Grade Bond Fund U.S. Government Securities Fund Money Market Funds 0-20% Prime Quality Money Market Fund
Other STI Classic Funds may be utilized in the future. Due to its investment strategy, the Portfolio holds STI Classic Funds that 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 PORTFOLIO? The value of an investment in the Fund is based primarily on the performance of the underlying Funds and the allocation of the Fund's assets among them. Since it purchases equity funds, the Portfolio is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of an underlying Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Portfolio. The prices of an underlying Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, an underlying Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Portfolio is also subject to the risk that the Adviser's asset allocation decisions will not anticipate market trends successfully. For example, weighting common stocks too heavily during a stock market decline may result in a failure to preserve capital. Conversely, investing too heavily in fixed income securities during a period of stock market appreciation may result in lower total return. The risks associated with investing in the Portfolio will vary depending upon how the assets are allocated among the underlying STI Classic Funds. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Portfolio. Of course, the Portfolio's past performance does not necessarily indicate how the Portfolio will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S TRUST SHARES FROM YEAR TO YEAR.* 1993 10.02% 1994 -3.52% 1995 22.68% 1996 12.16% 1997 18.08% 1998 11.16%
BEST QUARTER WORST QUARTER 13.65% -10.20% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 6.46%. THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX, THE LEHMAN BROTHERS AGGREGATE BOND INDEX, THE S&P 500 INDEX AND THE SALOMON 3 MONTH TREASURY BILL INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------------- Life Vision Balanced Portfolio 11.16% 11.75% 11.45%* Frank Russell 2000 Small Stock Index -2.55% 11.87% 13.01%* Lehman Brothers Aggregate Bond Index 8.67% 7.27% 7.68%* S&P 500 Index 28.60% 24.05% 21.60%* Salomon 3 Month Treasury Bill Index 5.05% 5.10% 4.76%*
* SINCE 12/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 smallest companies. The Lehman Brothers Aggregate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. government obligations, corporate debt securities, and AAA mortgage-backed securities. All securities in the index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Salomon 3 Month Treasury Bill Index is a widely-recognized index of U.S. Treasury bills. PORTFOLIO FEES AND EXPENSES This table describes the portfolio's fees and expenses that you may pay if you buy and hold portfolio shares. The table does not reflect any of the operating costs and investment advisory fees of the underlying STI Classic Funds. The portfolio and its shareholders will indirectly bear a pro rata share of the expenses of the underlying STI Classic Funds. ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.25% Other Expenses 0.21% ----- Total Annual Portfolio Operating Expenses 0.46%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Portfolio expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Portfolio would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $156 $483 $834 $1,824
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.04% AND 0.25%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." LIFE VISION MAXIMUM GROWTH PORTFOLIO FUND SUMMARY INVESTMENT GOAL High capital appreciation INVESTMENT FOCUS Equity and money market Funds SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Investing at least 80% of the Portfolio's total assets in STI Classic Equity Funds INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment, and are willing to be subject to the risks of equity securities INVESTMENT STRATEGY The Portfolio invests at least 80% of the Portfolio's total assets in STI Classic Funds that invest primarily in equity securities. The Portfolio's remaining assets may be invested in STI Classic Money Market Funds, securities issued by the U.S. Government, its agencies or instrumentalities, repurchase agreements and short-term paper. In selecting a diversified portfolio of underlying STI Classic Funds, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total return, volatility and expenses. THE PORTFOLIO CURRENTLY PLANS TO INVEST IN SHARES OF THE FOLLOWING UNDERLYING STI CLASSIC FUNDS WITHIN THE PERCENTAGE RANGES INDICATED:
INVESTMENT RANGE (PERCENTAGE OF THE LIFE VISION MAXIMUM GROWTH ASSET CLASS PORTFOLIO'S ASSETS) - ------------------------------------------------------------------------------- Equity Funds 80-100% Growth and Income Fund Capital Appreciation Fund Small Cap Equity Fund Small Cap Stock Growth Fund Money Market Funds 0-20% Prime Quality Money Market Fund
Other STI Classic Funds may be utilized in the future. Due to its investment strategy, the Portfolio holds STI Classic Funds that 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 PORTFOLIO? The value of an investment in the Fund is based primarily on the performance of the underlying Funds and the allocation of the Fund's assets among them. Since it purchases equity securities, the Portfolio is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of an underlying Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Portfolio. The Portfolio is also subject to the risk that the Adviser's asset allocation decisions will not anticipate market trends successfully. For example, weighting common stocks too heavily during a stock market decline may result in a failure to preserve capital. Conversely, investing too heavily in fixed income securities during a period of stock market appreciation may result in lower total return. The risks associated with investing in the Portfolio will vary depending upon how the assets are allocated among the underlying STI Classic Funds. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Portfolio. Of course, the Portfolio's past performance does not necessarily indicate how the Portfolio will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S TRUST SHARES FROM YEAR TO YEAR.* 1993 12.14% 1994 -4.30% 1995 25.12% 1996 16.62% 1997 22.53% 1998 12.31%
BEST QUARTER WORST QUARTER 18.72% -15.23% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 9.55%. THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX, THE S&P 500 INDEX AND THE SALOMON 3 MONTH TREASURY BILL INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------------- Life Vision Maximum Growth Portfolio 12.31% 13.96% 13.65%* Frank Russell 2000 Small Stock Index -2.55% 11.87% 13.01%* S&P 500 Index 28.60% 24.05% 21.60%* Salomon 3 Month Treasury Bill Index 5.05% 5.10% 4.76%*
* SINCE 12/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 smallest companies. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Salomon 3 Month Treasury Bill Index is a widely-recognized index of U.S. Treasury bills. PORTFOLIO FEES AND EXPENSES This table describes the portfolio's fees and expenses that you may pay if you buy and hold portfolio shares. The table does not reflect any of the operating costs and investment advisory fees of the underlying STI Classic Funds. The portfolios and its shareholders will indirectly bear a pro rata share of the expenses of the underlying STI Classic Funds. ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)*
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.25% Other Expenses 0.23% ----- Total Annual Portfolio Operating Expenses 0.48%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Portfolio for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Portfolio expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Portfolio would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $166 $514 $887 $1,933
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.02% AND 0.25%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." MORE INFORMATION ABOUT RISK
EQUITY RISK -- Equity securities include public and BALANCED FUND privately issued equity securities, common and preferred CAPITAL APPRECIATION FUND stocks, warrants, rights to subscribe to common stock CORE EQUITY FUND and convertible securities, as well as instruments that E-COMMERCE OPPORTUNITY FUND attempt to track the price movement of equity indices. GROWTH AND INCOME FUND Investments in equity securities and equity derivatives in INTERNATIONAL EQUITY FUND general are subject to market risks that may cause their INTERNATIONAL EQUITY INDEX FUND prices to fluctuate over time. The value of securities MID-CAP EQUITY FUND convertible into equity securities, such as warrants or SMALL CAP EQUITY FUND convertible debt, is also affected by prevailing interest SMALL CAP GROWTH STOCK FUND rates, the credit quality of the issuer and any call TAX SENSITIVE GROWTH FUND provision. Fluctuations in the value of equity securities in VALUE INCOME STOCK FUND which a mutual fund invests will cause a fund's net asset LIFE VISION BALANCED PORTFOLIO value to fluctuate. An investment in a portfolio of equity LIFE VISION GROWTH AND INCOME PORTFOLIO securities may be more suitable for long-term investors LIFE VISION MAXIMUM GROWTH PORTFOLIO who can bear the risk of these share price fluctuations. FIXED INCOME RISK -- The market value of fixed BALANCED FUND income investments change in response to interest rate INVESTMENT GRADE BOND FUND changes and other factors. During periods of falling LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND interest rates, the values of outstanding fixed income SHORT-TERM BOND FUND securities generally rise. Moreover, while securities with SHORT-TERM U.S. TREASURY SECURITIES FUND longer maturities tend to produce higher yields, the prices LIFE VISION BALANCED PORTFOLIO of longer maturity securities are also subject to greater LIFE VISION GROWTH AND INCOME PORTFOLIO market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK -- The possibility that an issuer will BALANCED FUND be unable to make timely payments of either principal or interest. INVESTMENT GRADE BOND FUND SHORT-TERM BOND FUND FOREIGN SECURITY RISKS -- Investments in securities of foreign GROWTH AND INCOME FUND companies or governments can be more volatile than investments INTERNATIONAL EQUITY FUND in U.S. companies or governments. Diplomatic, political, or INTERNATIONAL EQUITY INDEX FUND economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. TRACKING ERROR RISK -- Factors such as Fund INTERNATIONAL EQUITY INDEX FUND expenses, imperfect correlation between the Fund's investments and those of their benchmarks, rounding of share prices, changes to the benchmark, regulatory policies, and leverage, may affect their ability to achieve perfect correlation. The magnitude of any tracking error may be affected by a higher portfolio turnover rate. Because an index is just a composite of the prices of the securities it represents rather than an actual portfolio of those securities, an index will have no expenses. As a result, a Fund, which will have expenses such as taxes, custody, management fees and other operational costs, and brokerage, may not achieve its investment objective of accurately correlating to an index. YEAR 2000 RISK-- The Funds depend on the smooth ALL FUNDS functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business. Furthermore, many foreign countries are not as prepared as the U.S. for the year 2000 transition. As a result, computer difficulties in foreign markets and with foreign institutions as a result of the year 2000 may add to the possibility of losses to the Funds and their shareholders.
EACH FUND'S OTHER INVESTMENTS The prospectus describes the Fund's primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund (except the Money Market Funds) may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Investment Grade Bond and Short-Term Bond Funds each may shorten its average weighted maturity to as little as 90 days. A Fund (other than a Money Market Fund) will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A. (STI), P. O. Box 3786, Orlando, Florida 32802, serves as the Adviser to the Balanced Fund, Capital Appreciation Fund, International Equity Fund, Investment Grade Bond Fund, Limited-Term Federal Mortgage Securities Fund, Mid-Cap Equity Fund, Small Cap Equity Fund and Value Income Stock Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of:
BALANCED FUND 0.86% CAPITAL APPRECIATION FUND 1.06% INTERNATIONAL EQUITY FUND 1.20% INVESTMENT GRADE BOND FUND 0.66% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.55% MID-CAP EQUITY FUND 1.04% SMALL CAP EQUITY FUND 1.10% VALUE INCOME STOCK FUND 0.80%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Core Equity Fund, E-Commerce Opportunity Fund, Growth and Income Fund, International Equity Index, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Fund, Small Cap Growth Stock Fund, Tax Sensitive Growth Stock Fund, U.S. Government Securities Fund, Prime Quality Money Market Fund, U.S. Government Securities Money Market Fund, U.S. Treasury Money Market Fund, Life Vision Balanced Portfolio, Life Vision Growth and Income Portfolio and Life Vision Maximum Growth Portfolio. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of:
INTERNATIONAL EQUITY INDEX FUND 0.79% PRIME QUALITY MONEY MARKET FUND 0.48% SHORT-TERM BOND FUND 0.55% SHORT-TERM U.S. TREASURY SECURITIES FUND 0.54% U.S. GOVERNMENT SECURITIES FUND 0.63% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.52%
The Small Cap Growth Stock and Tax Sensitive Growth Stock Funds had not completed a full fiscal year and the Core Equity and E-Commerce Opportunity Funds had not commenced operations as of May 31, 1999. Prior to May 24, 1999, Crestar Asset Management Company served as the Adviser to the predecessors of the following Funds. For the fiscal period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of:
GROWTH AND INCOME FUND 0.75% U.S. TREASURY MONEY MARKET FUND 0.38% LIFE VISION BALANCED PORTFOLIO 0.12% LIFE VISION GROWTH AND INCOME PORTFOLIO 0.10% LIFE VISION MAXIMUM GROWTH PORTFOLIO 0.09%
The Advisers may use their affiliates as brokers for Fund transactions. THE INVESTMENT TEAM The Life Vision Balanced Portfolio, Life Vision Growth and Income Portfolio and Life Vision Maximum Growth Portfolio are managed by a team of investment professionals. No one person is primarily responsible for making investment recommendations to the team. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Anthony R. Gray, Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed income portion of the Fund. Mr. Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has more than 30 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. He has more than 13 years of investment experience. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has more than 20 years of investment experience. Mr. Anthony Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has managed the Capital Appreciation Fund since it began operating in June 1992. He has more than 30 years of investment experience. Mr. Robert J. Rhodes, CFA, has been employed by Trusco since 1973, and Director of Research since 1980. He has managed the Core Equity Fund since its inception in October 1999. He has more than 26 years of investment experience. Mr. Alan S. Kelley has served as a portfolio manager of Trusco since 1999. He has managed the E-Commerce Opportunity Fund since it began operating in October 1999. Prior to joining Trusco, Mr. Kelley served as a portfolio manager with SunTrust Bank, Atlanta from 1995 to 1999. Prior to 1995, he was a portfolio manager of Urban Equities, LLC. He has more than 5 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as lead portfolio manager of the Growth and Income Fund since it began operating in September 1992. Since 1992, he has served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999. Mr. Markunas has more than 17 years of investment experience. Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed the International Equity Fund since May 1997. Prior to joining STI Capital Management, N.A., Mr. Dau served as a senior international equity analyst for American Express Financial Advisors from 1996 to 1997 and as an international portfolio manager for the Principal Financial Group from 1992 to 1995. He has more than 8 years of investment experience. The International Equity Index Fund is managed by Mr. Chad Deakins and co-managed by Mr. Robert J. Rhodes. Mr. Deakins has served as a portfolio manager at Trusco since February 1999 and as a portfolio assistant since 1996. He has managed the International Equity Index Fund since February 1999. Prior to joining Trusco, Mr. Deakins worked at SunTrust Banks. He has more than 4 years of investment experience. Mr. Rhodes has served as Senior Vice President of Trusco since 1973. He has co-managed the International Equity Index Fund since it began operating in June 1994. He has more than 26 years of investment experience. The Investment Grade Bond Fund is co-managed by Mr. L. Earl Denney, CFA and Mr. Dave E. West, CFA. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has co-managed the Investment Grade Bond Fund since it began operating in June 1992. He has more than 20 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. Mr. West also co-manages the Investment Grade Bond Fund with Mr. Denney. He has more than 14 years of investment experience. The Limited-Term Federal Mortgage Securities Fund is co-managed by Mr. Dave E. West, CFA and Mr. L. Earl Denney, CFA. Mr. West has served as a Managing Director of STI and has worked there since 1985. He has managed the Limited-Term Federal Mortgage Securities Fund since it began operating in June 1994. He has more than 14 years of investment experience. Mr. West also co-manages the Investment Grade Bond Fund with Mr. Denney. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has co-managed the Limited-Term Mortgage Securities Fund since it began operating in June 1994. He has more than 20 years of investment experience. Mr. John Hamlin has served as Portfolio Manager of STI since March 1999. He has managed the Mid-Cap Equity Fund since April 1999. Prior to joining STI, Mr. Hamlin served as Portfolio Manager at Phoenix Investment Counsel, Inc. from 1992 to 1999. He has more 10 years of investment experience. Mr. David Yealy has served as Vice President of Trusco since 1993. He has managed the Prime Quality Money Market Fund since its inception in June 1992, the Short-Term U.S. Treasury Securities Fund since July 1996, and the U.S. Government Securities Money Market Fund since its inception in June 1992. He has more than 13 years of investment experience. Ms. Agnes Pampush, CFA, has served as Vice President of Trusco since 1988. She has managed the Short-Term Bond Fund since February 1999. She has more than 16 years of investment experience. Mr. Brett Barner, CFA, has served as a Managing Director of STI since 1994. He has managed the Small Cap Equity Fund since it began operating in January 1997. He has more than 15 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. Prior to joining Trusco, Mr. Garfinkel served as a portfolio manager with SunTrust Banks. He has more than 10 years of investment experience. Mr. Jonathan Mote, CFA, CFP, served as Portfolio Manager of Trusco since August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began operating in December 1998. Prior to joining Trusco, Mr. Mote served as a portfolio manager with SunTrust Banks. He has more than 14 years of investment experience. The U.S. Government Securities Fund is 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 Senior Vice President of Trusco since 1986, and has more than 28 years of investment experience. Mr. Ford has been a Portfolio Manager of Trusco since April 1994, and has more than 15 years of investment experience. Mr. Robert S. Bowman, CFA, has served as Vice President of Trusco since January 1999. He has managed the U.S. Treasury Money Market Fund since 1995. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995, and Vice president since 1995 of Crestar Asset Management Company. Mr. Bowman has more than 5 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. He has more than 17 years of investment experience. Mr. Lewis has served as a portfolio manager of STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 7 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions and potentially through the 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. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. If you are no longer eligible to participate in a 401(k) plan that holds Trust Shares of a Life Vision Portfolio on your behalf, you may exchange those shares for Investor Shares of the underlying Funds held by that Portfolio. There is no sales charge for such an exchange. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). But you may not do so for shares of the Money Market Funds on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund (except the Money Market Funds), generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. Each Money Market Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time.) So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Money Market Funds must generally receive your order before 3:00 p.m. Eastern time and receive federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as each Money Market Fund receives federal funds before calculating its NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund (except the Money Market Funds) generally values its investment portfolio at market price. In calculating NAV for each Money Market Fund, each Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If market prices are unavailable or a Fund thinks that the market price or amortized cost valuation method is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Each Money Market Fund expects its NAV to remain constant at $1.00 per share, although the Fund cannot guarantee this. Some Funds hold securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Funds do not calculate NAV. As a result, the market value of these investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. Redemption orders must be received by the Money Market Funds on a Business Day before 3:00 p.m. Eastern time. Orders received after this time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Adviser receives your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: QUARTERLY - ---------------------------------------------------------------------- BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INVESTMENT GRADE BOND FUND MID-CAP EQUITY FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND LIFE VISION BALANCED PORTFOLIO LIFE VISION GROWTH AND INCOME PORTFOLIO LIFE VISION MAXIMUM GROWTH PORTFOLIO ANNUALLY - ---------------------------------------------------------------------- INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND The Bond and Money Market Funds declare dividends daily and pay these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receive your written notice. To cancel your election, simply send the Funds written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. The International Equity and International Equity Index Funds may be able to pass along a tax credit for foreign income taxes they pay. Each Fund will notify you if it gives you the credit. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow present performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The information for each Fund, except the Growth and Income Fund and U.S. Treasury Money Market Fund, and the Life Vision Balanced Portfolio, Life Vision Growth and Income Portfolio, and Life Vision Maximum Growth Portfolio for the periods ended prior to May 31, 1999 have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund and U.S. Treasury Money Market Fund, and the Life Vision Balanced Portfolio, Life Vision Growth and Income Portfolio, and Life Vision Maximum Growth Portfolio for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI, at no charge by calling 1-800-874-4770. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED NET AND NET ASSET UNREALIZED DISTRIBUTION ASSET RATIO OF VALUE NET GAINS DISTRIBUTIONS FROM VALUE NET ASSETS EXPENSES BEGINNING INVESTMENT (LOSSES) FROM NET REALIZED END END OF TO OF INCOME ON INVESTMENT CAPITAL OF TOTAL PERIOD AVERAGE PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------------- BALANCED FUND TRUST SHARES 1999 $13.09 $0.28 $1.09 $(0.28) $(0.92) $13.26 10.98% $251,752 0.97% 1998 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 188,465 0.96 1997 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 151,358 0.95 1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26 111,638 0.95 1995 9.76 0.33 0.49 (0.32) -- 10.26 8.72 89,051 0.95 CAPITAL APPRECIATION FUND TRUST SHARES 1999 $16.48 $ 0.05 $2.70 $(0.06) $(2.55) $16.62 17.83% $1,966,842 1.17% 1998 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1,532,587 1.16 1997 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1,085,128 1.15 1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 981,498 1.15 1995 11.99 0.16 0.57 (0.14) (0.40) 12.18 6.63 984,205 1.15 GROWTH AND INCOME FUND (A) TRUST SHARES 1999(1) $15.10 $ 0.04 $ 1.97 $(0.02) $(1.00) $16.09 14.24% $ 634,279 1.14% FOR THE YEARS ENDED NOVEMBER 30: 1998 16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64% 577,042 1.03% 1997 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 590,824 1.02 1996 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68 553,648 1.02 1995 10.73 0.24 2.62 (0.26) (1.73) 11.60 28.76 220,386 1.02 1994 11.38 0.20 (0.24) (0.19) (0.42) 10.73 (0.49) 166,713 1.01 RATIO OF RATIO OF RATIO OF NET INVESTMENT NET EXPENSES TO INCOME INVESTMENT AVERAGE NET TO AVERAGE NET INCOME ASSETS ASSETS TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE WAIVERS AND WAIVERS AND TURNOVER NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - --------------------------------------------------------------------------- BALANCED FUND TRUST SHARES 1999 2.19% 1.06% 2.10% 179% 1998 2.51 1.08 2.39 154 1997 2.89 1.08 2.76 197 1996 3.00 1.09 2.86 155 1995 3.44 1.11 3.28 157 CAPITAL APPRECIATION FUND TRUST SHARES 1999 0.29% 1.26% 0.20% 147% 1998 0.61 1.27 0.50 194 1997 0.83 1.25 0.73 141 1996 0.90 1.27 0.78 156 1995 1.38 1.28 1.25 128 GROWTH AND INCOME FUND (A) TRUST SHARES 1999(1) 0.49% 1.43% 0.20% 31% FOR THE YEARS ENDED NOVEMBER 30: 1998 0.63% 1.21 0.45% 71% 1997 0.92 1.17 0.77 100 1996 1.38 1.17 1.23 82 1995 2.16 1.17 2.01 175 1994 1.82 1.01 1.82 116
+ Returns are for the period indicated and have not been annualized. total return figures do not reflect applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The Crestar Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED NET AND NET ASSET UNREALIZED DISTRIBUTION ASSET RATIO OF VALUE NET GAINS DISTRIBUTIONS FROM VALUE NET ASSETS EXPENSES BEGINNING INVESTMENT (LOSSES) FROM NET REALIZED END END OF TO OF INCOME ON INVESTMENT CAPITAL OF TOTAL PERIOD AVERAGE PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) NET ASSETS - ---------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND TRUST SHARES 1999 $15.00 $ -- $(1.14) $(0.05) $(0.84) $12.97 (7.43%) $573,255 1.47% 1998 13.63 0.04 2.69 (0.04) (1.32) 15.00 21.87 628,870 1.47 1997 11.40 0.03 2.57 (0.02) (0.35) 13.63 23.29 489,325 1.46 1996(2) 10.00 0.05 1.35 -- -- 11.40 14.00 213,306 1.46 INTERNATIONAL EQUITY INDEX FUND TRUST SHARES 1999 $13.31 $ 0.09 $ 0.85 $(0.24) $(2.19) $11.82 7.87% $74,616 1.07% 1998 11.34 0.11 2.65 (0.11) (0.68) 13.31 25.82 56,200 1.06 1997 10.96 0.10 0.69 (0.11) (0.30) 11.34 7.48 53,516 1.05 1996 10.24 0.10 0.84 (0.13) (0.09) 10.96 9.29 90,980 1.05 1995(3) 10.00 0.08 0.19 (0.02) (0.01) 10.24 2.69 89,446 1.05 INVESTMENT GRADE BOND FUND TRUST SHARES 1999 $10.65 $ 0.56 $(0.11) $(0.56) $(0.18) $10.36 4.25% $1,149,068 0.77% 1998 10.16 0.60 0.49 (0.60) -- 10.65 10.92 793,488 0.76 1997 10.07 0.60 0.09 (0.60) -- 10.16 6.99 633,646 0.75 1996 10.26 0.60 (0.19) (0.60) -- 10.07 4.02 599,514 0.75 1995 9.89 0.61 0.37 (0.61) -- 10.26 10.39 543,308 0.75 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND TRUST SHARES 1999 $10.12 $ 0.54 $(0.06) $(0.54) $(0.12) $9.94 4.75% $135,256 0.67% 1998 10.02 0.58 0.11 (0.58) (0.01) 10.12 7.12 137,488 0.66 1997 9.99 0.58 0.04 (0.58) (0.01) 10.02 6.43 123,903 0.65 1996 10.11 0.62 (0.14) (0.60) -- 9.99 4.84 73,370 0.65 1995(4) 10.00 0.58 0.13 (0.60) -- 10.11 7.50 41,823 0.65 RATIO OF RATIO OF RATIO OF NET INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET INCOME ASSETS ASSETS (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE WAIVERS AND WAIVERS AND TURNOVER NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND TRUST SHARES 1999 0.68% 1.52% 0.63% 161% 1998 0.61 1.48 0.60 108 1997 0.51 1.51 0.46 139 1996(2) 1.36 1.65 1.17 113 INTERNATIONAL EQUITY INDEX FUND TRUST SHARES 1999 0.69% 1.17% 0.59% 32% 1998 0.88 1.18 0.76 1 1997 0.71 1.15 0.61 2 1996 0.84 1.19 0.70 30 1995(3) 1.13 1.31 0.87 10 INVESTMENT GRADE BOND FUND TRUST SHARES 1999 5.25% 0.85% 5.17% 221% 1998 5.67 0.86 5.57 109 1997 5.89 0.85 5.79 298 1996 5.81 0.87 5.69 184 1995 6.22 0.88 6.09 238 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND TRUST SHARES 1999 5.28% 0.77% 5.18% 379% 1998 5.75 0.77 5.64 163 1997 5.81 0.78 5.68 133 1996 6.04 0.84 5.85 83 1995(4) 6.43 0.93 6.15 68
+ Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (2) Commenced operations on December 1, 1995. All ratios for the period have been annualized. (3) Commenced operations on June 6, 1994. All ratios for the period have been annualized. (4) Commenced operations on June 7, 1994. All ratios for the period have been annualized. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED NET AND NET ASSET UNREALIZED DISTRIBUTION ASSET RATIO OF VALUE NET GAINS DISTRIBUTIONS FROM VALUE NET ASSETS EXPENSES BEGINNING INVESTMENT (LOSSES) FROM NET REALIZED END END OF TO OF INCOME ON INVESTMENT CAPITAL OF TOTAL PERIOD AVERAGE PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) NET ASSETS - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY FUND TRUST SHARES 1999 $13.79 $ 0.01 $0.07 $ -- $(1.19) $12.68 1.61% $254,055 1.17% 1998 13.21 -- 2.54 -- (1.96) 13.79 21.14 337,825 1.16 1997 12.76 0.03 1.69 (0.05) (1.22) 13.21 14.23 287,370 1.15 1996 11.00 0.08 2.63 (0.08) (0.87) 12.76 25.54 253,905 1.15 1995 9.85 0.08 1.15 (0.08) -- 11.00 12.56 125,562 1.15 SHORT-TERM BOND FUND TRUST SHARES 1999 $10.05 $0.51 $(0.10) $(0.52) $(0.03) $ 9.91 4.06% $209,904 0.67% 1998 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 120,422 0.66 1997 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 89,701 0.65 1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45 91,156 0.65 1995 9.79 0.53 0.19 (0.53) -- 9.98 7.60 60,952 0.65 SHORT-TERM U.S. TREASURY SECURITIES FUND TRUST SHARES 1999 $ 9.97 $0.47 $(0.02) $(0.47) $ -- $ 9.95 4.59% $ 56,027 0.67% 1998 9.88 0.51 0.10 (0.52) -- 9.97 6.30 46,920 0.66 1997 9.84 0.51 0.04 (0.51) -- 9.88 5.76 21,988 0.65 1996 9.93 0.55 (0.09) (0.55) -- 9.84 4.73 10,149 0.65 1995 9.82 0.47 0.11 (0.47) -- 9.93 6.11 9,599 0.65 SMALL CAP EQUITY FUND TRUST SHARES 1999 $12.88 $0.13 $(2.57) $(0.13) $(0.61) $ 9.70 (18.72%) $301,984 1.22% 1998 11.07 0.14 2.41 (0.12) (0.62) 12.88 23.59 390,841 1.21 1997(1) 10.00 0.05 1.04 (0.02) -- 11.07 10.97 131,049 1.20 RATIO OF RATIO OF RATIO OF NET INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET INCOME ASSETS ASSETS (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE WAIVERS AND WAIVERS AND TURNOVER NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------- MID-CAP EQUITY FUND TRUST SHARES 1999 (0.47%) 1.28% (0.58%) 76% 1998 (0.29) 1.27 (0.40) 129 1997 0.23 1.26 0.12 152 1996 0.70 1.29 0.56 116 1995 0.88 1.32 0.71 66 SHORT-TERM BOND FUND TRUST SHARES 1999 5.12% 0.77% 5.02% 108% 1998 5.47 0.79 5.34 87 1997 5.37 0.78 5.24 118 1996 5.39 0.81 5.23 163 1995 5.49 0.85 5.29 200 SHORT-TERM U.S. TREASURY SECURITIES FUND TRUST SHARES 1999 4.69% 0.78% 4.58% 57% 1998 5.19 0.84 5.01 39 1997 5.23 0.92 4.96 93 1996 5.56 1.00 5.21 94 1995 4.91 1.08 4.48 88 SMALL CAP EQUITY FUND TRUST SHARES 1999 1.27% 1.27% 1.22% 63% 1998 1.07 1.31 0.97 55 1997(1) 1.86 1.37 1.69 27
+ Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on January 31, 1997. All ratios for the period have been annualized. STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED NET AND NET ASSET UNREALIZED DISTRIBUTION ASSET RATIO OF VALUE NET GAINS DISTRIBUTIONS FROM VALUE NET ASSETS EXPENSES BEGINNING INVESTMENT (LOSSES) FROM NET REALIZED END END OF TO OF INCOME ON INVESTMENT CAPITAL OF TOTAL PERIOD AVERAGE PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) NET ASSETS - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP GROWTH STOCK FUND TRUST SHARES 1999(2) $10.00 $(0.05) $ 4.62 $ -- $(0.02) $14.55 45.70% $152,290 1.20% TAX SENSITIVE GROWTH STOCK FUND TRUST SHARES 1999(3) $25.61 $0.02 $ 4.34 $(0.01) $ -- $29.96 17.04% $223,543 1.20% U.S. GOVERNMENT SECURITIES FUND TRUST SHARES 1999 $10.46 $0.59 $(0.18) $(0.59) $ -- $10.28 3.90% $102,167 0.77% 1998 10.02 0.61 0.44 (0.61) -- 10.46 10.76 34,899 0.76 1997 9.91 0.62 0.11 (0.62) -- 10.02 7.54 19,471 0.75 1996 10.27 0.62 (0.33) (0.62) (0.03) 9.91 2.77 10,277 0.75 1995(4) 9.98 0.53 0.29 (0.53) -- 10.27 8.64 3,291 0.75 VALUE INCOME STOCK FUND TRUST SHARES 1999 $13.90 $0.24 $1.02 $(0.24) $(2.07) $12.85 11.13% $1,589,951 0.92% 1998 13.71 0.26 2.62 (0.27) (2.42) 13.90 23.10 1,725,418 0.92 1997 13.15 0.30 2.32 (0.30) (1.76) 13.71 22.18 1,488,062 0.91 1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91 1,244,399 0.92 1995 10.54 0.32 1.56 (0.32) (0.51) 11.59 19.06 991,977 0.95 RATIO OF RATIO OF RATIO OF NET INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET INCOME ASSETS ASSETS (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE WAIVERS AND WAIVERS AND TURNOVER NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------- SMALL CAP GROWTH STOCK FUND TRUST SHARES 1999(2) (0.48%) 1.49% (0.77%) 75% TAX SENSITIVE GROWTH STOCK FUND TRUST SHARES 1999(3) 0.21% 1.34% 0.07% 18% U.S. GOVERNMENT SECURITIES FUND TRUST SHARES 1999 5.58% 0.88% 5.47% 19% 1998 5.93 0.92 5.77 14 1997 6.19 1.02 5.92 21 1996 6.05 1.25 5.55 83 1995(4) 6.67 3.33 4.09 30 VALUE INCOME STOCK FUND TRUST SHARES 1999 1.91% 0.92% 1.91% 69% 1998 1.85 0.92 1.85 99 1997 2.40 0.91 2.40 105 1996 2.86 0.92 2.86 134 1995 3.16 0.95 3.16 126
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (2) Commenced operations on October 8, 1998. All ratios for the period have been annualized. (3) Commenced operations on December 11, 1998. All ratios for the period have been annualized. (4) Commenced operations on July 31, 1994. All ratios for the period have been annualized. STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED NET AND NET ASSET UNREALIZED DISTRIBUTION ASSET RATIO OF VALUE NET GAINS DISTRIBUTIONS FROM VALUE NET ASSETS EXPENSES BEGINNING INVESTMENT (LOSSES) FROM NET REALIZED END END OF TO OF INCOME ON INVESTMENT CAPITAL OF TOTAL PERIOD AVERAGE PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) NET ASSETS - ------------------------------------------------------------------------------------------------------------------------------------ PRIME QUALITY MONEY MARKET FUND TRUST SHARES 1999 $1.00 $0.05 $-- $(0.05) $-- $1.00 4.83% $3,903,232 0.60% 1998 1.00 0.05 -- (0.05) -- 1.00 5.22% 1,880,229 0.59% 1997 1.00 0.05 -- (0.05) -- 1.00 5.01% 1,086,555 0.58% 1996 1.00 0.05 -- (0.05) -- 1.00 5.25% 1,050,800 0.58% 1995 1.00 0.05 -- (0.05) -- 1.00 4.79% 799,189 0.58% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND TRUST SHARES 1999 $1.00 $0.04 $-- $(0.04) $-- $1.00 4.57% $404,459 0.63% 1998 1.00 0.05 -- (0.05) -- 1.00 5.04% 377,490 0.62% 1997 1.00 0.05 -- (0.05) -- 1.00 4.83% 344,350 0.61% 1996 1.00 0.05 -- (0.05) -- 1.00 5.14% 325,493 0.61% 1995 1.00 0.05 -- (0.05) -- 1.00 4.67% 434,111 0.61% U.S. TREASURY MONEY MARKET FUND (A) TRUST SHARES 1999* $1.00 $0.02 $-- $(0.02) $-- $1.00 2.08% $760,833 0.68% FOR THE YEAR ENDED NOVEMBER 30: 1998 1.00 0.05 -- (0.05) -- 1.00 4.89% 699,923 0.66% 1997 1.00 0.05 -- (0.05) -- 1.00 4.91% 632,381 0.65% 1996 1.00 0.05 -- (0.05) -- 1.00 4.80% 389,051 0.66% 1995 1.00 0.05 -- (0.05) -- 1.00 5.29% 370,454 0.66% RATIO OF RATIO OF RATIO OF NET INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET INCOME ASSETS ASSETS (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE WAIVERS AND WAIVERS AND TURNOVER NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------- PRIME QUALITY MONEY MARKET FUND TRUST SHARES 1999 4.69% 0.77% 4.52% 1998 5.10% 0.77% 4.92% 1997 4.90% 0.76% 4.72% 1996 5.11% 0.78% 4.91% 1995 4.77% 0.79% 4.56% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND TRUST SHARES 1999 4.47% 0.76% 4.34% 1998 4.92% 0.78% 4.76% 1997 4.73% 0.76% 4.58% 1996 5.02% 0.78% 4.85% 1995 4.64% 0.80% 4.45% U.S. TREASURY MONEY MARKET FUND (A) TRUST SHARES 1999* 4.10% 0.83% 3.95% FOR THE YEAR ENDED NOVEMBER 30: 1998 4.77% 0.81% 4.62% 1997 4.82% 0.80% 4.67% 1996 4.69% 0.81% 4.54% 1995 5.16% 0.81% 5.01%
* For the period December 1, 1998 TO May 31, 1999. All ratios for the period have been annualized. + Total return is for the period indicated and has not been annualized. (A) On May 24, 1999, the Crestar U.S. Treasury Money Fund Exchanged all of its assets and certain liabilities for shares of the U.S. Treasury Money Market Fund. The Crestar U.S. Treasury Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0. STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED NET AND NET ASSET UNREALIZED DISTRIBUTION ASSET RATIO OF VALUE NET GAINS DISTRIBUTIONS FROM VALUE NET ASSETS EXPENSES BEGINNING INVESTMENT (LOSSES) FROM NET REALIZED END END OF TO OF INCOME ON INVESTMENT CAPITAL OF TOTAL PERIOD AVERAGE PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN+ (000) NET ASSETS - ------------------------------------------------------------------------------------------------------------------------------------ LIFE VISION BALANCED PORTFOLIO (A) TRUST SHARES 1999(1) $11.01 $0.11 $0.56 $(0.09) $(0.79) $10.80 6.35% $88,188 0.27% FOR THE YEARS ENDED NOVEMBER 30: 1998 10.46 0.24 0.58 (0.24) (0.03) 11.01 7.90 93,211 0.25 1997(2) 10.00 0.12 0.45 (0.11) -- 10.46 5.70 89,442 0.25 LIFE VISION GROWTH AND INCOME PORTFOLIO (A) TRUST SHARES 1999(1) $11.06 $0.08 $0.69 $(0.06) $(1.44) $10.33 7.75% $21,950 0.27% FOR THE YEARS ENDED NOVEMBER 30: 1998 10.51 0.18 0.56 (0.18) (0.01) 11.06 7.12 19,042 0.25 1997(2) 10.00 0.09 0.51 (0.09) -- 10.51 5.97 22,521 0.25 LIFE VISION MAXIMUM GROWTH PORTFOLIO (A) TRUST SHARES 1999(1) $11.32 $0.02 $1.13 $(0.01) $(1.15) $11.31 10.99% $18,699 0.27% FOR THE YEARS ENDED NOVEMBER 30: 1998 10.65 0.03 0.67 (0.03) -- 11.32 6.53 16,230 0.25 1997(2) 10.00 0.03 0.65 (0.03) -- 10.65 6.82 13,712 0.25 RATIO OF RATIO OF RATIO OF NET INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET INCOME ASSETS ASSETS (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE WAIVERS AND WAIVERS AND TURNOVER NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------- LIFE VISION BALANCED PORTFOLIO (A) TRUST SHARES 1999(1) 1.90% 0.42% 1.75% 48% FOR THE YEARS ENDED NOVEMBER 30: 1998 2.21 0.42 2.04 52 1997(2) 2.66 0.42 2.49 43 LIFE VISION GROWTH AND INCOME PORTFOLIO TRUST SHARES 1999(1) 1.38% 0.60% 1.05% 40% FOR THE YEARS ENDED NOVEMBER 30: 1998 1.68 0.59 1.34 57 1997(2) 2.11 0.59 1.77 25 LIFE VISION MAXIMUM GROWTH PORTFOLIO (A) TRUST SHARES 1999(1) 0.28% 0.63% (0.08%) 33% FOR THE YEARS ENDED NOVEMBER 30: 1998 0.23 0.66 (0.18) 75 1997(2) 0.72 0.73 0.24 34
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (A) On May 24, 1999, the Crestar Life Vision Balanced, Crestar Life Vision Growth and Income, and Crestar Life Vision Maximum Growth portfolios exchanged all of their assets and certain liabilities for shares of the Life Vision Balanced, Life Vision Growth and Income, and Life Vision Maximum Growth portfolios, respectively. The Crestar Life Vision Balanced, Crestar Life Vision Growth and Income, and Crestar Life Vision Maximum Growth portfolios are the accounting survivors in these transactions, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (2) Commenced operations on JUNE 30, 1997. All ratios for the period have been annualized. STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS BOND AND MONEY MARKET FUNDS TRUST SHARES PROSPECTUS OCTOBER 1, 1999 FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND U.S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND MONEY MARKET FUNDS PRIME QUALITY MONEY MARKET FUND TAX-EXEMPT MONEY MARKET FUND TAX-FREE MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND U.S. TREASURY MONEY MARKET FUND INVESTMENT ADVISERS STI CAPITAL MANAGEMENT, N.A. SUNTRUST BANK, ATLANTA TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund (other than a money market fund) is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Bond and Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: PAGE FLORIDA TAX-EXEMPT BOND FUND................................ 3 GEORGIA TAX-EXEMPT BOND FUND................................ 4 INVESTMENT GRADE BOND FUND.................................. 6 INVESTMENT GRADE TAX-EXEMPT BOND FUND....................... 8 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND............... 10 MARYLAND MUNICIPAL BOND FUND................................ 12 SHORT-TERM BOND FUND........................................ 14 SHORT-TERM U.S. TREASURY SECURITIES FUND.................... 16 U.S. GOVERNMENT SECURITIES FUND............................. 18 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND................... 20 VIRGINIA MUNICIPAL BOND FUND................................ 22 PRIME QUALITY MONEY MARKET FUND............................. 24 TAX-EXEMPT MONEY MARKET FUND................................ 26 TAX-FREE MONEY MARKET FUND.................................. 28 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND................ 30 U.S. TREASURY MONEY MARKET FUND............................. 32 MORE INFORMATION ABOUT RISK................................. 34 EACH FUND'S OTHER INVESTMENTS............................... 35 THE INVESTMENT ADVISERS AND PORTFOLIO MANAGERS.............. 36 PURCHASING AND SELLING FUND SHARES.......................... 37 DIVIDENDS AND DISTRIBUTIONS................................. 39 TAXES....................................................... 40 FINANCIAL HIGHLIGHTS........................................ 46 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS........................................... Back Cover [INSERT ICONS HERE] FLORIDA TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOAL Current income exempt from federal income taxes for Florida residents with shares themselves expected to be exempt from the Florida intangible personal property tax INVESTMENT FOCUS Florida municipal securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones INVESTOR PROFILE Florida residents who want income exempt from federal income taxes INVESTMENT STRATEGY The Florida Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal income taxes, and the shares themselves are expected to be exempt from the Florida intangible personal property tax. Issuers of these securities can be located in Florida, Puerto Rico and other U.S. territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. Under certain circumstances, such as a national financial emergency or a temporary decline in availability of Florida obligations, up to 20% of the Fund's assets may be invested in securities subject to the Florida intangible personal property tax and/or securities that generate income subject to federal personal income taxes. These securities may include short-term municipal securities outside Florida or certain taxable fixed income securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Florida subjects the Fund to economic and government policies of Florida. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 15.85% 1996 3.94% 1997 7.82% 1998 6.24%
BEST QUARTER WORST QUARTER 6.18% -1.41% (3/31/95) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -2.10%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ----------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund 6.24% 6.45%* Lehman Brothers 10-Year Municipal Bond Index 6.76% 6.19%**
* SINCE 1/25/94 ** SINCE 1/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The index represents various market sectors and geographic locations. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.55% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones INVESTOR PROFILE Georgia residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Georgia Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Georgia income taxes. Issuers of these securities can be located in Georgia, Puerto Rico and other U.S. Territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser tries to diversify the Fund's holdings within Georgia. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Georgia subjects the Fund to economic conditions and government policies within Georgia. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 13.51% 1996 3.53% 1997 8.17% 1998 5.79%
BEST QUARTER WORST QUARTER 5.02% -0.79% (3/31/95) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -2.24%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund 5.79% 5.06%* Lehman Brothers 10-Year Municipal Bond Index 6.76% 6.19%**
* SINCE 1/18/94 ** SINCE 1/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The index represents various market sectors and geographic locations. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 0.78%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $80 $249 $433 $966
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.54% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers Government/Corporate Bond Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 10.84% 1994 -3.32% 1995 17.80% 1996 2.34% 1997 9.08% 1998 9.19% BEST QUARTER WORST QUARTER 6.11% -2.67% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.83%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------- Investment Grade Bond Fund 9.19% 6.78% 7.30%* Lehman Brothers Government/Corporate Bond Index 9.47% 7.30% 7.77%**
* SINCE 7/16/92 ** SINCE 7/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ---------------------------------------------------------------------------- Investment Advisory Fees 0.74% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.85%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $87 $271 $471 $1,049
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.66% AND 0.77%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones INVESTOR PROFILE Investors who want to receive tax-free current income and an increase in the value of their investment 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 possessions. In addition, up to 20% of the Fund may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1994 -0.32% 1995 14.97% 1996 5.52% 1997 7.79% 1998 7.06% BEST QUARTER WORST QUARTER 6.07% -3.14% (3/31/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -0.96%. THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX. PREVIOUSLY THE FUND'S RETURNS HAD BEEN COMPARED TO THE LEHMAN BROTHERS 5-YEAR G.O. INDEX, BUT THE ADVISER BELIEVES THAT THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX, BECAUSE OF ITS EMPHASIS ON REVENUE BONDS AS WELL AS GENERAL OBLIGATION BONDS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund 7.06% 6.89% 6.71%* Lehman Brothers 5-Year Municipal Bond Index 5.85% 5.22% 5.25%** Lehman Brothers 5-Year G.O. Index 5.85% 5.36% 5.40%**
* SINCE 10/21/93 ** SINCE 10/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Lehman Brothers 5-Year G.O. Index, is a widely-recognized index of municipal bonds with maturities ranging from 4 to 6 years. The Lehman Brothers 5-Year Municipal Bond Index is a widely-recognized index of intermediate investment grade tax-exempt bonds. The index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 4 and 6 years. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------------- Investment Advisory Fees 0.74% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 0.87%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $89 $278 $482 $1,073
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.64% AND 0.77%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital INVESTMENT FOCUS Mortgage-backed securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that are less prone to prepayment risk INVESTOR PROFILE Conservative investors who want to receive income from their investment INVESTMENT STRATEGY The Limited-Term Federal Mortgage Securities Fund invests primarily in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA and collateralized mortgage obligations. These securities typically have an effective maturity from 1 to 5 years. In selecting investments for the Fund, the Adviser tries to identify securities that the Adviser expects to perform well in rising and falling markets. The Adviser also attempts to reduce the risk that the underlying mortgages are prepaid by focusing on securities that it believes are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for prepayment, but few have occurred. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, mortgage-backed securities, may underperform other fixed income market segments or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 12.14% 1996 4.53% 1997 6.74% 1998 6.90% BEST QUARTER WORST QUARTER 4.05% -0.32% (3/31/95) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 0.32%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S. TREASURY INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S. GOVERNMENTS, INTERMEDIATE-TERM INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - --------------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 6.90% 6.64%* Merrill Lynch 1-5 Year U.S. Treasury Index 7.74% 7.24%** Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index 7.67% 7.24%**
* SINCE 6/6/94 ** SINCE 6/30/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year U.S. Treasury Index is a widely-recognized, capitalization-weighted index of U.S. Treasury securities with maturities 1 year or greater and no more than 5 years. The Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index is a widely-recognized capitalization weighted index including all U.S. Treasuries, and agency securities with maturities of 1 year or greater but less than 5 years from maturity. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.55% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." MARYLAND MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Maryland income tax, consistent with preservation of capital INVESTMENT FOCUS Maryland municipal securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities INVESTOR PROFILE Maryland residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Maryland Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Maryland income taxes. Issuers of these securities can be located in Maryland, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Maryland subjects the Fund to economic and government policies of Maryland. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1997 8.78% 1998 5.87% BEST QUARTER WORST QUARTER 3.58% -0.70% (6/30/97) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -0.59%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------- Maryland Municipal Bond Fund 5.87% 5.11%* Lehman Brothers General Obligation Bond Index 6.68% 7.60%**
* SINCE 3/1/96 ** SINCE 3/31/96 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ----------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.19% ----- Total Annual Fund Operating Expenses 0.84%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.49% AND 0.68%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1994 -0.07% 1995 11.77% 1996 3.90% 1997 6.78% 1998 6.84%
BEST QUARTER WORST QUARTER 3.76% -0.58% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -0.20%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX AND THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------------------------------------------------------------------------- Short-Term Bond Fund 6.84% 5.77% 5.68%* Salomon One Year Treasury Benchmark On-the-Run Index 5.89% 5.66% 5.38%** Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 6.95% 6.00% 5.79%**
* SINCE 3/15/93 ** SINCE 3/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon One Year Treasury Benchmark On-the-Run Index is a widely-recognized index of U.S. Treasury securities. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the index have maturities 1 year or greater and less than 3 years. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ---------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ---- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.55% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT STRATEGY Attempts to identify Treasury securities with maturities that offer a comparably better return potential and yield than either shorter maturity or longer maturity securities for a given level of interest rate risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of 3 years or less). The Fund intends to maintain an average weighted maturity from 1 to 2 years. The Fund offers investors the opportunity to capture the advantage of investing in short-term bonds over money market instruments. Generally, short-term bonds offer a comparably better return than money market instruments, with a modest increase in interest rate risk. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view toward maximizing returns and yield. The Adviser tries to select those U.S. Treasury securities that offer the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, short-term U.S. Treasury securities, may underperform other fixed income market segments or the fixed income markets as a whole. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1994 1.41% 1995 8.58% 1996 4.52% 1997 5.86% 1998 6.24%
BEST QUARTER WORST QUARTER 2.61% -0.10% (3/31/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 0.91%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 6.24% 5.30% 5.06%* Salomon 1-3 Year Treasury Index 6.98% 5.95% 5.73%** Salomon 6 Month Treasury Bill Index 5.27% 5.24% 4.98%**
* SINCE 3/15/93 ** SINCE 3/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury Index is a widely-recognized index of U.S. Treasury securities with maturities 1 year or greater and less than 3 years. The Salomon 6 Month Treasury Bill Index is a widely-recognized index of the 6 month U.S. Treasury bills. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ---------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.13% ---- Total Annual Fund Operating Expenses 0.78%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $80 $249 $433 $966
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.54% AND 0.67%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 moderate PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk INVESTOR PROFILE Conservative investors who want to receive income from their investment INVESTMENT STRATEGY The U.S. Government Securities Fund invests primarily in U.S. government debt securities, such as mortgage-backed securities and U.S. Treasury obligations. In an attempt to provide a consistently high dividend without adding undue risk, the Fund focuses its investments in mortgage-backed securities. The average maturity of the Fund's portfolio will typically range from 7 to 14 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, U.S. government debt securities, may underperform other fixed income market segments or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 17.33% 1996 2.55% 1997 8.94% 1998 8.16%
BEST QUARTER WORST QUARTER 5.89% -2.24% (6/30/95) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.47%. THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX. PREVIOUSLY THE FUND'S RETURNS HAD BEEN COMPARED TO THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX, BUT THE ADVISER BELIEVES THAT THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON MORTGAGE-BACKED SECURITIES, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS.
TRUST SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------------------------------------------------- U.S. Government Securities Fund 8.16% 7.82%* Merrill Lynch Government/Mortgage Index 8.91% 8.83%** Lehman Brothers Intermediate Government Bond Index 8.47% 7.69%**
* SINCE 8/1/94 ** SINCE 8/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Lehman Brothers Intermediate Government Bond Index, is a widely-recognized index of U.S. Treasury securities and government agency securities with maturities ranging from 1 to 10 years. The Merrill Lynch Government/Mortgage Index is a synthetic index created by combining, at their respective market weights; (i) the Merrill Lynch Government Master Index which is a widely-recognized index comprised of U.S. Treasury securities and U.S. government agency securities with a maturity of at least 1 year; and (ii) the Merrill Lynch Mortgage Master Index which is a widely-recognized index comprised of mortgage- backed securities including 15 and 30 year single family mortgages in addition to aggregated pooled mortgages. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------- Investment Advisory Fees 0.74% Other Expenses 0.14% ---- Total Annual Fund Operating Expenses 0.88%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $90 $281 $488 $1,084
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.63% AND 0.77%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income tax, consistent with preservation of capital INVESTMENT FOCUS Virginia municipal securities SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT STRATEGY Attempts to limit risk by investing in investment grade municipal securities with an intermediate average maturity INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Virginia Intermediate Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. The Adviser also considers stability and growth of principal. The Adviser expects that the Fund's average weighted maturity will range from 5 to 10 years but there is no limit on the maturities of individual securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies of Virginia. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1994 -6.45% 1995 14.25% 1996 2.95% 1997 7.25% 1998 5.22%
BEST QUARTER WORST QUARTER 5.99% -6.80% (3/31/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.36%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR G.O. BOND INDEX AND THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------------------ Virginia Intermediate Municipal Bond Fund 5.22% 4.42% 5.29%* Lehman Brothers 5-Year G.O. Bond Index 5.85% 5.36% 5.77%** Lehman Brothers General Obligation Bond Index 6.68% 6.13% 6.92%**
* SINCE 1/11/93 ** SINCE 1/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year G.O. Bond Index is a widely-recognized index of municipal bonds with maturities ranging from 4 to 6 years. The index represents various market sectors and geographic locations. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ----------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.76%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $78 $243 $422 $942
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." VIRGINIA MUNICIPAL BOND FUND INVESTMENT GOAL High current income exempt from federal and Virginia income taxes, consistent with preservation of capital INVESTMENT FOCUS Virginia municipal securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Virginia Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies of Virginia. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR. 1996 1.68% 1997 8.82% 1998 5.85%
BEST QUARTER WORST QUARTER 3.41% -2.73% (6/30/97) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.25%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------ Virginia Municipal Bond Fund 5.85% 6.71%* Lehman Brothers General Obligation Bond Index 6.68% 7.99%**
* SINCE 4/4/95 ** SINCE 4/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ---------------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.16% ----- Total Annual Fund Operating Expenses 0.81%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $83 $259 $450 $1,002
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.58% AND 0.74%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." PRIME QUALITY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off INVESTOR PROFILE Conservative investors who want to receive current income INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 2.77% 1994 3.77% 1995 5.47% 1996 4.99% 1997 5.15% 1998 5.10%
BEST QUARTER WORST QUARTER 1.37% 0.68% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.24%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA FIRST TIER AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------------------------------------------------------------- Prime Quality Money Market Fund 5.10% 4.89% 4.40%* IBC/Financial Data First Tier Average 4.96% 4.79% 4.31%**
* SINCE 6/8/92 ** SINCE 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two of the five recognized rating agencies. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - --------------------------------------------------------------------- Investment Advisory Fees 0.65% Other Expenses 0.12% ---- Total Annual Fund Operating Expenses 0.77%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $79 $246 $428 $954
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.48% AND 0.60%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to increase income without added risk by analyzing credit quality INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment INVESTMENT STRATEGY The Tax-Exempt Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal income taxes. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 2.02% 1994 2.47% 1995 3.48% 1996 3.06% 1997 3.23% 1998 3.02%
BEST QUARTER WORST QUARTER 0.92% 0.45% (6/30/95) (3/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 1.30%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market Fund 3.02% 3.05% 2.83%* IBC/Financial Data Tax-Free Stockbroker & General Purpose Average 2.92% 2.92% 2.72%**
* SINCE 6/8/92 ** SINCE 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from Federal taxation. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - --------------------------------------------------------------------- Investment Advisory Fees 0.55% Other Expenses 0.11% ---- Total Annual Fund Operating Expenses 0.66%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $67 $211 $368 $822
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.41% AND 0.52%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." TAX-FREE MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal income tax, while preserving capital and liquidity INVESTMENT FOCUS Municipal money market instruments PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without added risk by analyzing credit quality INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment INVESTMENT STRATEGY The Tax-Free Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal income taxes. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. The Fund may invest more than 25% of its assets in money market instruments issued by issuers located in one or more of the following states: Arizona, California, Maryland, New Jersey, New York and Pennsylvania and will invest more than 25% of its assets in money market instruments issued by issuers located in Virginia. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. The Fund's concentration of investments in securities of issuers located in a single state subjects the Fund to economic and government policies of that state. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1990 5.86% 1991 4.55% 1992 2.86% 1993 1.84% 1994 2.18% 1995 3.28% 1996 3.11% 1997 3.08% 1998 2.93%
BEST QUARTER WORST QUARTER 1.47% 0.43% (6/30/90) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 1.27%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------------------- Tax-Free Money Market Fund 2.93% 2.92% 3.45%* IBC/Financial Data Tax-Free Stockbroker & General Purpose Average 2.92% 2.92% 3.32%**
* SINCE 6/15/89 ** SINCE 6/30/89 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from Federal taxation. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ---------------------------------------------------------------------- Investment Advisory Fees 0.40% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.51%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $52 $164 $285 $640
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to increase income without adding undue risk by analyzing yields 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; they are backed by the full faith and credit of the U.S. government and repurchase agreements involving these securities. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 2.67% 1994 3.64% 1995 5.39% 1996 4.81% 1997 4.99% 1998 4.88%
BEST QUARTER WORST QUARTER 1.36% 0.65% (6/30/95) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.08%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------------------------------------------------------------- U.S. Government Securities Money Market Fund 4.88% 4.74% 4.26%* IBC/Financial Data U.S. Treasury & Repo Average 4.81% 4.66% 4.19%**
* SINCE 6/8/92 ** SINCE 6/30/92 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ------------------------------------------------------------------------ Investment Advisory Fees 0.65% Other Expenses 0.11% ---- Total Annual Fund Operating Expenses 0.76%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated 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 $78 $243 $422 $942
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.52% AND 0.63%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." U.S. TREASURY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while maintaining liquidity INVESTMENT FOCUS Money market instruments issued and guaranteed by the U.S. Treasury PRINCIPAL INVESTMENT STRATEGY Investing in U.S. Treasury obligations and repurchase agreements INVESTOR PROFILE Conservative investors who want to receive current income from their investment INVESTMENT STRATEGY The U.S. Treasury Money Market Fund invests solely in U.S. Treasury obligations and repurchase agreements that are collateralized by obligations issued or guaranteed by the U.S. Treasury. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (Standard and Poor's Corporation, AAA). The Fund will maintain an average maturity of 90 days or less, and will only acquire securities that have a remaining maturity of 397 days or less. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1989 8.84% 1990 7.86% 1991 5.75% 1992 3.40% 1993 2.51% 1994 3.50% 1995 5.33% 1996 4.77% 1997 4.93% 1998 4.82%
BEST QUARTER WORST QUARTER 2.25% 0.61% (6/30/89) (12/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.05%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE IBC/FINANCIAL DATA U.S. TREASURY & REPO AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------- U.S. Treasury Money Market Fund 4.82% 4.67% 5.15% 5.38%* IBC/Financial Data U.S. Treasury & Repo Average 4.81% 4.66%** N/A N/A
* SINCE 2/18/87 ** SINCE 12/31/93 To obtain more information about the Fund's yield, call 1-800-814-3397. WHAT IS AN AVERAGE? An average is a composite of mutual funds with similar investment goals. The IBC/Financial Data U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - ------------------------------------------------------------------------------ Investment Advisory Fees 0.65% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.75%
* Expense information in the table has been restated to reflect current fees. 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $77 $240 $417 $930
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.53% AND 0.63%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." MORE INFORMATION ABOUT RISK FIXED INCOME RISK -- The market value of fixed income investments FLORIDA TAX-EXEMPT BOND FUND change in response to interest rate changes and other factors. GEORGIA TAX-EXEMPT BOND FUND During periods of falling interest rates, the values of INVESTMENT GRADE BOND FUND outstanding fixed income securities generally rise. Moreover, INVESTMENT GRADE TAX-EXEMPT BOND FUND while securities with longer maturities tend to produce higher LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND yields, the prices of longer maturity securities are also subject MARYLAND MUNICIPAL BOND FUND to greater market fluctuations as a result of changes in interest SHORT-TERM BOND FUND rates. In addition to these fundamental risks, different types of SHORT-TERM U.S. TREASURY SECURITIES FUND fixed income securities may be subject to the following additional U.S. GOVERNMENT SECURITIES FUND RISKS: VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND CREDIT RISK -- The possibility that an issuer will be unable FLORIDA TAX-EXEMPT BOND FUND to make timely payments of either principal or interest. GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND MUNICIPAL ISSUER RISK -- There may be economic or political FLORIDA TAX-EXEMPT BOND FUND changes that impact the ability of municipal issuers to GEORGIA TAX-EXEMPT BOND FUND repay principal and to make interest payments on municipal INVESTMENT GRADE TAX-EXEMPT BOND FUND securities. Changes to the financial condition or credit MARYLAND MUNICIPAL BOND FUND rating of municipal issuers may also adversely affect the TAX-EXEMPT MONEY MARKET FUND value of the Fund's municipal securities. Constitutional TAX-FREE MONEY MARKET FUND or legislative limits on borrowing by municipal issuers may VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND result in reduced supplies of municipal securities. Moreover, VIRGINIA MUNICIPAL BOND FUND certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states. REGIONAL RISK -- To the extent that the Fund's investments are FLORIDA TAX-EXEMPT BOND FUND concentrated in a specific geographic region, the Fund may GEORGIA TAX-EXEMPT BOND FUND be subject to the political and other developments affecting that MARYLAND MUNICIPAL BOND FUND region. Regional economies are often closely interrelated, and TAX-FREE MONEY MARKET FUND political and economic developments affecting one region, country VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND or state often affect other regions, countries or states, thus VIRGINIA MUNICIPAL BOND FUND subjecting a Fund to additional risks. YEAR 2000 RISK -- The Funds depend on the smooth functioning of ALL FUNDS computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business.
EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Bond Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Bond Fund and the U.S. Government Securities Fund each may shorten its average weighted maturity to as little as 90 days. A Bond Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A., (STI) P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Florida Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund and Limited-Term Federal Mortgage Securities Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal year ended May 31, 1999, STI received advisory fees of: Florida Tax-Exempt Bond Fund 0.55% Investment Grade Bond Fund 0.66% Investment Grade Tax-Exempt Bond Fund 0.64% Limited-Term Federal Mortgage Securities Fund 0.55%
SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia 30303, serves as the Adviser to the Georgia Tax-Exempt Bond Fund. As of December 31, 1998, SunTrust Bank, Atlanta had approximately $90.7 billion in assets under management. For the fiscal year ended May 31, 1999, SunTrust Bank, Atlanta received advisory fees of: Georgia Tax-Exempt Bond Fund 0.54%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Maryland Municipal Bond Fund, Prime Quality Money Market Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Fund, Tax-Exempt Money Market Fund, Tax-Free Money Market Fund, U.S. Government Securities Fund, U.S. Government Securities Money Market Fund, U.S. Treasury Money Market Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal year ended May 31, 1999, Trusco received advisory fees of: Prime Quality Money Market Fund 0.48% Short-Term Bond Fund 0.55% Short-Term U.S. Treasury Securities Fund 0.54% Tax-Exempt Money Market Fund 0.54% U.S. Government Securities Fund 0.63% U.S. Government Securities Money Market Fund 0.52%
Crestar Asset Management Company served as Adviser to the predecessors of the following Funds. For the fiscal period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of: Maryland Municipal Bond Fund 0.25% Tax-Free Money Market Fund 0.40% U.S. Treasury Money Market Fund 0.40% Virginia Intermediate Municipal Bond Fund 0.50% Virginia Municipal Bond Fund 0.50%
The Advisers may use their affiliates as brokers for fund transactions. PORTFOLIO MANAGERS Mr. Ronald Schwartz, CFA, has served as Senior Vice President of STI since 1988. He has managed the Florida Tax-Exempt Bond Fund and the Investment Grade Tax-Exempt Bond Fund since each Fund began operating in January 1994, and June 1992, respectively. He has more than 18 years of investment experience. Ms. Gay Cash has served as First Vice President of SunTrust Bank, Atlanta since 1998 and has worked there since 1987. She has managed the Georgia Tax-Exempt Bond Fund since it began operating in January 1994. She has more than 20 years of investment experience. The Investment Grade Bond Fund and the Limited-Term Federal Mortgage Securities Fund are co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Mortgage Securities Fund since it began operating in June 1994. He has more than 20 years of investment experience. Mr. West is a Managing Director of STI and has worked there since 1985. He has managed the Limited-Term Federal Mortgage Securities Fund since it began operating in June 1994. He has more than 14 years of investment experience. Mr. Robert S. Bowman, CFA, has served as Vice President of Trusco since January 1999. He has managed the Maryland Municipal Bond Fund since 1998, the Tax-Free Money Market Fund since 1995, the U.S. Treasury Money Market Fund since 1995, and the Virginia Municipal Bond Fund since 1998. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995, and Vice President since 1995 of Crestar Asset Management Company. Mr. Bowman has more than 5 years of investment experience. Mr. David Yealy has served as Vice President of Trusco since 1993. He has managed the Prime Quality Money Market Fund since it began operating in June 1992, the Short-Term U.S. Treasury Securities Fund since July 1996 and the U.S. Government Securities Money Market Fund since it began operating in June 1992. He has more than 13 years of investment experience. Ms. Agnes Pampush, CFA, has served as Vice President of Trusco since 1988. She has managed the Short-Term Bond Fund since February 1999. She has more than 16 years of investment experience. Ms. Cheryl L. Page, CFA, has served as Vice President of Trusco since January 1999. She has managed the Virginia Intermediate Municipal Bond Fund since July 1993. Prior to joining Trusco, Ms. Page served as Portfolio Manager, from 1991 to 1996, and Vice President since 1996, of Crestar Asset Management Company. She has more than 12 years of investment experience. 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 Senior Vice President of Trusco since 1986, and has more than 28 years of investment experience. Mr. Ford has been a Portfolio Manager of Trusco since April 1994, and has more than 15 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions and potentially through the 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. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). But you may not do so for shares of the Money Market Funds on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund (except the Money Market Funds), generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. Each Money Market Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time.) So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Money Market Funds must generally receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, before 12:00 p.m. Eastern time for the Tax-Free Money Market Fund or before 3:00 p.m. Eastern time for the Prime Quality Money Market and U.S. Government Securities Money Market Funds. Also each Money Market Fund must receive federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as each Money Market Fund receives federal funds before calculating its NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund (except the Money Market Funds) generally values its investment portfolio at market price. In calculating NAV for each Money Market Fund, each Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If market prices are unavailable or a Fund thinks that the market price or amortized cost valuation method is unreliable during certain market conditions or for other reasons, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Each Money Market Fund expects its NAV to remain constant at $1.00 per share, although the Fund cannot guarantee this. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. Redemption orders must be received by the Money Market Funds on a Business Day before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, 12:00 p.m. Eastern Time for the Tax-Free Money Market Fund or 3:00 p.m. Eastern time for the Prime Quality, U.S. Treasury and U.S. Government Securities Money Market Funds. Orders received after these times will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sales proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Funds have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Funds are not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believe to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund declares dividends daily and pays these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receive your written notice. To cancel your election, simply send the Funds written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. The Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade Tax-Exempt Bond Fund, Maryland Municipal Bond Fund, Tax-Exempt Money Market Fund, Tax-Free Money Market Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund intend to distribute federally tax-exempt income. Each Fund may invest a portion of its assets in securities that generate taxable income for federal or state income taxes. Income exempt from federal tax may be subject to state and local taxes. Any capital gains distributed by these Funds may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow present performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund except the Maryland Municipal Bond Fund, Tax-Free Money Market Fund, U.S. Treasury Money Market Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999 has been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Maryland Municipal Bond Fund, Tax-Free Money Market Fund, U.S. Treasury Money Market Fund, Virginia Intermediate Municipal Bond Fund, and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4770. FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET NET REALIZED AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) - ---------------------------------------------------------------------------------------------------------------------- FLORIDA TAX-EXEMPT BOND FUND TRUST SHARES 1999 $10.72 $ 0.42 $(0.02) $(0.42) $(0.11) $10.59 3.72% 1998 10.28 0.44 0.45 (0.44) (0.01) 10.72 8.77 1997 10.06 0.46 0.25 (0.46) (0.03) 10.28 7.22 1996 10.18 0.46 (0.07) (0.46) (0.05) 10.06 3.87 1995 9.75 0.44 0.43 (0.44) -- 10.18 9.26 GEORGIA TAX-EXEMPT BOND FUND TRUST SHARES 1999 $10.11 $ 0.39 $(0.06) $(0.39) $(0.02) $10.03 3.33% 1998 9.73 0.41 0.39 (0.41) (0.01) 10.11 8.37 1997 9.56 0.42 0.22 (0.42) (0.05) 9.73 6.79 1996 9.63 0.43 (0.05) (0.43) (0.02) 9.56 3.89 1995 9.42 0.42 0.21 (0.42) -- 9.63 6.94 INVESTMENT GRADE BOND FUND TRUST SHARES 1999 $10.65 $ 0.56 $(0.11) $(0.56) $(0.18) $10.36 4.25% 1998 10.16 0.60 0.49 (0.60) -- 10.65 10.92 1997 10.07 0.60 0.09 (0.60) -- 10.16 6.99 1996 10.26 0.60 (0.19) (0.60) -- 10.07 4.02 1995 9.89 0.61 0.37 (0.61) -- 10.26 10.39 INVESTMENT GRADE TAX-EXEMPT BOND FUND TRUST SHARES 1999 $11.40 $ 0.43 $ 0.10 $(0.43) $(0.40) $11.10 4.67% 1998 11.22 0.44 0.50 (0.44) (0.32) 11.40 8.57 1997 11.10 0.44 0.33 (0.44) (0.21) 11.22 7.13 1996 11.28 0.45 0.19 (0.45) (0.37) 11.10 5.82 1995 10.68 0.46 0.60 (0.46) -- 11.28 10.21 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND TRUST SHARES 1999 $10.12 $ 0.54 $(0.06) $(0.54) $(0.12) $ 9.94 4.75% 1998 10.02 0.58 0.11 (0.58) (0.01) 10.12 7.12 1997 9.99 0.58 0.04 (0.58) (0.01) 10.02 6.43 1996 10.11 0.62 (0.14) (0.60) -- 9.99 4.84 1995(1) 10.00 0.58 0.13 (0.60) -- 10.11 7.50 RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME (LOSS) TO RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO END OF AVERAGE NET TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- FLORIDA TAX-EXEMPT BOND FUND TRUST SHARES 1999 $ 118,609 0.67% 3.90% 0.77% 3.80% 72% 1998 93,939 0.66 4.16 0.80 4.02 69 1997 50,487 0.65 4.48 0.80 4.33 135 1996 30,790 0.65 4.49 0.88 4.26 63 1995 10,118 0.65 4.63 1.13 4.15 105 GEORGIA TAX-EXEMPT BOND FUND TRUST SHARES 1999 $ 87,452 0.67% 3.87% 0.78% 3.76% 12% 1998 62,363 0.66 4.09 0.81 3.94 7 1997 39,732 0.65 4.31 0.81 4.15 15 1996 22,950 0.65 4.36 0.89 4.12 60 1995 13,187 0.65 4.56 0.98 4.23 25 INVESTMENT GRADE BOND FUND TRUST SHARES 1999 $1,149,068 0.77% 5.25% 0.85% 5.17% 221% 1998 793,488 0.76 5.67 0.86 5.57 109 1997 633,646 0.75 5.89 0.85 5.79 298 1996 599,514 0.75 5.81 0.87 5.69 184 1995 543,308 0.75 6.22 0.88 6.09 238 INVESTMENT GRADE TAX-EXEMPT BOND FUND TRUST SHARES 1999 $ 154,123 0.77% 3.75% 0.87% 3.65% 224% 1998 146,606 0.76 3.83 0.88 3.71 378 1997 139,144 0.75 3.96 0.86 3.85 489 1996 124,507 0.75 4.01 0.89 3.87 514 1995 78,208 0.75 4.34 0.91 4.18 592 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND TRUST SHARES 1999 $ 135,256 0.67% 5.28% 0.77% 5.18% 379% 1998 137,488 0.66 5.75 0.77 5.64 163 1997 123,903 0.65 5.81 0.78 5.68 133 1996 73,370 0.65 6.04 0.84 5.85 83 1995(1) 41,823 0.65 6.43 0.93 6.15 68
FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET NET REALIZED AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) - --------------------------------------------------------------------------------------------------------------------- MARYLAND MUNICIPAL BOND FUND (A) TRUST SHARES 1999(2) $10.22 $ 0.20 $(0.15) $(0.20) $(0.01) $10.06 0.48% FOR THE YEARS ENDED NOVEMBER 30: 1998 9.95 0.42 0.27 (0.42) -- 10.22 7.03 1997 9.76 0.43 0.19 (0.43) -- 9.95 6.50 1996(3) 10.00 0.31 (0.24) (0.31) -- 9.76 1.07 SHORT-TERM BOND FUND TRUST SHARES 1999 $10.05 $ 0.51 $(0.10) $(0.52) $(0.03) $ 9.91 4.06% 1998 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 1997 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45 1995 9.79 0.53 0.19 (0.53) -- 9.98 7.60 SHORT-TERM U.S. TREASURY SECURITIES FUND TRUST SHARES 1999 $ 9.97 $ 0.47 $(0.02) $(0.47) $ -- $ 9.95 4.59% 1998 9.88 0.51 0.10 (0.52) -- 9.97 6.30 1997 9.84 0.51 0.04 (0.51) -- 9.88 5.76 1996 9.93 0.55 (0.09) (0.55) -- 9.84 4.73 1995 9.82 0.47 0.11 (0.47) -- 9.93 6.11 U.S. GOVERNMENT SECURITIES FUND TRUST SHARES 1999 $10.46 $ 0.59 $(0.18) $(0.59) $ -- $10.28 3.90% 1998 10.02 0.61 0.44 (0.61) -- 10.46 10.76 1997 9.91 0.62 0.11 (0.62) -- 10.02 7.54 1996 10.27 0.62 (0.33) (0.62) (0.03) 9.91 2.77 1995(4) 9.98 0.53 0.29 (0.53) -- 10.27 8.64 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) TRUST SHARES 1999(2) $10.44 $ 0.21 $(0.17) $(0.21) $(0.07) $10.20 0.42% FOR YEARS ENDED NOVEMBER 30: 1998 10.31 0.45 0.17 (0.45) (0.04) 10.44 6.10 1997 10.22 0.46 0.09 (0.46) -- 10.31 5.55 1996 10.24 0.42 (0.02) (0.42) -- 10.22 4.01 1995 9.21 0.43 1.03 (0.43) -- 10.24 16.09 1994 10.33 0.44 (1.10) (0.44) (0.02) 9.21 (6.53) RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME (LOSS) TO RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO END OF AVERAGE NET TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- MARYLAND MUNICIPAL BOND FUND (A) TRUST SHARES 1999(2) $ 29,658 0.70% 3.83% 1.37% 3.16% 19% FOR THE YEARS ENDED NOVEMBER 30: 1998 19,115 0.62 4.11 1.15 3.58 12 1997 11,461 0.63 4.38 1.16 3.85 5 1996(3) 5,808 0.71 4.30 1.36 3.65 9 SHORT-TERM BOND FUND TRUST SHARES 1999 $ 209,904 0.67% 5.12% 0.77% 5.02% 108% 1998 120,422 0.66 5.47 0.79 5.34 87 1997 89,701 0.65 5.37 0.78 5.24 118 1996 91,156 0.65 5.39 0.81 5.23 163 1995 60,952 0.65 5.49 0.85 5.29 200 SHORT-TERM U.S. TREASURY SECURITIES FUND TRUST SHARES 1999 $ 56,027 0.67% 4.69% 0.78% 4.58% 57% 1998 46,920 0.66 5.19 0.84 5.01 39 1997 21,988 0.65 5.23 0.92 4.96 93 1996 10,149 0.65 5.56 1.00 5.21 94 1995 9,599 0.65 4.91 1.08 4.48 88 U.S. GOVERNMENT SECURITIES FUND TRUST SHARES 1999 $ 102,167 0.77% 5.58% 0.88% 5.47% 19% 1998 34,899 0.76 5.93 0.92 5.77 14 1997 19,471 0.75 6.19 1.02 5.92 21 1996 10,277 0.75 6.05 1.25 5.55 83 1995(4) 3,291 0.75 6.67 3.33 4.09 30 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) TRUST SHARES 1999(2) $ 240,083 0.84% 4.12% 1.18% 3.78% 19% FOR YEARS ENDED NOVEMBER 30: 1998 243,606 0.79 4.33 0.97 4.15 24 1997 237,096 0.78 4.57 0.93 4.42 30 1996 243,137 0.78 4.35 0.93 4.20 25 1995 43,373 0.72 4.34 0.94 4.12 28 1994 41,365 0.65 4.48 0.77 4.36 24
FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET NET REALIZED AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) - --------------------------------------------------------------------------------------------------------------------- VIRGINIA MUNICIPAL BOND FUND (A) TRUST SHARES 1999(2) $10.68 $ 0.22 $(0.19) $(0.22) $(0.06) $10.43 0.27% FOR YEARS ENDED NOVEMBER 30: 1998 10.44 0.47 0.27 (0.47) (0.03) 10.68 7.19 1997 10.28 0.48 0.17 (0.48) (0.01) 10.44 6.46 1996 10.40 0.47 (0.12) (0.47) -- 10.28 3.48 1995(5) 10.00 0.31 0.44 (0.31) (0.04) 10.40 7.67 PRIME QUALITY MONEY MARKET FUND TRUST SHARES 1999 $ 1.00 $ 0.05 $ -- $(0.05) $ -- $1.00 4.83% 1998 1.00 0.05 -- (0.05) -- 1.00 5.22 1997 1.00 0.05 -- (0.05) -- 1.00 5.01 1996 1.00 0.05 -- (0.05) -- 1.00 5.25 1995 1.00 0.05 -- (0.05) -- 1.00 4.79 TAX-EXEMPT MONEY MARKET FUND TRUST SHARES 1999 $ 1.00 $ 0.03 $ -- $(0.03) $ -- $1.00 2.81% 1998 1.00 0.03 -- (0.03) -- 1.00 3.21 1997 1.00 0.03 -- (0.03) -- 1.00 3.09 1996 1.00 0.03 -- (0.03) -- 1.00 3.28 1995 1.00 0.03 -- (0.03) -- 1.00 3.10 TAX-FREE MONEY MARKET FUND (A) TRUST SHARES 1999* $ 1.00 $ 0.01 $ -- $(0.01) $ -- $1.00 1.27% FOR THE YEAR ENDED NOVEMBER 30: 1998 1.00 0.03 -- (0.03) -- 1.00 2.97 1997 1.00 0.03 -- (0.03) -- 1.00 3.06 1996 1.00 0.03 -- (0.03) -- 1.00 3.14 1995 1.00 0.03 -- (0.03) -- 1.00 3.26 1994 1.00 0.02 -- (0.02) -- 1.00 2.07 RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME (LOSS) TO RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO END OF AVERAGE NET TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- VIRGINIA MUNICIPAL BOND FUND (A) TRUST SHARES 1999(2) $ 31,939 0.76% 4.20% 1.30% 3.66% 7% FOR YEARS ENDED NOVEMBER 30: 1998 29,252 0.69 4.41 1.10 4.00 28 1997 20,044 0.69 4.65 1.09 4.25 39 1996 15,911 0.71 4.61 1.11 4.21 24 1995(5) 6,247 0.71 4.61 1.11 4.21 35 PRIME QUALITY MONEY MARKET FUND TRUST SHARES 1999 $3,903,232 0.60% 4.69% 0.77% 4.52% ----% 1998 1,880,229 0.59 5.10 0.77 4.92 ---- 1997 1,086,555 0.58 4.90 0.76 4.72 ---- 1996 1,050,800 0.58 5.11 0.78 4.91 ---- 1995 799,189 0.58 4.77 0.79 4.56 ---- TAX-EXEMPT MONEY MARKET FUND TRUST SHARES 1999 $ 641,640 0.52% 2.75% 0.66% 2.61% ----% 1998 448,023 0.51 3.14 0.67 2.98 ---- 1997 333,006 0.50 3.04 0.66 2.88 ---- 1996 273,613 0.50 3.23 0.68 3.05 ---- 1995 215,413 0.45 3.12 0.70 2.87 ---- TAX-FREE MONEY MARKET FUND (A) TRUST SHARES 1999* $ 270,431 0.67% 2.51% 0.82% 2.36% ----% FOR THE YEAR ENDED NOVEMBER 30: 1998 270,899 0.66 2.92 0.81 2.77 ---- 1997 226,837 0.66 3.02 0.81 2.87 ---- 1996 182,320 0.66 2.88 0.81 2.73 ---- 1995 202,333 0.66 3.19 0.81 3.04 ---- 1994 157,602 0.67 2.06 0.67 2.06 ----
FINANCIAL HIGHLIGHTS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET NET REALIZED AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) - --------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND TRUST SHARES 1999 $ 1.00 $ 0.04 $ -- $(0.04) $ -- $1.00 4.57% 1998 1.00 0.05 -- (0.05) -- 1.00 5.04 1997 1.00 0.05 -- (0.05) -- 1.00 4.83 1996 1.00 0.05 -- (0.05) -- 1.00 5.14 1995 1.00 0.05 -- (0.05) -- 1.00 4.67 U.S. TREASURY MONEY MARKET FUND (A) TRUST SHARES 1999* $ 1.00 $0.02 $ -- $(0.02) $ -- $1.00 2.08% FOR THE YEAR ENDED NOVEMBER 30: 1998 1.00 0.05 -- (0.05) -- 1.00 4.89 1997 1.00 0.05 -- (0.05) -- 1.00 4.91 1996 1.00 0.05 -- (0.05) -- 1.00 4.80 1995 1.00 0.05 -- (0.05) -- 1.00 5.29 RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME (LOSS) TO RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO END OF AVERAGE NET TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND TRUST SHARES 1999 $ 404,459 0.63% 4.47% 0.76% 4.34% ----% 1998 377,490 0.62 4.92 0.78 4.76 ---- 1997 344,350 0.61 4.73 0.76 4.58 ---- 1996 325,493 0.61 5.02 0.78 4.85 ---- 1995 434,111 0.61 4.64 0.80 4.45 ---- U.S. TREASURY MONEY MARKET FUND (A) TRUST SHARES 1999* $ 760,833 0.68% 4.10% 0.83% 3.95% ----% FOR THE YEAR ENDED NOVEMBER 30: 1998 699,923 0.66 4.77 0.81 4.62 ---- 1997 632,381 0.65 4.82 0.80 4.67 ---- 1996 389,051 0.66 4.69 0.81 4.54 ---- 1995 370,454 0.66 5.16 0.81 5.01 ----
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. TOTAL RETURN FIGURES DO NOT REFLECT APPLICABLE SALES LOADS. * FOR THE PERIOD DECEMBER 1, 1998 TO MAY 31, 1999. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (1) COMMENCED OPERATIONS ON JUNE 7, 1994. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (2) FOR THE SIX MONTH PERIOD ENDED MAY 31, 1999. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (3) COMMENCED OPERATIONS ON MARCH 1, 1996. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (4) COMMENCED OPERATIONS ON JULY 31, 1994. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (5) COMMENCED OPERATIONS ON APRIL 5, 1994. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (A) ON MAY 24, 1999, THE CRESTFUNDS MARYLAND MUNICIPAL BOND FUND, THE CRESTFUNDS VIRGINIA INTERMEDIATE MUNICIPAL BOND AND THE CRESTFUNDS VIRGINIA MUNICIPAL BOND FUNDS EXCHANGED ALL OF THEIR ASSETS AND CERTAIN LIABILITIES FOR SHARES OF THE MARYLAND MUNICIPAL BOND FUND, VIRGINIA INTERMEDIATE MUNICIPAL BOND AND VIRGINIA MUNICIPAL BOND FUNDS, RESPECTIVELY. THE CRESTFUNDS MARYLAND MUNICIPAL BOND FUND, CRESTFUNDS VIRGINIA INTERMEDIATE MUNICIPAL BOND AND CRESTFUNDS VIRGINIA MUNICIPAL BOND FUNDS ARE THE ACCOUNTING SURVIVORS IN THIS TRANSACTION, AND AS A RESULT, THEIR BASIS OF ACCOUNTING FOR ASSETS AND LIABILITIES AND THEIR OPERATING RESULTS FOR THE PERIODS PRIOR TO MAY 24, 1999 HAVE BEEN CARRIED FORWARD IN THESE FINANCIAL HIGHLIGHTS. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR ROUND TO $0. STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 SunTrust Bank, Atlanta 25 Park Place Atlanta, GA 30303 Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS BOND FUNDS INVESTOR SHARES AND FLEX SHARES PROSPECTUS OCTOBER 1, 1999 FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND U.S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND INVESTMENT ADVISERS STI CAPITAL MANAGEMENT, N.A. SUNTRUST BANK, ATLANTA TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS CHOOSING INVESTOR OR FLEX SHARES The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor Shares and Flex Shares of the Bond Funds that you should know before investing. Please read this prospectus and keep it for future reference. Investor Shares and Flex Shares have different expenses and other characteristics, allowing you to choose the class that best suits your needs. You should consider the amount you want to invest, how long you plan to have it invested, and whether you plan to make additional investments. INVESTOR SHARES - FRONT-END SALES CHARGE - 12b-1 FEES - $2,000 MINIMUM INITIAL INVESTMENT FLEX SHARES - CONTINGENT DEFERRED SALES CHARGE - HIGHER 12b-1 FEES - $5,000 MINIMUM INITIAL INVESTMENT THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
PAGE FLORIDA TAX-EXEMPT BOND FUND................................ 2 GEORGIA TAX-EXEMPT BOND FUND................................ 4 INVESTMENT GRADE BOND FUND.................................. 6 INVESTMENT GRADE TAX-EXEMPT BOND FUND....................... 8 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND............... 10 MARYLAND MUNICIPAL BOND FUND................................ 12 SHORT-TERM BOND FUND........................................ 14 SHORT-TERM U.S. TREASURY SECURITIES FUND.................... 16 U.S. GOVERNMENT SECURITIES FUND............................. 18 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND................... 20 VIRGINIA MUNICIPAL BOND FUND................................ 22 MORE INFORMATION ABOUT RISK................................. 24 EACH FUND'S OTHER INVESTMENTS............................... 25 THE INVESTMENT ADVISERS AND PORTFOLIO MANAGERS.............. 25 PURCHASING, SELLING AND EXCHANGING FUND SHARES.............. 26 DIVIDENDS AND DISTRIBUTIONS................................. 32 TAXES....................................................... 32 FINANCIAL HIGHLIGHTS........................................ 33 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS........................................... 38
[INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. FLORIDA TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOAL Current income exempt from federal income taxes for Florida residents with shares themselves expected to be exempt from the Florida intangible personal property tax INVESTMENT FOCUS Florida municipal securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones INVESTOR PROFILE Florida residents who want income exempt from federal income taxes INVESTMENT STRATEGY The Florida Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal income taxes, and the shares themselves are expected to be exempt from the Florida intangible personal property tax. Issuers of these securities can be located in Florida, Puerto Rico and other U.S. territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. Under certain circumstances, such as a national financial emergency or a temporary decline in availability of Florida obligations, up to 20% of the Fund's assets may be invested in securities subject to the Florida intangible personal property tax and/or securities that generate income subject to federal personal income taxes. These securities may include short-term municipal securities outside Florida or certain taxable fixed income securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Florida subjects the Fund to economic and government policies of Florida. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 15.70% 1996 3.73% 1997 7.60% 1998 5.94%
BEST QUARTER WORST QUARTER 6.13% -1.56% (3/31/95) (3/31/96)
* The performance information shown above is based on a calendar year. The Fund's total return from 1/1/99 to 6/30/99 was -2.10%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund 1.93% 5.41%* Lehman Brothers 10-year Municipal Bond Index 6.76% 6.19%**
* SINCE 1/18/94 ** SINCE 1/31/94
FLEX SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------ FLORIDA TAX-EXEMPT BOND FUND 3.54% 6.01%* LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 6.76% 7.82%**
* SINCE 6/1/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The index represents various market sectors and geographic locations. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) INVESTOR SHARES FLEX SHARES - ------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.18% 1.00% Other Expenses 0.48% 0.23% ----- ----- Total Annual Fund Operating Expenses 1.31% 1.88%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $503 $775 $1,066 $1,895 FLEX SHARES $391 $591 $1,016 $2,201
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $503 $775 $1,066 $1,895 FLEX SHARES $191 $591 $1,016 $2,201
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.55%, 0.00% AND 0.87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.55%, 0.59% AND 1.37%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones INVESTOR PROFILE Georgia residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Georgia Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Georgia income taxes. Issuers of these securities can be located in Georgia, Puerto Rico and other U.S. Territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser tries to diversify the Fund's holdings within Georgia. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. *** WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Georgia subjects the Fund to economic conditions and government policies within Georgia. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 13.13% 1996 3.43% 1997 7.96% 1998 5.47%
BEST QUARTER WORST QUARTER 4.84% -0.73% (3/31/95) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -2.33%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund 1.55% 4.07%* Lehman Brothers 10-Year Municipal Bond Index 6.76% 6.19%**
* SINCE 1/19/94 ** SINCE 1/31/94
FLEX SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund 3.06% 5.44%* Lehman Brothers 10-Year Municipal Bond Index 6.76% 7.82%**
* SINCE 6/6/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The index represents various market sectors and geographic locations. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.18% 1.00% Other Expenses 0.42% 0.24% ----- ----- Total Annual Fund Operating Expenses 1.25% 1.89%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return 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 $498 $757 $1,036 $1,830 FLEX SHARES $392 $594 $1,021 $2,212
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $498 $757 $1,036 $1,830 FLEX SHARES $192 $594 $1,021 $2,212
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.54%, 0.00% AND 0.87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.54%, 0.59% AND 1.37%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers Government/Corporate Bond Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1993 10.42% 1994 -3.57% 1995 17.26% 1996 1.93% 1997 8.64% 1998 8.79%
BEST QUARTER WORST QUARTER 6.02% -2.67% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -2.02%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund 4.72% 5.56% 6.36%* Lehman Brothers Government/Corporate Bond Index 9.47% 7.30% 8.09%**
* SINCE 6/11/92 ** SINCE 6/30/92
FLEX SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------------ Investment Grade Bond Fund 6.24% 6.67%* Lehman Brothers Government/Corporate Bond Index 9.47% 8.23%**
* SINCE 6/7/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.74% 0.74% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.19% 0.26% ----- ----- Total Annual Fund Operating Expenses 1.36% 2.00%
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 $508 $790 $1,092 $1,949 FLEX SHARES $403 $627 $1,078 $2,327
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $508 $790 $1,092 $1,949 FLEX SHARES $203 $627 $1,078 $2,327
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.66%, 0.32% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.66%, 0.74% AND 1.66%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." 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 Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones INVESTOR PROFILE Investors who want to receive tax-free current income and an increase in the value of their investment 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 possessions. In addition, up to 20% of the Fund may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1993 14.35% 1994 -0.60% 1995 14.51% 1996 4.99% 1997 7.36% 1998 6.73%
BEST QUARTER WORST QUARTER 5.87% -3.14% (3/31/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.23%. THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX. PREVIOUSLY THE FUND'S RETURNS HAD BEEN COMPARED TO THE LEHMAN BROTHERS 5-YEAR G.O. INDEX, BUT THE ADVISER BELIEVES THAT THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX, BECAUSE OF ITS EMPHASIS ON REVENUE BONDS AS WELL AS GENERAL OBLIGATION BONDS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund 2.73% 5.68% 7.18%* Lehman Brothers 5-Year Municipal Bond Index 5.85% 5.22% 5.99%** Lehman Brothers 5-Year G.O. Index 5.85% 5.36% 6.07%**
* SINCE 6/9/92 ** SINCE 6/30/92
FLEX SHARES 1 YEAR SINCE INCEPTION - ----------------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund 4.22% 6.34%* Lehman Brothers 5-Year Municipal Bond Index 5.85% 6.01%** Lehman Brothers 5-Year G.O. Index 5.85% 6.18%**
* SINCE 6/1/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Lehman Brothers 5-Year G.O. Index, is a widely-recognized index of municipal bonds with maturities ranging from 4 to 6 years. The Lehman Brothers 5-Year Municipal Bond Index is a widely-recognized index of intermediate investment grade tax-exempt bonds. The index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 4 and 6 years. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.74% 0.74% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.15% 0.29% ----- ----- Total Annual Fund Operating Expenses 1.32% 2.03%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns 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 $504 $778 $1,071 $1,906 FLEX SHARES $406 $637 $1,093 $2,358
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $504 $778 $1,071 $1,906 FLEX SHARES $206 $637 $1,093 $2,358
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.64%, 0.38% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.64%, 0.72% AND 1.65%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital INVESTMENT FOCUS Mortgage-backed securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that are less prone to prepayment risk INVESTOR PROFILE Conservative investors who want to receive income from their investment INVESTMENT STRATEGY The Limited-Term Federal Mortgage Securities Fund invests primarily in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA and collateralized mortgage obligations. These securities typically have an effective maturity from 1 to 5 years. In selecting investments for the Fund, the Adviser tries to identify securities that the Adviser expects to perform well in rising and falling markets. The Adviser also attempt to reduce the risk that the underlying mortgages are prepaid by focusing on securities that it believes are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for prepayment, but few have occurred. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, mortgage-backed securities, may underperform other fixed income market segments or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 12.02% 1996 4.29% 1997 6.37% 1998 6.73%
BEST QUARTER WORST QUARTER 4.01% 0.16% (3/31/95) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 0.18%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S. TREASURY INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S. GOVERNMENTS, INTERMEDIATE-TERM INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - --------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 4.05% 6.00%* Merrill Lynch 1-5 Year U.S. Treasury Index 7.74% 7.13%** Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index 7.87% 7.13%**
* SINCE 7/18/94 ** SINCE 7/31/94
FLEX SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 4.27% 5.74%* Merrill Lynch 1-5 Year U.S. Treasury Index 7.74% 6.82%** Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index 7.87% 6.81%**
* SINCE 6/7/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year U.S. Treasury Index is a widely-recognized, capitalization-weighted index of U.S. Treasury securities with maturities 1 year or greater and no more than 5 years. The Merrill Lynch 1-5 Year U.S. Governments, Intermediate-Term Index is a widely-recognized, capitalization weighted index including all U.S. Treasuries, and agency securities with maturities of 1 year or greater but less than 5 years from maturity. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 2.50% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares."
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.23% 1.00% Other Expenses 0.64% 0.77% ----- ----- Total Annual Fund Operating Expenses 1.52% 2.42%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. 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 $401 $718 $1,058 $2,017 FLEX SHARES $445 $755 $1,291 $2,756
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $401 $718 $1,058 $2,017 FLEX SHARES $245 $755 $1,291 $2,756
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.55%, 0.00% AND 0.92%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.55%, 0.00% AND 1.27%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." MARYLAND MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Maryland income tax, consistent with preservation of capital INVESTMENT FOCUS Maryland municipal securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities INVESTOR PROFILE Maryland residents who want income exempt from federal and state income taxes
INVESTMENT STRATEGY The Maryland Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Maryland income taxes. Issuers of these securities can be located in Maryland, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Maryland subjects the Fund to economic and government policies of Maryland. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1997 7.90% 1998 4.91% BEST QUARTER WORST QUARTER 3.35% -0.91% (6/30/97) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.02%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
FLEX SHARES 1 YEAR SINCE INCEPTION - --------------------------------------------------------- --------------- ----------------- Maryland Municipal Bond Fund 2.91% 6.18%* Lehman Brothers General Obligation Bond Index 6.68% 7.99%**
* SINCE 4/25/96 ** SINCE 4/30/96 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
FLEX SHARES - ---------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00%
* This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
FLEX SHARES - ---------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.51% ----- Total Annual Fund Operating Expenses 2.16%
* Expense information in the table has been restated to reflect current fees. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS FLEX SHARES $419 $676 $1,159 $2,493
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS FLEX SHARES $219 $676 $1,159 $2,493
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.49%, 0.59% AND 1.59%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." 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 STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1994 -0.33% 1995 11.68% 1996 3.66% 1997 6.46% 1998 6.73%
BEST QUARTER WORST QUARTER 3.81% -0.63% (6/30/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -0.27%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX AND THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund 4.55% 5.13% 5.02%* Salomon One Year Treasury Benchmark On-The-Run Index 5.89% 5.66% 5.38%** Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 6.95% 6.00% 5.79%**
* SINCE 3/22/93 ** SINCE 3/31/93
FLEX SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund 4.27% 5.67%* Salomon One Year Treasury Benchmark On-The-Run Index 5.89% 5.98%** Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 6.95% 6.53%**
* SINCE 6/20/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon One Year Treasury Benchmark On-the-Run Index is a widely-recognized index of U.S. Treasury securities. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the index have maturities 1 year or greater and less than 3 years. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - -------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 2.00% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - -------------------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.23% 1.00% Other Expenses 0.71% 0.68% ----- ----- Total Annual Fund Operating Expenses 1.59% 2.33%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns 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 $358 $692 $1,048 $2,051 FLEX SHARES $436 $727 $1,245 $2,666
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $358 $692 $1,048 $2,051 FLEX SHARES $236 $727 $1,245 $2,666
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.55%, 0.00% AND 0.87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.55%, 0.00% AND 1.22%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." 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 SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT STRATEGY Attempts to identify Treasury securities with maturities that offer a comparably better return potential and yield than either shorter maturity or longer maturity securities for a given level of interest rate risk INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of 3 years or less). The Fund intends to maintain an average weighted maturity from 1 to 2 years. The Fund offers investors the opportunity to capture the advantage of investing in short-term bonds over money market instruments. Generally, short-term bonds offer a comparably better return than money market instruments, with a modest increase in interest rate risk. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view toward maximizing returns and yield. The Adviser tries to select those U.S. Treasury securities that offer the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, short-term U.S. Treasury securities, may underperform other fixed income market segments or the fixed income markets as a whole. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1994 1.28% 1995 8.39% 1996 4.38% 1997 5.70% 1998 6.09%
BEST QUARTER WORST QUARTER 2.60% -0.13% (3/31/95) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 0.93%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY INDEX AND SALOMON 6 MONTH TREASURY BILL INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 5.04% 4.93% 4.72%* Salomon 1-3 Year Treasury Index 6.98% 5.95% 5.73%** Salomon 6 Month Treasury Bill Index 5.27% 5.24% 4.98%**
* SINCE 3/18/93 ** SINCE 3/31/93
FLEX SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 3.84% 5.21%* Salomon 1-3 Year Treasury Index 6.98% 6.50%** Salomon 6 Month Treasury Bill Index 5.27% 5.39%**
* SINCE 6/22/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury Index is a widely-recognized index of U.S. Treasury securities with maturities 1 year or greater and less than 3 years. The Salomon 6 Month Treasury Bill Index is a widely-recognized index of the 6 Month U.S. Treasury bills. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - ----------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 1.00% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - ---------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.18% 1.00% Other Expenses 0.51% 0.60% ----- ----- Total Annual Fund Operating Expenses 1.34% 2.25%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. 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 $235 $520 $827 $1,697 FLEX SHARES $428 $703 $1,205 $2,585
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $235 $520 $827 $1,697 FLEX SHARES $228 $703 $1,205 $2,585
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.54%, 0.00% AND 0.82%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.54%, 0.00% AND 1.07%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." 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 moderate PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk INVESTOR PROFILE Conservative investors who want to receive income from their investment INVESTMENT STRATEGY The U.S. Government Securities Fund invests primarily in U.S. government debt securities, such as mortgage-backed securities and U.S. Treasury obligations. In an attempt to provide a consistently high dividend without adding undue risk, the Fund focuses its investments in mortgage-backed securities. The average maturity of the Fund's portfolio will typically range from 7 to 14 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that its market segment, U.S. government debt securities, may underperform other fixed income market segments or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 16.95% 1996 2.08% 1997 8.60% 1998 7.74%
BEST QUARTER WORST QUARTER 5.81% -2.31% (6/30/95) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.77%. THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX. PREVIOUSLY THE FUND'S RETURNS HAD BEEN COMPARED TO THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX, BUT THE ADVISER BELIEVES THAT THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON MORTGAGE-BACKED SECURITIES, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------------------------------------------------- U.S. Government Securities Fund 3.74% 6.36%* Merrill Lynch Government/Mortgage Index 8.91% 8.96%** Lehman Brothers Intermediate Bond Index 8.47% 7.77%**
* SINCE 6/6/94 ** SINCE 6/30/94
FLEX SHARES 1 YEAR SINCE INCEPTION - ----------------------------------------------------------------------------------- U.S. Government Securities Fund 5.31% 6.20%* Merrill Lynch Government/Mortgage Index 8.91% 8.06%** Lehman Brothers Intermediate Bond Index 8.47% 7.21%**
* SINCE 6/7/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Lehman Brothers Intermediate Government Bond Index, is a widely-recognized index of U.S. Treasury securities and government agency securities with maturities ranging from 1 to 10 years. The Merrill Lynch Government/Mortgage Index is a synthetic index created by combining, at their respective market weights; (i) the Merrill Lynch Government Master Index which is a widely-recognized index comprised of U.S. Treasury securities and U.S. government agency securities with a maturity of at least 1 year; and (ii) the Merrill Lynch Master Mortgage Index which is a widely-recognized index comprised of mortgage-backed securities including 15 and 30 year single family mortgages in addition to aggregated pooled mortgages. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - -------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - ----------------------------------------------------------------------------------------------------- Investment Advisory Fees 0.74% 0.74% Distribution and Service (12b-1) Fees 0.38% 1.00% Other Expenses 0.48% 0.34% ----- ----- Total Annual Fund Operating Expenses 1.60% 2.08%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $532 $861 $1,213 $2,204 Flex Shares $411 $652 $1,119 $2,410
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $532 $861 $1,213 $2,204 Flex Shares $211 $652 $1,119 $2,410
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.63%, 0.06% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.63%, 0.70% AND 1.68%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income tax, consistent with preservation of capital INVESTMENT FOCUS Virginia municipal securities SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT STRATEGY Attempts to limit risk by investing in investment grade municipal securities with an intermediate average maturity INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Virginia Intermediate Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. The Adviser also considers stability and growth of principal. The Adviser expects that the Fund's average weighted maturity will range from 5 to 10 years but there is no limit on the maturities of individual securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies of Virginia. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1994 -6.47% 1995 14.37% 1996 2.94% 1997 7.24% 1998 5.32%
BEST QUARTER WORST QUARTER 3.18% -6.72% (6/30/97) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.33%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR G.O. BOND INDEX AND THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------------------------- Virginia Intermediate Municipal Bond Fund 1.40% 3.66% 4.22%* Lehman Brothers 5-Year G.O. Bond Index 5.85% 5.36% 5.67%** Lehman Brothers General Obligation Bond Index 6.68% 6.13% 6.66%**
* SINCE 5/5/93 ** SINCE 5/31/93 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year G.O. Bond Index is a widely-recognized index of municipal bonds with maturities ranging from 4 to 6 years. The index represents various market sectors and geographic locations. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES - ----------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
INVESTOR SHARES - ----------------------------------------------------------------------------------- Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 0.15% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 0.93%
* Expense information in the table has been restated to reflect current fees. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $482 $709 $953 $1,654
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.65%, 0.00% AND 0.79%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." VIRGINIA MUNICIPAL BOND FUND FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income taxes, consistent with preservation of capital INVESTMENT FOCUS Virginia municipal securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes INVESTMENT STRATEGY The Virginia Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies of Virginia. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1996 0.81% 1997 7.91% 1998 4.83%
BEST QUARTER WORST QUARTER 3.18% -2.93% (6/30/97) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.57%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
FLEX SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------------- Virginia Municipal Bond Fund 2.83% 5.66%* Lehman Brothers General Obligation Bond Index 6.68% 7.99%**
* SINCE 4/14/95 ** SINCE 4/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) FLEX SHARES - --------------------------------------------------------------------------------------- ------------------------------ Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00%
* This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)* FLEX SHARES - --------------------------------------------------------------------- ---------------------- Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.48% ----- Total Annual Fund Operating Expenses 2.13%
* Expense information in the table has been restated to reflect current fees. 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 $416 $667 $1,144 $2,462
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $216 $667 $1,144 $2,462
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.58%, 0.59% AND 1.65%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." MORE INFORMATION ABOUT RISK FIXED INCOME RISK-- The market value of fixed income investments ALL FUNDS change in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK -- The possibility that an issuer will be FLORIDA TAX-EXEMPT BOND FUND unable to make timely payments of either principal or GEORGIA TAX-EXEMPT BONd FUND interest. INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND MUNICIPAL ISSUER RISK-- There may be economic or FLORIDA TAX-EXEMPT BOND FUND political changes that impact the ability of municipal GEORGIA TAX-EXEMPT BOND FUND issuers to repay principal and to make interest payments INVESTMENT GRADE TAX-EXEMPT BOND FUND on municipal securities. Changes to the financial MARYLAND MUNICIPAL BOND FUND condition or credit rating of municipal issuers may also TAX-EXEMPT MONEY MARKET FUND adversely affect the value of the Fund's municipal TAX-FREE MONEY MARKET FUND securities. Constitutional or legislative limits on VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND borrowing by municipal issuers may result in reduced VIRGINIA MUNICIPAL BOND FUND supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states.
REGIONAL RISK -- To the extent that the Fund's FLORIDA TAX-EXEMPT BOND FUND investments are concentrated in a specific geographic GEORGIA TAX-EXEMPT BOND FUND region, the Fund may be subject to the political and other MARYLAND MUNICIPAL BOND FUND developments affecting that region. Regional economies VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND are often closely interrelated, and political and economic VIRGINIA MUNICIPAL BOND FUND developments affecting one region, country or state often affect other regions, countries or states, thus subjecting a Fund to additional risks. YEAR 2000 RISK -- The Funds depend on the smooth functioning of ALL FUNDS computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business.
EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund each may shorten its average weighted maturity to as little as 90 days. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Florida Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund and Limited-Term Federal Mortgage Securities Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of: FLORIDA TAX-EXEMPT BOND FUND 0.55% INVESTMENT GRADE BOND FUND 0.66% INVESTMENT GRADE TAX-EXEMPT BOND FUND 0.64% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.55%
SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia 30303, serves as the Adviser to the Georgia Tax-Exempt Bond Fund. As of December 31, 1998, SunTrust Bank, Atlanta had approximately $90.7 billion in assets under management. For the fiscal period ended May 31, 1999, SunTrust Bank, Atlanta received advisory fees of: GEORGIA TAX-EXEMPT BOND FUND 0.54%
Trusco Capital Management, Inc., (Trusco) 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Maryland Municipal Bond Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Fund, U.S. Government Securities Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco, received advisory fees of: SHORT-TERM BOND FUND 0.55% SHORT-TERM U.S. TREASURY SECURITIES FUND 0.54% U.S. GOVERNMENT SECURITIES FUND 0.63%
Crestar Asset Management Company served as Adviser to the predecessors of the following Funds. For the fiscal period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of: MARYLAND MUNICIPAL BOND FUND 0.25% VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 0.50% VIRGINIA MUNICIPAL BOND FUND 0.50%
The Advisers may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. Ronald Schwartz, CFA, has served as Senior Vice President of STI since 1988. He has managed the Florida Tax-Exempt Bond Fund and the Investment Grade Tax-Exempt Bond Fund since each Fund began operating in January 1994, and June 1992, respectively. He has more than 18 years of investment experience. Ms. Gay Cash has served as First Vice President of SunTrust Bank, Atlanta since 1998 and has worked there since 1987. She has managed the Georgia Tax-Exempt Bond Fund since it began operating in January 1994. She has more than 20 years of investment experience. The Investment Grade Bond Fund and the Limited-Term Federal Mortgage Securities Fund are co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Mortgage Securities Fund since it began operating in June 1994. He has more than 20 years of investment experience. Mr. West is a Managing Director of STI and has worked there since 1985. He has managed the Limited-Term Federal Mortgage Securities Fund since it began operating in June 1994. He has more than 14 years of investment experience. Mr. Robert S. Bowman, CFA, has served as Vice President of Trusco since January 1999. He has managed the Maryland Municipal Bond Fund and the Virginia Municipal Bond Fund since 1998. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995, and Vice President since 1995 of Crestar Asset Management Company. Mr. Bowman has more than 5 years of investment experience. Ms. Agnes Pampush, CFA, has served as Vice President of Trusco since 1988. She has managed the Short-Term Bond Fund since February 1999. She has more than 16 years of investment experience. Mr. David Yealy has served as Vice President of Trusco since 1993. He has managed the Short-Term U.S. Treasury Securities Fund since July 1996. He has more than 13 years of investment experience. 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 Senior Vice President of Trusco since 1986, and has more than 28 years of investment experience. Mr. Ford has been a Portfolio Manager of Trusco since April 1994, and has more than 15 years of investment experience. Ms. Cheryl L. Page, CFA, has served as Vice President of Trusco since January 1999. She has managed the Virginia Intermediate Municipal Bond Fund since July 1993. Prior to joining Trusco, Ms. Page served as Portfolio Manager, from 1991 to 1996, and Vice President since 1996, of Crestar Asset Management Company. She has more than 12 years of investment experience. PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to buy, sell (sometimes called "redeem") or exchange Investor Shares and Flex Shares of the Funds. HOW TO PURCHASE FUND SHARES A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your account is established, you may buy shares of the Funds by: - - Mail - - Telephone (1-800-874-4770) - - Wire - - Automated Clearing House (ACH) You may also buy shares through investment representatives of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place transactions in Fund shares for their customers. Please contact your financial institution directly and follow its procedures for Fund share transactions. Your institution may charge a fee for its services, in addition to the fees charged by a Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. YOU MAY HAVE TO TRANSMIT YOUR PURCHASE, SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE, SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest in any Fund at least: CLASS DOLLAR AMOUNT Investor Shares $2,000 Flex Shares $5,000 ($2,000 for retirement plans)
Your subsequent investments in any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. A Fund may accept investments of smaller amounts for either class of shares at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call SunTrust at 1-800-428-6970 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 to $100,000 once or twice a month. If you are buying Flex Shares, you should plan on investing at least $5,000 per Fund during the first two years. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. SALES CHARGES FRONT-END SALES CHARGES -- INVESTOR SHARES The offering price of Investor Shares is the NAV next calculated after a Fund receives your request, plus the front-end sales charge. The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment: Florida Tax-Exempt Bond Fund Georgia Tax-Exempt Bond Fund Investment Grade Bond Fund Investment Grade Tax-Exempt Bond Fund U.S. Government Securities Bond Fund Virginia Intermediate Municipal Bond Fund YOUR SALES CHARGE AS A YOUR SALES CHARGE AS A IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - --------------------------------------------------------------------------------------------------------------------- LESS THAN $100,000 3.75% 3.90% $100,000 BUT LESS THAN $250,000 3.25% 3.36% $250,000 BUT LESS THAN $1,000,000 2.50% 2.56% $1,000,000 AND OVER 1.50% 1.52%
Limited-Term Federal Mortgage Securities Fund YOUR SALES CHARGE AS A YOUR SALES CHARGE AS A IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - --------------------------------------------------------------------------------------------------------------------- LESS THAN $100,000 2.50% 2.50% $100,000 BUT LESS THAN $250,000 1.75% 1.78% $250,000 BUT LESS THAN $1,000,000 1.25% 1.27% $1,000,000 AND OVER None None
Short-Term Bond Fund
YOUR SALES CHARGE AS A YOUR SALES CHARGE AS A IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - ------------------------------------------------------------------------------------------------------------------ LESS THAN $100,000 2.00% 2.04% $100,000 BUT LESS THAN $250,000 1.50% 1.52% $250,000 BUT LESS THAN $1,000,000 1.00% 1.01% $1,000,000 AND OVER NONE None
Short-Term U.S. Treasury Securities Fund
YOUR SALES CHARGE AS A YOUR SALES CHARGE AS A IF YOUR INVESTMENT IS: PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - ------------------------------------------------------------------------------------------------------------------ LESS THAN $100,000 1.00% 1.01% $100,000 BUT LESS THAN $250,000 0.79% 0.76% $250,000 BUT LESS THAN $1,000,000 0.50% 0.50% $1,000,000 AND OVER NONE NONE
WAIVER OF FRONT-END SALES CHARGE -- INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: - - through reinvestment of dividends and distributions; - - through a SunTrust Securities, Inc. asset allocation account; - - by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); - - by employees, and members of their immediate family, of SunTrust and its affiliates; - - 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; - - 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 - - through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front-end sales charge. REPURCHASE OF INVESTOR SHARES You may repurchase any amount of Investor Shares of any Fund at NAV (without the normal front-end sales charge), up to the limit of the value of any amount of Investor Shares (other than those which were purchased with reinvested dividends and distributions) that you redeemed within the past 60 days. In effect, this allows you to reacquire shares that you may have had to redeem, without re-paying the front-end sales charge. To exercise this privilege, the Funds must receive your purchase order within 60 days of your redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE REPURCHASING SHARES. REDUCED SALES CHARGES -- INVESTOR SHARES RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this right allows you to add the value of the Investor Shares you already own to the amount that you are currently purchasing. The Funds will combine the value of your current purchases with the current value of any Investor Shares you purchased previously for (i) your account, (ii) your spouse's account, (iii) a joint account with your spouse, or (iv) your minor children's trust or custodial accounts. A fiduciary purchasing shares for the same fiduciary account, trust or estate may also use this right of accumulation. The Funds will only consider the value of Investor Shares purchased previously that were sold subject to a sales charge. TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED, YOU MUST ASK THE FUNDS FOR THE REDUCTION AT THE TIME OF PURCHASE. You must provide the Funds with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). The Funds may amend or terminate this right of accumulation at any time. LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. In other words, a Letter of Intent allows you to purchase Investor Shares of a Fund over a 13-month period and receive the same sales charge as if you had purchased all the shares at the same time. The Funds will only consider the value of Investor Shares sold subject to a sales charge. As a result, shares of the Investor Shares purchased with dividends or distributions will not be included in the calculation. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send the Funds a Letter of Intent. In calculating the total amount of purchases you may include in your letter purchases made up to 90 days before the date of the Letter. The 13-month period begins on the date of the first purchase, including those purchases made in the 90-day period before the date of the Letter. Please note that the purchase price of these prior purchases will not be adjusted. You are not legally bound by the terms of your Letter of Intent to purchase the amount of your shares stated in the Letter. The Letter does, however, authorize the Fund to hold in escrow 3.75% of the total amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the Fund's transfer agent will redeem the necessary portion of the escrowed shares to make up the difference between the reduced rate sales charge (based on the amount you intended to purchase) and the sales charge that would normally apply (based on the actual amount you purchased). COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate sales charge rate, the Fund will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: - - to make certain withdrawals from a retirement plan (not including IRAs); - - because of death or disability; or - - for certain payments under the Systematic Withdrawal Plan (which is discussed later). OFFERING PRICE OF FUND SHARES The offering price of Investor Shares is the NAV next calculated after the transfer agent receives your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. HOW TO SELL YOUR FUND SHARES If you own your shares through a brokerage account with SunTrust, you may sell (sometimes called "redeem") your shares on any Business Day by contacting a SunTrust Securities directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request less, in the case of Flex Shares, any applicable deferred sales charge. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a SunTrust affiliates bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required minimum you may be required to sell your shares. The account balance minimums are:
CLASS DOLLAR AMOUNT Investor Shares $2,000 Flex Shares $5,000
But, the Funds will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting SunTrust Securities or your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. You may exchange your shares up to four times during a calendar year. If you exchange your shares more than four times during a year, you may be charged a $10.00 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS). This exchange privilege may be changed or canceled at any time upon 60 days notice. EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Funds receives your exchange request. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DISTRIBUTION OF FUND SHARES Each Fund has adopted a distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets are as follows: For Investor Shares Florida Tax-Exempt Bond Fund 0.18% Georgia Tax-Exempt Bond Fund 0.18% Investment Grade Bond Fund 0.43% Investment Grade Tax-Exempt Bond Fund 0.43% Limited-Term Federal Mortgage Securities Fund 0.23% Short-Term Bond Fund 0.23% Short-Term U.S. Treasury Securities Fund 0.18% U.S. Government Securities Fund 0.38% Virginia Intermediate Municipal Bond Fund 0.15%
For Flex Shares, the maximum distribution fee is 1.00% of the average daily net assets of each Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide incentives, in the form of cash or other compensation, including merchandise, airline vouchers, trips and vacation packages, to dealers selling shares of a Fund. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income dividends daily and pays these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and its shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE IS A TAXABLE EVENT. The Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond 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. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares and Flex Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The information for each Fund except the Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999 has been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund, and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4770. FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET ASSET NET UNREALIZED DISTRIBUTIONS VALUE INVESTMENT GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD - ---------------------------------------------------------------------------------------------------------------------- FLORIDA TAX-EXEMPT BOND FUND INVESTOR SHARES 1999 $10.72 $ 0.40 $(0.01) $(0.40) $(0.11) $10.60 1998 10.29 0.42 0.44 (0.42) (0.01) 10.72 1997 10.07 0.44 0.25 (0.44) (0.03) 10.29 1996 10.18 0.44 (0.06) (0.44) (0.05) 10.07 1995 9.75 0.42 0.43 (0.42) -- 10.18 FLEX SHARES 1999 $10.74 $0.35 $(0.01) $(0.35) $(0.11) $10.62 1998 10.30 0.37 0.45 (0.37) (0.01) 10.74 1997 10.08 0.39 0.25 (0.39) (0.03) 10.30 1996(1) 10.19 0.39 (0.06) (0.39) (0.05) 10.08 GEORGIA TAX-EXEMPT BOND FUND INVESTOR SHARES 1999 $10.13 $0.37 $(0.06) $(0.37) $(0.02) $10.05 1998 9.74 0.39 0.40 (0.39) (0.01) 10.13 1997 9.58 0.40 0.21 (0.40) (0.05) 9.74 1996 9.65 0.41 (0.05) (0.41) (0.02) 9.58 1995 9.44 0.40 0.21 (0.40) -- 9.65 FLEX SHARES 1999 $10.12 $ 0.32 $(0.06) $(0.32) $(0.02) $10.04 1998 9.73 0.34 0.40 (0.34) (0.01) 10.12 1997 9.56 0.35 0.22 (0.35) (0.05) 9.73 1996(2) 9.72 0.36 (0.14) (0.36) (0.02) 9.56 INVESTMENT GRADE BOND FUND INVESTOR SHARES 1999 $10.65 $ 0.52 $(0.11) $(0.52) $(0.18) $10.36 1998 10.16 0.55 0.49 (0.55) -- 10.65 1997 10.06 0.56 0.10 (0.56) -- 10.16 1996 10.26 0.56 (0.20) (0.56) -- 10.06 1995 9.89 0.57 0.38 (0.58) -- 10.26 FLEX SHARES 1999 $10.66 $ 0.47 $(0.11) $(0.47) $(0.18) $10.37 1998 10.17 0.51 0.49 (0.51) -- 10.66 1997 10.07 0.51 0.10 (0.51) -- 10.17 1996(3) 10.33 0.52 (0.26) (0.52) -- 10.07
RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME (LOSS) TO RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO TOTAL END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER RETURN (A) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS REIMBURSEMENTS) RATE - ---------------------------------------------------------------------------------------------------------------------------------- FLORIDA TAX-EXEMPT BOND FUND INVESTOR SHARES 1999 3.62% $3,799 0.87% 3.71% 1.31% 3.27% 72% 1998 8.46 3,381 0.86 3.98 1.34 3.50 69 1997 7.00 3,226 0.85 4.28 1.31 3.82 135 1996 3.76 4,025 0.85 4.28 1.36 3.77 63 1995 9.04 3,320 0.85 4.36 1.50 3.71 105 FLEX SHARES 1999 3.13% $14,762 1.37% 3.21% 1.88% 2.70% 72% 1998 8.04 8,160 1.36 3.45 2.01 2.80 69 1997 6.48 3,000 1.35 3.78 2.28 2.85 135 1996(1) 3.27 2,692 1.35 3.79 2.54 2.60 63 GEORGIA TAX-EXEMPT BOND FUND INVESTOR SHARES 1999 3.13% $3,676 0.87% 3.67% 1.25% 3.29% 12% 1998 8.26 3,975 0.86 3.89 1.30 3.45 7 1997 6.47 3,511 0.85 4.10 1.33 3.62 15 1996 3.69 3,418 0.85 4.17 1.41 3.61 60 1995 6.70 3,268 0.85 4.31 1.43 3.73 25 FLEX SHARES 1999 2.63% $13,358 1.37% 3.19% 1.89% 2.67% 12% 1998 7.74 8,264 1.36 3.39 2.02 2.73 7 1997 6.06 4,662 1.35 3.60 2.07 2.88 15 1996(2) 2.25* 4,207 1.35 3.66 2.35 2.66 60 INVESTMENT GRADE BOND FUND INVESTOR SHARES 1999 3.86% $34,913 1.17% 4.87% 1.36% 4.68% 221% 1998 10.49 33,269 1.14 5.29 1.38 5.05 109 1997 6.66 33,165 1.15 5.48 1.41 5.22 298 1996 3.50 36,155 1.15 5.40 1.44 5.11 184 1995 10.04 33,772 1.15 5.79 1.49 5.45 238 FLEX SHARES 1999 3.35% $26,020 1.66% 4.40% 2.00% 4.06% 221% 1998 9.99 13,111 1.65 4.76 2.11 4.30 109 1997 6.16 5,763 1.64 5.00 2.20 4.44 298 1996(3) 2.50 4,621 1.64 4.84 2.49 3.99 184
+ Return is for the period indicated and has not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 6, 1995. All ratios for the period have been annualized. (3) Commenced operations on June 7, 1995. All ratios for the period have been annualized. Amounts designated as "____" are either $0 or round to $0. (A) Total return figures do not reflect applicable sales loads. * Annualized. STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND DISTRIBUTIONS NET ASSET NET UNREALIZED DISTRIBUTIONS FROM VALUE INVESTMENT GAINS FROM NET REALIZED NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL VALUE END OF PERIOD (LOSS) ON INVESTMENTS INCOME GAINS OF PERIOD - ---------------------------------------------------------------------------------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND INVESTOR SHARES 1999 $11.41 $0.38 $0.11 $(0.38) $(0.40) $11.12 1998 11.24 0.39 0.49 (0.39) (0.32) 11.41 1997 11.12 0.40 0.33 (0.40) (0.21) 11.24 1996 11.30 0.41 0.19 (0.41) (0.37) 11.12 1995 10.69 0.42 0.61 (0.42) -- 11.30 FLEX SHARES 1999 $11.40 $0.33 $0.10 $(0.33) $(0.40) $11.10 1998 11.23 0.33 0.49 (0.33) (0.32) 11.40 1997 11.11 0.35 0.33 (0.35) (0.21) 11.23 1996(4) 11.30 0.37 0.18 (0.37) (0.37) 11.11 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND INVESTOR SHARES 1999 $10.11 $0.51 $(0.06) $(0.51) $(0.12) $9.93 1998 10.00 0.56 0.12 (0.56) (0.01) 10.11 1997 9.97 0.56 0.04 (0.56) (0.01) 10.00 1996 10.11 0.60 (0.14) (0.60) -- 9.97 1995(5) 9.98 0.58 0.13 (0.58) -- 10.11 FLEX SHARES 1999 $10.12 $0.48 $(0.06) $(0.48) $(0.12) $9.94 1998 10.02 0.52 0.11 (0.52) (0.01) 10.12 1997 9.99 0.52 0.04 (0.52) (0.01) 10.02 1996(6) 10.14 0.55 (0.15) (0.55) -- 9.99
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO RATIO OF AVERAGE NET AVERAGE NET RATIO OF NET INVESTMENT ASSETS ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO TOTAL END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER RETURN (+) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT GRADE TAX-EXEMPT BOND FUND INVESTOR SHARES 1999 4.35% $25,195 1.17% 3.36% 1.32% 3.21% 224% 1998 8.05 28,159 1.16 3.43 1.43 3.16 378 1997 6.69 31,857 1.15 3.56 1.38 3.33 489 1996 5.40 37,427 1.15 3.61 1.42 3.34 514 1995 9.91 41,693 1.15 3.88 1.43 3.60 592 FLEX SHARES 1999 3.78% $16,518 1.65% 2.86% 2.03% 2.48% 224% 1998 7.50 8,399 1.64 2.95 2.10 2.49 378 1997 6.19 4,681 1.63 3.08 2.15 2.56 489 1996(4) 4.91 5,536 1.63 3.12 2.25 2.50 514 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND INVESTOR SHARES 1999 4.47% $2,214 0.92% 5.03% 1.52% 4.43% 379% 1998 6.95 2,705 0.91 5.50 1.51 4.90 163 1997 6.17 2,426 0.90 5.55 1.48 4.97 133 1996 4.59 2,512 0.90 5.75 2.25 4.40 83 1995(5) 7.45 623 0.90 6.27 7.74 (0.57) 68 FLEX SHARES 1999 4.14% $2,119 1.27% 4.69% 2.42% 3.54% 379% 1998 6.49 1,543 1.26 5.16 2.72 3.70 163 1997 5.80 1,409 1.25 5.20 2.66 3.79 133 1996(6) 4.10 1,349 1.25 5.38 3.59 3.04 83
+ Returns are for the period indicated and have not been annualized. total return figures do not reflect applicable sales loads. (1) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2) Commended operations on July 17, 1994. All ratios for the period have been annualized. (3) Commended operations on June 7, 1995. All ratios for the period have been annualized. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND DISTRIBUTIONS NET ASSET NET UNREALIZED DISTRIBUTIONS FROM VALUE INVESTMENT GAINS FROM NET REALIZED NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL VALUE END OF PERIOD (LOSS) ON INVESTMENTS INCOME GAINS OF PERIOD - ---------------------------------------------------------------------------------------------------------------- MARYLAND MUNICIPAL BOND FUND (A) FLEX SHARES 1999 $10.24 $0.15 $(0.15) $(0.15) $(0.01) $10.08 FOR THE YEARS ENDED NOVEMBER 30: 1998 9.96 0.33 0.28 (0.33) -- 10.24 1997 9.76 0.34 0.20 (0.34) -- 9.96 1996(7) 9.53 0.20 0.23 (0.20) -- 9.76 SHORT-TERM BOND FUND INVESTOR SHARES 1999 $10.07 $0.49 $(0.10) $(0.50) $(0.03) $9.93 1998 9.91 0.53 0.17 (0.53) (0.01) 10.07 1997 9.88 0.51 0.06 (0.51) (0.03) 9.91 1996 10.01 0.52 (0.10) (0.53) (0.02) 9.88 1995 9.81 0.51 0.19 (0.50) -- 10.01 FLEX SHARES 1999 $10.07 $0.47 $(0.11) $(0.47) $(0.03) $9.93 1998 9.91 0.50 0.17 (0.50) (0.01) 10.07 1997 9.88 0.48 0.06 (0.48) (0.03) 9.91 1996(8) 10.02 0.47 (0.12) (0.47) (0.02) 9.88
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO RATIO OF AVERAGE NET AVERAGE NET RATIO OF NET INVESTMENT ASSETS ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO TOTAL END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER RETURN (+) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ MARYLAND MUNICIPAL BOND FUND (A) FLEX SHARES 1999 0.05% $7,723 1.59% 2.94% 1.98% 2.55% 19% FOR THE YEARS ENDED NOVEMBER 30: 1998 6.17 3,246 1.57 3.16 1.96 2.77 12 1997 5.64 561 1.54 3.43 2.00 2.97 5 1996(7) 7.67 113 1.55 3.42 2.20 2.77 9 SHORT-TERM BOND FUND INVESTOR SHARES 1999 3.88% $1,825 0.87% 4.92% 1.59% 4.20% 108% 1998 7.19 1,949 0.86 5.27 1.71 4.42 87 1997 5.97 2,182 0.85 5.16 1.58 4.43 118 1996 4.23 2,700 0.85 5.20 1.72 4.33 163 1995 7.44 2,609 0.85 5.24 1.56 4.53 200 FLEX SHARES 1999 3.50% $2,341 1.22% 4.55% 2.33% 3.44% 108% 1998 6.84 2,110 1.21 4.93 2.85 3.29 87 1997 5.62 1,073 1.20 4.82 3.02 3.00 118 1996(8) 3.73 966 1.20 4.77 4.06 1.91 163
+ Returns are for the period indicated and have not been annualized. total return figures do not reflect applicable sales loads. (4) Commenced operations on April 25, 1996. all ratios for the period have been annualized. (5) Commenced operations on June 20, 1995. all ratios for the period have been annualized. (A) On May 24, 1999, the Crest Funds Maryland Municipal Bond, Crest Funds Virginia intermediate Municipal Bond, and Crest Funds Virginia Municipal Bond Funds exchanged all of their assets and certain liabilities for shares of the Maryland Municipal Bond Fund. The Crest Funds Maryland Municipal Bond, Virginia intermediate Municipal Bond, and Virginia Municipal Bond Funds, respectively is the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND DISTRIBUTIONS NET ASSET NET UNREALIZED DISTRIBUTIONS FROM VALUE INVESTMENT GAINS FROM NET REALIZED NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL VALUE END OF PERIOD (LOSS) ON INVESTMENTS INCOME GAINS OF PERIOD - ---------------------------------------------------------------------------------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND INVESTOR SHARES 1999 $9.96 $0.46 $(0.01) $(0.46) $-- $9.95 1998 9.88 0.49 0.09 (0.50) -- 9.96 1997 9.84 0.50 0.04 (0.50) -- 9.88 1996 9.94 0.54 (0.10) (0.54) -- 9.84 1995 9.83 0.46 0.11 (0.46) -- 9.94 FLEX SHARES 1999 $9.94 $0.44 $(0.02) $(0.43) $-- $9.93 1998 9.85 0.47 0.10 (0.48) -- 9.94 1997 9.82 0.47 0.03 (0.47) -- 9.85 1996(6) 9.96 0.48 (0.14) (0.48) -- 9.82 U.S. GOVERNMENT SECURITIES FUND INVESTOR SHARES 1999 $10.45 $0.54 $(0.17) $(0.54) $-- $10.28 1998 10.02 0.57 0.43 (0.57) -- 10.45 1997 9.90 0.58 0.12 (0.58) -- 10.02 1996 10.26 0.59 (0.33) (0.59) (0.03) 9.90 1995(7) 10.00 0.56 0.26 (0.56) -- 10.26 FLEX SHARES 1999 $10.46 $ 0.49 $(0.18) $(0.49) $-- $10.28 1998 10.02 0.52 0.44 (0.52) -- 10.46 1997 9.91 0.53 0.11 (0.53) -- 10.02 1996(8) 10.31 0.52 (0.37) (0.52) (0.03) 9.91
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO RATIO OF AVERAGE NET AVERAGE NET RATIO OF NET INVESTMENT ASSETS ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO TOTAL END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER RETURN (+) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM U.S. TREASURY SECURITIES FUND INVESTOR SHARES 1999 4.54% $2,799 0.82% 4.54% 1.34% 4.02% 57% 1998 6.04 3,277 0.81 5.07 1.33 4.55 39 1997 5.59 3,921 0.80 5.05 1.35 4.50 93 1996 4.52 4,192 0.80 5.43 1.32 4.91 94 1995 6.03 7,144 0.80 4.74 1.33 4.21 88 FLEX SHARES 1999 4.32% $4,931 1.07% 4.22% 2.25% 3.04% 57% 1998 5.90 1,413 1.06 4.81 2.87 3.00 39 1997 5.19 1,091 1.05 4.75 2.51 3.29 93 1996(6) 3.72 2,423 1.05 5.03 2.97 3.11 94 U.S. GOVERNMENT SECURITIES FUND INVESTOR SHARES 1999 3.56% $2,534 1.17% 5.17% 1.60% 4.74% 19% 1998 10.23 3,225 1.16 5.53 1.76 4.93 14 1997 7.21 2,243 1.15 5.76 1.79 5.12 21 1996 2.47 2,396 1.15 5.68 2.50 4.33 83 1995(7) 8.61 589 1.15 6.08 6.84 0.39 30 FLEX SHARES 1999 2.99% $11,520 1.68% 4.66% 2.08% 4.26% 19% 1998 9.78 4,022 1.67 5.02 2.32 4.37 14 1997 6.57 2,801 1.66 5.26 2.42 4.50 21 1996(8) 1.42 2,826 1.66 5.18 2.86 3.98 83
(6) Commenced Operations ON June 22, 1995. All Ratios for the period have been annualized. (7) Commenced operations on June 9, 1994. All ratios for the period have been annualized. (8) Commenced operations on June 7, 1995. All ratios for the period have been annualized. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND DISTRIBUTIONS NET ASSET NET UNREALIZED DISTRIBUTIONS FROM VALUE INVESTMENT GAINS FROM NET REALIZED NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL VALUE END OF PERIOD (LOSS) ON INVESTMENTS INCOME GAINS OF PERIOD - ---------------------------------------------------------------------------------------------------------------- VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) INVESTOR SHARES 1999(9) $10.45 $ 0.22 $(0.18) $(0.22) $(0.07) $10.20 FOR YEARS ENDED NOVEMBER 30: 1998 10.31 0.46 0.17 (0.45) (0.04) 10.45 1997 10.21 0.47 0.09 (0.46) -- 10.31 1996 10.23 0.42 (0.02) (0.42) -- 10.21 1995 9.20 0.43 1.03 (0.43) -- 10.23 1994 10.32 0.44 (1.10) (0.44) (0.02) 9.20 VIRGINIA MUNICIPAL BOND FUND (A) FLEX SHARES 1999(9) $10.73 $ 0.17 $(0.18) $(0.18) $(0.06) $10.48 FOR YEARS ENDED NOVEMBER 30: 1998 10.48 0.37 0.28 (0.37) (0.03) 10.73 1997 10.31 0.39 0.18 (0.39) (0.01) 10.48 1996 10.43 0.38 (0.12) (0.38) -- 10.31 1995(10) 10.06 0.24 0.41 (0.24) (0.04) 10.43
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO RATIO OF AVERAGE NET AVERAGE NET RATIO OF NET INVESTMENT ASSETS ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO TOTAL END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER RETURN (+) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) INVESTOR SHARES 1999(12) 0.35% $7,706 0.79% 4.17% 0.93% 4.03% 19% FOR YEARS ENDED NOVEMBER 30: 1998 6.19 7,899 0.79 4.33 0.94 4.18 24 1997 5.65 7,826 0.79 4.56 0.94 4.41 30 1996 4.01 8,185 0.79 4.12 0.94 3.97 25 1995 16.10 8,649 0.73 4.33 0.95 4.11 28 1994 (6.56) 7,481 0.66 4.47 0.80 4.33 24 VIRGINIA MUNICIPAL BOND FUND (A) FLEX SHARES 1999(9) (0.16)% $6,939 1.65% 3.32% 1.91% 3.06% 7% FOR YEARS ENDED NOVEMBER 30: 1998 6.24 3,697 1.64 3.46 1.92 3.18 28 1997 5.58 1,476 1.60 3.73 2.00 3.33 39 1996 2.58 787 1.57 3.73 1.97 3.33 24 1995(10) 6.51 628 1.57 3.76 1.97 3.36 35
+ Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (9) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (10) Commenced operations on April 17, 1995. All ratios for the period have been annualized. STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 SunTrust Bank, Atlanta 25 Park Place Atlanta, GA 30303 Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS EQUITY FUNDS TRUST SHARES PROSPECTUS OCTOBER 1, 1999 BALANCED FUND CAPITAL APPRECIATION FUND (FORMERLY CAPITAL GROWTH FUND) CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISERS TO THE FUNDS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Equity Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
PAGE BALANCED FUND........................................... 2 CAPITAL APPRECIATION FUND............................... 4 CORE EQUITY FUND........................................ 6 E-COMMERCE OPPORTUNITY FUND............................. 8 GROWTH AND INCOME FUND.................................. 10 INTERNATIONAL EQUITY FUND............................... 12 INTERNATIONAL EQUITY INDEX FUND......................... 14 MID-CAP EQUITY FUND..................................... 16 SMALL CAP EQUITY FUND................................... 18 SMALL CAP GROWTH STOCK FUND............................. 20 TAX SENSITIVE GROWTH STOCK FUND......................... 22 VALUE INCOME STOCK FUND................................. 24 MORE INFORMATION ABOUT RISK............................. 26 EACH FUND'S OTHER INVESTMENTS........................... 27 THE INVESTMENT ADVISERS AND PORTFOLIO MANAGERS.......... 27 PURCHASING AND SELLING FUND SHARES...................... 29 DIVIDENDS AND DISTRIBUTIONS............................. 31 TAXES................................................... 31 FINANCIAL HIGHLIGHTS.................................... 38 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS...................................Back Cover
[INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 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 STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, The Adviser attempts to identify high-quality companies with a history of earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 25.51% 1996 12.13% 1997 21.14% 1998 19.55% BEST QUARTER WORST QUARTER 12.57% -5.70% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 5.39%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND THE S&P 500 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- BALANCED FUND 19.55% 14.30%* LEHMAN GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.11%** S&P 500 INDEX 28.60% 23.66%**
* Since 1/3/94 ** Since 1/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.95% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.06%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $108 $337 $585 $1,294
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.86% AND 0.97%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." CAPITAL APPRECIATION FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment INVESTMENT STRATEGY The Capital Appreciation Fund invests primarily in U.S. common stocks and other equity securities that the Adviser believes are undervalued by the stock market. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser rotates the Fund's investments among various market sectors based on the Adviser's research of business cycles. The Adviser's strategy focuses on large-cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13% 1998 28.06% BEST QUARTER WORST QUARTER 22.93% -11.16% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 10.45%. This table compares the Fund's average annual total returns for the periods ended December 31, 1998, to those of the S&P 500 Index.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------- Capital Appreciation Fund 28.06% 19.66% 18.64%* S&P 500 Index 28.60% 24.05% 20.82%**
* Since 7/1/92 ** Since 7/31/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $128 $400 $692 $1,523
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.06% AND 1.17%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." CORE EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth INVESTMENT FOCUS Common stocks of mid- to large-cap companies SHARE PRICE VOLATILITY Moderate to high PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with superior earnings trends INVESTOR PROFILE Investors seeking long-term growth of capital without regard to income who are willing to accept more volatility for the possibility of higher returns INVESTMENT STRATEGY The Core Equity Fund invests primarily in common stocks of U.S. companies with market capitalizations of more than $1 billion. In selecting stocks for the Fund, the Adviser attempts to capture superior growth prospects based on earnings potential, profitability and other measures. These measures include growth characteristics such as whether a company makes significant investments in research and product development or whether a company is participating in rapidly expanding industries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. In addition, the Fund is subject to the risk that its principal market segment, mid- to large-capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. PERFORMANCE INFORMATION As of September 30, 1999, the Core Equity Fund had not commenced operations, and did not have a performance history. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.10% Other Expenses* 0.20% ----- Total Annual Fund Operating Expenses 1.30%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS $132 $412
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses are expected to be lower because the Adviser is voluntarily waiving a portion of its fees. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." E-COMMERCE OPPORTUNITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth INVESTMENT FOCUS Common stocks of companies participating in multiple electronic commerce market segments SHARE PRICE VOLATILITY Very high PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies utilizing electronic commerce opportunities to achieve above average growth INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept significant volatility for the possibility of higher returns INVESTMENT STRATEGY The E-Commerce Opportunity Fund invests primarily in common stocks of U.S. companies that are expected to benefit substantially from electronic commerce and achieve above average growth. The Fund defines electronic commerce, or e-commerce, as conducting business For the purpose of the Fund, electronic commerce, or e-commerce, is defined broadly as conducting business through the use of computers, the Internet, telecommunication lines and other electronic means of information transfer. The Fund's holdings are generally diversified across three market segments. The first segment is comprised of recently established corporations that are implementing pioneering electronic commerce strategies. The second segment consists of technology companies that provide the infrastructure to support electronic based commerce. The third segment includes conventional corporations that are leveraging electronic commerce opportunities to improve their competitive advantage. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. Due to the focus of the Fund, many holdings share similar risk factors. Many companies in the portfolio have limited operating histories, function in rapidly changing business environments and trade at valuations which are significantly higher than average. As a result, the Fund's NAV may be more volatile than other, broadly diversified equity funds. PERFORMANCE INFORMATION As of September 30, 1999, the E-Commerce Opportunity Fund had not commenced operations, and did not have a performance history. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.10% Other Expenses 0.20% ----- Total Annual Fund Operating Expenses 1.30%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS $132 $412
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses are expected to be lower because the Adviser is voluntarily waiving a portion of its fees. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." GROWTH AND INCOME FUND FUND SUMMARY INVESTMENT FOCUS PRIMARY Long-term capital appreciation SECONDARY Current income INVESTMENT FOCUS Equity securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average earnings momentum relative either to their sectors or the market as a whole. INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole INVESTMENT STRATEGY The Growth and Income Fund invests primarily in equity securities, including common stock and listed American Depository Receipts (ADR's), of domestic and foreign companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio manager team selects stocks of companies with strong financial quality and above average earnings momentum to secure the best relative values in each economic sector. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1993 10.20% 1994 -0.81% 1995 29.38% 1996 19.06% 1997 27.69% 1998 18.20% BEST QUARTER WORST QUARTER 17.38% -10.36% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 12.76%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------- Growth and Income Fund 18.20% 18.19% 17.26%* S&P 500 Index 28.60% 24.05% 21.60%**
* Since 9/25/92 ** Since 9/30/92 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.90% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.01%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $103 $322 $558 $1,236
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." INTERNATIONAL EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Foreign common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued companies with 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 INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. In selecting investments for the Fund, the Adviser diversifies 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. The Adviser's "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. The Adviser's goal is to find companies with top management, quality products and sound financial positions, that are trading at a discount. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, foreign common stocks, may underperform other equity market segments or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1995, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. This bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1996 22.08% 1997 13.35% 1998 11.22% BEST QUARTER WORST QUARTER 16.88% -18.28% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.91%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- International Equity Fund 11.22% 21.28%* MSCI EAFE Index 20.00% 10.87%*
* Since 1/31/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.25% Other Expenses 0.28% ----- Total Annual Fund Operating Expenses 1.53%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $156 $483 $834 $1,824
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.20% AND 1.48%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." INTERNATIONAL EQUITY INDEX FUND FUND SUMMARY INVESTMENT GOAL 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 STRATEGY Statistical analysis to track the Index INVESTOR PROFILE Aggressive investors who want exposure to foreign markets and are willing to accept the increased risks of foreign investing for the possibility of higher returns INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, the Adviser chooses companies included in the MSCI EAFE-GDP Index, an index of equity securities of companies located in Europe, Australasia and the Far East. While the Fund is structured to have overall investment characteristics similar to those of the Index, it selects a sample of stocks within the index using a statistical process. So, the Fund will not hold all stocks included in the Index. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, foreign common stocks, may underperform other market segments or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. In addition to the above mentioned risks, the Adviser may not be able to match the performance of the Fund's benchmark. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. This bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1995 10.73% 1996 6.04% 1997 8.99% 1998 30.02% BEST QUARTER WORST QUARTER 21.26% -12.98% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 6.23%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST - GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND 30.02% 11.15%* MSCI EAFE-GDP WEIGHTED INDEX 25.12% 9.42%**
* Since 6/6/94 ** Since 6/30/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Weighted Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The index is weighted by the gross domestic product of the various countries in the index. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.90% Other Expenses 0.28% ----- Total Annual Fund Operating Expenses 1.18%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $120 $375 $649 $1,432
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.79% AND 1.07%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify companies with above average growth potential at an attractive price INVESTOR PROFILE Investors who want the value of their investment to grow and who are willing to accept more volatility for the possibility of higher returns INVESTMENT STRATEGY The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have small- to mid-sized market capitalizations (i.e., companies with market capitalizations of $500 million to $10 billion and companies in the S&P MidCap 400 Index) and that have above average growth potential at attractive prices. The Adviser evaluates companies based on their industry sectors and the market in general. The Fund maintains holdings in the industries that appear to perform best during a given business cycle. The Adviser analyzes companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. The Adviser does not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, mid-cap common stocks, may underperform other equity market segments or the equity markets as a whole. The small- to mid-sized capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap and mid-cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 31.22% 1996 15.42% 1997 21.23% 1998 6.48% BEST QUARTER WORST QUARTER 24.73% -19.96% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 6.51%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P MIDCAP 400 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- Mid-Cap Equity Fund 6.48% 14.25%* S&P MidCap 400 Index 19.12% 19.34%**
* Since 2/2/94 ** Since 2/28/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P MidCap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. FUND FEES EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 1.28%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $130 $406 $702 $1,545
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04% AND 1.17%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." SMALL CAP EQUITY FUND FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income INVESTMENT FOCUS U.S. small cap common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap stocks INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment INVESTMENT STRATEGY The Small Cap Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, the Adviser chooses common stocks of small sized companies (i.e., companies with market capitalizations under $1 billion) that it believes are undervalued in the market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization common stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 30.99% 1996 34.25% 1997 32.59% 1998 -13.45% BEST QUARTER WORST QUARTER 14.95% -21.99% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 3.88%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- SMALL CAP EQUITY FUND -13.45% 17.77%* FRANK RUSSELL 2000 SMALL STOCK INDEX -2.55% 13.71%*
* Since 8/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 1.27%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $129 $403 $697 $1,534
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.10% AND 1.22%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." SMALL CAP GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS U.S. small cap common stocks of growth companies SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion. The Adviser selects companies that demonstrate above average earnings and sales growth potential. The selected companies tend to have an established operating history and a solid balance sheet. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The Small Cap Growth Stock Fund commenced operations on October 8, 1998, and therefore does not have a performance history for a full calendar year. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund Shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.34% ----- Total Annual Fund Operating Expenses 1.49%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $152 $471 $813 $1,779
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.86% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." TAX SENSITIVE GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth with nominal dividend income INVESTMENT FOCUS U.S. common stocks of growth companies SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have above average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions INVESTOR PROFILE Investors who want to increase the value of their investment while minimizing taxable capital gains distributions INVESTMENT STRATEGY The Tax Sensitive Growth Stock Fund invests primarily in a diversified portfolio of common stocks of financially strong U.S. growth companies. Many of these companies have a history of stable or rising dividend payout policies. The Adviser attempts to minimize the impact of capital gains taxes on investment returns by using a low turnover rate (generally 50% or less) strategy, in conjunction with other tax management strategies. These strategies may lead to lower capital gains distributions and, therefore, lower capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, common stocks of U.S. growth companies, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1998, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. This bar chart shows changes in the performance of the Fund's Trust Shares from year to year.* 1996 21.04% 1997 28.76% 1998 31.73% BEST QUARTER WORST QUARTER 27.74% -9.96% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 17.56%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF S&P 500 INDEX AND THE LIPPER GROWTH AND INCOME FUNDS INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- TAX SENSITIVE GROWTH STOCK FUND 31.73% 27.15%* S&P 500 INDEX 28.60% 28.23%** LIPPER GROWTH AND INCOME FUNDS INDEX X.XX% X.XX%
* Since 12/31/95 ** Since 12/31/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Lipper Growth and Income Funds Index is a widely-recognized composite of mutual funds that have growth-of earnings orientations and income requirements for level and/or rising dividends. This table compares the Fund's average annual total returns for the periods ended December 31, 1998, to those of S&P 500 Index and the Lipper Growth and Income Funds Index.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------ Tax Sensitive Growth Stock Fund 31.73% 27.15%* - ------------------------------------------------------------------------ S&P 500 Index 28.60% 28.23%* - ------------------------------------------------------------------------ Lipper Growth and Income Funds Index 13.58% 20.25%* - ------------------------------------------------------------------------
* SINCE 12/31/95 - ------------------------------------------------------------------------ WHAT IS AN INDEX - ------------------------------------------------------------------------ An Index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Lipper Growth and Income Funds Index is a widely-recognized composite of mutual funds that have growth-of-earnings orientations and income requirements for level and/or rising dividends. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.19% ----- Total Annual Fund Operating Expenses 1.34%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $136 $425 $734 $1,613
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.01% AND 1.20%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." 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 STRATEGY Attempts to identify high dividend-paying, undervalued stocks INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08% 1998 10.58% BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 13.51%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P/BARRA VALUE INDEX AND THE LIPPER EQUITY INCOME FUND INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------------------------------------------------------------- Value Income Stock Fund 10.58% 18.76% 17.21%* S&P/Barra Value Index 14.68% 19.88% 15.76%* Lipper Equity Income Fund Index 11.78% 16.62% 13.53%*
* Since 10/31/89 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P/BARRA Value Index is a widely recognized index of the stocks in the S&P 500 Index that have lower price to book ratios. The Lipper Equity Income Fund Index is an equally weighted index of typically the 30 largest funds that seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.80% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.92%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $94 $293 $509 $1,131
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Advisers." MORE INFORMATION ABOUT RISK EQUITY RISK-- Equity securities include ALL FUNDS public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK -- The market value of BALANCED FUND fixed income investments change in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK -- The possibility that an issuer BALANCED FUND will be unable to make timely payments of either principal or interest. FOREIGN SECURITY RISKS-- Investments in GROWTH AND INCOME FUND securities of foreign companies or INTERNATIONAL EQUITY FUND governments can be more volatile than INTERNATIONAL EQUITY INDEX FUND investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. TRACKING ERROR RISK-- Factors such as Fund INTERNATIONAL EQUITY INDEX FUND expenses, imperfect correlation between the Fund's investments and those of their benchmarks, rounding of share prices, changes to the benchmark, regulatory policies, and leverage, may affect their ability to achieve perfect correlation. The magnitude of any tracking error may be affected by a higher portfolio turnover rate. Because an index is just a composite of the prices of the securities it represents rather than an actual portfolio of those securities, an index will have no expenses. As a result, a Fund, which will have expenses such as taxes, custody, management fees and other operational costs, and brokerage, may not achieve its investment objective of accurately correlating to an index. YEAR 2000 RISK-- The Funds depend on the All Funds smooth functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business. Furthermore, many foreign countries are not as prepared as the U.S. for the year 2000 transition. As a result, computer difficulties in foreign markets and with foreign institutions as a result of the year 2000 may add to the possibility of losses to the Funds and their shareholders. EACH FUND'S OTHER INVESTMENTS This Prospectus describes the Funds' principal strategies, and the Funds will normally invest in the types of securities described in this Prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objective. The Small Cap Equity Fund also may invest in investment grade fixed income securities and mid- to large cap common stocks. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Balanced Fund, Capital Appreciation Fund, International Equity Fund, Mid-Cap Equity Fund, Small Cap Equity Fund and Value Income Stock Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of: BALANCED FUND 0.86% CAPITAL APPRECIATION FUND 1.06% INTERNATIONAL EQUITY FUND 1.20% MID-CAP EQUITY FUND 1.04% SMALL CAP EQUITY FUND 1.10% VALUE INCOME STOCK FUND 0.80%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Core Equity Fund, E-Commerce Opportunity Fund, Growth and Income Fund, International Equity Index Fund, Small Cap Growth Stock Fund and Tax Sensitive Growth Stock Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: INTERNATIONAL EQUITY INDEX FUND 0.79% The Small Cap Growth Stock and Tax Sensitive Growth Stock Funds had not completed a full fiscal year and the Core Equity and E-Commerce Opportunity Funds had not commenced operations as of May 31, 1999. Prior to May 24, 1999, Crestar Asset Management Company served as the Adviser to the predecessor of the Growth and Income Fund. For the fiscal period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of 0.75% for the Growth and Income Fund. The Advisers may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Anthony R. Gray, Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed-income portion of the Fund. Mr. Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has more than 30 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. He has more than 13 years of investment experience. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has more than 20 years of investment experience. Mr. Anthony Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has managed the Capital Appreciation Fund since it began operating in June 1992. He has more than 30 years of investment experience. Mr. Robert J. Rhodes, CFA, has been employed by Trusco since 1973, and Director of Research since 1980. He has managed the Core Equity Fund since it began operating in October 1999. He has more than 26 years of investment experience. Mr. Alan S. Kelley has served as portfolio manager of Trusco since 1999. He has managed the E-Commerce Opportunity Fund since it began operating in October 1999. Prior to joining Trusco, Mr. Kelley served as a portfolio manager with SunTrust Bank, Atlanta from 1995 to 1999. Prior to 1995, he was a portfolio manager of Urban Equities, LLC. He has more than 5 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as lead portfolio manager of the Growth and Income Fund since it began operating in September 1992. Since 1992, he has served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999. Mr. Markunas has more than 17 years of investment experience. Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed the International Equity Fund since May 1997. Prior to joining STI Capital Management, N.A., Mr. Dau served as senior international equity analyst for American Express Financial Advisors from 1996 to 1997 and as an international portfolio manager for the Principal Financial Group from 1992 to 1995. He has more than 8 years of investment experience. The International Equity Index Fund is managed by Mr. Chad Deakins and co-managed by Mr. Robert J. Rhodes. Mr. Deakins has served as a portfolio manager at Trusco since February 1999 and as a portfolio assistant since 1996. He has managed the International Equity Index Fund since February 1999. Prior to joining Trusco, Mr. Deakins worked at SunTrust Banks. He has more than 4 years of investment experience. Mr. Rhodes has been employed by Trusco since 1973, and Director of Research since 1980. He has co-managed the International Equity Index Fund since it began operating in June 1994. He has more than 26 years of investment experience. Mr. John Hamlin has served as Portfolio Manager of STI since March 1999. He has managed the Mid-Cap Equity Fund since April 1999. Prior to joining STI, Mr. Hamlin served as Portfolio Manager at Phoenix Investment Counsel, Inc. from 1992 to 1999. He has more than 10 years of investment experience. Mr. Brett Barner, CFA, has served as a Managing Director of STI since 1994. He has managed the Small Cap Equity Fund since it began operating in January 1997. He has more than 15 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. Prior to joining Trusco, Mr. Garfinkel served as a portfolio manager with SunTrust Banks. He has more than 10 years of investment experience. Mr. Jonathan Mote, CFA, CFP, served as Portfolio Manager of Trusco since August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began operating in December 1998. Prior to joining Trusco, Mr. Mote served as a portfolio manager with SunTrust Banks. He has more than 14 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. He has more than 17 years of investment experience. Mr. Lewis has served as a portfolio manager of STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 7 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions and potentially through the 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. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Some Funds hold securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Funds do not calculate NAV. As a result, the market value of these investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: QUARTERLY ANNUALLY - ---------- -------- Balanced Fund International Equity Fund Capital Appreciation Fund International Equity Index Fund Core Equity Fund E-Commerce Opportunity Fund Growth and Income Fund Mid-Cap Equity Fund Small Cap Equity Fund Small Cap Growth Stock Fund Tax Sensitive Growth Stock Fund Value Income Stock Fund Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receives your written notice. To cancel your election, simply send the Funds written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. The International Equity Fund and International Equity Index Fund may be able to pass along a tax credit for foreign income taxes they pay. Each Fund will notify you if it gives you the credit. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The tables that follow presents performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The information for each Fund except the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The reports of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4700. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN+ - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED FUND TRUST SHARES 1999 $13.09 $ 0.28 $ 1.09 $(0.28) $ (0.92) $13.26 10.98% 1998 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 1997 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26 1995 9.76 0.33 0.49 (0.32) -- 10.26 8.72 CAPITAL APPRECIATION FUND TRUST SHARES 1999 $16.48 $ 0.05 $ 2.70 $(0.06) $ (2.55) $16.62 17.83% 1998 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1997 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 1995 11.99 0.16 0.57 (0.14) (0.40) 12.18 6.63 GROWTH AND INCOME FUND (A) TRUST SHARES 1999(1) $15.10 $ 0.04 $ 1.97 $(0.02) $ (1.00) $16.09 14.24% FOR THE YEARS ENDED NOVEMBER 30: 1998 16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64% 1997 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 1996 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68 1995 10.73 0.24 2.62 (0.26) (1.73) 11.60 28.76 1994 11.38 0.20 (0.24) (0.19) (0.42) 10.73 (0.49)
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED FUND TRUST SHARES 1999 $ 251,752 0.97% 2.19% 1.06% 2.10% 179% 1998 188,465 0.96 2.51 1.08 2.39 154 1997 151,358 0.95 2.89 1.08 2.76 197 1996 111,638 0.95 3.00 1.09 2.86 155 1995 89,051 0.95 3.44 1.11 3.28 157 CAPITAL APPRECIATION FUND TRUST SHARES 1999 $1,966,842 1.17% 0.29% 1.26% 0.20% 147% 1998 1,532,587 1.16 0.61 1.27 0.50 194 1997 1,085,128 1.15 0.83 1.25 0.73 141 1996 981,498 1.15 0.90 1.27 0.78 156 1995 984,205 1.15 1.38 1.28 1.25 128 GROWTH AND INCOME FUND (A) TRUST SHARES 1999(1) $ 634,279 1.14% 0.49% 1.43% 0.20% 31% FOR THE YEARS ENDED NOVEMBER 30: 1998 577,042 1.03% 0.63% 1.21 0.45% 71% 1997 590,824 1.02 0.92 1.17 0.77 100 1996 553,648 1.02 1.38 1.17 1.23 82 1995 220,386 1.02 2.16 1.17 2.01 175 1994 166,713 1.01 1.82 1.01 1.82 116
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The Crestar Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights.
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN+ - ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND TRUST SHARES 1999 $15.00 $ -- $(1.14) $(0.05) $(0.84) $12.97 (7.43%) 1998 13.63 0.04 2.69 (0.04) (1.32) 15.00 21.87 1997 11.40 0.03 2.57 (0.02) (0.35) 13.63 23.29 1996(2) 10.00 0.05 1.35 -- -- 11.40 14.00 INTERNATIONAL EQUITY INDEX FUND TRUST SHARES 1999 $13.31 $ 0.09 $ 0.85 $(0.24) $(2.19) $11.82 7.87% 1998 11.34 0.11 2.65 (0.11) (0.68) 13.31 25.82 1997 10.96 0.10 0.69 (0.11) (0.30) 11.34 7.48 1996 10.24 0.10 0.84 (0.13) (0.09) 10.96 9.29 1995(3) 10.00 0.08 0.19 (0.02) (0.01) 10.24 2.69 MID-CAP EQUITY FUND TRUST SHARES 1999 $13.79 $ 0.01 $ 0.07 $ -- $(1.19) $12.68 1.61% 1998 13.21 -- 2.54 -- (1.96) 13.79 21.14 1997 12.76 0.03 1.69 (0.05) (1.22) 13.21 14.23 1996 11.00 0.08 2.63 (0.08) (0.87) 12.76 25.54 1995 9.85 0.08 1.15 (0.08) -- 11.00 12.56
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND TRUST SHARES 1999 $573,255 1.48% 0.68% 1.53% 0.63% 161% 1998 628,870 1.47 0.61 1.48 0.60 108 1997 489,325 1.46 0.51 1.51 0.46 139 1996(2) 213,306 1.46 1.36 1.65 1.17 113 INTERNATIONAL EQUITY INDEX FUND TRUST SHARES 1999 $ 74,616 1.07% 0.69% 1.18% 0.58% 32% 1998 56,200 1.06 0.88 1.18 0.76 1 1997 53,516 1.05 0.71 1.15 0.61 2 1996 90,980 1.05 0.84 1.19 0.70 30 1995(3) 89,446 1.05 1.13 1.31 0.87 10 MID-CAP EQUITY FUND TRUST SHARES 1999 $254,055 1.17% (0.47%) 1.28% (0.58%) 76% 1998 337,825 1.16 (0.29) 1.27 (0.40) 129 1997 287,370 1.15 0.23 1.26 0.12 152 1996 253,905 1.15 0.70 1.29 0.56 116 1995 125,562 1.15 0.88 1.32 0.71 66
(2) Commenced operations on December 1, 1995. All ratios for the period have been annualized. (3) Commenced operations on June 6, 1994. All ratios for the period have been annualized. Amounts designated as "-" are either $0 or round to $0.
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN+ - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP EQUITY FUND TRUST SHARES 1999 $12.88 $ 0.13 $(2.57) $(0.13) $(0.61) $ 9.70 (18.72%) 1998 11.07 0.14 2.41 (0.12) (0.62) 12.88 23.59 1997(4) 10.00 0.05 1.04 (0.02) -- 11.07 10.97 SMALL CAP GROWTH STOCK FUND TRUST SHARES 1999(5) $10.00 $(0.05) $ 4.62 $ -- $(0.02) $14.55 45.70% TAX SENSITIVE GROWTH STOCK FUND TRUST SHARES 1999(6) $25.61 $ 0.02 $ 4.34 $(0.01) $ -- $29.96 17.04% VALUE INCOME STOCK FUND TRUST SHARES 1999 $13.90 $ 0.24 $ 1.02 $(0.24) $(2.07) $12.85 11.13% 1998 13.71 0.26 2.62 (0.27) (2.42) 13.90 23.10 1997 13.15 0.30 2.32 (0.30) (1.76) 13.71 22.18 1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91 1995 10.54 0.32 1.56 (0.32) (0.51) 11.59 19.06
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP EQUITY FUND TRUST SHARES 1999 $ 301,984 1.22% 1.27% 1.27% 1.22% 63% 1998 390,841 1.21 1.07 1.31 0.97 55 1997(4) 131,049 1.20 1.86 1.37 1.69 27 SMALL CAP GROWTH STOCK FUND TRUST SHARES 1999(5) $ 152,290 1.20% (0.48%) 1.49% (0.77%) 75% TAX SENSITIVE GROWTH STOCK FUND TRUST SHARES 1999(6) $ 223,543 1.20% 0.21% 1.34% 0.07% 18% VALUE INCOME STOCK FUND TRUST SHARES 1999 $1,589,951 0.92% 1.91% 0.92% 1.91% 69% 1998 1,725,418 0.92 1.85 0.92 1.85 99 1997 1,488,062 0.91 2.40 0.91 2.40 105 1996 1,244,399 0.92 2.86 0.92 2.86 134 1995 991,977 0.95 3.16 0.95 3.16 126
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (4) Commenced operations on January 31, 1997. All ratios for the period have been annualized. (5) Commenced operations on October 8, 1998. All ratios for the period have been annualized. (6) Commenced operations on December 11, 1998. All ratios for the period have been annualized. STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Fund's Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS EQUITY FUNDS INVESTOR SHARES AND FLEX SHARES PROSPECTUS OCTOBER 1, 1999 BALANCED FUND CAPITAL APPRECIATION FUND (FORMERLY CAPITAL GROWTH FUND) CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISERS STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Page 1 of 71 HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor Shares and Flex Shares of the Funds that you should know before investing. Please read this prospectus and keep it for future reference. Investor Shares and Flex Shares have different expenses and other characteristics, allowing you to choose the class that best suits your needs. You should consider the amount you want to invest, how long you plan to have it invested, and whether you plan to make additional investments. INVESTOR SHARES - FRONT-END SALES CHARGE - 12B-1 FEES - $2,000 MINIMUM INITIAL INVESTMENT FLEX SHARES - CONTINGENT DEFERRED SALES CHARGE - HIGHER 12B-1 FEES - $5,000 MINIMUM INITIAL INVESTMENT Page 2 of 71 THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
PAGE BALANCED FUND................................................. 2 CAPITAL APPRECIATION FUND..................................... 4 CORE EQUITY FUND.............................................. 6 E-COMMERCE OPPORTUNITY FUND................................... 8 GROWTH AND INCOME FUND........................................ 10 INTERNATIONAL EQUITY FUND..................................... 12 INTERNATIONAL EQUITY INDEX FUND............................... 14 MID-CAP EQUITY FUND........................................... 16 SMALL CAP EQUITY FUND......................................... 18 SMALL CAP GROWTH STOCK FUND................................... 20 TAX SENSITIVE GROWTH STOCK FUND............................... 22 VALUE INCOME STOCK FUND....................................... 22 MORE INFORMATION ABOUT RISK................................... 24 EACH FUND'S OTHER INVESTMENTS................................. 25 THE INVESTMENT ADVISERS AND PORTFOLIO MANAGERS................ 26 PURCHASING, SELLING AND EXCHANGING FUND SHARES................ 27 DIVIDENDS AND DISTRIBUTIONS................................... 29 TAXES......................................................... 30 FINANCIAL HIGHLIGHTS.......................................... 32 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS............................................. Back Cover
FOR MORE INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR THE "SIMPLY SPEAKING" EXPLANATIONS. [INSERT ICONS HERE] Page 3 of 71 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. Page 4 of 71 BALANCED FUND FUND SUMMARY INVESTMENT GOAL PRIMARY U.S. common stocks SECONDARY Bonds INVESTMENT FOCUS Capital appreciation and current income SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate (bonds). In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Page 5 of 71 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 25.08% 1996 11.85% 1997 20.71% 1998 19.21%
BEST QUARTER WORST QUARTER 12.52% -5.81% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 5.21%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX AND THE S&P 500 INDEX.
SINCE INVESTOR SHARES 1 YEAR INCEPTION - -------------------------------------------------- -------- ----------- BALANCED FUND 14.75% 13.01%* LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.11%** S&P 500 INDEX 28.60% 23.66%**
* SINCE 1/3/94 ** SINCE 1/31/94
SINCE FLEX SHARES 1 YEAR INCEPTION - -------------------------------------------------- -------- ----------- BALANCED FUND 16.28% 16.98%* LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.47% 8.23%** S&P 500 INDEX 28.60% 28.61%**
* SINCE 6/14/95 ** SINCE 6/30/95 Page 6 of 71 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 0.95% 0.95% Distribution and Service (12b-1) Fees 0.28% 1.00% Other Expenses 0.20% 0.20% ----- ----- Total Annual Fund Operating Expenses 1.43% 2.15%
Page 7 of 71 EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $515 $810 $1,127 $2,024 FLEX SHARES $418 $673 $1,154 $2,483
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $515 $810 $1,127 $2,024 FLEX SHARES $218 $673 $1,154 $2,483
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.86%, 0.21% AND 1.27%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.86%, 0.97% AND 2.03%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 8 of 71 CAPITAL APPRECIATION FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment INVESTMENT STRATEGY The Capital Appreciation Fund invest primarily in U.S. common stocks and other equity securities that the Adviser believes are undervalued by the stock market. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser rotates the Fund's investments among various market sectors based on the Adviser's research of business cycles. The Adviser's strategy focuses on large cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Page 9 of 71 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1993 9.27% 1994 -8.01% 1995 30.33% 1996 19.50% 1997 30.34% 1998 27.26%
BEST QUARTER WORST QUARTER 22.78% -11.26% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 10.12%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------- ------- ------- --------------- CAPITAL APPRECIATION FUND 22.47% 18.00% 17.67%* S&P 500 INDEX 28.60% 24.05% 21.27%**
* SINCE 6/9/92 ** SINCE 6/30/92
FLEX SHARES 1 YEAR SINCE INCEPTION - --------------------------- -------------- ----------------- CAPITAL APPRECIATION FUND 24.57% 25.68%* S&P 500 INDEX 28.60% 28.61%**
* SINCE 6/1/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. Page 10 of 71 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.68% 1.00% Other Expenses 0.13% 0.23% ----- ----- Total Annual Fund Operating Expenses 1.96% 2.38%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $567 $967 $1,393 $2,575 FLEX SHARES $441 $742 $1,270 $2,716
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $567 $967 $1,393 $2,575 FLEX SHARES $241 $742 $1,270 $2,716
Page 11 of 71 FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.06%, 0.63% AND 1.82%, RESPECTIVELY. INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.06%, 1.00% AND 2.29%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 12 of 71 CORE EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth INVESTMENT FOCUS Common stocks of mid - to large-cap companies SHARE PRICE VOLATILITY Moderate to high PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with superior earnings trends INVESTOR PROFILE Investors seeking long-term growth of capital without regard to income who are willing to accept more volatility for the possibility of higher returns INVESTMENT STRATEGY The Core Equity Fund primarily invests in common stocks of U.S. companies with market capitalizations of more than $1 billion. In selecting stocks for the Fund, the Adviser attempts to capture superior growth prospects based on earnings potential, profitability and other measures. These measures include growth characteristics such as whether a company makes significant investments in research and product development or whether a company is participating in rapidly expanding industries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. In addition, the Fund is subject to the risk that its principal market segment, mid- to large-capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. PERFORMANCE INFORMATION As of July 31, 1999, the Core Equity Fund had not commenced operations, and did not have a performance history. Page 13 of 71 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 1.10% 1.10% Distribution and Service (12b-1) Fees 0.45% 1.00% Other Expenses* 0.25% 0.25% ----- ----- Total Annual Fund Operating Expenses 1.80% 2.35%
* Other Expenses are based on estimated amounts for the current year. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $551 $920 $1,313 $2,412 FLEX SHARES $438 $733 $1,255 $2,686
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $551 $920 $1,313 $2,412 FLEX SHARES $238 $733 $1,255 $2,686
Page 14 of 71 FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses are expected to be lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.00%, 0.40% AND 1.65%, RESPECTIVELY. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.00%, 1.00% AND 2.25%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 15 of 71 E-COMMERCE OPPORTUNITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth INVESTMENT FOCUS Common stocks of companies participating in multiple electronic commerce market segments SHARE PRICE VOLATILITY Very high PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies utilizing electronic commerce opportunities to achieve above average growth INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept significant volatility for the possibility of higher returns INVESTMENT STRATEGY The E-Commerce Opportunity Fund invests primarily in common stocks of U.S. companies that are expected to benefit substantially from electronic commerce. For the purpose of the Fund, electronic commerce, or e-commerce, is defined broadly as conducting business through the use of computers, the Internet, telecommunication lines and other electronic means of information transfer. The Fund's holdings are generally diversified across three market segments. The first segment is comprised of recently established corporations that are implementing pioneering electronic commerce strategies. The second segment consists of technology companies that provide the infrastructure to support electronic based commerce. The third segment includes conventional corporations that are leveraging electronic commerce opportunities to improve their competitive advantage. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. In addition, the Fund is subject to the risk that the securities in the same industry that the Fund purchases will underperform the market as a whole. To the extent that the Fund's investments are concentrated in issuers conducting business in the same industry, the Fund is subject to legislative Page 16 of 71 or regulatory changes, adverse market conditions and/or increased competition affecting that industry. Due to the focus of the Fund, many holdings share similar risk factors. Many companies in the portfolio have limited operating histories, function in rapidly changing business environments and trade at valuations which are significantly higher than average. As a result, the Fund may be more volatile than other, broadly diversified equity funds. PERFORMANCE INFORMATION As of July 31, 1999, the E-Commerce Opportunity Fund had not commenced operations, and did not have a performance history. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 1.10% 1.10% Distribution and Service (12b-1) Fees 0.55% 1.00% Other Expenses* 0.25% 0.25% ----- ----- Total Annual Fund Operating Expenses 1.90% 2.35%
* Other Expenses are based on estimated amounts for the current year. Page 17 of 71 EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $561 $950 $1,363 $2,514 FLEX SHARES $438 $733 $1,255 $2,686
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $561 $950 $1,363 $2,514 FLEX SHARES $238 $733 $1,255 $2,686
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's estimated expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest estimated expenses that could be currently charged to the Fund. Actual expenses are expected to be lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.00%, 0.50% AND 1.75%, RESPECTIVELY. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.00%, 1.00% AND 2.25%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 18 of 71 GROWTH AND INCOME FUND FUND SUMMARY INVESTMENT GOAL PRIMARY Long-term capital appreciation SECONDARY Current income INVESTMENT FOCUS Equity securities SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion, low price/earnings ratios and above average earnings momentum INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole INVESTMENT STRATEGY The Growth and Income Fund invests primarily in domestic and foreign common stock of companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to select companies with a favorable price to earnings ratio. Stocks of companies with strong financial quality and above average earnings momentum are selected to secure the best relative values in each economic sector. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the Page 19 of 71 value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1994 -0.91% 1995 29.45% 1996 19.12% 1997 27.58% 1998 18.25%
BEST QUARTER WORST QUARTER 17.35% -10.35% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 12.81%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - -------------------------- ------------- ------------- ----------------- GROWTH AND INCOME FUND 13.78% 17.28% 16.22%* S&P 500 INDEX 28.60% 24.05% 22.40%**
* SINCE 5/7/93 ** SINCE 5/31/93
FLEX SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------- -------------- ----------------- GROWTH AND INCOME FUND 15.28% 21.50%* S&P 500 INDEX 28.60% 29.32%**
* SINCE 4/5/95 ** SINCE 4/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an Page 20 of 71 index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 0.90% 0.90% Distribution and Service (12b-1) Fees 0.25% 1.00% Other Expenses 0.20% 0.22% ----- ----- Total Annual Fund Operating Expenses 1.35% 2.12%
* EXPENSE INFORMATION IN THE TABLE HAS BEEN RESTATED TO REFLECT CURRENT FEES. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $507 $787 $1,087 $1,938 FLEX SHARES $415 $664 $1,139 $2,452
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $507 $787 $1,087 $1,938 FLEX SHARES $215 $664 $1,139 $2,452
Page 21 of 71 FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.90%, 0.08% AND 1.18%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.90%, 0.81% AND 1.93%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 22 of 71 INTERNATIONAL EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Foreign common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued companies with 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 of the possibility of higher returns; and want exposure to a diversified portfolio of international stocks INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. In selecting investments for the Fund, the Adviser diversifies 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. The Adviser's "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. The Adviser's goal is to find companies with top management, quality products and sound financial positions, that are trading at a discount. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, foreign common stocks, may underperform other equity market segments or the equity markets as a whole. Page 23 of 71 Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1995, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The periods from December 1995 to January 1996 represent the performance of the Trust Shares of the Fund. Trust Shares have lower expenses than Investor and Flex Shares, which results in higher performance shown below. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE PERIODS FROM JANUARY 1996 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE INVESTOR SHARES OF THE FUND. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1996 21.58% 1997 13.01% 1998 10.69%
BEST QUARTER WORST QUARTER 16.74% -18.33% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 2.69%. Page 24 of 71 THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ----------------------------------------- --------------- ----------------- INTERNATIONAL EQUITY FUND 6.53% 19.75%* MSCI EAFE INDEX 20.00% 10.87%* * SINCE 1/31/95 FLEX SHARES 1 YEAR SINCE INCEPTION - ----------------------------------------- --------------- ----------------- INTERNATIONAL EQUITY FUND 7.91% 20.31%* MSCI EAFE INDEX 20.00% 10.87%* * SINCE 1/31/95
WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 1.25% 1.25% Distribution and Service (12b-1) Fees 0.33% 1.00% Other Expenses 0.35% 0.59% ----- ----- Total Annual Fund Operating Expenses 1.93% 2.84%
* Expense information in the table has been restated to reflect current fees. Page 25 of 71 EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $564 $958 $1,378 $2,544 FLEX SHARES $487 $880 $1,499 $3,166
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $564 $958 $1,378 $2,544 FLEX SHARES $287 $880 $1,499 $3,166
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.20%, 0.28% AND 1.83%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.20%, 0.74% AND 2.53%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 26 of 71 INTERNATIONAL EQUITY INDEX FUND FUND SUMMARY INVESTMENT GOAL 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 STRATEGY Statistical analysis to track the Index INVESTOR PROFILE Aggressive investors who want exposure to foreign markets and are willing to accept the increased risks of foreign investing for the possibility of higher returns INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, the Adviser chooses companies included in the MSCI EAFE-GDP Index, an index of equity securities of companies located in Europe, Australasia and the Far East. While the Fund is structured to have overall investment characteristics similar to those of the Index, it selects a sample of stocks within the index using a statistical process. So, the Fund will not hold all stocks included in the Index. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, foreign common stocks, may underperform other market segments or the equity markets as a whole. Page 27 of 71 Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. In addition to the above mentioned risks, the Adviser may not be able to match the performance of the Fund's benchmark. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 10.20% 1996 5.78% 1997 8.44% 1998 29.68%
BEST QUARTER WORST QUARTER 21.20% -13.09% (12/13/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 5.93%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST-GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------- -------------- ----------------- INTERNATIONAL EQUITY INDEX FUND 24.85% 9.79%* MSCI EAFE-GDP INDEX 25.12% 9.42%**
* SINCE 6/6/94 ** SINCE 6/30/94 Page 28 of 71
FLEX SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------- -------------- ----------------- INTERNATIONAL EQUITY INDEX FUND 26.70% 12.53%* MSCI EAFE-GDP INDEX 25.12% 11.60%**
* SINCE 6/8/95 ** SINCE 6/30/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Weighted Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The index is weighted by the gross domestic product of the various countries in the index. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 0.90% 0.90% Distribution and Service (12b-1) Fees 0.38% 1.00% Other Expenses 0.38% 0.67% ----- ----- Total Annual Fund Operating Expenses 1.66% 2.57%
Page 29 of 71 EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $537 $879 $1,243 $2,267 FLEX SHARES $460 $799 $1,365 $2,905
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $537 $879 $1,243 $2,267 FLEX SHARES $260 $799 $1,365 $2,905
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.79%, 0.30% AND 1.47%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.79%, 0.66% AND 2.12%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 30 of 71 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 STRATEGY Attempts to identify companies with above average growth potential at an attractive price INVESTOR PROFILE Investors who want the value of their investment to grow and who are willing to accept more volatility for the possibility of higher returns INVESTMENT STRATEGY The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have small- to mid-sized market capitalizations (i.e., companies with market capitalizations of $500 million to $10 billion and companies in the S&P MidCap 400 Index) and that have above average growth potentials at attractive prices. The Adviser evaluates companies based on their industry sectors and the market in general. The Fund maintains holdings in the industries that appear to perform best during a given business cycle. The Adviser analyzes companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. The Adviser does not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, mid-cap common stocks, may underperform other equity market segments or the equity markets as a whole. The small- to-mid-sized capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may Page 31 of 71 depend upon a relatively small management group. Therefore, small cap and mid-cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
1995 30.57% 1996 14.93% 1997 20.67% 1998 5.98%
BEST QUARTER WORST QUARTER 24.52% -20.00% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 6.35%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P MIDCAP 400 INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------- -------------- ----------------- MID-CAP EQUITY FUND 2.00% 12.79%* S&P MIDCAP 400 INDEX 19.12% 18.63%*
* SINCE 1/31/94
FLEX SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------- -------------- ----------------- MID-CAP EQUITY FUND 3.46% 15.05%* S&P MIDCAP 400 INDEX 19.12% 23.44%**
* SINCE 6/5/95 ** SINCE 6/30/95 Page 32 of 71 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P MidCap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.18% 0.33% ----- ----- Total Annual Fund Operating Expenses 1.76% 2.48%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $547 $908 $1,293 $2,370 FLEX SHARES $451 $773 $1,321 $2,816
Page 33 of 71 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $547 $908 $1,293 $2,370 FLEX SHARES $251 $773 $1,321 $2,816
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%, 0.40% AND 1.62%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, 0.85% AND 2.22%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 34 of 71 SMALL CAP EQUITY FUND FUND SUMMARY INVESTMENT GOAL PRIMARY Capital appreciation SECONDARY Current income INVESTMENT FOCUS U.S. small cap common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap stocks INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment INVESTMENT STRATEGY The Small Cap Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, the Adviser chooses common stocks of small sized companies (i.e., companies with market capitalizations under $1 billion) that it believes are undervalued in the market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization common stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. Page 35 of 71 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The periods from January 1997 to June 1997 represent the performance of Trust Shares of the Fund. The periods from June 1997 to the present represent the performance of the Flex Shares of the Fund. Trust Shares have lower expenses than Flex Shares, which results in higher performance shown below. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1995 30.99% 1996 34.25% 1997 31.79% 1998 -14.33%
BEST QUARTER WORST QUARTER 14.91% -22.14% (6/30/97) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -3.42%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION - ---------------------------------------- -------------- ----------------- SMALL CAP EQUITY FUND -15.94% 17.33%* FRANK RUSSELL 2000 SMALL STOCK INDEX -2.55% 13.71%*
* SINCE 8/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. Page 36 of 71 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
FLEX SHARES - ----------------------------------------------------- ------------------------ Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00%
* THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
FLEX SHARES - ----------------------------------------------------------------- ----------- Investment Advisory Fees 1.15% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.40% ----- Total Annual Fund Operating Expenses 2.55%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $458 $793 $1,355 $2,885
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $258 $793 $1,355 $2,885
Page 37 of 71 FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.10%, 0.77% AND 2.27%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 38 of 71 SMALL CAP GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS U.S. small cap common stocks of growth companies SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion. The Adviser selects companies that demonstrate above average earnings and sales growth potential. The selected companies tend to have an established operating history and a sold balance sheet. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, small capitalization growth stocks, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. Page 39 of 71 PERFORMANCE INFORMATION The Small Cap Growth Stock Fund commenced operations on October 8, 1998, and therefore does not have a performance history for a full calendar year. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - -------------------------------------------------- --------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* None 2.00%
* THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.50% 1.00% Other Expenses* 0.25% 1.04% ----- ----- Total Annual Fund Operating Expenses 1.90% 3.19%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $522 $983 $1,669 $3,494 Investor Shares $561 $950 $1,363 $2,514
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $322 $983 $1,669 $3,494 Investor Shares $561 $950 $1,363 $2,514
Page 40 of 71 FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 0.86%, 0.35% AND 2.25%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 41 of 71 TAX SENSITIVE GROWTH STOCK FUND FUND SUMMARY INVESTMENT GOAL Long-term capital growth with nominal dividend income INVESTMENT FOCUS U.S. common stocks of growth companies SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have above-average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions INVESTOR PROFILE Investors who want to increase the value of their investment while minimizing taxable capital gains distributions INVESTMENT STRATEGY The Tax Sensitive Growth Stock Fund primarily invests in a diversified portfolio of common stocks of financially strong U.S. growth companies. Many of these companies have a history of stable or rising dividend payout policies. The Adviser attempts to minimize the impact of capital gains taxes on investment returns by using a low turnover rate (generally 50% or less) strategy, in conjunction with other tax management strategies. These strategies may lead to lower capital gains distributions and, therefore, lower capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, common stocks of U.S. growth companies, may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange and may or may not pay dividends. Page 42 of 71 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1998, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Flex Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO EYAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1996 21.04% 1997 28.76% 1998 31.73%
BEST QUARTER WORST QUARTER 27.74% -9.96% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 17.00%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P 500 INDEX AND THE LIPPER GROWTH AND INCOME FUND INDEX..
FLEX SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------- --------------- ------------------ TAX SENSITIVE GROWTH STOCK FUND 29.73% 27.15%* S&P 500 INDEX 28.60% 28.23%** LIPPER GROWTH AND INCOME FUNDS INDEX 13.58% 20.25%
* SINCE 12/31/95 ** SINCE 12/31/95 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The Lipper Growth and Income Funds Index is a widely-recognized composite of mutual funds that have growth-of earnings orientations and income requirements for level and/or rising dividends. Page 43 of 71 FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
FLEX SHARES - ----------------------------------------------------- ---------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00%
* THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
FLEX SHARES - ---------------------------------------------------------------- ------------- Investment Advisory Fees 1.15% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.33% ----- Total Annual Fund Operating Expenses 2.48%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns 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 $451 $773 $1,321 $2,816
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $251 $773 $1,321 $2,816
Page 44 of 71 FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 1.01%, 0.91% AND 2.25%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 45 of 71 VALUE INCOME STOCK FUND FUND SUMMARY INVESTMENT GOAL PRIMARY Current income SECONDARY Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend-paying, undervalued stocks INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Page 46 of 71 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Investor Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE PERIODS FROM FEBRUARY 1993 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE FUND'S INVESTOR SHARES. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1990 -4.93% 1991 39.30% 1992 20.05% 1993 10.86% 1994 2.87% 1995 35.50% 1996 19.06% 1997 26.57% 1998 10.16%
BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 13.34%. Page 47 of 71 THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE S&P/BARRA VALUE INDEX AND THE LIPPER EQUITY INCOME FUND INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------- -------------- ------------- ----------------- VALUE INCOME STOCK FUND 6.02% 17.36% 16.42%* S&P/BARRA VALUE INDEX 14.68% 19.88% 15.76%* LIPPER EQUITY INCOME FUND INDEX 11.78% 16.62% 13.53%*
* SINCE 10/31/89
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION - ---------------------------------------- -------------- ------------- ----------------- VALUE INCOME STOCK FUND 7.50% 17.83% 16.71%* S&P/BARRA VALUE INDEX 14.68% 19.88% 15.76%* LIPPER EQUITY INCOME FUND INDEX 11.78% 16.62% 13.53%*
* SINCE 10/31/89 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. The Lipper Equity Income Fund Index is an equally weighted index of typically the 30 largest funds that seek relatively high current income and growth of income through investing 60% or more of their portfolios in equities. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------- ---------------- ----------- Investment Advisory Fees 0.80% 0.80% Distribution and Service (12b-1) Fees 0.33% 1.00% Other Expenses 0.15% 0.23% ----- ----- Total Annual Fund Operating Expenses 1.28% 2.03%
Page 48 of 71 EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return 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 $500 $766 $1,051 $1,862 FLEX SHARES $406 $637 $1,093 $2,358
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $500 $766 $1,051 $1,862 FLEX SHARES $206 $637 $1,093 $2,358
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 0.80%, 0.33% AND 1.28%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 0.80%, 0.99% AND 2.02%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisers" and "Distribution of Fund Shares." Page 49 of 71 MORE INFORMATION ABOUT RISK EQUITY RISK -- Equity securities include public and privately ALL FUNDS issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK -- The market value of fixed income BALANCED FUND investments change in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK -- The possibility that an issuer BALANCED FUND will be unable to make timely payments of either principal or interest. Page 50 of 71 FOREIGN SECURITY RISKS-- Investments in GROWTH AND INCOME FUND securities of foreign companies or INTERNATIONAL EQUITY FUND governments can be more volatile than INTERNATIONAL EQUITY INDEX FUND investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. TRACKING ERROR RISK INTERNATIONAL EQUITY INDEX FUND Factors such as Fund expenses, imperfect correlation between the Fund's investments and those of their benchmarks, rounding of share prices, changes to the benchmark, regulatory policies, and leverage, may affect their ability to achieve perfect correlation. The magnitude of any tracking error may be affected by a higher portfolio turnover rate. Because an index is just a composite of the prices of the securities it represents rather than an actual portfolio of those securities, an index will have no expenses. As a result, a Fund, which will have expenses such as taxes, custody, management fees and other operation costs, and brokerage, may not achieve its investment objective of accurately correlating to an index. Page 51 of 71 YEAR 2000 RISK-- The Funds depend on the smooth functioning ALL FUNDS of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While it is likely that such assurances have been received, the Funds and their 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 Funds do business. Furthermore, many foreign countries are not as prepared as the U.S. for the year 2000 transition. As a result, computer difficulties in foreign markets and with foreign institutions as a result of the year 2000 may add to the possibility of losses to the Funds and their shareholders. Page 52 of 71 EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that we use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations. The Small Cap Equity Fund also may invest in investment grade fixed income securities and mid- to large cap common stocks that would not ordinarily be consistent with a Fund's objective. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A., (STI) P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Balanced Fund, Capital Appreciation Fund, International Equity Fund, Mid-Cap Equity Fund, Small Cap Equity Fund, and Value Income Stock Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of: BALANCED FUND 0.86% CAPITAL APPRECIATION FUND 1.06% INTERNATIONAL EQUITY FUND 1.20% MID-CAP EQUITY FUND 1.04% SMALL CAP EQUITY FUND 1.10% VALUE INCOME STOCK FUND 0.80%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Core Equity Fund, E-Commerce Opportunity Fund, Growth and Income Fund, International Equity Index Fund, Small Cap Growth Stock Fund, and Tax Sensitive Growth Stock Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: INTERNATIONAL EQUITY INDEX FUND 0.79%
The Small Cap Growth Stock and Tax Sensitive Growth Stock Funds had not completed a full fiscal year and the Core Equity and E-Commerce Opportunity Funds had not commenced operations as of May 31, 1999. Page 53 of 71 Prior to May 24, 1999, Crestar Asset Management Company served as the Adviser to the predecessor of the Growth and Income Fund. For the period ended May 31, 1999, Crestar Asset Management Company and/or Trusco received advisory fees of 0.75% for the Growth and Income Fund. The Advisers may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Anthony R. Gray, Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed income portion of the Fund. Mr. Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has more than 30 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. He has more than 13 years of investment experience. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has more than 20 years of investment experience. Mr. Anthony Gray has served as Chairman and Chief investment Officer of STI since 1979. He has managed the Capital Appreciation Fund since it began operating in June 1992. He has more than 30 years of investment experience. Mr. Robert J. Rhodes, CFA, has served as Senior Vice President of Trusco since 1973. He has managed the Core Equity Fund since it began operating in October 1999. He has more than 26 years of investment experience. Mr. Alan S. Kelley has served as a portfolio manager of Trusco since 1999. He has managed the E-Commerce Opportunity Fund since it began operating in October 1999. Prior to joining Trusco, Mr. Kelley served as a portfolio manager with SunTrust Bank, Atlanta from 1995 to 1999. Prior to 1995, he was a portfolio manager of Urban Equities, LLC. He has more than 5 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as lead portfolio manager of the Growth and Income Fund since it began operating in September 1992. Since 1992, he has served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999. Mr. Markunas has more than 17 years of investment experience. Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed the International Equity Fund since May 1997. Prior to joining STI Capital Management, N.A., Mr. Dau served as senior international equity analyst for American Express Financial Advisers from 1996 to 1997 and as an international portfolio manager for the Principal Financial Group from 1992 to 1995. He has more than 8 years of investment experience. The International Equity Index Fund is managed by Mr. Chad Deakins and co-managed by Mr. Robert J. Rhodes. Mr. Deakins has served as a portfolio manager at Trusco since February 1999 and as a portfolio assistant since 1996. He has managed the International Equity Index Fund since February 1999. Prior to joining Trusco, Mr. Deakins worked at SunTrust Banks or an affiliate. He has more than 4 years of investment experience. He has co-managed the Page 54 of 71 International Equity Index Fund since it began operating in June 1994. He has more than 26 years of investment experience. Mr. John Hamlin has served as portfolio manager of STI since March 1999. He has managed the Mid-Cap Equity Fund since April 1999. Prior to joining STI, Mr. Hamlin served as Portfolio Manager at Phoenix Investment Counsel, Inc. from 1992 to 1999. He has more than 10 years of investment experience. Mr. Brett Barner, CFA, has served as a Managing Director of STI since 1994. He has managed the Small Cap Equity Fund since it began operating in January 1997. He has more than 15 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. Prior to joining Trusco, Mr. Garfinkel served as a portfolio manager with SunTrust Bank. He has more than 10 years of investment experience. Mr. Jonathan Mote, CFA, CFP, served as Portfolio Manager of Trusco since August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began operating in December 1998. Prior to joining Trusco, Mr. Mote served as a portfolio manager with SunTrust Banks. He has more than 13 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. He has more than 15 years of investment experience. Mr. Lewis has served as a portfolio manager of STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 7 years of investment experience. PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to buy, sell (sometimes called "redeem") or exchange Investor Shares and Flex Shares of the Funds. Page 55 of 71 HOW TO PURCHASE FUND SHARES A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your account is established, you may buy shares of the Funds by: - Mail - Telephone (1-800-874-4770) - Wire - Automated Clearing House (ACH) You may also buy shares through Investment Consultants of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place trades in Funds shares for their customers. Please contact your financial institution directly and follow its procedures for Fund Share transactions. Your institution may charge a fee for its services, in addition to the fees charged by the Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE, SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE, SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that the market price is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Page 56 of 71 NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest in any Fund at least:
CLASS DOLLAR AMOUNT Investor Shares $2,000 Flex Shares $5,000 ($2,000 for retirement plans)
Your subsequent investments in any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. A Fund may accept investments of smaller amounts for either class of shares at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call SunTrust at 1-800-428-6970 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 to $100,000 once or twice a month. If you are buying Flex Shares, you should plan on investing at least $5,000 per Fund during the first two years. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. SALES CHARGES FRONT-END SALES CHARGES -- INVESTOR SHARES The offering price of Investor Shares is the NAV next calculated after a Fund receives your request, plus the front-end sales charge. Page 57 of 71 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 YOUR SALES CHARGE AS A IF YOUR INVESTMENT IS: A PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - ----------------------------------- -------------------------------- ----------------------------------- LESS THAN $100,000 3.75% 3.90% $100,000 BUT LESS THAN $250,000 3.25% 3.36% $250,000 BUT LESS THAN $1,000,000 2.50% 2.56% $1,000,000 AND OVER 1.50% 1.52%
WAIVER OF FRONT-END SALES CHARGE -- INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: - through reinvestment of dividends and distributions; - through a SunTrust Securities, Inc. asset allocation account; - by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); - by employees, and members of their immediate family, of SunTrust and its affiliates; - 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; - 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 - through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front-end sales charge. REPURCHASE OF INVESTOR SHARES You may repurchase any amount of Investor Shares of any Fund at NAV (without the normal front-end sales charge), up to the limit of the value of any amount of Investor Shares (other than those which were purchased with reinvested dividends and distributions) that you redeemed within the past 60 days. In effect, this allows you to reacquire shares that you may have had to redeem, without re-paying the front-end sales charge. To exercise this privilege, the Funds must receive your purchase order within 60 days of your redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE REPURCHASING SHARES. REDUCED SALES CHARGES -- INVESTOR SHARES RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this right allows you to add the value of the Investor Shares you already own to the amount that you are currently purchasing. The Funds will combine the value of your current purchases with the current value of any Investor Shares you purchased previously for (i) your account, (ii) your spouse's account, (iii) a joint account with your spouse, or (iv) your minor children's trust or custodial accounts. A fiduciary purchasing shares for the same fiduciary account, trust or estate may also use this right of accumulation. The Funds will only consider the value of Investor Shares purchased previously that were sold subject to a sales charge. To be entitled to a reduced sales charge based on shares already owned, you must ask the Funds for the reduction at the time of purchase. You must provide the Funds with your account number(s) and, if applicable, the account numbers for your spouse Page 58 of 71 and/or children (and provide the children's ages). The Funds may amend or terminate this right of accumulation at any time. LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. In other words, a Letter of Intent allows you to purchase Investor Shares of a Fund over a 13-month period and receive the same sales charge as if you had purchased all the shares at the same time. The Funds will only consider the value of Investor Shares sold subject to a sales charge. As a result, shares of the Investor Shares purchased with dividends or distributions will not be included in the calculation. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send the Funds a Letter of Intent. In calculating the total amount of purchases you may include in your letter purchases made up to 90 days before the date of the Letter. The 13-month period begins on the date of the first purchase, including those purchases made in the 90-day period before the date of the Letter. Please note that the purchase price of these prior purchases will not be adjusted. You are not legally bound by the terms of your Letter of Intent to purchase the amount of your shares stated in the Letter. The Letter does, however, authorize the Fund to hold in escrow 3.75% of the total amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the Fund's transfer agent will redeem the necessary portion of the escrowed shares to make up the difference between the reduced rate sales charge (based on the amount you intended to purchase) and the sales charge that would normally apply (based on the actual amount you purchased). COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate sales charge rate, the Fund will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: - make certain withdrawals from a retirement plan (not including IRAs); - because of death or disability; or - for certain payments under the Systematic Withdrawal Plan (which is discussed later). OFFERING PRICE OF FUND SHARES Page 59 of 71 The offering price of Investor Shares is the NAV next calculated after the transfer agent receives your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. HOW TO SELL YOUR FUND SHARES If you own your shares through a brokerage account with SunTrust, you may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust Securities directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request less, in the case of Flex Shares, any applicable deferred sales charge. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a SunTrust affiliates bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS). REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required minimum you may be required to sell your shares. The account balance minimums are: Page 60 of 71
CLASS DOLLAR AMOUNT Investor Shares $2,000 Flex Shares $5,000
But, the Funds will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting SunTrust Securities or your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. You may exchange your shares up to four times during a calendar year. If you exchange your shares more than four times during a year, you may be charged a $10.00 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK, OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 dAYS). This exchange privilege may be changed or canceled at any time upon 60 days notice. EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Funds receives your exchange request. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. TELEPHONE TRANSACTIONS Page 61 of 71 Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. Page 62 of 71 DISTRIBUTION OF FUND SHARES Each Fund has adopted a distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets are as follows: For Investor Shares BALANCED FUND 0.28% CAPITAL APPRECIATION FUND 0.68% CORE EQUITY FUND 0.45% E-COMMERCE OPPORTUNITY FUND 0.55% GROWTH AND INCOME FUND 0.25% INTERNATIONAL EQUITY FUND 0.33% INTERNATIONAL EQUITY INDEX FUND 0.33% MID-CAP EQUITY FUND 0.43% VALUE INCOME STOCK FUND 0.33%
For Flex Shares the maximum distribution fee is 1.00% of the average daily net assets of each Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide incentives, in the form of cash or other compensation, including merchandise, airline vouchers, trips and vacation packages, to dealers selling shares of a Fund. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows:
QUARTERLY ANNUALLY - --------- -------- BALANCED FUND INTERNATIONAL EQUITY FUND CAPITAL APPRECIATION FUND INTERNATIONAL EQUITY INDEX FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND MID-CAP EQUITY FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND
Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. Page 63 of 71 You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX aDVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE IS A TAXABLE EVENT. The International Equity Fund and International Equity Index Fund may be able to pass along a tax credit for foreign income taxes they pay. Each Fund will notify you if it gives you the credit. MORE INFORMATION ABOUT TAXES IS IN THE SAI. Page 64 of 71 FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares and Flex Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund except the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The reports of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4770. Page 65 of 71 FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOS RETURN(+) - -------------------------------------------------------------------------------------------------------------------------------- BALANCED FUND INVESTOR SHARES 1999 $13.14 $ 0.24 $ 1.10 $(0.24) $(0.92) $13.32 10.70% 1998 11.99 0.28 2.19 (0.29) (1.03) 13.14 21.72 1997 11.60 0.29 1.48 (0.29) (1.09) 11.99 16.27 1996 10.30 0.30 1.41 (0.30) (0.11) 11.60 16.88 1995 9.79 0.28 0.51 (0.28) -- 10.30 8.29 FLEX SHARES 1999 $13.02 $ 0.16 $ 1.07 $(0.16) $(0.92) $13.17 9.84% 1998 11.90 0.20 2.16 (0.21) (1.03) 13.02 20.85 1997 11.53 0.22 1.45 (0.21) (1.09) 11.90 15.40 1996(1) 10.36 0.24 1.29 (0.25) (0.11) 11.53 15.58 CAPITAL APPRECIATION FUND INVESTOR SHARES 1999 $16.43 $(0.05) $ 2.70 $ -- $(2.55) $16.53 17.20% 1998 15.06 (0.01) 3.95 -- (2.57) 16.43 28.71 1997 14.89 0.03 3.10 (0.02) (2.94) 15.06 23.74 1996 12.17 0.03 3.32 (0.04) (0.59) 14.89 28.18 1995 11.98 0.09 0.57 (0.07) (0.40) 12.17 5.93 FLEX SHARES 1999 $16.22 $(0.09) $ 2.60 $ -- $(2.55) $16.18 16.50% 1998 14.96 (0.04) 3.87 -- (2.57) 16.22 28.12 1997 14.84 (0.01) 3.07 -- (2.94) 14.96 23.24 1996(2) 12.20 0.02 3.26 (0.05) (0.59) 14.84 27.48 INVESTOR SHARES 1999(3) $15.21 $ 0.04 $ 1.99 $(0.05) $(1.00) $16.21 $14.31 FOR THE YEARS ENDED NOVEMBER 30: 1998 16.64 0.10 1.66 (0.10) (3.09) 15.21 13.69% 1997 13.47 0.13 3.25 (0.14) (0.07) 16.64 25.42 1996 11.66 0.17 2.39 (0.16) (0.59) 13.47 22.63 1995 10.78 0.25 2.62 (0.26) (1.73) 11.66 28.71 1994 11.42 0.18 (0.22) (0.18) (0.42) 10.78 (0.45) FLEX SHARES 1999(3) $15.14 $(0.01) $ 1.97 $ -- $(1.00) $16.10 13.85% FOR THE YEARS ENDED NOVEMBER 30: 1998 16.59 (0.01) 1.64 -- (3.08) 15.14 12.78% 1997 13.44 0.04 3.23 (0.05) (0.07) 16.59 24.63 1996 11.64 0.09 2.38 (0.08) (0.59) 13.44 21.81 1995(4) 11.11 0.12 1.62 (0.14) (1.07) 11.64 15.78 INTERNATIONAL EQUITY FUND INVESTOR SHARES 1999 $14.92 $(0.09) $(1.10) $ -- $(0.84) $12.89 (7.82%) 1998 13.58 0.02 2.64 -- (1.32) 14.92 21.39 1997 11.38 (0.01) 2.56 -- (0.35) 13.58 22.85 1996(3) 10.44 0.04 0.90 -- -- 11.38 9.00 FLEX SHARES 1999 $14.68 $(0.29) $(0.97) $ -- $(0.84) $12.58 (8.48%) 1998 13.47 0.07 2.46 -- (1.32) 14.68 20.54 1997 11.37 (0.04) 2.49 -- (0.35) 13.47 21.98 1996(3) 10.44 0.02 0.91 -- -- 11.37 8.91
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- BALANCED FUND INVESTOR SHARES 1999 $ 14,962 1.27% 1.89% 1.43% 1.73% 179% 1998 8,313 1.26 2.21 1.59 1.88 154 1997 6,012 1.25 2.58 1.64 2.19 197 1996 4,896 1.25 2.70 1.89 2.06 155 1995 3,765 1.25 3.17 1.80 2.62 157 FLEX SHARES 1999 $ 73,526 2.03% 1.13% 2.15% 1.01% 179% 1998 27,625 2.02 1.41 2.23 1.20 154 1997 6,067 2.01 1.84 2.45 1.40 197 1996(1) 3,131 2.00 1.85 2.97 0.88 155 CAPITAL APPRECIATION INVESTOR SHARES 1999 $311,120 1.82% (0.30%) 1.96% (0.44%) 147% 1998 271,044 1.81 (0.03) 2.01 (0.23) 194 1997 218,660 1.80 0.19 2.02 (0.03) 141 1996 191,078 1.80 0.24 2.08 (0.04) 156 1995 160,875 1.80 0.73 2.10 0.43 128 FLEX SHARES 1999 $162,100 2.29% (0.86%) 2.38% (0.95%) 147% 1998 106,670 2.26 (0.46) 2.37 (0.57) 194 1997 36,753 2.27 (0.29) 2.43 (0.45) 141 1996(2) 10,969 2.27 (0.29) 2.68 (0.70) 156 INVESTOR SHARES 1999(3) $36,958 $1.08% $0.54% 1.17% 0.45% 31% FOR THE YEARS ENDED NOVEMBER 30: 1998 34,434 1.03% 0.63% 1.18 0.48 71% 1997 28,112 1.03 0.89 1.18 0.74 100 1996 17,997 1.03 1.35 1.18 1.20 82 1995 12,633 1.03 2.14 1.18 1.99 175 1994 8,115 1.02 1.81 1.04 1.79 116 FLEX SHARES 1999(3) $35,163 1.83% (0.21%) 1.97% (0.35%) 31% FOR THE YEARS ENDED NOVEMBER 30: 1998 25,656 1.78 (0.13%) 2.05 (0.38%) 71 1997 18,269 1.73 0.15 2.09 (0.20) 100 1996 5,131 1.68 0.71 2.03 0.36 82 1995(4) 2,086 1.68 1.13 2.03 0.78 175 INTERNATIONAL EQUITY FUND INVESTOR SHARES 1999 $ 14,145 1.83% 0.30% 1.93% 0.20% 161% 1998 17,383 1.82 0.24 1.91 0.15 108 1997 10,674 1.81 0.18 2.05 (0.06) 139 1996(3) 3,448 1.81 1.73 3.14 0.40 113 FLEX SHARES 1999 $ 17,103 2.53% (0.40%) 2.82% (0.69%) 161% 1998 21,164 2.52 (0.46) 2.58 (0.52) 108 1997 8,375 2.51 (0.27) 3.03 (0.79) 139 1996(3) 953 2.51 1.08 5.86 (2.27) 113
Page 66 of 71 + RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. TOTAL RETURN FIGURES DO NOT INCLUDE APPLICABLE SALES LOADS. (1) COMMENCED OPERATIONS ON JUNE 14, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (2) COMMENCED OPERATIONS ON JUNE 1, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (3) COMMENCED OPERATIONS ON JANUARY 2, 1996. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. Page 67 of 71 FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOS RETURN(+) - --------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND INVESTOR SHARES 1999 $13.20 $(0.11) $ 0.98 $(0.18) $(2.19) $11.70 7.33% 1998 11.26 0.16 2.53 (0.07) (0.68) 13.20 25.25 1997 10.88 0.03 0.72 (0.07) (0.30) 11.26 7.12 1996 10.20 0.05 0.85 (0.13) (0.09) 10.88 8.90 1995(3) 10.00 0.05 0.17 (0.01) (0.01) 10.20 2.18 FLEX SHARES 1999 $13.17 $(0.15) $ 0.94 $(0.04) $(2.19) $11.73 6.68% 1998 11.24 0.17 2.44 -- (0.68) 13.17 24.50 1997 10.87 (0.05) 0.72 -- (0.30) 11.24 6.41 1996(4) 10.24 -- 0.82 (0.10) (0.09) 10.87 8.32 MID-CAP EQUITY FUND INVESTOR SHARES 1999 $13.67 $(0.06) $ 0.08 $ -- $ (1.19) $12.50 1.17% 1998 13.17 (0.03) 2.49 -- (1.96) 13.67 20.56 1997 12.74 (0.03) 1.69 (0.01) (1.22) 13.17 13.76 1996 10.99 0.03 2.62 (0.03) (0.87) 12.74 24.93 1995 9.84 0.03 1.15 (0.03) -- 10.99 11.96 FLEX SHARES 1999 $13.42 $(0.14) $ 0.08 $ -- $ (1.19) $12.17 0.56% 1998 13.04 (0.04) 2.38 -- (1.96) 13.42 19.80 1997 12.69 (0.07) 1.64 -- (1.22) 13.04 13.06 1996(5) 11.13 -- 2.45 (0.02) (0.87) 12.69 23.00 SMALL CAP EQUITY FUND FLEX SHARES 1999 $12.80 $ 0.01 $ (2.53) $(0.02) $(0.61) $ 9.65 (19.52%) 1998(6) 11.28 0.03 2.17 (0.06) (0.62) 12.80 22.29 SMALL CAP GROWTH STOCK FUND FLEX SHARES 1999(7) $10.00 $(0.19) $ 4.67 $ -- $(0.02) $14.46 44.78%
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND INVESTOR SHARES 1999 $ 4,909 1.47% 0.25% 1.71% 0.01% 32% 1998 7,141 1.46 0.50 1.84 0.12 1 1997 5,592 1.45 0.28 1.88 (0.15) 2 1996 5,597 1.45 0.48 2.06 (0.13) 30 1995(3) 3,960 1.45 0.67 2.44 (0.32) 10 FLEX SHARES 1999 $ 1,465 2.12% (0.30%) 2.92% (1.10%) 32% 1998 1,469 2.11 (0.03) 3.52 (1.44) 1 1997 900 2.10 (0.39) 3.69 (1.98) 2 1996(4) 917 2.10 (0.24) 4.14 (2.28) 30 MID-CAP EQUITY FUND INVESTOR SHARES 1999 $19,230 1.62% (0.90%) 1.76% (1.04%) 76% 1998 24,930 1.61 (0.75) 1.84 (0.98) 129 1997 20,245 1.60 (0.21) 1.85 (0.46) 152 1996 17,971 1.60 0.25 1.96 (0.11) 116 1995 7,345 1.60 0.43 2.27 (0.24) 66 FLEX SHARES 1999 $15,804 2.22% (1.52%) 2.48% (1.78%) 76% 1998 19,042 2.21 (1.37) 2.47 (1.63) 129 1997 10,120 2.20 (0.85) 2.58 (1.23) 152 1996(5) 5,029 2.20 (0.37) 3.04 (1.21) 116 SMALL CAP EQUITY FUND FLEX SHARES 1999 $19,465 2.27% 0.21% 2.55% (0.07%) 63% 1998(6) 40,613 2.06 0.01 2.35 (0.28) 55 SMALL CAP GROWTH STOCK FUND FLEX SHARES 1999(7) $ 6,158 2.25% (1.50%) 3.19% (2.44%) 75%
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. TOTAL RETURN FIGURES DO NOT INCLUDE APPLICABLE SALES LOADS. (3) COMMENCED OPERATIONS ON JANUARY 2, 1996. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (4) COMMENCED OPERATIONS ON JUNE 8, 1994. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (5) COMMENCED OPERATIONS ON JUNE 5, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (6) COMMENCED OPERATIONS ON JUNE 5, 1997. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (7) COMMENCED OPERATIONS ON OCTOBER 8, 1998. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. Page 68 of 71 FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOS RETURN+ - ------------------------------------------------------------------------------------------------------------------------------ TAX SENSITIVE GROWTH STOCK FUND FLEX SHARES 1999(9) $25.52 $(0.04) $ 4.37 $ -- $ -- $29.85 16.97% VALUE INCOME STOCK FUND INVESTOR SHARES 1999 $13.87 $ 0.19 $ 1.02 $(0.20) $(2.07) $12.81 10.71% 1998 13.68 0.20 2.62 (0.21) (2.42) 13.87 22.71 1997 13.13 0.25 2.32 (0.26) (1.76) 13.68 21.69 1996 11.58 0.30 2.71 (0.30) (1.16) 13.13 27.39 1995 10.52 0.28 1.56 (0.27) (0.51) 11.58 18.71 FLEX SHARES 1999 $13.75 $ 0.10 $ 1.01 $(0.11) $(2.07) $12.68 9.91% 1998 13.61 0.12 2.57 (0.13) (2.42) 13.75 21.76 1997 13.08 0.18 2.29 (0.18) (1.76) 13.61 20.91 1996(10) 11.59 0.26 2.65 (0.26) (1.16) 13.08 26.52
RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- TAX SENSITIVE GROWTH STOCK FUND FLEX SHARES 1999(9) $ 75,875 2.25% (0.80%) 2.48% (1.03%) 18% VALUE INCOME STOCK INVESTOR SHARES 1999 $ 194,312 1.28% 1.55% 1.28% 1.55% 69% 1998 210,591 1.27 1.47 1.27 1.47 99 1997 165,999 1.30 2.01 1.31 2.00 105 1996 130,597 1.30 2.47 1.37 2.40 134 1995 92,256 1.30 2.80 1.41 2.69 126 FLEX SHARES 1999 $ 167,000 2.02% 0.81% 2.03% 0.80% 69% 1998 180,530 2.01 0.78 2.01 0.78 99 1997 73,466 2.00 1.33 2.03 1.30 105 1996(10) 26,298 2.00 1.72 2.15 1.57 134
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. TOTAL RETURN FIGURES DO NOT INCLUDE APPLICABLE SALES LOADS. (8) COMMENCED OPERATIONS ON JUNE 5, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (9) COMMENCED OPERATIONS ON DECEMBER 15, 1998. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. (10) COMMENCED OPERATIONS ON JUNE 1, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. Page 69 of 71 STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 Page 70 of 71 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' Investment Company Act registration number is 811-06557. Page 71 of 71 STI CLASSIC FUNDS-EQUITY FUNDS TRUST SHARES PROSPECTUS OCTOBER 1, 1999 BALANCED FUND FOR PARTICIPANTS OF THE DEKALB COUNTY, GEORGIA BOARD OF EDUCATION TAX SHELTERED ANNUITY PLAN INVESTMENT ADVISER TO THE FUND STI CAPITAL MANAGEMENT, N.A. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Balanced Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED INFORMATION ABOUT THE FUND, PLEASE SEE: PAGE PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE INFORMATION AND EXPENSES..................... 2 MORE INFORMATION ABOUT RISK.................................. 4 THE FUND'S OTHER INVESTMENTS................................. 4 THE INVESTMENT ADVISER AND PORTFOLIO MANAGER................. 5 PURCHASING AND SELLING FUND SHARES........................... 5 DIVIDENDS AND DISTRIBUTIONS.................................. 5 TAXES........................................................ 7 FINANCIAL HIGHLIGHTS......................................... 7 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS........................................ 14 [INSERT ICONS HERE] RISK/RETURN INFORMATION COMMON TO THE FUNDS The Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. The Fund has its own investment goal and strategies for reaching that goal. The investment manager invests Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in the Fund involves risks and there is no guarantee that the Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in the Fund is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities the Fund owns and the markets in which it trades. The effect on the Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. BALANCED FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation and current income INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value
INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1995 25.51% 1996 12.13% 1997 21.14% 1998 19.55% BEST QUARTER WORST QUARTER 12.57% -5.70% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 5.39%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND THE S&P 500 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - ------------------------------------------------------------------------------------- Balanced Fund 19.55% 14.30%* Lehman Government/Corporate Bond Index 9.47% 7.11%** S&P 500 Index 28.60% 23.66%**
* SINCE 1/3/94 ** SINCE 1/31/94 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ----------------------------------------------------------------------------------- Investment Advisory Fees 0.95% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.06%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $108 $337 $585 $1,294
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 0.86% AND 0.97%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." MORE INFORMATION ABOUT RISK EQUITY RISK -- Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK -- The market value of fixed income investments change in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK -- The possibility that an issuer will be unable to make timely payments of either principal or interest. YEAR 2000 RISK -- The Fund depends on the smooth functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Fund 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 Fund has asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and has sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Fund. While such assurances have been received, the Fund 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 Fund does business. THE FUND'S OTHER INVESTMENTS This prospectus describes the Fund's primary strategies, and the Fund will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, the Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Fund uses under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, the Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. The Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, the Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISER The Investment Adviser makes investment decisions for the Fund and continuously reviews, supervises and administers the Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Balanced Fund. As of July 1, 1999, STI had approximately $14.5 billion in assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of: BALANCED FUND 0.86% The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Anthony R. Gray, Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed income portion of the Fund. Mr. Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has more than 30 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. He has more than 13 years of investment experience. Mr. Denney is a Managing Director of STI and has worked there since 1983. He has more than 20 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to buy and sell (sometimes called "redeem") Trust Shares of the Fund. HOW TO PURCHASE FUND SHARES The Fund offers Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions 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. The Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Fund receives your purchase order. The Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for the Fund, generally the Fund must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUND CALCULATES NAV In calculating NAV, the Fund generally values its investment portfolio at market price. If market prices are unavailable or the Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Fund or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Fund receives your request. RECEIVING YOUR MONEY Normally, the Fund will send your sale proceeds within five Business Days after the Fund receives your request, but it may take up to seven days. REDEMPTIONS IN KIND The Fund generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES The Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS The Balanced Fund distributes its income quarterly and makes distributions of capital gains, if any, at least annually. If you own Fund shares on the Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax issues that affect the Fund and its shareholders. This summary is based on current tax laws, which may change. The Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The table that follows presents performance information about Trust Shares of the Fund. This information is intended to help you understand the Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund, assuming you reinvested all of your dividends and distributions. This information for the Fund has been audited by Arthur Andersen LLP, independent public accountants. Their report, along with the Fund's financial statements, appears in the annual report that accompanies the Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4700. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTION NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME GAINS CAPITAL OF PERIOD RETURN+ - --------------------------------------------------------------------------------------------------------------------- BALANCED FUND TRUST SHARES 1999 $13.09 $ 0.28 $ 1.09 $(0.28) $(0.92) $13.26 10.98% 1998 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 1997 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26 1995 9.76 0.33 0.49 (0.32) -- 10.26 8.72 RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ----------------------------------------------------------------------------------------------------------------------- BALANCED FUND TRUST SHARES 1999 $ 251,752 0.97% 2.19% 1.06% 2.10% 179% 1998 188,465 0.96 2.51 1.08 2.39 154 1997 151,358 0.95 2.89 1.08 2.76 197 1996 111,638 0.95 3.00 1.09 2.86 155 1995 89,051 0.95 3.44 1.11 3.28 157
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. TOTAL RETURN FIGURES DO NOT INCLUDE APPLICABLE SALES LOADS. STI CLASSIC FUNDS INVESTMENT ADVISER STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Fund is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list the fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Fund. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Fund's Investment Company Act registration number is 811-06557. PROSPECTUS STI CLASSIC FUNDS - EQUITY FUNDS TRUST SHARES EMERGING MARKETS EQUITY FUND SUNBELT EQUITY FUND OCTOBER 1, 1999 INVESTMENT ADVISERS STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. (the "Advisers") THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Page 1 of 19 HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Emerging Markets Equity Fund and Sunbelt Equity Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: PAGE EMERGING MARKETS EQUITY FUND................................. 2 SUNBELT EQUITY FUND.......................................... 4 MORE INFORMATION ABOUT RISK.................................. 6 EACH FUND'S OTHER INVESTMENTS................................ 7 THE INVESTMENT ADVISERS AND PORTFOLIO MANAGERS............... 7 PURCHASING AND SELLING FUND SHARES........................... 8 DIVIDENDS AND DISTRIBUTIONS.................................. 9 TAXES........................................................ 9 FINANCIAL HIGHLIGHTS......................................... 10 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS........................................Back Cover [INSERT ICONS HERE] Page 2 of 19 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. The Board of Trustees approved, subject to shareholder approval, the reorganization of (1) the Sunbelt Equity Fund with and into the Small Cap Growth Stock Fund and (2) the Emerging Markets Equity Fund with and into the International Equity Fund. A shareholders meeting will be called for December and proxy materials will be sent to all Sunbelt Equity Fund and Emerging Markets Equity Fund shareholders prior to that meeting. If approved by shareholders, each of the foregoing reorganizations would be put into effect in early December 1999, or shortly thereafter. Page 3 of 19 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 STRATEGY Focus on individual stocks and companies in an attempt to identify attractively priced investments INVESTOR PROFILE Aggressive long-term investors who are willing to accept the volatility of emerging markets for the possibility of higher returns 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. The Adviser's "bottom-up" strategy focuses on individual stocks and companies. Through research, the Adviser attempts to identify investments that it feels are attractively priced relative to the current market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of Page 4 of 19 issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. PERFORMANCE INFORMATION The bar chart and the performance table on the following table illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 31, 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.*
1997 -3.43% 1998 -18.19% BEST QUARTER WORST QUARTER 13.07% -22.82% (12/31/98) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS 26.92%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1998 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS FREE INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- Emerging Markets Equity Fund -18.19% -3.71%* MSCI Emerging Markets Free Index -25.33% -14.07%*
* SINCE 3/31/96 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Morgan Stanley Capital International Emerging Markets Free Index is a widely-recognized index of 500 stocks from approximately 17 different emerging market countries. Page 5 of 19 FUND FEES AND EXPENSES This table describes the fund's fees and expenses that you may pay if you buy and hold fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.30% Other Expenses 0.31% ----- Total Annual Fund Operating Expenses 1.61%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $164 $508 $876 $1,911
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.26% AND 1.57%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." Page 6 of 19 SUNBELT EQUITY FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS Southern U.S. common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with positive earnings trends INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept higher volatility for the possibility of higher returns 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. The Adviser's 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 the Adviser's philosophy. The Adviser does not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. 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. Page 7 of 19 PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1994, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1989 25.72% 1990 -4.38% 1991 49.78% 1992 18.80% 1994 22.70% 1993 -4.69% 1995 24.39% 1996 18.42% 1997 21.34% 1998 -10.25%
BEST QUARTER WORST QUARTER 21.62% -23.44% (3/31/91) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.28%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE FRANK RUSSELL 2000 GROWTH INDEX AND THE S&P SMALLCAP 600 INDEX.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION - ------------------------------------------------------------------------------ Sunbelt Equity Fund -10.25% 8.86% 14.91% 14.64%* Frank Russell 2000 Growth Index 1.23% 10.22% 11.54%** N/A S&P SmallCap 600 Index -1.29% 13.21% 13.19%** N/A
* SINCE 11/30/80 ** SINCE 12/31/88 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Growth Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the largest U.S. Page 8 of 19 companies with higher growth rates and price-to-book ratios. The S&P SmallCap 600 Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 600 domestic small cap stocks. FUND FEES AND EXPENSES This table describes the fund's fees and expenses that you may pay if you buy and hold Fund shares. ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
TRUST SHARES - ---------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses 0.15% ----- Total Annual Fund Operating Expenses 1.30%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return 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 $132 $412 $713 $1,568
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.02% AND 1.17%, RESPECTIVELY. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisers." Page 9 of 19 MORE INFORMATION ABOUT RISK EQUITY RISK (BOTH FUNDS) -- Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FOREIGN SECURITY RISKS (EMERGING MARKETS EQUITY FUND) - -- Investments in securities of foreign companies or governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. Page 10 of 19 REGIONAL RISK (SUNBELT EQUITY FUND) -- To the extent that the Fund' investments are concentrated in a specific geographic region, the Fund may be subject to the political and other developments affecting that region. Regional economies are often closely interrelated, and political and economic developments affecting one region, country or state often affect other regions, countries or states, thus subjecting a Fund to additional risks. YEAR 2000 RISK (BOTH FUNDS) -- The Funds depend on the smooth functioning of computer systems in almost every aspect of their business. Like other mutual funds, businesses and individuals around the world, the Funds could be adversely affected if the computer systems used by their service providers do not properly process dates on and after January 1, 2000, and distinguish between the year 2000 and the year 1900. The Funds have asked their mission critical service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Funds. While such assurances have been received, the Funds and their 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 Funds do business. Furthermore, many foreign countries are not as prepared as the U.S. for the year 2000 transition. As a result, computer difficulties in foreign markets and with foreign institutions as a result of the year 2000 may add to the possibility of losses to the Funds and their shareholders. Page 11 of 19 EACH FUND'S OTHER INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISERS The Investment Advisers make investment decisions for the Funds and continuously review, supervise and administer each Fund's respective investment program. The Board of Trustees supervises the Advisers and establishes policies that the Advisers must follow in its management activities. STI Capital Management, N.A., (STI) P.O. Box 3808, Orlando, Florida 32802, serves as the Adviser to the Emerging Markets Equity Fund. As of July 1, 1999, STI had approximately $14.5 billion assets under management. For the fiscal period ended May 31, 1999, STI received advisory fees of: EMERGING MARKETS EQUITY FUND 1.26% Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Sunbelt Equity Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: SUNBELT EQUITY FUND 1.02% The Advisers may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed the Emerging Markets Equity Fund since May 1997. He has more than 8 years of investment experience. Prior to joining STI, he was a senior international equity analyst for American Express Financial Advisers from 1996 to 1997 and as an international portfolio manager for the Principal Financial Group from 1992 to 1995. Page 12 of 19 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. PURCHASING AND SELLING FUND HARES This section tells you how to buy and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions and potentially through the 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. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Page 13 of 19 Some Funds hold securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Funds do not calculate NAV. As a result, the market value of these investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. Page 14 of 19 DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: The Emerging Markets Equity Fund distributes its income annually and the Sunbelt Equity Fund distributes its income quarterly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE IS A TAXABLE EVENT. The Emerging Markets Equity Fund may be able to pass along a tax credit for foreign income taxes it pays. The Fund will notify you if it gives you the credit. MORE INFORMATION ABOUT TAXES IS IN THE SAI. Page 15 of 19 FINANCIAL HIGHLIGHTS The table that follows presents performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The information for the Funds has been audited by Arthur Andersen LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4770. Page 16 of 19 FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET NET REALIZED AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN+ - ------------------------------------------------------------------------------------------------------------------ EMERGING MARKETS EQUITY FUND TRUST SHARES 1999 $ 8.87 $ 0.14 $(0.72) $(0.17) $ -- $ 8.12 (6.22%) 1998 10.79 0.16 (1.86) (0.08) (0.14) 8.87 (15.74) 1997(1) 10.00 0.04 0.75 -- -- 10.79 7.90 SUNBELT EQUITY FUND TRUST SHARES 1999 $15.12 $(0.28) $(2.84) $ -- $(0.91) $11.09 (20.46%) 1998 13.28 0.01 3.03 -- (1.20) 15.12 23.86 1997 14.11 (0.09) 0.25 -- (0.99) 13.28 1.48 1996 10.03 (0.04) 4.32 -- (0.20) 14.11 43.19 1995 9.70 (0.01) 0.38 -- (0.04) 10.03 3.81 RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME (LOSS) TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO END OF AVERAGE NET INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER PERIOD (000) ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE - ------------------------------------------ --------------------------------------------------------------------------------- EMERGING MARKETS EQUITY FUND TRUST SHARES 1999 $ 26,751 1.57% 1.79% 1.61% 1.75% 67% 1998 34,554 1.56 1.14 1.78 0.92 74 1997(1) 39,495 1.55 1.37 2.04 0.88 24 SUNBELT EQUITY FUND 1999 $197,215 1.17% (0.68%) 1.30% (0.81%) 84% 1998 431,921 1.16 (0.90) 1.27 (1.01) 70 1997 381,371 1.15 (0.65) 1.26 (0.76) 72 1996 412,430 1.15 (0.34) 1.28 (0.47) 106 1995 258,908 1.15 (0.12) 1.30 (0.27) 80
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on January 31, 1997. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or round to $0. Page 17 of 19 STI CLASSIC FUNDS INVESTMENT ADVISERS STI Capital Management, N.A. P.O. Box 3808 Orlando, FL 32802 Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Funds. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 Page 18 of 19 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Fund's Investment Company Act registration number is 811-06557. Page 19 of 19 STI CLASSIC FUNDS INVESTOR SHARES AND FLEX SHARES PROSPECTUS OCTOBER 1, 1999 SUNBELT EQUITY FUND INVESTMENT ADVISER TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios which have individual investment goals and strategies. This prospectus gives you important information about the Investor Shares and Flex Shares of the Sunbelt Equity Fund (Fund) that you should know before investing. Please read this prospectus and keep it for future reference. Investor Shares and Flex Shares have different expenses and other characteristics, allowing you to choose the class that best suits your needs. You should consider the amount you want to invest, how long you plan to have it invested, and whether you plan to make additional investments. INVESTOR SHARES - FRONT-END SALES CHARGE - 12b-1 FEES - $2,000 MINIMUM INITIAL INVESTMENT FLEX SHARES - CONTINGENT DEFERRED SALES CHARGE - HIGHER 12b-1 FEES - $5,000 MINIMUM INITIAL INVESTMENT THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED INFORMATION ABOUT THE FUND, PLEASE SEE: PAGE PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE INFORMATION AND EXPENSES......................... 2 MORE INFORMATION ABOUT RISK.................................. 5 THE FUND'S OTHER INVESTMENTS................................. 5 THE INVESTMENT ADVISER AND PORTFOLIO MANAGER................. 5 PURCHASING, SELLING AND EXCHANGING FUND SHARES............... 11 TAXES........................................................ 11 FINANCIAL HIGHLIGHTS......................................... 12 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS........................................Back Cover [INSERT ICONS HERE] RISK/RETURN INFORMATION The Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. The Fund has its own investment goal and strategies for reaching that goal. The investment managers invest Fund assets in a way that they believe will help the Fund achieve its goal. Still, investing in the Fund involves risk and there is no guarantee that the Fund will achieve its goal. An investment manager's judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job an investment manager does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in the Fund is based on the market value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities the Fund owns and the markets in which they trade. The effect on the Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. The Board of Trustees approved, subject to shareholder approval, the reorganization of the Sunbelt Equity Fund with and into the Small Cap Growth Stock Fund. A shareholders meeting will be called for December and proxy materials will be sent to all Sunbelt Equity Fund shareholders prior to that meeting. If approved by shareholders, the foregoing reorganization would be put into effect in early December 1999, or shortly thereafter. SUNBELT EQUITY FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS Southern U.S. common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with positive earning trends INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept higher volatility for the possibility of higher returns 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. The Adviser's 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. The Adviser does not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Because the Fund focuses its investments in southern companies, economic conditions in or, government policies imposed by southern states may cause the Fund to be more volatile than an equity fund that invests in companies located across the U.S. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1994, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Investor Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE PERIODS FROM JANUARY 1994 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE INVESTOR SHARES OF THE FUND. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* 1989 25.19% 1990 -5.28% 1991 49.14% 1992 18.13% 1993 21.80% 1994 -5.20% 1995 23.99% 1996 17.80% 1997 20.79% 1998 -10.61% BEST QUARTER WORST QUARTER 21.67% -23.52% (3/31/91) (9/30/98)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/99 TO 6/30/99 WAS -1.49%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998, TO THOSE OF THE FRANK RUSSELL 2000 GROWTH INDEX AND THE S&P SMALLCAP 600 INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION - ----------------------------------------- --------------- -------------- ------------- ------------------ Sunbelt Equity Fund -13.95% 7.55% 13.87% 13.80%* Frank Russell 2000 Growth Index 1.23% 10.22% 11.54%** X.XX% S&P SmallCap 600 Index -1.29% 13.21% 13.19%** X.XX%
* SINCE 11/30/80 **
FLEX SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION - ----------------------------------------- --------------- -------------- ------------- ------------------ Sunbelt Equity Fund -12.78% 8.06% 14.48% 14.41%* Frank Russell 2000 Growth Index 1.23% 10.22% 11.54%** N/A S&P SmallCap 600 Index -1.29% 13.21% 13.19%** N/A
* SINCE 11/30/80 ** SINCE 12/31/89 WHAT IS AN INDEX? An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Growth Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the largest U.S. companies with higher growth rates and price-to-book ratios. The S&P SmallCap 600 Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 600 domestic small cap stocks. FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
INVESTOR SHARES FLEX SHARES - ------------------------------------------------------------------------------------ ---------------- ---------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00%
* This sales charge varies depending upon how much you invest. See "Purchasing Fund Shares." ** This sales charge is imposed if you sell Flex Shares within 1 year of your purchase. See "Selling Fund Shares." ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
INVESTOR SHARES FLEX SHARES - --------------------------------------------------------------------- ---------------------- ------------------------- Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.20% 0.51% ----- ----- Total Annual Fund Operating Expenses 1.78% 2.66%
EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. 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 $549 $914 $1,303 $2,391 FLEX SHARES $469 $826 $1,410 $2,993
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS INVESTOR SHARES $549 $914 $1,303 $2,391 FLEX SHARES $269 $826 $1,410 $2,993
FUND EXPENSES Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.02%, 0.40% AND 1.62%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.02%, 0.69% AND 2.22%, RESPECTIVELY. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." MORE INFORMATION ABOUT RISK EQUITY RISK -- Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. REGIONAL RISK -- To the extent that the Fund's investments are concentrated in a specific geographic region, the Fund may be subject to the political and other developments affecting that region. Regional economies are often closely interrelated, and political and economic developments affecting one region, country or state often affect other regions, countries or states, thus subjecting a Fund to additional risks. YEAR 2000 RISK -- The Fund 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 Fund 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 Fund has asked its mission critical service providers whether they expect to have its computer systems adjusted for the year 2000 transition, and have sought and received assurances from such service providers that they are devoting significant resources to prevent material adverse consequences to the Fund. While such assurances have been received, the Fund 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 Fund does business. THE FUND'S OTHER INVESTMENTS This prospectus describes the Fund's primary strategies, and the Fund will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, the Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that we use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, the Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. The Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, the Fund cannot guarantee that it will achieve its investment goal. INVESTMENT ADVISER The Investment Adviser makes investment decisions for the Fund and continuously reviews, supervises and administers the Fund's investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Fund. As of July 1, 1999, Trusco had approximately $30 billion in assets under management. For the fiscal period ended May 31, 1999, Trusco received advisory fees of: SUNBELT EQUITY FUND 1.02% The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGER 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. PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to buy, sell (sometimes called "redeem") or exchange Investor Shares and Flex Shares of the Fund. HOW TO PURCHASE FUND SHARES A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your account is established, you may buy shares of the Funds by: You may purchase shares directly by: - - Mail - - Telephone (1-800-874-4770) - - Wire - - Automated Clearing House (ACH). You may also buy shares through investment representatives of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place transactions in Fund shares for their customers. Please contact your financial institution directly and follow its procedures for Fund share transactions. Your institution may charge a fee for its services, in addition to the fees charged by a Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Fund receives your purchase order. The Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for the Fund, generally the Fund must receive your purchase order before 4:00 p.m. Eastern time. YOU MAY HAVE TO TRANSMIT YOUR PURCHASE, SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE, SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUND CALCULATES NAV In calculating NAV, the Fund generally values its investment portfolio at market price. If market prices are unavailable or the Fund thinks that the market price is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets in the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest at least:
CLASS DOLLAR AMOUNT Investor Shares $2,000 Flex Shares $5,000 ($2,000 for retirement plans)
Your subsequent investments in any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. A Fund may accept investments of smaller amounts for either class of shares at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call SunTrust at 1-800-428-6970 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 to $100,000 once or twice a month. If you are buying Flex Shares, you should plan on investing at least $5,000 per Fund during the first two years. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. SALES CHARGES FRONT-END SALES CHARGES -- INVESTOR SHARES The offering price of Investor Shares is the NAV next calculated after the Fund receives your request, plus the front-end sales charge. The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment:
YOUR SALES CHARGE AS YOUR SALES CHARGE AS A IF YOUR INVESTMENT IS: A PERCENTAGE OF OFFERING PRICE PERCENTAGE OF YOUR NET INVESTMENT - --------------------------------------- -------------------------------- ----------------------------------- LESS THAN $100,000 3.75% 3.90% $100,000 BUT LESS THAN $250,000 3.25% 3.36% $250,000 BUT LESS THAN $1,000,000 2.50% 2.56% $1,000,000 AND OVER 1.50% 1.52%
WAIVER OF FRONT-END SALES CHARGE -- INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: - - through reinvestment of dividends and distributions; - - through a SunTrust Securities, Inc. asset allocation account; - - by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); - - by employees, and members of their immediate family, of SunTrust and its affiliates; - - 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; - - 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 - - through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front-end sales charge. REPURCHASE OF INVESTOR SHARES You may repurchase any amount of Investor Shares of the Fund at NAV (without the normal front-end sales charge), up to the limit of the value of any amount of Investor Shares (other than those which were purchased with reinvested dividends and distributions) that you redeemed within the past 60 days. In effect, this allows you to reacquire shares that you may have had to redeem, without re-paying the front-end sales charge. To exercise this privilege, the Fund must receive your purchase order within 60 days of your redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE REPURCHASING SHARES. REDUCED SALES CHARGES -- INVESTOR SHARES RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this right allows you to add the value of the Investor Shares you already own to the amount that you are currently purchasing. The Fund will combine the value of your current purchases with the current value of any Investor Shares you purchased previously for (i) your account, (ii) your spouse's account, (iii) a joint account with your spouse, or (iv) your minor children's trust or custodial accounts. A fiduciary purchasing shares for the same fiduciary account, trust or estate may also use this right of accumulation. The Fund will only consider the value of Investor Shares purchased previously that were sold subject to a sales charge. TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED, YOU MUST ASK THE FUNDS FOR THE REDUCTION AT THE TIME OF PURCHASE. You must provide the Fund with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). The Funds may amend or terminate this right of accumulation at any time. LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. In other words, a Letter of Intent allows you to purchase Investor Shares of a Fund over a 13-month period and receive the same sales charge as if you had purchased all the shares at the same time. The Fund will only consider the value of Investor Shares sold subject to a sales charge. As a result, shares of the Investor Shares purchased with dividends or distributions will not be included in the calculation. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send the Fund a Letter of Intent. In calculating the total amount of purchases you may include in your letter purchases made up to 90 days before the date of the Letter. The 13-month period begins on the date of the first purchase, including those purchases made in the 90-day period before the date of the Letter. Please note that the purchase price of these prior purchases will not be adjusted. You are not legally bound by the terms of your Letter of Intent to purchase the amount of your shares stated in the Letter. The Letter does, however, authorize the Fund to hold in escrow 3.75% of the total amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the Fund's transfer agent will redeem the necessary portion of the escrowed shares to make up the difference between the reduced rate sales charge (based on the amount you intended to purchase) and the sales charge that would normally apply (based on the actual amount you purchased). COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate sales charge rate, the Fund will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: - - to make certain withdrawals from a retirement plan (not including IRAs); - - because of death or disability; or - - for certain payments under the Systematic Withdrawal Plan (which is discussed later). OFFERING PRICE OF FUND SHARES The offering price of Investor Shares is the NAV next calculated after the transfer agent receives your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. HOW TO SELL YOUR FUND SHARES If you own your shares through a brokerage account with SunTrust, you may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust Securities directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request less, in the case of Flex Shares, any applicable deferred sales charge. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a SunTrust affiliates bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Fund will send your sale proceeds within five Business Days after the Fund receives your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS). REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required minimum you may be required to sell your shares. The account balance minimums are:
CLASS DOLLAR AMOUNT Investor Shares $2,000 Flex Shares $5,000
But, the Fund will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting SunTrust Securities or your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. You may exchange your shares up to four times during a calendar year. If you exchange your shares more than four times during a year, you may be charged a $10.00 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK, OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be changed or canceled at any time upon 60 days' notice. EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange request. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DISTRIBUTION OF FUND SHARES The 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 the Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets are as follows: For Investor Shares 0.43% For Flex Shares the maximum distribution fee is 1.00% of the average daily net assets of the Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide incentives, in the form of cash or other compensation, including merchandise, airline vouchers, trips and vacation packages, to dealers selling shares of the Fund. DIVIDENDS AND DISTRIBUTIONS The Fund distributes its income quarterly. The Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax issues that affect the Fund and its shareholders. This summary is based on current tax laws, which may change. The Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. FINANCIAL HIGHLIGHTS The table that follows presents performance information about Investor Shares and Flex Shares of the Fund. This information is intended to help you understand the Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund, assuming you reinvested all of your dividends and distributions. This information for the Fund has been audited by Arthur Andersen LLP, independent public accountants. This report, along with the Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-874-4770. FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET AND UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) - ------------------------------------------------------------------------------------------------------------------ SUNBELT EQUITY FUND INVESTOR SHARES 1999 $14.77 $(0.33) $ (2.77) $-- $(0.91) $10.76 (20.75%) 1998 13.06 (0.07) 2.98 -- (1.20) 14.77 23.25 1997 13.95 (0.14) 0.24 -- (0.99) 13.06 1.05 1996 9.96 (0.11) 4.30 -- (0.20) 13.95 42.58 1995 9.69 (0.05) 0.36 -- (0.04) 9.96 3.20 FLEX SHARES 1999 $14.60 $(0.40) $ (2.74) $-- $(0.91) $10.55 (21.28%) 1998 13.00 (0.09) 2.89 -- (1.20) 14.60 22.48 1997 13.97 (0.14) 0.16 -- (0.99) 13.00 0.46 1996(1) 10.20 (0.07) 4.04 -- (0.20) 13.97 39.86 RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME (LOSS) NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS NET ASSETS RATIO OF INCOME (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO END OF EXPENSES TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER PERIOD (0000) AVERAGE NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE - --------------------------------------------------------------------------------------------------------------------------------- SUNBELT EQUITY FUND INVESTOR SHARES 1999 $ 16,949 1.62% (1.12%) 1.78% (1.28%) 84% 1998 30,860 1.61 (1.35) 1.86 (1.60) 70 1997 28,095 1.60 (1.10) 1.84 (1.34) 72 1996 29,002 1.60 (0.79) 1.93 (1.12) 106 1995 22,180 1.60 (0.57) 1.98 (0.95) 80 FLEX SHARES 1999 $ 4,395 2.22% (1.74%) 2.66% (2.18%) 84% 1998 8,070 2.21 (1.96) 2.58 (2.33) 70 1997 5,689 2.20 (1.72) 2.69 (2.21) 72 1996(1) 2,705 2.20 (1.43) 3.62 (2.85) 106
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on June 5, 1995. All ratios for the period have been annualized. STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Fund is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 1999, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list the Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends. The reports also contain detailed financial information about the Fund. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, PA 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the 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 STI Classic Funds' 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, 1999. Prospectuses may be obtained through the Distributor, SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, Pennsylvania 19456. TABLE OF CONTENTS PAGE THE TRUST....................................................................B-2 ADDITIONAL INFORMATION ABOUT CERTAIN FUNDS...................................B-3 DESCRIPTION OF PERMITTED INVESTMENTS........................................B-20 INVESTMENT LIMITATIONS......................................................B-38 INVESTMENT ADVISERS.........................................................B-41 THE ADMINISTRATOR...........................................................B-45 THE DISTRIBUTOR.............................................................B-47 THE TRANSFER AGENT..........................................................B-54 THE CUSTODIAN...............................................................B-54 INDEPENDENT PUBLIC ACCOUNTANTS..............................................B-54 LEGAL COUNSEL...............................................................B-54 TRUSTEES AND OFFICERS OF THE TRUST..........................................B-54 PERFORMANCE INFORMATION.....................................................B-57 COMPUTATION OF YIELD........................................................B-57 CALCULATION OF TOTAL RETURN.................................................B-63 PURCHASING SHARES...........................................................B-68 REDEEMING SHARES............................................................B-69 DETERMINATION OF NET ASSET VALUE............................................B-70 TAXES.......................................................................B-70 FUND TRANSACTIONS...........................................................B-73 TRADING PRACTICES AND BROKERAGE.............................................B-73 DESCRIPTION OF SHARES.......................................................B-73 SHAREHOLDER LIABILITY.......................................................B-80 LIMITATION OF TRUSTEES' LIABILITY...........................................B-80 YEAR 2000...................................................................B-80 5% AND 25% SHAREHOLDERS.....................................................B-81 EXPERTS.....................................................................B-95 APPENDIX A: FINANCIAL STATEMENTS.............................................F-1 October 1, 1999 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 Funds through one, two or three separate classes (Trust Shares, Investor Shares and Flex Shares), which provide for variations in sales charges, distribution costs, transfer agent fees, voting rights and dividends. Except for these differences, each Share of each Fund represents an equal proportionate interest in that portfolio. See "Description of Shares." This Statement of Additional Information relates to each class of the following funds:
TRUST SHARES INVESTOR SHARES FLEX SHARES EQUITY FUNDS - ------------ Capital Appreciation Fund X X X Core Equity Fund X X X E-Commerce Opportunity Fund X X X Emerging Markets Equity Fund X Growth and Income Fund X X X International Equity Fund X X X International Equity Index Fund X X X Mid-Cap Equity Fund X X X Small Cap Equity Fund X X Small Cap Growth Stock Fund X X X Sunbelt Equity Fund X X X Tax Sensitive Growth Stock Fund X X Value Income Stock Fund X X X BALANCED FUND - ------------- Balanced Fund X X X BOND FUNDS - ---------- Investment Grade Tax-Exempt Bond Fund X X X Limited-Term Federal Mortgage Securities 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 TAX-EXEMPT BOND FUNDS - --------------------- Florida Tax-Exempt Bond Fund X X X Georgia Tax-Exempt Bond Fund X X X Investment Grade Tax-Exempt Bond Fund X X X
B-2
TRUST SHARES INVESTOR SHARES FLEX SHARES Maryland Municipal Bond Fund X X Virginia Intermediate Municipal Bond Fund X X Virginia Municipal Bond Fund X X MONEY MARKET FUNDS - ------------------ Prime Quality Money Market Fund X X X Tax-Exempt Money Market Fund X X Tax-Free Money Market Fund X X U.S. Government Securities Money Market Fund X X U.S. Treasury Money Market Fund X LIFE VISION PORTFOLIOS - ---------------------- Balanced Portfolio X Growth and Income Portfolio X Maximum Growth Portfolio X
These various series are collectively referred to herein as the "Funds." The Trust pays its expenses, including fees of its service providers, audit and legal expenses, expenses of preparing prospectuses, proxy solicitation material and reports to shareholders, costs of custodial services, and registering the shares under federal and state securities laws, pricing, insurance expenses, litigation, and other extraordinary expenses, brokerage costs, interest charges, taxes, and organization expenses. ADDITIONAL INFORMATION ABOUT CERTAIN FUNDS EQUITY FUNDS - ------------ CAPITAL APPRECIATION FUND The Capital Appreciation Fund invests primarily in a diversified portfolio of common stocks, warrants, and securities convertible into common stocks which, in the Fund's Adviser's opinion, are undervalued in the marketplace at the time of purchase. In selecting securities for the Fund, its Adviser will evaluate factors believed to affect capital appreciation such as the issuer's background, industry position, historical returns on equity and experience and qualifications of the management team. Dividend and interest income should be considered incidental to the growth of capital. The Fund's Adviser will rotate the Capital Appreciation Fund's holdings between various market sectors based on economic analysis of the overall business cycle. Under normal conditions, at least 65% of the total assets of the Capital Appreciation Fund will be invested in common stocks. All of the common stocks in which the Fund invests are traded on registered exchanges or on the over-the-counter market in the United States. Assets of the Capital Appreciation Fund not invested in the securities described above may be invested in U.S. dollar denominated equity securities of foreign issuers (including sponsored American Depositary Receipts ("ADRs") that are traded on exchanges or listed on National B-3 Association of Securities Dealers Automated Quotations ("NASDAQ"); securities issued by money market mutual funds; pay-in-kind securities; and bonds. The bonds that the Capital Appreciation Fund may purchase may be rated in any rating category or may be unrated, provided that no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by Standard & Poor's Corporation ("S&P"), rated below Baa by Moody's Investors Services, Inc. ("Moody's"), or of comparable quality not rated by S&P or Moody's. In addition, the Fund may invest up to 10% of its assets in restricted securities. GROWTH AND INCOME FUND The Growth and Income Fund seeks to provide long-term capital appreciation and, as a secondary objective, current income, by investing primarily in income producing equity securities of companies with large market capitalizations. The Fund's investments will be broadly diversified among major economic sectors and among those securities with above-average total return potential. A number of valuation criteria are considered in the equity selection process, the principal one being the issue's price to earnings ("P/E") ratio in relation to other stocks in the same industry. Stocks with the lowest P/E ratios, along with strong financial quality and above-average earnings momentum, are selected to secure the best relative values in each economic sector. The Adviser believes that this approach will produce a portfolio with less volatility and greater dividend yield than the market as a whole. The Fund will invest primarily in the income producing equity securities of companies with market capitalizations of at least $1 billion. The Fund will invest primarily in domestic and foreign common stock and in securities convertible into common stock, such as convertible bonds and convertible preferred stock rated investment-grade. The Adviser will select stocks for this Fund from a list of companies traded in the U.S. securities markets, including sponsored ADRs of qualifying foreign companies. A qualitative screening process is employed to exclude companies with poor earnings results or highly leveraged balance sheets in an effort to construct a portfolio with low risk characteristics relative to the major stock market indices, although it is not the intention of the Fund to match the risk or performance characteristics of any index. As a non-fundamental investment policy, the Fund may to the extent consistent with its investment objective, invest in any debt security in which the Fund may invest. As a non-fundamental investment policy, the Growth and Income Fund may also invest up to 10% of its assets in the U.S. Treasury obligations. Although the Growth and Income Fund intends under normal circumstances to be fully invested at all times in the securities mentioned above, the Fund may make substantial temporary investments in high-quality, short-term debt securities and money market instruments, including repurchase agreements, and in shares of other open-end management investment companies which invest primarily in money market instruments, when the Adviser believes market conditions warrant a defensive position. Should the Fund elect to purchase shares of money market funds, it will incur additional expenses charged by that money market fund, such as management fees. INTERNATIONAL EQUITY FUND The International Equity Fund, under normal market conditions, will invest at least 65% of its assets in equity securities of foreign issuers consisting of: common and preferred stocks, warrants, options and securities convertible into common stock. B-4 Securities of foreign issuers purchased by the Fund may be purchased in foreign markets, on United States registered exchanges, the over-the-counter market or in the form of sponsored or unsponsored ADRs traded on registered exchanges or NASDAQ, or sponsored or unsponsored European Depositary Receipts ("EDRs"). The Fund may enter into forward foreign currency contracts as a hedge against possible variations in foreign exchange rates. A forward foreign currency contract is a commitment to purchase or sell a specified currency, at a specified future date, at a specified price. The Fund may enter into forward foreign currency contracts to hedge a specific security transaction or to hedge a portfolio position. The Fund also may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage the portfolios exposure to changes in dollar exchange rates. The Fund expects to be fully invested in the investments described above, but may invest up to 35% of its total assets in bonds and debentures issued by non-U.S. or U.S. companies, securities issued or guaranteed by foreign or U.S. governments and foreign and U.S. commercial paper. The Fund may invest in futures contracts, including stock index futures contracts, and options on futures contracts. The bonds that the Fund may purchase may be rated in any rating category or may be unrated provided that no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. When investing in bonds, the Fund may seek capital gains by taking advantage of price appreciation caused by interest rate and credit quality changes. The Fund may also purchase shares of closed-end investment companies that invest in the securities of issuers in a single country or region. The Fund is also permitted to acquire floating and variable rate securities, purchase securities on a when-issued basis and purchase illiquid securities. The Fund will invest in the foreign issues of at least three different countries outside the United States. A foreign issue is one the issuer of which (1) is organized under the laws of a specific country, or for which the principal securities trading market is in a specific country or (2) derives a significant proportion (at least 50 percent) of its revenues or profits from goods produced or sold, investments made, or services performed in a specific country or which have at least 50 percent of its assets situated in that country. The Fund will invest primarily in developed countries (for example Japan, Canada and the United Kingdom). In addition, the Fund may invest in securities of issuers whose principal activities are in countries with emerging markets. The Fund defines an emerging market country as any country the economy and market of which the World Bank or the United Nations considers to be emerging or developing. INTERNATIONAL EQUITY INDEX FUND The International Equity Index Fund will invest substantially all and, under normal market conditions, at least 65% of its assets in common and preferred stocks; warrants; options; and securities convertible into common stock of companies headquartered or based in the approximately twenty foreign countries included in the MSCI EAFE-GDP Weighted Index. The Fund will invest only in the over 900 companies included in the MSCI EAFE-GDP Weighted Index. Because it is impractical to invest in every company included in the Index, the Fund will select a representative sample of securities in each country using a statistically-based optimization process. The Fund will be constructed to have aggregate investment characteristics similar to those of the MSCI EAFE-GDP Weighted Index. The Fund will invest in a statistically selected sample of the securities included in the MSCI EAFE-GDP Weighted Index, although not all countries or all companies within a country will be represented in the Fund's portfolio of securities at any time. The Fund expects to invest in approximately 300 stocks so that the results fall within a targeted tracking error range. From time to time, adjustments may be made B-5 in the Fund's portfolio because of changes in the composition of the MSCI EAFE-GDP Weighted Index. No attempt will be made to manage the portfolio using traditional economic, financial and market analyses. The Fund expects that there will be a close correlation between the Fund's performance and that of the MSCI EAFE-GDP Weighted Index. A correlation of 1.00 would be achieved when the net asset value of the Fund, including the value of its dividend and capital gains distributions, increases or decreases in exact proportion to changes in the MSCI EAFE-GDP Weighted Index. The correlation between the Fund and the MSCI EAFE-GDP Weighted Index is expected to be over 0.95 on an annual basis. The Fund's ability to track the MSCI EAFE-GDP Weighted Index, however, may be affected by, among other things, transaction costs, changes in either the composition of the MSCI EAFE-GDP Weighted Index or number of shares outstanding for the component companies of the MSCI EAFE-GDP Weighted Index, and the timing and amount of purchases and redemptions. Securities of foreign issuers purchased by the Fund may be purchased in foreign markets, on United States registered exchanges, the over-the-counter market or in the form of sponsored or unsponsored ADRs traded on registered exchanges or NASDAQ, or sponsored or unsponsored EDRs. The Fund may enter into forward foreign currency contracts as a hedge against possible variations in foreign exchange rates. A forward foreign currency contract is a commitment to purchase or sell a specified currency, at a specified future date, at a specified price. The Fund may enter into forward foreign currency contracts to hedge a specific security transaction or to hedge a portfolio position. These contracts may be bought or sold to protect the Fund, to some degree, against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar. The Fund expects to be fully invested in the investments described above, but may invest up to 35% of its total assets in U.S. and non-U.S. denominated money market instruments; repurchase agreements; futures contracts, including stock index futures contracts; and options on futures contracts. Obligations relating to futures contracts will be limited to 20% of the Fund's total assets. The Fund is also permitted to acquire floating and variable rate securities; purchase securities on a when-issued basis; and purchase illiquid securities. MID-CAP EQUITY FUND The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks, preferred stocks, and securities convertible into common stocks of small to mid-size companies, (i.e., $500 million to $10 billion, respectively, as measured by their market capitalization), with above-average growth of earnings. Under normal conditions, at least 80% of the total assets of the Fund will be invested in equity securities, and as a matter of non-fundamental policy, the Fund will invest at least 65% of its assets in mid-size companies. Current income will not be an important criterion of investment selection and any such income should be considered incidental. In selecting securities for the Fund, the Fund's Adviser will evaluate factors such as the issuer's background, industry position, historical returns on equity, and experience and qualifications of the management team. Most of the common stocks in which the Fund invests are traded on registered exchanges or on the over-the-counter market in the United States. Assets of the Fund not invested in the securities described above may be invested in U.S. dollar denominated equity securities of foreign issuers (including sponsored ADRs that are traded on exchanges or listed on NASDAQ); securities issued by mutual funds; repurchase agreements; and bonds. The bonds that the Fund may purchase, including nay variable or floating rate instruments, must be rated B or better by S&P or Moody's, provided that this requirement shall not apply to the Fund's purchase of bonds issued by the government of Canada or by various supranational entities, and provided further that no more than B-6 10% of the Fund's total assets will be invested in bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. The Fund may invest up to 10% of its assets in restricted securities. SMALL CAP EQUITY FUND The Small Cap Equity Fund invests substantially all, and under normal market conditions at least 65%, of its assets in the equity securities of smaller companies (i.e., companies with market capitalizations of less than $1 billion) which, in the Adviser's opinion, are undervalued for above-average capital growth. Any remaining assets may be invested in the equity securities of companies with larger market capitalizations which the Adviser believes are also undervalued. The Fund may also invest in U.S. dollar denominated equity securities of foreign issuers (including ADRs). Equity securities include common stock, preferred stock, warrants and rights to subscribe to common stock and, in general, any security that is convertible into or exchangeable for common stock. In order to meet liquidity needs, or for temporary defensive purposes, the Fund may invest all or a portion of its assets in common stocks of larger, more established companies, fixed income securities, repurchase agreements, cash or money market securities. Fixed income securities will only be purchased if they are rated investment grade or better by one or more NRSROs. Investment grade bonds include securities rated at least BBB by S&P or Baa by Moody's. Money market securities will only be purchased if they have been given one of the two top ratings by two or more NRSROs, or if not rated, determined to be of comparable quality by the Fund's Adviser. To the extent the Fund is engaged in temporary defensive investing, the Fund may not be pursuing its investment objective. The Fund may engage in options transactions for hedging purposes only. The Fund will not invest more than 20% of its total assets in unsponsored ADR facilities. SUNBELT EQUITY FUND The Sunbelt Equity Fund seeks to provide capital appreciation by investing substantially all, and under normal market conditions at least 65%, of its assets in common stocks; preferred stocks; warrants; and securities convertible into common stock of U.S. companies headquartered and/or conducting a substantial portion of their operations in (i.e., maintaining at least 50% of their assets in or deriving at least 50% of their revenues and/or sales from) the southern region of the United States. Current income will not be an important criterion of investment selection and any such income should be considered incidental. The Fund's Adviser will seek to identify and purchase securities of companies that it believes to be undervalued and that possess a strong balance sheet, a strong earnings record and adequate market liquidity. Most of the common stocks in which the Fund invests are traded on registered exchanges such as the New York or American Stock Exchange or on NASDAQ. The Fund will invest no more than 10% of its assets in convertible securities rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. The Fund may invest up to 10% of its total assets in restricted securities. The Fund may also purchase futures and options for hedging purposes. Obligations relating to futures contracts will be limited to not more than 20% of the Fund's total assets. The Fund will invest primarily in stocks of U.S. companies headquartered and/or operating in the following U.S. states: Texas, Arkansas, Alabama, Mississippi, Tennessee, Kentucky, Florida, Virginia, Georgia, North B-7 Carolina, South Carolina and Louisiana. To the extent that the Fund's investments are not as geographically dispersed across the U.S. as other funds with comparable objectives, the impact of economic forces on and the relative economic conditions of these states will be greater on Shareholders. VALUE INCOME STOCK FUND The Value Income Stock Fund seeks to provide current income by structuring its investments in an attempt to maintain the Fund's yield at a level above the average dividend yield of the securities comprising the S&P 500 Stock Index. Achieving such a yield will be the Fund's primary consideration when purchasing securities. A secondary consideration of the Fund will be capital appreciation. The Fund will invest at least 80% of its total assets in equity securities. Investments will consist primarily of common stocks, and, under normal market conditions, at least 65% of the Fund's assets will be invested in common stocks issued by corporations which have a history of paying regular dividends, although there can be no assurance that such corporations will continue to pay dividends. Other equity securities in which the Fund may invest are convertible debt securities; preferred stocks and warrants which are convertible into or exchangeable for common stocks; and U.S. dollar denominated equity securities of foreign issuers (including sponsored ADRs that are traded on exchanges or listed on NASDAQ). All of the common stocks in which the Fund invests are traded on registered exchanges such as the New York or American Stock Exchange or on the over-the-counter market in the United States (i.e., NASDAQ). The Fund may also purchase debt securities (corporate debt obligations and U.S. Treasury obligations) which may be rated in any rating category or may be unrated, provided that no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. The Fund may also invest in futures and options. The Fund will invest primarily in stocks of companies operating in all aspects of the U.S. and world economies that have a market capitalization of at least $500 million, and that the Fund's Adviser believes possess fundamentally favorable long-term characteristics. However, stocks of companies with smaller market capitalizations and stocks that are out of favor in the financial community and in which little opportunity for price appreciation is recognized by the financial community may also be purchased if the Fund's Adviser believes they are undervalued. BALANCED FUND The Balanced Fund seeks to provide capital appreciation and current income through investments in a diversified portfolio of common and preferred stocks, warrants, securities convertible into common stocks, and investment grade fixed income securities. Under normal conditions, no more than 70% of the total assets of the Fund will be invested in common stocks and other equity securities, and no more than 60% of the Fund's total assets will be invested in bonds and other fixed income securities. The Fund will maintain at least 25% of its total assets in senior fixed income securities. In selecting equity securities for the Fund, the Fund's Adviser will evaluate factors believed to affect capital appreciation such as the issuer's background, industry position, historical returns on equity and experience and qualifications of the management team. The Fund's Adviser will rotate the Fund's holdings between various market sectors based on economic analysis of the overall business cycle. B-8 All of the common stocks in which the Fund invests are traded on registered exchanges or on NASDAQ. Assets of the Fund not invested in the securities described above may be invested in U.S. dollar denominated equity securities of foreign issuers (including sponsored ADRs that are traded on exchanges or listed on NASDAQ), securities issued by investment companies, and bonds. The Fund will invest in investment grade fixed income securities rated BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser, including corporate debt obligations; mortgage-backed securities, collateralized mortgage obligations and asset-backed securities; obligations issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities; custodial receipts involving U.S. Treasury obligations; securities of the government of Canada and its provincial and local governments; securities issued or guaranteed by foreign governments, their political subdivisions, agencies or instrumentalities; and obligations of supranational entities. No more than 25% of the Fund's assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser. The Fund may purchase mortgage-backed securities issued or guaranteed as to the payment of principal and interest by the U.S. Government, its agencies or instrumentalities or, subject to a limit of 25% of the Fund's assets, mortgage-backed securities issued by private issuers. These mortgage-backed securities may be backed or collateralized by fixed, adjustable or floating rate mortgages. The Fund may also invest in asset backed securities which consist of securities backed by company receivables, truck and auto loans, leases, credit card receivables and home equity loans. In order to reduce interest rate risk, the Fund may purchase floating or variable rate securities. It may also buy securities on a when-issued basis, putable securities, pay-in-kind securities and zero coupon securities. The Fund may also invest in futures and options. Some floating or variable rate securities will be subject to interest rate "caps" or "floors." BOND FUNDS - ---------- INVESTMENT GRADE BOND FUND The Investment Grade Bond Fund will invest only in those obligations deemed investment grade obligations rated BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser, including corporate debt obligations; mortgage-backed securities, collateralized mortgage obligations ("CMOs") and asset-backed securities; obligations issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities; custodial receipts involving U.S. Treasury obligations; securities of the government of Canada and its provincial and local governments; securities issued or guaranteed by foreign governments, their political subdivisions, agencies or instrumentalities; obligations or supranational entities and sponsored ADRs that are traded on exchanges or listed on NASDAQ. Under normal circumstances, at least 65% of the Fund's total assets will be invested in corporate and government bonds and debentures. No more than 25% of the Fund's assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser. The Fund may purchase mortgage-backed securities issued or guaranteed as to the payment of principal and interest by the U.S. Government, its agencies or instrumentalities or, subject to a limit of 35% of the Fund's B-9 assets, mortgage-backed securities issued by private issuers. These mortgage-backed securities may be backed or collateralized by fixed, adjustable or floating rate mortgages. The Fund may also invest in asset-backed securities which consist of securities backed by company receivables, truck and auto loans, leases, credit card receivables and home equity loans. In order to reduce interest rate risk, and subject to a general limit of 25% of the Fund's assets, the Fund may purchase floating or variable rate securities. Some floating or variable rate securities will be subject to interest rate "caps" or "floors." It may also buy securities on a when-issued basis, putable securities, medium term notes, and zero coupon securities. The Fund may also invest up to 10% of its assets in restricted securities. The Fund may also engage in futures and options. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from 4 to 10 years. In the case of mortgage related securities and asset-backed securities, maturity will be determined based on the expected average life of the security. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. By so limiting the maturity of its investments, the Fund expects that its net asset value will experience less price movement in response to changes in interest rates than the net asset values of mutual funds investing in similar credit quality securities with longer maturities. LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Under normal market conditions, the Fund will invest at least 65% of its assets in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, including mortgage-backed securities issued or guaranteed by U.S. Government agencies such as the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities consisting of CMOs and real estate mortgage investment conduits ("REMICs") purchased by the Fund will be issued or guaranteed as to payment of principal and interest by the U.S. Government, its agencies or instrumentalities or, if issued by private issuers, rated in one of the two highest rating categories by a NRSRO. The principal governmental issuers or guarantors of mortgage-backed securities are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and credit of the U.S. Government while obligations of FNMA and FHLMC are supported by the respective agency only. The Fund may purchase mortgage-backed securities that are backed or collateralized by fixed, adjustable or floating rate mortgages. Mortgage-backed securities that are not issued or guaranteed by the U.S. Government, its agencies or instrumentalities, including securities nominally issued by a governmental entity (such as the Resolution Trust Corporation), are not obligations of a governmental entity and thus may bear a risk of nonpayment. The timely payment of principal and interest normally is supported, at least partially, by various forms of insurance or guarantees. There can be no assurance, however, that such credit enhancement will support full payment of the principal and interest on such obligations. The average maturity of the Fund's investment portfolio will typically range from 7 to 14 years. With respect to the remaining 35% of its assets, the Fund may invest in corporate or government bonds that carry a rating of Baa or better by Moody's or BBB or better by S&P, or that are deemed by the Fund's Adviser to be of comparable quality; commercial paper rated at the time of purchase within the two highest ratings categories of an NRSRO; bankers' acceptances; certificates of deposit and time deposits; and U.S. Treasury obligations, which B-10 include custodial receipts and repurchase agreements involving securities that constitute permissible investments for the Fund. The Fund intends to invest in privately issued, mortgage-backed securities only if they are rated in one of the two highest rating categories by an NRSRO. The Fund may purchase securities on a forward commitment or when-issued basis, which means that delivery and payment for such securities generally takes place after the customary securities settlement period. The Fund may purchase floating or variable rate securities, and may engage in dollar rolls. SHORT-TERM BOND FUND Under normal circumstances, the Short-Term Bond Fund will invest solely in investment grade obligations rated BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser consisting of debt obligations of U.S. and foreign corporations; mortgage-backed securities; CMOs; asset-backed securities; obligations (including mortgage-backed securities) issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities; and custodial receipts involving U.S. Treasury obligations; (including Separately Traded Registered interest and Principal Securities ("STRIPS") and Coupon Under Book Entry System ("CUBES")). Under normal circumstances, at least 65% of the Fund's total assets will be invested in corporate and government bonds and debentures. No more than 25% of the Fund's assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase by the Fund's Adviser. The Fund may purchase, without limitation, mortgage-backed securities issued or guaranteed as to the payment of principal and interest by the U.S. Government, its agencies or instrumentalities and, subject to a limit of 25% of the Fund's assets, mortgage-backed securities issued by private issuers. These mortgage-backed securities may be backed or collateralized by fixed, adjustable or floating rate mortgages. The Fund may also invest in asset-backed securities, which consist of securities backed by company receivables, truck and auto loans; leases; credit card receivables; and home equity loans. The Fund will purchase mortgage-backed and asset-backed securities only if they are rated at least AA by S&P or Aa by Moody's or, if unrated, determined to be of comparable quality at the time of purchase by the Fund's Adviser. The Fund may purchase securities on a when-issued basis and may acquire floating or variable rate securities, medium term notes, putable securities, and zero coupon securities. The Fund may also purchase securities issued by foreign governments and supranational agencies. The Fund may also invest in municipal securities when the Fund's Adviser feels it is consistent with the Fund's investment objective. The Fund will not invest in municipal securities unless the Fund's Adviser believes that the yield will be higher than the yield for comparable taxable investments in which the Fund is permitted to invest. The following quality criteria apply to the Fund's investments in municipal securities. The Fund's investments in municipal notes will be limited to those obligations (i) where both principal and interest are backed by the full faith and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or better at the time of investment by Moody's, (iii) which are rated SP-2 or better at the time of investment by S&P, or (iv) which, if not rated, are of equivalent quality to MIG-2, V-MIG-2, or SP-2 or better in the Adviser's judgment. The Fund's investment in municipal bonds will be limited to bonds rated BBB or better by S&P or Baa or better by Moody's, or, if not rated by S&P or Moody's, deemed by the Fund's Adviser to be of comparable quality. For the Fund's investments in other types of tax-exempt municipal investments, such as participation interests in municipal lease/purchase agreements, the quality of the underlying credit or of the bank providing a credit support arrangement must, in the Fund's Adviser's opinion, be equivalent to the municipal note or bond ratings stated above. The Fund is also authorized to invest up to 10% of its assets B-11 in restricted securities, including Rule 144A securities, that the Fund's Adviser determines are liquid under guidelines adopted by the Trust's Board of Trustees. The Fund may also enter into bond futures contracts and options on bond futures contracts and engage in securities lending. The Fund intends to maintain a dollar-weighted average maturity of 4 years or less, and the maximum remaining maturity for any security held by the Fund is seven and one-half years. Under normal market conditions it is anticipated that the Fund's dollar-weighted average maturity will range from 2 to 4 years. In the case of mortgage-related securities and asset-backed securities, maturity will be determined based on the expected average life of the security. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. By so limiting the maturity of its investments, the Fund expects that its net asset value will experience less price movement in response to changes in interest rates than the net asset values of mutual funds investing in similar credit quality securities with longer maturities. SHORT-TERM U.S. TREASURY SECURITIES FUND The Short-Term U.S. Treasury Securities Fund will invest exclusively in obligations issued by the U.S. Treasury with maximum remaining maturities of 3 years or less. U.S. Treasury securities are considered to be among the safest, as to timely principal and interest payments, investments available. The Fund will not invest in repurchase agreements. The Fund may borrow money for temporary or emergency purposes in an amount not exceeding one-third of its total assets, but has no present intention to do so. Under normal market conditions, it is anticipated that the Fund's average maturity will range from one to two years. Furthermore, for temporary defensive purposes during periods when the Fund's Adviser determines that market conditions warrant, the Short-Term U.S. Treasury Securities Fund may reduce its average weighted maturity to less than one year. U.S. GOVERNMENT SECURITIES FUND Under normal market conditions, the Fund will invest at least 65% of its assets in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, including mortgage-backed securities issued or guaranteed by U.S. Government agencies such as the GNMA, the FNMA or the FHLMC. Mortgage-backed securities consisting of CMOs and REMICs purchased by the Fund will be issued or guaranteed as to payment of principal and interest by the U.S. Government, its agencies or instrumentalities or, if issued by private issuers, rated in one of the two highest rating categories by a NRSRO. The principal governmental issuers or guarantors of mortgage-backed securities are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and credit of the U.S. Government while obligations of FNMA and FHLMC are supported by the respective agency only. The Fund may purchase mortgage-backed securities that are backed or collateralized by fixed, adjustable or floating rate mortgages. Mortgage-backed securities that are not issued or guaranteed by the U.S. Government, its agencies or instrumentalities, including securities nominally issued by a governmental entity (such as the Resolution Trust Corporation), are not obligations of a governmental entity and thus may bear a risk of nonpayment. The timely payment of principal and interest normally is supported, at least partially, by various forms of insurance or guarantees. There can be no assurance, however, that such credit enhancement will support full payment of the principal and interest on such obligations. The average maturity of the Fund's investment portfolio will typically range from 7 to 14 years. B-12 With respect to the remaining 35% of its assets, the Fund may invest in corporate or government bonds that carry a rating of Baa or better by Moody's or BBB or better by S&P, or that are deemed by the Fund's Adviser to be of comparable quality; commercial paper rated at the time of purchase within the two highest ratings categories of an NRSRO; bankers' acceptances; certificates of deposit and time deposits; and U.S. Treasury obligations, which include custodial receipts and repurchase agreements involving securities that constitute permissible investments for the Fund. The Fund intends to invest in privately issued, mortgage-backed securities only if they are rated in one of the two highest rating categories by an NRSRO. The Fund may purchase securities on a forward commitment or when-issued basis, which means that delivery and payment for such securities generally takes place after the customary securities settlement period. The Fund may purchase floating or variable rate securities, and may engage in dollar rolls. TAX-EXEMPT BOND FUNDS - --------------------- FLORIDA TAX-EXEMPT BOND FUND The Florida Tax-Exempt Bond Fund intends to be fully invested in municipal securities the interest on which is exempt from regular federal income taxes based on opinions from bond counsel to the issuers. The issuers of these securities can be located in Florida, the District of Columbia, Puerto Rico and other U.S. territories and possessions. It is a fundamental policy of the Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income tax and not treated as a preference item for purposes of the alternative minimum tax. At least 65% of the Fund's assets will be invested in Florida municipal bonds and debentures, and at least 75% of its total assets invested in municipal bonds will be in securities rated A or better by S&P or Moody's. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by Moody's. The Fund will only acquire securities not rated by S&P or Moody's if, at the time of purchase, the Fund's Adviser determines that such unrated obligations are of comparable quality to rated obligations that may be acquired by the Fund. The Fund may invest in commitments to purchase the above securities on a when-issued or delayed delivery basis, floating or variable rate securities, and may purchase municipal forwards, putable securities, medium term notes, and zero coupon securities. The Fund's Adviser has discretion to invest up to 20% of the Fund's total assets in taxable debt securities rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser, repurchase agreements, and securities subject to the alternative minimum tax. The Fund may also invest in futures and options, but has no present intention to do so for other than hedging purposes. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from 6 to 25 years. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. GEORGIA TAX-EXEMPT BOND FUND The Georgia Tax-Exempt Bond Fund intends to be fully invested in municipal securities the interest on which is exempt from regular federal income taxes and substantially exempt from State of Georgia income taxes based on B-13 opinions from bond counsel to the issuers. The issuers of these securities can be located in Georgia, the District of Columbia, Puerto Rico and other U.S. territories and possessions. It is a fundamental policy of the Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income tax and not treated as a preference items for purposes of the alternative minimum tax. At least 65% of the Fund's assets will be invested in Georgia municipal bonds and debentures, and at least 75% of its total assets invested in municipal bonds will be in securities rated A or better by S&P or Moody's. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by Moody's. The Fund will only acquire securities not rated by S&P or Moody's if, at the time of purchase, the Fund's Adviser determines that such unrated obligations are of comparable quality to rated obligations that may be acquired by the Fund. The Fund may invest in commitments to purchase the above securities on a when-issued or delayed delivery basis, floating or variable rate securities, and may purchase municipal forwards, putable securities, medium term notes, and zero coupon securities. The Fund's Adviser has discretion to invest up to 20% of the Fund's total assets in taxable debt securities rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Fund's Adviser, repurchase agreements, and securities subject to the alternative minimum tax. The Fund may also invest in futures and options, but has no present intention to do so for other than hedging purposes. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from 6 to 25 years. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. INVESTMENT GRADE TAX-EXEMPT BOND FUND The Investment Grade Tax-Exempt Bond Fund intends to be fully invested in municipal securities the interest on which is exempt from regular federal income taxes in the opinion of bond counsel to the issuer. The issuers of these securities can be located in all fifty states, the District of Columbia, Puerto Rico and other U.S. territories and possessions. It is a fundamental policy of the Investment Grade Tax-Exempt bond Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income tax and not treated as a preference item for purposes of the alternative minimum tax. At least 65% of the Fund's assets will be invested in municipal bonds and debentures, and at least 75% of its total assets invested in municipal bonds will be in securities rated A or better by S&P or Moody's. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate demand obligations. The Fund will only acquire unrated securities if, at the time of purchase, the Fund's Adviser determines that such unrated obligations are of comparable quality to rated obligations that may be acquired by the Fund. The Fund may invest in commitments to purchase the above securities on a when-issued or delayed delivery basis, floating or variable rate securities, and may purchase municipal forwards, medium term notes, putable securities, and zero coupon securities. The Fund's Adviser has discretion to invest up to 20% of the Fund's total assets in taxable debt securities rated at least BBB or better by S&P or Baa or better by Moody's or, if unrated, of comparable quality at the time of purchase as determined by the Fund's Adviser, repurchase agreements, and securities subject to the alternative minimum tax. The Fund may also invest up to 10% of its assets in restricted B-14 securities that the Fund's Adviser determines are liquid under guidelines adopted by the Trust's Board of Trustees and may engage in futures and options transactions. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from 4 to 10 years. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. By so limiting the maturity of its investments, the Fund's net asset value is expected to experience less price movement in response to changes in interest rates than the net asset values of mutual funds investing in similar credit quality securities with longer maturities. MARYLAND MUNICIPAL BOND FUND The Maryland Municipal Bond Fund seeks to provide high current income exempt from federal and Maryland income tax in a manner consistent with the preservation of capital by investing in municipal bonds of investment-grade quality. There are no limits on the dollar-weighted average portfolio maturity of the Fund, and the Fund may acquire individual securities without regard to their remaining maturities. The Fund is non-diversified, which means that it has greater latitude than a diversified fund with respect to the investment of its assets in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. As a fundamental policy, at least 80% of the Fund's income will, under normal circumstances, be exempt from regular federal income taxes. Interest on some "private activity" municipal obligations is subject to the federal alternative minimum tax ("AMT bonds"). AMT bonds are municipal obligations that benefit a private or industrial user or finance a private facility. The Fund reserves the right to invest up to 100% of its assets in AMT bonds. As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal circumstances, produce income that is exempt from Maryland income taxes. VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND The Virginia Intermediate Municipal Bond Fund seeks to provide high current income exempt from federal and Virginia income tax in a manner consistent with the preservation of capital by investing in municipal bonds of investment-grade quality. The Fund is managed to maintain a dollar-weighted average portfolio maturity of between 5 and 10 years. The Fund may hold individual securities with remaining maturities of more than 10 years, as long as the dollar-weighted average maturity is no more than 10 years. Stability and growth of principal also will be considered when choosing securities. The Fund is non-diversified, which means that it has greater latitude than a diversified fund with respect to the investment of its assets in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. As a fundamental policy, at least 80% of the Fund's income will, under normal circumstances, be exempt from regular federal income taxes. Interest on some "private activity" municipal obligations is subject to the federal AMT bonds. AMT bonds are municipal obligations that benefit a private or industrial user or finance a private facility. The Fund reserves the right to invest up to 100% of its assets in AMT bonds, although the Fund has no current intention of investing in such securities. B-15 As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal circumstances, produce income that is exempt from Virginia income taxes. VIRGINIA MUNICIPAL BOND FUND The Virginia Municipal Bond Fund seeks to provide high current income exempt from federal and Virginia income tax in a manner consistent with the preservation of capital by investing in municipal bonds of investment-grade quality. There are no limits on the dollar-weighted average portfolio maturity of the Fund, and the Fund may acquire individual securities without regard to their remaining maturities. The Fund is non-diversified, which means that it has greater latitude than a diversified fund with respect to the investment of its assets in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. As a fundamental policy, at least 80% of the Fund's income will, under normal circumstances, be exempt from regular federal income taxes. Interest on some "private activity" municipal obligations is subject to the federal AMT bonds. AMT bonds are municipal obligations that benefit a private or industrial user or finance a private facility. The Fund reserves the right to invest up to 100% of its assets in AMT bonds, although the Fund has no current intention of investing in such securities. As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal circumstances, produce income that is exempt from Virginia income taxes. MONEY MARKET FUNDS - ------------------ PRIME QUALITY MONEY MARKET FUND The Prime Quality Money Market Fund will invest in money market instruments denominated in U.S. dollars consisting of (i) U.S. Treasury obligation; (ii) custodial receipts representing interests in component parts of U.S. Treasury obligations; (iii) obligations issued or guaranteed as to principal and interest by agencies and instrumentalities of the U.S. Government; (iv) commercial paper issued by domestic and foreign issuers rated in the highest short-term rating category by one or more NRSROs or, if not rated, determined by the Fund's Adviser to be of comparable quality; (v) high quality obligations (including certificates of deposit, time deposits, bankers' acceptances, Eurodollar and Yankee bank obligations) of U.S. commercial banks (including foreign branches of such banks), and U.S. and London branches of foreign banks or savings and loan and thrift institutions that are members of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the Federal Savings and Loan Insurance Corporation; (vi) high quality short-term corporate obligations issued by companies with commercial paper meeting the ratings indicated in (iv), above, or, if not rated, determined by the Fund's Adviser to be of comparable quality; (vii) repurchase agreements involving such obligations; (viii) high quality obligations of supranational entities satisfying the credit ratings described in (iv), above, or, if not rated, determined by the Fund's Adviser to be of comparable quality; and (ix) medium term notes. The Fund may not invest more than 25% of its total assets in obligations issued by foreign branches of U.S. Banks and London branches of foreign banks. The Fund may purchase securities subject to standby commitments. As a money market fund, the Fund is subject to limitations on the percentage of its assets that may be invested in any one issuer and on the percentage that may be invested in securities carrying the second highest rating assigned by the requisite NRSROs. B-16 TAX-EXEMPT MONEY MARKET FUND The Tax-Exempt Money Market Fund intends to be fully invested in securities the interest on which is exempt from regular federal income taxes in the opinion of bond counsel to the issuer. It is a fundamental policy of the Tax-Exempt Money Market Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income taxes and not treated as a preference item for purposes of the alternative minimum tax. The Fund may invest in high quality, U.S. dollar denominated municipal securities of issuers located in all fifty states, the District of Columbia, Puerto Rico and other U.S. territories rated in one of the two highest short-term rating categories by S&P or Moody's or, if not rated, determined by the Fund's Adviser to be of comparable quality. The Fund will primarily purchase municipal bonds with a remaining maturity of 397 days or less, and will also acquire municipal notes and tax-exempt commercial paper with similar maturities. The Fund may agree to purchase short-term securities on a when-issued basis and may invest in securities subject to standby commitments. Securities purchased on a when-issued basis are subject to settlement within 45 days of the purchase date. The Fund's Adviser has discretion to invest up to 20% of the Fund's assets in U.S. dollar denominated obligations consisting of taxable money market instruments, obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities, repurchase agreements and securities subject to the alternative minimum tax. TAX-FREE MONEY MARKET FUND Tax-Free Money Market Fund invests only in high-quality municipal securities that have remaining maturities at the time of purchase of 397 days or less. Although the Fund will attempt to invest 100% of its assets in tax-exempt municipal securities, the interest on which is exempt from federal income tax, including the federal alternative minimum tax, the Fund reserves the right to invest up to 20% of the value of its net assets in securities, including private activity bonds, the interest on which is fully taxable or subject to the alternative minimum tax. As a fundamental policy, at least 80% of the Fund's income will, under normal circumstances, be exempt from federal income including the federal alternative minimum tax. The Tax-Free Money Market Fund will invest in municipal obligations whose interest payments are exempt from federal income tax. Municipal obligations, which are issued by states, cities, municipalities or municipal agencies, will include variable rate demand obligations ("VRDOs"), tax anticipation notes ("TANS"), revenue anticipation notes ("RANS"), bond anticipation notes ("BANS"), construction loan notes, and tax-exempt commercial paper. The Fund may also invest in municipal bonds within the maturity limitations discussed above and may enter into commitments to purchase these securities on a delayed-delivery basis. The Fund is non-diversified, which means that it has greater latitude than a diversified fund to invest in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. U.S. GOVERNMENT SECURITIES MONEY MARKET FUND The U.S. Government Securities Money Market Fund will invest exclusively in U.S. Treasury obligations, U.S. Government Subsidiary Corporation securities (e.g., GNMA Securities) and repurchase agreements with dealers selected pursuant to guidelines adopted by the Trust's Board of Trustees and collateralized by U.S. Treasury securities and U.S. Government Subsidiary Corporation securities. B-17 U.S. TREASURY MONEY MARKET FUND The U.S. Treasury Money Market Fund's investments are limited to obligations having a remaining maturity of 397 days or less that are issued by the U.S. Treasury and repurchase agreements that provide for repurchase within 397 days and that are collateralized by obligations issued or guaranteed by the U.S. Treasury. The investment policies of the Fund may result in a lower yield than that of other money market funds, such as the Prime Quality Money Market Fund, which may invest in other types of instruments. The U.S. Treasury Money Market Fund limits its investments so as to obtain the highest investment quality rating by an NRSRO. These quality ratings are based on, but not limited to, an analysis of the Fund's operational policies, investment strategies and management. These rating organizations also many undertake an ongoing analysis and assessment of these criteria in order to continually update the Fund's rating. LIFE VISION PORTFOLIOS - ---------------------- The Portfolios provide investors with the opportunity to pursue three distinct asset allocation strategies implemented through investments in shares of selected STI Classic Funds. By investing in the Portfolios, investors have the opportunity to diversify and allocate their assets among the broad range of funds in STI Classic Funds. The Adviser simplifies the diversification and asset allocation process by reviewing, analyzing, selecting, monitoring, reallocating and rebalancing each Portfolio's holdings of STI Classic Funds for investors. The assets of each Portfolio will be allocated among underlying STI Classic Funds in accordance with its investment objective, the Adviser's outlook for the economy, the financial markets and the relative market valuations of the underlying STI Classic Funds. Each Portfolio has the ability to invest its assets allocated to a particular asset class in one or more of the underlying STI Classic Funds, which have differing investment objectives, policies and risk characteristics. The risks associated with investing in a Portfolio will vary depending upon how the assets within its asset classes are allocated from time to time among the underlying STI Classic Funds. Although the Portfolios currently expect to invest in one or more of the underlying STI Classic Funds identified below, the Adviser has the discretion to change the particular STI Classic Funds used as underlying investments for the Portfolios. If the Adviser determines in the future that it is in a Portfolio's best interest, the Adviser may substitute or include other underlying STI Classic Funds, including STI Classic Funds that do not currently exist. STI PRIME QUALITY FUND STI SHORT-TERM BOND FUND STI INVESTMENT GRADE BOND FUND STI U.S. GOVERNMENT SECURITIES FUND STI CAPITAL APPRECIATION FUND STI SMALL CAP GROWTH STOCK FUND STI GROWTH AND INCOME FUND The investment objective of each Portfolio is set forth below. Each Portfolio's objective, the asset allocation percentage ranges described below, the list of underlying STI Classic Funds described above, and those policies identified as non-fundamental may be changed by the Company's Board of Directors without shareholder approval. A Portfolio's investment policies identified as fundamental may not be changed except by approval of the majority of the outstanding shares of that Portfolio. The Adviser will manage each Portfolio consistent with B-18 that Portfolio's investment objective and policies. There is no assurance that a Portfolio will achieve its investment objective. STI BALANCED PORTFOLIO The STI Balanced Portfolio seeks both capital appreciation and current income. Under normal market conditions, the Portfolio will invest primarily in shares of underlying STI Classic Funds that invest primarily in equity securities, but at least 25% of the Portfolio's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in fixed-income securities. The Portfolio's remaining assets may be invested in shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. Government, its agencies or instrumentalities, repurchase agreements and short-term paper. In general, relative to the other Portfolios, the STI Balanced Portfolio should offer investors a balanced level of income and capital appreciation, while subjecting investors to a lower level of principal risk. STI GROWTH AND INCOME PORTFOLIO The STI Growth and Income Portfolio seeks to provide long-term capital appreciation, with current income as a secondary objective. Under normal market conditions, at least 80% of the Portfolio's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in either equity securities that seek capital appreciation, or invest primarily in fixed-income securities that seek income. The Portfolio's remaining assets may be invested in shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. Government, its agencies or instrumentalities, repurchase agreements and short-term paper. In general, relative to the other Portfolios, the STI Growth and Income Portfolio should offer investors the potential for a medium to high level of capital growth and the potential for a medium level of income, while subjecting investors to a medium level of principal risk. STI MAXIMUM GROWTH PORTFOLIO The STI Maximum Growth Portfolio seeks to provide a high level of capital appreciation, without regard to current income. Under normal market conditions, at least 80% of the Portfolio's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in equity securities that seek capital appreciation. The Portfolio's remaining assets may be invested in shares of underlying STI Classic Funds that invest primarily in fixed-income securities, shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. Government, its agencies or instrumentalities, repurchase agreements and short-term paper. In general, relative to the other Portfolios, the STI Maximum Growth Portfolio should offer investors the potential for a high level of capital growth, and the potential for a lower level of current income, while subjecting investors to a medium to high level of principal risk. GENERAL INVESTMENT POLICIES OF THE PORTFOLIOS To achieve each Portfolio's investment objective, the Adviser will attempt to identify and select a diversified portfolio of underlying STI Classic Funds. In the selection process, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total return, volatility and expenses. Each Portfolio invests a percentage of its assets, within percentage ranges the Adviser believes appropriate, in select underlying B-19 STI Classic Funds, which are separately-managed series of the Company. The percentages will reflect the extent to which each Portfolio invests in the particular market segment represented by each underlying fund in STI Classic Funds, and the varying degrees of potential investment risk and reward represented by each Portfolio's investments in those corresponding underlying funds. These percentage ranges may change when it is appropriate in light of each Portfolio's investment objective. Each Portfolio may invest up to 100% of its assets in shares of the underlying STI Classic Funds. In addition, when the Adviser deems it appropriate, for temporary defensive purposes, each Portfolio may invest 100% of its assets directly in securities issued by the U.S. Government or its agencies or instrumentalities, repurchase agreements, short-term paper and shares of underlying STI Classic Funds that are money market funds (and shares of unaffiliated money market funds, as permitted by the SEC). To the extent that a Portfolio is engaged in temporary defensive investing, it will not be pursuing its investment objective. When the Adviser deems it appropriate, in order to meet liquidity needs, each Portfolio may invest its assets directly in securities issued by the U.S. Government or its agencies or instrumentalities, repurchase agreements, short-term paper and shares of underlying STI Classic Funds that are money market funds (and shares of unaffiliated money market funds, as permitted by the SEC). The following risk factors are associated with a Portfolio's investments in underlying STI Classic Funds: - - When the Portfolios invest in underlying STI Classic Funds, shareholders will be exposed to the risks associated with investing in those underlying STI Classic Funds. Those risks include risks associated with investing in foreign securities, asset-backed securities, delayed delivery transactions, ADRs, mortgage-backed securities, repurchase agreements and reverse repurchase agreements. - - The Portfolios and the underlying STI Classic Funds have the same officers, Trustees and often the same investment advisor, which may give rise to certain conflicts of interest. - - Each Portfolio's investment performance is substantially related to the investment performance of the underlying STI Classic Funds. - - Investing in the underlying STI Classic Funds involves certain additional expenses that would not be present in a direct investment in the underlying STI Classic Funds. When a Portfolio invests in underlying STI Classic Funds, shareholders bear not only the Portfolio's expenses, but also the expenses of the underlying STI Classic Funds. DESCRIPTION OF PERMITTED INVESTMENTS AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY RECEIPTS (EDRS) AND GLOBAL 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 B-20 deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. B-21 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. The market for asset-backed securities is at a relatively early stage of development. Accordingly, there may be a limited secondary market for such securities. BANKERS' ACCEPTANCES Bankers' acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used by corporations to finance the shipment and storage of goods. Maturities are generally six months or less. BANK OBLIGATIONS Bank obligations are short-term obligations issued by U.S. and foreign banks, including bankers' acceptances, certificates of deposit, custodial receipts, and time deposits. Eurodollar and Yankee Bank Obligations are U.S. dollar-denominated certificates of deposit or time deposits issued outside the U.S. by foreign branches of U.S. banks or by foreign banks. CERTIFICATES OF DEPOSIT Certificates of deposit are interest bearing instruments with a specific maturity. They are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market prior to maturity. Certificates of deposit with penalties for early withdrawal will be considered illiquid. B-22 COMMERCIAL PAPER Commercial paper is a term used to describe unsecured short-term promissory notes issued by banks, municipalities, corporations and other entities. Maturities on these issues vary from a few to 270 days. COMMON AND PREFERRED STOCKS Common and preferred stocks represent units of ownership in a corporation. Owners of common stock typically are entitled to vote on important matters. Owners of preferred stock ordinarily do not have voting rights, but are entitled to dividends at a specified rate. Preferred stock has a prior claim to common stockholders with respect to dividends. CONVERTIBLE SECURITIES Convertible securities are securities issued by corporations that are exchangeable for a set number of another security at a prestated price. The market value of a convertible security tends to move with the market value of the underlying stock. The value of a convertible security is also affected by prevailing interest rates, the credit quality of the issuer, and any call option provisions. CUSTODIAL RECEIPTS The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. Receipts include Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS"). TRs, TIGRs and CATS are sold as zero coupon securities. DEBT SECURITIES Debt securities represent money borrowed that obligates the issuer (E.G., a corporation, municipality, government, government agency) to repay the borrowed amount at maturity (when the obligation is due and payable) and usually to pay the holder interest at specific times (E.G., bonds, notes, debentures). DOLLAR ROLLS Dollar rolls are transactions in which securities are sold for delivery in the current month and the seller contracts to repurchase substantially similar securities on a specified future date. Any difference between the sale price and the purchase price (plus interest earned on the cash proceeds of the sale) is applied against the past interest income on the securities sold to arrive at an implied borrowing rate. Dollar rolls may be renewed prior to cash settlement and initially may involve only a firm commitment agreement by the Fund to buy a security. If the broker-dealer to whom 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, B-23 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 Economic and Monetary Union (EMU) implemented 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 that converted or tied their currencies to the Euro include Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland, Finland, Italy, Portugal, and Spain. Financial transactions and market information, including share quotations and company accounts, in participating countries are denominated in Euros, although the bank notes used by participating countries remain legal tender. Approximately 46% of the stock exchange capitalization of the total European market may now 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 Advisers 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. EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS Eurodollar bank obligations are U.S. dollar denominated certificates of deposit or time deposits issued outside the United States by foreign branches of U.S. banks or by foreign banks. Yankee dollar obligations are U.S. dollar denominated obligations issued in the United States by foreign banks. FOREIGN SECURITIES Foreign securities include equity securities of foreign entities, obligations of foreign branches of U.S. banks and of foreign banks, including, without limitation, European Certificates of Deposit, European Time Deposits, European Bankers' Acceptances, Canadian Time Deposits, Europaper and Yankee Certificates of Deposit, and investments in Canadian Commercial Paper and foreign securities. These instruments have investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. B-24 In making investment decisions for the Fund, the Adviser evaluates the risks associated with investing Fund assets in a particular country, including risks stemming from a country's financial infrastructure and settlement practices; the likelihood of expropriation, nationalization or confiscation of invested assets; prevailing or developing custodial practices in the country; the country's laws and regulations regarding the safekeeping, maintenance and recovery of invested assets, the likelihood of government-imposed exchange control restrictions which could impair the liquidity of Fund assets maintained with custodians in that country, as well as risks from political acts of foreign governments ("country risks"). Of course, the Adviser cannot assure that the Fund will not suffer losses resulting from investing in foreign countries. Holding Fund assets in foreign countries through specific foreign custodians presents additional risks, including but not limited to the risks that a particular foreign custodian or depository will not exercise proper care with respect to Fund assets or will not have the financial strength or adequate practices and procedures to properly safeguard Fund assets. 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 Emerging Markets, International Equity Index and International Equity Funds, when included in appropriate amounts in a portfolio otherwise consisting of domestic securities, may provide a source of increased diversification. The Emerging Markets Equity, International Equity Index and International Equity Funds seek increased diversification by combining securities from various countries and geographic areas that offer different investment opportunities and are affected by different economic trends. The international investments of the Emerging Markets, International Equity Index and International Equity Funds may reduce the effect that events in any one country or geographic area will have on its investment holdings. Of course, negative movement by a Fund's investments in one foreign market represented in its portfolio may offset potential gains from the Fund's investments in another country's markets. Emerging countries are all countries that are considered to be developing or emerging countries by the World Bank or the International Finance Corporation, as well as countries classified by the United Nations or otherwise regarded by the international financial community as developing. Currently, the countries excluded from this category are Ireland, Spain, New Zealand, Australia, the United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada, Germany, Denmark, the United States, Sweden, Finland, Norway, Japan, and Switzerland. FORWARD FOREIGN CURRENCY CONTRACTS Forward foreign currency contracts involve obligations to purchase or sell a specific currency amount at a future date, agreed upon by the parties, at a price set at the time of the contract. A Fund may also enter into a contract to sell, for a fixed amount of U.S. dollars or other appropriate currency, the amount of foreign currency approximating the value of some or all of the Fund's securities denominated in the foreign currency. A Fund may realize a gain or loss from currency transactions. B-25 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 Advisers 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 B-26 instrument and sold it after the decline. The risk of loss from the purchase of options is less as compared with the purchase or sale of futures contracts because the maximum amount at risk is the premium paid for the option. Utilization of futures transactions by the Funds does involve the risk of imperfect or no correlation where the securities underlying futures contracts have different maturities than the fund securities being hedged. It is also possible that the Funds could both lose money on futures contracts and experience a decline in value of its fund securities. There is also the risk of loss by the Funds of margin deposits in the event of the bankruptcy of a broker with whom the Funds have an open position in a futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. GICS A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. Generally, GICs are not assignable or transferable without the permission of the issuing insurance company. For this reason, an active secondary market in GICs does not currently exist and GICs are considered to be illiquid investments. HIGH YIELD SECURITIES High yield securities, commonly referred to as junk bonds, are debt obligations rated below investment grade, I.E., below BBB by S&P or Baa by Moody's, or their unrated equivalents. The risks associated with investing in high yield securities include: (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 B-27 Hedging in an investment strategy designed to offset investment risks. Hedging activities include, among other things, the use of options and futures. There are risks associated with hedging activities, including: (1) the success of a hedging strategy may depend on an ability to predict movements in the prices of individual securities, fluctuations in markets, and movements in interest rates; (2) there may be an imperfect or no correlation between the changes in market value of the securities held by a Fund and the prices of futures and option on futures; (3) there may not be a liquid secondary market for a futures contract or option; and (4) trading restrictions or limitations may be imposed by an exchange, and government regulations may restrict trading in futures contracts and options. ILLIQUID SECURITIES Illiquid securities are securities that cannot be disposed of within seven days at approximately the price at which they are being carried on a Fund's books. INVESTMENT COMPANY SHARES The Funds may purchase shares of other mutual funds to the extent consistent with applicable law. Investment companies typically incur fees that are separate from those fees incurred directly by the Funds. A Fund's purchase of such investment company securities results in the layering of expenses, such that you would indirectly bear a proportionate share of investment company operating expenses, such as advisory fees. INVESTMENT GRADE OBLIGATIONS Investment grade obligations are debt obligations rated BBB by S&P or Baa by Moody's, or their unrated equivalents. These securities are deemed to have speculative characteristics. LOAN PARTICIPATIONS Loan participations are interest in loans to U.S. corporations which are administered by the lending bank or agent for a syndicate of lending banks. In a loan participation, the borrower corporation is the issuer of the participation interest except to the extent the Fund derives its rights from the intermediary bank. Because the intermediary bank does not guarantee a loan participation, a loan participation is subject to the credit risks associated with the underlying corporate borrower. In the event of bankruptcy or insolvency of the corporate borrower, a loan participation may be subject to certain defenses that can be asserted by the borrower as a result of improper conduct by the intermediary bank. In addition, in the event the underlying corporate borrower fails to pay principal and interest when due, the Fund may be subject to delays, expenses, and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the borrower. Under the terms of a Loan Participation, the Fund may be regarded as a creditor of the intermediary bank (rather than of the underlying corporate borrower), so that the Fund may also be subject to the risk that the intermediary bank may become insolvent. The secondary market for loan participations is limited and any such participation purchased by the Fund may be regarded as illiquid. MORTGAGE-BACKED SECURITIES B-28 Mortgage-backed securities are instruments that entitle the holder to a share of all interest and principal payments from mortgages underlying the security. The mortgages backing these securities include conventional thirty-year fixed rate mortgages, graduated payment mortgages, adjustable rate mortgages, and floating mortgages. GOVERNMENT PASS-THROUGH SECURITIES These are securities that are issued or guaranteed by a U.S. Government agency representing an interest in a pool of mortgage loans. The primary issuers or guarantors of these mortgage-backed securities are the Government National Mortgage Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC obligations are not backed by the full faith and credit of the U.S. Government as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions of interest to certificate holders. GNMA and Fannie Mae also guarantee timely distributions of scheduled principal. In the past, FHLMC has only guaranteed the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely payment of monthly principal reductions. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. 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, B-29 private pass-through securities generally lack a guarantee by an entity having the credit status of a governmental agency or instrumentality. The two principal types of private mortgage-backed securities are collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOS CMOs are securities collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of the issuers payable out of the issuers' general funds and additionally secured by a first lien on a pool of single family detached properties). CMOs are rated in one of the two highest categories by S&P or Moody's. Many CMOs are issued with a number of classes or series which have different expected maturities. Investors purchasing such CMOs are credited with their portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled prepayments of principal based on a predetermined priority schedule. Accordingly, the CMOs in the longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and some CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies or instrumentalities, the CMOs themselves are not generally guaranteed. REMICS REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities and are rated in one of the two highest categories by S&P or Moody's. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest. GNMA REMIC Certificates are backed by the full faith and credit of the U.S. Government. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are securities that are created when a U.S. Government agency or a financial institution separates the interest and principal components of a mortgage-backed security and sells them as individual securities. The holder of the "principal-only" security (PO) receives the Principal payments made by the underlying mortgage-backed security, while the holder of the "interest-only" security (IO) receives interest payments from the same underlying security. The prices of stripped mortgage-backed securities may be particularly affected by changes in interest rates. As interest rates fall, prepayment rates tend to increase, which tends to reduce prices of IOs and increase prices of POs. Rising interest rates can have the opposite effect. B-30 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 Advisers 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 Adviser. An average life estimate is a function of an assumption regarding anticipated prepayment patterns. The assumption is based upon current interest rates, current conditions in the relevant housing markets and other factors. The assumption is necessarily subjective, and thus different market participants could produce somewhat different average life estimates with regard to the same security. There can be no assurance that the average life as estimated by an Adviser will be the actual average life. MUNICIPAL FORWARDS Municipal forwards are forward commitments for the purchase of tax-exempt bonds with a specified coupon to be delivered by an issuer at a future date, typically exceeding 45 days but normally less than one year after the commitment date. Municipal forwards are normally used as a refunding mechanism for bonds that may only be redeemed on a designated future date (see "When-Issued Securities and Municipal Forwards" for more information). MUNICIPAL LEASE OBLIGATIONS Municipal lease obligations are securities issued by state and local governments and authorities to finance the acquisition of equipment and facilities. They make take the form of a lease, an installment purchase contract, an conditional sales contract, or a participation interest in any of the above. MUNICIPAL SECURITIES MUNICIPAL BONDS include general obligation bonds, revenue or special obligation bonds, private activity and industrial development bonds and participation interests in municipal bonds. General obligation bonds are backed by the taxing power of the issuing municipality. Revenue bonds are backed by the revenues of a project or facility (for example, tolls from a bridge). Certificates of participation represent an interest in an underlying obligation or commitment, such as an obligation issued in connection with a leasing arrangement. The payment of principal and interest on private activity and industrial development bonds generally is totally dependent on the ability of a facility's user to meet its financial obligations and the pledge, if any, of real and personal property as security for the payment. MUNICIPAL NOTES consist of general obligation notes, tax anticipation notes (notes sold to finance working capital needs of the issuer in anticipation of receiving taxes on a future date), revenue anticipation notes (notes sold to provide needed cash prior to receipt of expected non-tax revenues from a specific source), bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes. A Fund's investments in any of the notes described above will be limited to those obligations (i) where both principal and interest are backed by the full faith and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 at the time of investment by Moody's, (iii) which are rated SP-2 at the time B-31 of investment by S&P, or (iv) which, if not rated by S&P or Moody's, are in the Adviser'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 Adviser to have essentially the same characteristics and quality as bonds having the above ratings. A Fund may purchase industrial development and pollution control bonds if the interest paid is exempt from Federal income tax. These bonds are issued by or on behalf of public authorities to raise money to finance various privately-operated facilities for business and manufacturing, housing, sports and pollution control. These bonds are also used to finance public facilities such as airports, mass transit systems, ports and parking. The payment of the principal and interest on such bonds is dependent solely on the ability of the facility's user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. OTHER TYPES OF TAX-EXEMPT INSTRUMENTS which are permissible investments include floating rate notes. Investments in such floating rate instruments will normally involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate (such as the prime rate) at a major commercial bank, and that the Fund can demand payment of the obligation at all times or at stipulated dates on short notice (not to exceed 30 days) at par plus accrued interest. Such obligations are frequently secured by letters of credit or other credit support arrangements provided by banks. The quality of the underlying credit or of the bank, as the case may be, must, in the Adviser's opinion be equivalent to the long-term bond or commercial paper ratings stated above. The Adviser will monitor the earning power, cash flow and liquidity ratios of the issuers of such instruments and the ability of an issuer of a demand instrument to pay principal and interest on demand. The Funds may also purchase participation interests in municipal securities (such as industrial development bonds and municipal lease/purchase agreements). A participation interest gives a Fund an undivided interest in the underlying municipal security. If it is unrated, the participation interest will be backed by an irrevocable letter of credit or guarantee of a credit-worthy financial institution or the payment obligations otherwise will be collateralized by U.S. Government securities. Participation interests may have fixed, variable or floating rates of interest and may include a demand feature. A participation interest without a demand feature or with a demand feature exceeding seven days may be deemed to be an illiquid security subject to the 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 Adviser will review the proceedings relating to the issuance of municipal securities or the basis for such opinions. OPTIONS A Fund may write call options on a covered basis only, and will not engage in option writing strategies for speculative purposes. A call option gives the purchaser of such option the right to buy, and the writer, in this case the Fund, the obligation to sell the underlying security at the exercise price during the option period. The B-32 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 Advisers. B-33 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 Advisers 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. RESOURCE RECOVERY BONDS The Tax-Free Money Market Fund and the municipal bond funds may purchase resource recovery bonds, which are a type of revenue bond issued to build facilities such as solid waste incinerators or waste-to-energy plants. Typically, a private corporation will be involved, at least during the construction phase, and the revenue stream will be secured by fees or rents paid by municipalities for use of the facilities. The viability of a resource recovery project, environmental protection regulations, and project operator tax incentives may affect the value and credit quality of resource recovery bonds. RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS Investments by a money market fund are subject to limitations imposed under regulations adopted by the SEC. Under these regulations, money market funds may acquire only obligations that present minimal credit risk and that are "eligible securities," which means they are (i) rated, at the time of investment, by at least two NRSROs (one if it is the only organization rating such obligation) in the highest rating category or, if unrated, determined to be of comparable quality (a "first tier security"), or (ii) rated according to the foregoing criteria in the second highest rating category or, if unrated, determined to be of comparable quality ("second tier security"). In the case of taxable money market funds, investments in second tier securities are subject to further constraints in that (i) no more than 5% of a money market fund's assets may be invested in second tier securities and (ii) any B-34 investment in securities of any one such issuer is limited to the greater of 1% of the money market fund's total assets or $1 million. A taxable money market fund may not purchase securities of any issuer (except securities issued or guaranteed by the U.S. Government, its agencies of instrumentalities) if, as a result, more than 5% of the total assets of the Fund would be invested the securities of one issuer. A taxable money market fund may also hold more than 5% of its assets in first tier securities of a single issuer for three "business days" (that is, any day other than a Saturday, Sunday or customary business holiday). RESTRICTED SECURITIES Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") or an exemption from registration. 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 Adviser pursuant to guidelines adopted by the Board of Trustees. Under these guidelines, the particular Adviser will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such Restricted Securities, each Adviser intends to purchase securities that are exempt from registration under Rule 144A under the 1933 Act. SECURITIES LENDING Each Fund may lend securities pursuant to agreements which require that the loans be continuously secured by collateral at all times equal to 100% of the market value of the loaned securities which consists of: cash, securities of the U.S. Government or its agencies, or any combination of cash and such securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of the Fund's total assets taken at fair market value. A Fund will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. Government securities. However, a Fund will normally pay lending fees to such broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the appropriate Adviser to be of good standing and when, in the judgment of that Adviser, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. The Funds may use the Distributor or a broker-dealer affiliate of an Adviser as a broker in these transactions. SHORT-TERM OBLIGATIONS Short-term obligations are debt obligations maturing (becoming payable) in 397 days or less, including commercial paper and short-term corporate obligations. Short-term corporate obligations are short-term obligations issued by corporations. B-35 STANDBY COMMITMENTS AND PUTS The Funds may purchase securities at a price which would result in a yield to maturity lower than that generally offered by the seller at the time of purchase when they can simultaneously acquire the right to sell the securities back to the seller, the issuer or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Funds to meet redemptions and remain as fully invested as possible in municipal securities. The Funds reserve the right to engage in put transactions. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. A Fund would limit its put transactions to institutions which the Adviser believes present minimal credit risks, and the Adviser would use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, a Fund would be a general creditor (I.E., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Fund and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Fund could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Fund. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Fund may purchase subject to a standby commitment or put, but the amount paid directly or indirectly for all standby commitments or puts which are not integral parts of the security as originally issued held in the Fund will not exceed 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 Adviser 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' Adviser will only purchase STRIPS for Money Market Funds that have a remaining maturity of 397 days or less; therefore, the Money Market Funds currently may only purchase interest component parts of U.S. Treasury securities. While there is no limitation on the percentage of a Fund's assets that may be comprised of STRIPS, the Money Market Funds' Adviser will monitor the level of such holdings to avoid the risk of impairing shareholders' redemption rights and of deviations in the value of shares of the Money Market Funds. SUPRANATIONAL AGENCY OBLIGATIONS B-36 Supranational agency obligations are obligations of supranational entities established through the joint participation of several governments, including the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (also known as the "World Bank"), African Development Bank, European Economic Community, European Investment Bank, and the Nordic Investment Bank. SWAPS, CAPS, FLOORS, COLLARS Swaps, caps, floors and collars are hedging tools designed to permit the purchaser to preserve a return or spread on a particular investment or portion of its portfolio. They are also used to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. In a typical interest rate swap, one party agrees to make regular payments equal to a floating interest rate times a "notional principal amount." This is done in return for payments equal to a fixed rate times the same amount, for a specific period of time. If a swap agreement provides for payment in different currencies, the parties might agree to exchange the notional principal amount as well. Swaps may also depend on other prices or rates, such as the value of an index or mortgage prepayment rates. In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances. This is usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specific interest rate exceeds an agreed-upon level. Meanwhile, the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. An interest rate collar combines elements of buying a cap and selling a floor. Swap agreements are subject to risks related to the counterparty's ability to perform, and may decline in value if the counterparty's creditworthiness deteriorates. The Fund may also suffer losses if it is unable to terminate outstanding swap agreements or reduce its exposure through offsetting transactions. Any obligation the Fund may have under these types of arrangements will be covered by setting aside liquid high-grade securities in a segregated account. The Fund will enter into swaps only with counterparties believed to be creditworthy. U.S. GOVERNMENT AGENCY OBLIGATIONS U.S. Government agency obligations are obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government. Agencies of the United States Government which issue obligations consist of, among others, the Export Import Bank of the United States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing Administration, Government National Mortgage Association ("GNMA"), Maritime Administration, Small Business Administration and The Tennessee Valley Authority. Obligations of instrumentalities of the United States Government include securities issued by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae and the United States Postal Service as well as government trust certificates. Some of these securities are supported by the full faith and credit of the United States Treasury, others are supported by the right of the issuer to borrow from the Treasury and still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. Government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing the value of the obligation prior to maturity. U.S. TREASURY OBLIGATIONS B-37 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 Adviser, be equivalent to the ratings applicable to permitted investments for the particular Fund. The appropriate Advisor will monitor on an ongoing basis the earning power, cash flow and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. Variable rate master demand notes may or may not be backed by bank letters of credit. WARRANTS Warrants give holders the right, but not the obligation, to buy shares of a company at a given price, usually higher than the market price, during a specified period. WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS When-issued securities are securities that are delivered and paid for normally within 45 days after the date of commitment to purchase. Municipal forwards call for delivery of the underlying municipal security normally after 45 days but before one year after the commitment date. Although a Fund will only make commitments to purchase when-issued securities and municipal forwards with the intention of actually acquiring the securities, a Fund may sell them before the settlement date. When-issued securities are subject to market fluctuation, and accrue no interest to the purchaser during this pre-settlement period. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing municipal forwards and when-issued securities entails leveraging and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself. In that case, there could be an unrealized loss at the time of delivery. B-38 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. The phrase "principally invests" as used in the prospectus means that the Fund invests at least 65% of its assets in the securities as described in the sentence. Each tax-exempt fund invests at least 80% of its total assets in securities with income exempt from federal income and alternative minimum taxes. INVESTMENT 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. ALL FUNDS (EXCEPT THE LIFE VISION PORTFOLIOS) 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, Emerging Markets Equity Fund, International Equity Fund, International Equity B-39 Index Fund, Limited-Term Federal Mortgage Securities Fund, U.S. Government Securities Fund, Small Cap Equity Fund and Value Income Stock Fund, and 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, and Small Cap Equity Funds' purchases of investment company shares are not limited to money market funds. Under these rules and regulations, a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund owns more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the total assets of a Fund; or securities (other than treasury stock) issued by all investment companies represent more than 10% of the total assets of the Fund. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. 11. Purchase securities of any issuer (except securities issued or guaranteed by the United States, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result more than 5% of the total assets of a Fund would be invested in the securities of such issuer; provided, however, that a Fund may invest up to 25% of its total assets without regard to this restriction as permitted by applicable law. 12. Purchase any securities which would cause more than 25% of the total assets of a Fund to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to investments in obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities, repurchase agreements involving such securities or tax-exempt securities issued by governments or political subdivisions of governments and, with respect B-40 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. LIFE VISION PORTFOLIOS A Portfolio may not: 1. Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities or securities issued by investment companies) if, as a result, more than 5% of the total assets of a Portfolio would be invested in the securities of such issuer; provided, however, that a Portfolio may invest more than 25% of its assets without regard to this restrictions permitted by applicable law. 2. Borrow money, except that a Portfolio (a) may borrow money for temporary or emergency purposes in an amount not exceeding 5% of the Portfolio's total assets determined at the time of the borrowing and (b) may borrow money from banks or by engaging in reverse repurchase agreements. Asset coverage of at least 300% is required for all borrowings, except where a Portfolio has borrowed money for temporary purposes in amounts not exceeding 5% of its total assets; 3. Underwrite securities issued by others, except to the extent that the Portfolio may be considered an underwriter within the meaning of the Securities Act of 1933 (the "Securities Act") in the disposition of restricted securities; 4. Issue senior securities (as defined in the 1940 Act), except as permitted by rule, regulation or order of the Securities and Exchange Commission (the "SEC"); 5. Purchase the securities of any issuer (other than securities issuued or guaranteed by the U.S. Government or any of its agencies or instrumentalities or securities issued by investment companies) if, as a result, more than 25% of the Portfolio's total assets would be invested in the securities of companies whose principal business activities are in the same industry. In addition, each Portfolio may not invest more than 25% of its assets in underlying STI Classic Funds that, as a matter of policy, concentrate their assets in any one industry. However, a Portfolio may indirectly invest more than 25% of its total assets in one industry through its investments in the underlying STI Classic Funds. Each Portfolio may invest up to 100% of its assets in securities issued by investment companies; 6. Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Portfolio from investing in securities or other instruments either issued by companies that invest in real estate, backed by real estate or securities of companies engaged in the real estate business); 7. Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments; and B-41 8. Lend any security or make any other loan, except as permitted by the 1940 Act. NON-FUNDAMENTAL POLICIES No Fund may purchase or hold illiquid securities (I.E., securities that cannot be disposed of for their approximate carrying value in seven days or less (which term includes repurchase agreements and time deposits maturing in more than seven days) if, in the aggregate, more than 15% of its net assets (10% for the Prime Quality Money Market, U.S. Government Securities Money Market, U.S. Treasury Money Market Fund, and Tax-Exempt Money Market Funds) would be invested in illiquid securities. Each Portfolio does not currently intend to purchase securities on margin, except that a Portfolio may obtain such short-term credits as are necessary for the clearance of transactions. Each Portfolio does not currently intend to sell securities short. Each Portfolio does not currently intend to purchase or sell futures contracts or put or call options. Each Portfolio may not invest in shares of unaffiliated money market funds, except as permitted by the SEC. With the exception of the limitations on liquidity standards, the foregoing percentages will apply at the time of the purchase of a security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. INVESTMENT ADVISERS The Trust and STI Capital Management, N.A., Trusco Capital Management, Inc., and SunTrust Bank, Atlanta (the "Advisers") have entered into advisory agreements with the Trust (the "Advisory Agreements"). The Advisers are indirect wholly-owned subsidiaries of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a southeastern regional bank holding company with assets of $90.7 billion as of July 1, 1999. The Advisory Agreements provide that each Adviser shall not be protected against any liability to the Trust or its Shareholders by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. Each Advisory Agreement provides that if, for any fiscal year, the ratio of expenses of any Fund (including amounts payable to an Adviser but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by certain states, the Adviser and/or the Administrator will bear the amount of such excess. The Adviser will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of 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 B-42 majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Adviser, or by the Adviser on 90 days' written notice to the Trust. For its advisory services, STI Capital Management is entitled to a fee, which is calculated daily and paid monthly, at the annual rate of: .95% of the average daily net assets of the Balanced Fund, 1.15% of the average daily net assets of the Capital Appreciation Fund and Small Cap Equity Fund, 1.30% of the average daily net assets of the Emerging Markets Equity Fund, .65% of the average daily net assets of the Florida Tax-Exempt Bond Fund and Limited-Term Federal Mortgage Securities Fund, 1.25% of the average daily net assets of the International Equity Fund, .74% of the average daily net assets of the Investment Grade Bond Fund and Investment Grade Tax-Exempt Bond Fund, and .80% of the average daily net assets of the Value Income Stock Fund. For its advisory services, SunTrust Bank, Atlanta is entitled to a fee, which is calculated daily and paid monthly, at the annual rate of: .65% of the average daily net assets of the Georgia Tax-Exempt Bond Fund. For its advisory services, Trusco Capital Management is entitled to a fee, which is calculated daily and paid monthly, at the annual rate of: 1.10% of the average daily net assets of the Core Equity Fund and E-Commerce Opportunity Fund, 1.30% of the average daily net assets of the Emerging Markets Equity Fund, .90% of the average daily net assets of the Growth and Income Fund and International Equity Index Fund, .65% of the average daily net assets of the Maryland Municipal Bond Fund, Prime Quality Money Market Fund, Short-Term Bond Fund, Short Term U.S. Treasury Securities Fund, U.S. Government Securities Money Market Fund, U.S. Treasury Money Market Fund, Virginia Intermediate Bond Fund, and Virginia Municipal Bond Fund, 1.15% of the average daily net assets of the Small Cap Growth Stock Fund, Sunbelt Equity Fund, and Tax Sensitive Growth Stock Fund, .55% of the average daily net assets of the Tax-Exempt Money Market Fund, .40% of the average daily net assets of the Tax-Free Money Market Fund, .74% of the average daily net assets of the U.S. Government Securities Fund, .25% of the average daily net assets of the Life Vision Balanced Portfolio, Life Vision Growth and Income Portfolio and Life Vision Maximum Growth Portfolio. For the fiscal years ended May 31, 1999, 1998, and 1997, the Funds paid the following advisory fees:
- ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR REIMBURSED ------------------------------------------------------------------------------------ FUND 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------- Balanced Fund $ 2,545,612 $ 1,561,250 $ 1,025,089 $ 248,175 $ 225,921 $ 151,557 - ---------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund $23,290,783 $17,607,676 $12,775,800 $ 1,878,163 $ 1,818,241 $ 1,227,247 - ---------------------------------------------------------------------------------------------------------------- Core Equity Fund * * * * * * - ---------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity * * * * * * Fund - ---------------------------------------------------------------------------------------------------------------- Emerging Markets Equity $ 353,884 $ 532,879 $ 84,210 $ 11,313 $ 90,361 $ 52,769 Fund - ---------------------------------------------------------------------------------------------------------------- Growth and Income Fund+ $ 2,557,502 $ 4,336,987 $ 2,617,223 $ 0 $ 0 $ 0 - ---------------------------------------------------------------------------------------------------------------- International Equity Fund $ 7,655,210 $ 7,200,723 $ 4,336,172 $ 308,111 $ 69,504 $ 157,567 - ----------------------------------------------------------------------------------------------------------------
B-43
- ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR REIMBURSED ------------------------------------------------------------------------------------ FUND 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------- International Equity Index $ 563,401 $ 542,649 $ 578,197 $ 69,541 $ 76,513 $ 80,147 Fund - ---------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund $ 3,717,216 $ 3,846,835 $ 3,008,690 $ 354,916 $ 422,281 $ 318,871 - ---------------------------------------------------------------------------------------------------------------- Small Cap Equity Fund $ 3,701,484 $ 3,249,839 $ 273,710 $ 161,431 $ 329,047 $ 48,251 - ---------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock $ 314,194 * * $ 78,750 * * Fund - ---------------------------------------------------------------------------------------------------------------- Sunbelt Equity Fund $ 3,788,317 $ 4,772,466 $ 4,399,351 $ 417,491 $ 515,457 $ 42,535 - ---------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth $ 1,007,528 * * $ 123,598 * * Stock Fund - ---------------------------------------------------------------------------------------------------------------- Value Income Stock Fund $15,302,049 $15,826,018 $12,025,425 $ 0 $ 0 $ 392 - ---------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond $ 803,898 $ 419,460 $ 220,701 $ 133,397 $ 120,797 $ 72,605 Fund - ---------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt $ 575,142 $ 300,318 $ 181,715 $ 95,940 $ 93,650 $ 63,837 Bond Fund - ---------------------------------------------------------------------------------------------------------------- Investment Grade Bond $ 6,499,072 $ 4,883,197 $ 4,147,888 $ 742,556 $ 794,236 $ 644,859 Fund - ---------------------------------------------------------------------------------------------------------------- Investment Grade Tax- $ 1,381,082 $ 1,118,840 $ 1,081,635 $ 191,430 $ 208,488 $ 190,250 Exempt Bond Fund - ---------------------------------------------------------------------------------------------------------------- Limited-Term Federal $ 955,171 $ 739,677 $ 540,017 $ 153,180 $ 158,869 $ 150,604 Mortgage Securities Fund - ---------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond $ 84,391 $ 50,300 $ 18,497 $ 48,919 $ 61,300 $ 15,422 Fund+ - ---------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund $ 889,938 $ 554,291 $ 485,613 $ 139,499 $ 164,522 $ 138,732 - ---------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury $ 352,070 $ 150,659 $ 83,694 $ 61,000 $ 77,862 $ 72,064 Securities Fund - ---------------------------------------------------------------------------------------------------------------- U.S. Government $ 380,132 $ 187,053 $ 91,748 $ 57,540 $ 54,354 $ 58,637 Securities Fund - ---------------------------------------------------------------------------------------------------------------- Virginia Intermediate $ 641,310 $ 1,248,000 $ 430,612 $ 0 $ 0 $ 0 Municipal Bond Fund+ - ---------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond $ 109,885 $ 167,000 $ 72,398 $ 19,517 $ 28,000 $ 12,074 Fund+ - ---------------------------------------------------------------------------------------------------------------- Prime Quality Money $17,530,383 $ 9,510,944 $ 7,586,108 $ 4,355,704 $ 2,699,560 $ 2,181,008 Market Fund - ----------------------------------------------------------------------------------------------------------------
B-44
- ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR REIMBURSED ------------------------------------------------------------------------------------ FUND 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------- Tax-Exempt Money $ 4,121,914 $ 2,218 $ 1,687,976 $ 1,057,349 $ 881,994 $ 673,486 Market Fund - ---------------------------------------------------------------------------------------------------------------- Tax-Free Money Market $ 606,611 $ 963,325 $ 732,401 $ 2,867 $ 0 $ 0 Fund+ - ---------------------------------------------------------------------------------------------------------------- U.S. Government $ 2,991,771 $ 1,983,590 $ 1,935,898 $ 607,412 $ 580,236 $ 518,656 Securities Money Market Fund - ---------------------------------------------------------------------------------------------------------------- U.S. Treasury Money $ 1,485,679 $ 2,412 $ 732,401 $ 20,972 $ 0 $ 0 Market Fund+ - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
*Not in operation during the period. + Prior to May 24, 1999, advisory fees were paid by the predecessor to this fund pursuant to an agreement between the CrestFunds and the Adviser for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. Crestar Asset Management Company served as the Adviser to the predecessors of the Life Vision Balanced, Life Vision Growth and Income, and Life Vision Maximum Growth Portfolios. For the fiscal years ended May 31, the Portfolios paid the following advisory fees:
- -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR REIMBURSED ------------------------------------------------------------------------- FUND 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------- Life Vision Balanced Portfolio+ $114,314 $233,180 $ 93,141 $ 54,595 $119,987 $ 48,499 - -------------------------------------------------------------------------------------------------------------- Life Vision Growth and $ 25,358 $ 53,342 $ 22,542 $ 15,141 $ 32,109 $ 13,685 Income Portfolio+ - -------------------------------------------------------------------------------------------------------------- Life Vision Maximum Growth $ 21,986 $ 39,508 $ 13,269 $ 13,352 $ 25,574 $ 9,042 Portfolio+ - --------------------------------------------------------------------------------------------------------------
+ Prior to May 24, 1999, advisory fees were paid by the predecessor to this fund pursuant to an agreement between The CrestFunds and the Adviser for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. Each Adviser has agreed to waive its fees or reimburse expenses in order to limit Fund expenses. BANKING LAWS Current interpretations of federal banking laws and regulations: B-45 - - prohibit SunTrust and the Advisers from sponsoring, organizing, controlling, or distributing the Funds' shares; but - - do not prohibit SunTrust or the Advisers generally from acting as an investment Adviser, transfer agent, or custodian to the Funds or from purchasing Fund shares as agent for and upon the order of a customer. The Advisers 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 Advisers 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 Advisers, 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 Advisers, or their affiliates, might offer to provide additional services. THE ADMINISTRATOR The Trust and SEI Investments Mutual Funds Services (the "Administrator") are parties to the Administration Agreement. The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administration Agreement shall remain in effect for a period of five years after the date of the Agreement and shall continue in effect for successive periods of two years subject to review at least annually by the Trustees of the Trust unless terminated by either party on not less than ninety days' written notice to the other party. The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all beneficial interest in the Administrator. SEI Investments and its subsidiaries and affiliates, including the Administrator, are leading providers of funds evaluation services, trust accounting systems, and brokerage and information services to financial institutions, institutional investors, and money managers. The Administrator and its affiliates also serve as administrator or sub-administrator to the following other mutual funds: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds(-Registered Trademark-), CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Advantage Fund, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional International Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds and UAM Funds, Inc. II. For its administrative services, the Administrator is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of: .12% of the first $1 billion of average aggregate net assets, .09% on the next $4 billion of average aggregate net assets, .07% of the next $3 billion of average aggregate net assets, .065% of the next $2 billion of average aggregate net assets, and .06% thereafter. B-46 For the fiscal years ended May 31, 1999, 1998, and 1997, the Funds paid the following administration fees:
- --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED ------------------------------------------------------------------------------------- FUND 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Balanced Fund $ 208,163 $ 136,092 $ 83,063 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund $1,575,430 $1,218,000 $ 817,905 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Core Equity Fund * * * * * * - --------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Fund * * * * * * - --------------------------------------------------------------------------------------------------------------------------- Emerging Markets Equity Fund $ 21,195 $ 29,039 $ 6,932 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund + $ 493,155 $ 950,402 $ 523,466 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- International Equity Fund $ 476,693 $ 415,520 $ 240,114 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- International Equity Index Fund $ 48,702 $ 43,285 $ 48,464 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund $ 253,448 $ 266,851 $ 194,430 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Small Cap Equity Fund $ 250,735 $ 229,578 $ 18,406 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Fund $ 20,515 * * $ 0 * * - --------------------------------------------------------------------------------------------------------------------------- Sunbelt Equity Fund $ 258,093 $ 329,793 $ 283,101 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock $ 66,610 * * $ 0 * * Fund - --------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund $1,497,697 $1,427,644 $1,009,167 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund $ 96,215 $ 60,551 $ 30,279 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund $ 68,828 $ 44,095 $ 25,353 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 683,010 $ 549,688 $ 435,278 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt $ 146,363 $ 128,433 $ 115,500 $ 0 $ 0 $ 0 Bond Fund - --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage $ 114,528 $ 99,420 $ 71,264 $ 0 $ 0 $ 0 Securities Fund - --------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond $ 32,996 $ 26,561 $ 4,627 $ 0 $ 0 $ 4,627 Fund+ - --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund $ 106,351 $ 80,065 $ 64,664 $ 0 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury $ 42,157 $ 25,973 $ 16,075 $ 0 $ 0 $ 0 Securities Fund - --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities $ 39,700 $ 23,704 $ 13,641 $ 0 $ 0 $ 0 Fund - ---------------------------------------------------------------------------------------------------------------------------
B-47
- --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED ------------------------------------------------------------------------------------- FUND 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate $ 185,163 $ 375,000 $ 138,184 $ 0 $ 384 $ 0 Municipal Bond Fund + - --------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Fund + $ 27,344 $ 46,181 $ 18,111 $ 19,949 $ 36,381 $ 18,111 - --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money Market $2,092,485 $ 784,975 $ 661,962 $ 249,822 $ 570,531 $ 347,518 Fund - --------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market $ 583,271 $ 398,493 $ 288,647 $ 0 $ 9,560 $ 0 Fund - --------------------------------------------------------------------------------------------------------------------------- Tax-Free Money Market Fund + $ 222,145 $ 366,000 $ 275,026 $ 0 $ 65 $ 0 - --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities $ 358,833 $ 236,106 $ 212,454 $ 2,621 $ 46,908 $ 41,257 Money Market Fund - --------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Money Market $ 549,645 $ 927,282 $ 592,194 $ 0 $ 0 $ 0 Fund + - --------------------------------------------------------------------------------------------------------------------------- Life Vision Balanced Portfolio + $ 19,970 $ 13,337 - --------------------------------------------------------------------------------------------------------------------------- Life Vision Growth and Income $ 20,120 $ 18,179 Portfolio + - --------------------------------------------------------------------------------------------------------------------------- Life Vision Maximum Growth $ 20,472 $ 19,058 Portfolio + - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
* Not in operation during the period. + Prior to May 24, 1999, administrator fees were paid by the predecessor to this fund pursuant to an agreement between the CrestFunds and the Administrator for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. 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-48 For the fiscal years ended May 31, 1999, 1998, and 1997, 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 ------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- Balanced Fund $ 32,800 $ 48,373 $ 13,525 $ 7,780 $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund $1,916,000 $ 560,435 $ 264,747 $ 127,525 $ 312 $ 958 - --------------------------------------------------------------------------------------------------------------------------------- Core Equity Fund * * * * * * - --------------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Fund * * * * * * - --------------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund + $ 26,000 $ 50,000 $ 323,215 $ 16,000 $ 50,000 $ 28,268 - --------------------------------------------------------------------------------------------------------------------------------- International Equity Fund $ 51,756 $ 93,755 $ 0 $ 16,007 $ 16 $ 0 - --------------------------------------------------------------------------------------------------------------------------------- International Equity Index Fund $ 22,720 $ 5,285 $ 0 $ 51,229 $ 16 $ 0 - --------------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund $ 90,377 $ 93,073 $ 31,167 $ 6,975 $ 26 $ 61 - --------------------------------------------------------------------------------------------------------------------------------- Sunbelt Equity Fund $ 97,209 $ 57,613 $ 36,784 $ 6,801 $ 0 $ 47 - --------------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund $ 638,471 $ 576,856 $ 335,991 $ 0 $ 361 $ 100 - --------------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund $ 7,000 $ 7,296 $ 3,657 $ 2,173 $ 0 $ 24 - --------------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund $ 6,000 $ 7,871 $ 6,999 $ 6,260 $ 0 $ 97 - --------------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 142,000 $ 54,658 $ 32,358 $ 36,642 $ 0 $ 62 - --------------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt $ 115,000 $ 10,402 $ 14,487 $ 11,683 $ 36 $ 20 Bond Fund - --------------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal $ 6,000 $ 485 $ 882 $ 1,486 $ 0 $ 11 Mortgage Securities Fund - --------------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund $ 4,000 $ 1,056 $ 617 $ 4,278 $ 10 $ 0 - --------------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury $ 5,000 $ 547 $ 796 $ 5,266 $ 4 $ 0 Securities Fund - --------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities $ 9,400 $ 23,873 $ 766 $ 1,771 $ 0 $ 3 Fund - --------------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Municipal $ 6,000 $ 13,621 $ 25,358 $ 5,894 $ 3,007 $ 2,316 Bond Fund + - --------------------------------------------------------------------------------------------------------------------------------- Prime Quality Money Market $ 1,157 $ 716 N/A $ 188 $ 251 N/A Fund - --------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities $ 104 $ 214 N/A $ 49 $ 27 N/A Money Market Fund - --------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market Fund $ 214 $ 190 N/A $ 58 $ 64 N/A - --------------------------------------------------------------------------------------------------------------------------------- Tax-Free Money Market Fund $ 14 $ 33 N/A $ 14 $ 33 N/A - ---------------------------------------------------------------------------------------------------------------------------------
+ Prior to May 24, 1999, sales charges were paid by the predecessor to this fund pursuant to an agreement between the CrestFunds and the Distributor for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. B-49 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 - --------------------------------------------------------------------------------------------------------------------------- Balanced, Capital Appreciation, Growth and 3.375% 2.925% 2.250% 1.350% Income Fund, International Equity Index, International Equity, Mid-Cap Equity, Small Cap Equity, Sunbelt Equity, Value Income Stock, Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, Investment Grade Bond, Investment Grade Tax-Exempt Bond, U.S. Government Securities, and Virginia Intermediate Bond Fund - --------------------------------------------------------------------------------------------------------------------------- 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, 1999, 1998 and 1997, the aggregate sales charges payable to the Distributor with respect to the Flex Shares of the Funds were as follows:
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- AGGREGATE SALES CHARGE PAYABLE AMOUNT RETAINED BY DISTRIBUTOR FUND TO DISTRIBUTOR ------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------- Balanced Fund $ 441,125 $ 11,758 $ 4,299 $ 14,028 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund $1,276,420 $ 60,500 $ 18,958 $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Core Equity Fund * * * * * * - ------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Fund $ 136 * * * * * - ------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund + $ 9,948 $ 203 $ 0 $ 21,000 $ 51,745 $ 22,970 - ------------------------------------------------------------------------------------------------------------------------- International Equity Fund $ 193,720 $ 23,393 $ 0 $ 51,229 $ 0 * - ------------------------------------------------------------------------------------------------------------------------- International Equity Index Fund $ 12,866 $ 992 $ 0 $ 4,378 $ 0 * - ------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund $ 172,976 $ 8,666 $ 10,239 $ 25,502 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Small Cap Equity Fund $ 275,796 $ 0 $ 0 $ 63,824 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Fund $ 4,124 * * $ 8,257 * * - -------------------------------------------------------------------------------------------------------------------------
B-50
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- AGGREGATE SALES CHARGE PAYABLE AMOUNT RETAINED BY DISTRIBUTOR FUND TO DISTRIBUTOR ------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund $ 144,663 * * $ 8,880 * * - ------------------------------------------------------------------------------------------------------------------------- Sunbelt Equity Fund $ 63,891 $ 4,183 $ 8,144 $ 19,557 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund $ 1,171 $ 112,674 $ 41,778 $ 9,021 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund $ 58,100 $ 2,556 $ 1,632 $ 47,200 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund $ 58,183 $ 3,920 $ 2,915 $ 41,114 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 135,983 $ 10,040 $ 5,684 $ 47,023 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt $ 66,107 $ 2,900 $ 10,407 $ 29,696 $ 0 $ 0 Bond Fund - ------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage $ 0 $ 2,805 $ 2,067 $ 17,676 $ 0 $ 0 Securities Fund - ------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Fund + $ 24,464 $ 18 $ 0 $ 0 $ 1,000 $ 1,644 - ------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund $ 21 $ 1,395 $ 1,678 $ 20,743 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury $ 27 $ 2,377 $ 8,261 $ 26,536 $ 0 $ 0 Securities Fund - ------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Fund $ 54,173 $ 2,014 $ 2,823 $ 21,800 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Fund + $ 25,146 $ 26 $ 0 $ 0 $ 1,000 $ 4,362 - ------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------
*Not in operation during the period. + Prior to May 24, 1999, sales charges fees were paid by the predecessor to this fund pursuant to an agreement between the CrestFunds and the Distributor for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. INVESTOR SHARES AND FLEX SHARES DISTRIBUTION PLANS The Distribution Agreement and the Investor Plan adopted by the Trust provide that Investor Shares of the Fund will pay the Distributor fees of up to the following respective levels: .28% of the average daily net assets of the Balanced Fund; .68% of the average daily net assets of the Capital Appreciation Fund; .45% of the average daily net assets of the Core Equity Fund, .55% of the average daily net assets of the E-Commerce Opportunity Fund, .25% of the average daily net assets of the Growth and Income Fund, .33% of the average daily net assets of the International Equity Fund; .38% of the average daily net assets of the International Equity Index Fund; .43% of the average daily net assets of the Mid-Cap Equity Fund; .43% of the average daily net assets of the Sunbelt Equity Fund; .33% of the average daily net assets of the Value Income Stock Fund; .18% of the average daily net assets of the Florida Tax-Exempt Bond Fund; .18% of the average daily net assets of the Georgia Tax-Exempt Bond Fund;.43% of the average daily net assets of the Investment Grade Bond Fund; .43% of the average daily net assets of the Investment Grade Tax-Exempt Bond Fund; .23% of the average daily net assets of the Limited- B-51 Term Federal Mortgage Securities Fund; .23% of the average daily net assets of the Short-Term Bond Fund; .18% of the average daily net assets of the Short-Term U.S. Treasury Securities Fund; .38% of the average daily net assets of the U.S. Government Securities Fund; .15% of the Virginia Intermediate Municipal Bond Fund, .20% of the average daily net assets of the Prime Quality Money Market Fund; .15% of the average daily net assets of the Tax-Exempt Money Market Fund; .40% of the average daily net assets of the Tax-Free Money Market Fund and .17% of the average daily net assets of the U.S. Government Securities Money Market Fund. The Distribution Agreement and the Flex Plan adopted by the Trust provide that each Flex Shares Fund will pay the Distributor a fee of up to .75% of the average daily net assets of that Fund. The Distributor can use these fees to compensate broker-dealers and service providers, including SunTrust and its affiliates, which provide administrative and/or distribution services to Investor Shares or Flex Shares Shareholders or their customers who beneficially own Investor Shares or Flex Shares. In addition, Flex Shares are subject to a service fee of up to .25% of the average daily net assets of the Flex Shares of each Fund. This service fee will be used for services provided and expenses incurred in maintaining shareholder accounts, responding to shareholder inquiries and providing information on their investments. Services for which broker-dealers and service providers may be compensated include establishing and maintaining customer accounts and records; aggregating and processing purchase and redemption requests from customers; placing net purchase and redemption orders with the Distributor; automatically investing customer account cash balances; providing periodic statements to customers; arranging for wires; answering customer inquiries concerning their investments; assisting customers in changing dividend options, account designations, and addresses; performing sub-accounting functions; processing dividend payments from the Trust on behalf of customers; and forwarding Shareholder communications from the Trust (such as proxies, Shareholder reports, and dividend distribution and tax notices) to these customers with respect to investments in the Trust. Certain state securities laws may require those financial institutions providing such distribution services to register as dealers pursuant to state law. Although banking laws and regulations prohibit banks from distributing shares of open-end investment companies such as the Trust, according to an opinion issued to the staff of the SEC by the Office of the Comptroller of the Currency, financial institutions are not prohibited from acting in other capacities for investment companies, such as providing shareholder services. Should future legislative, judicial, or administrative action prohibit or restrict the activities of financial institutions in connection with providing shareholder services, the Trust may be required to alter materially or discontinue its arrangements with such financial institutions. The Trust has adopted the Investor Plan and the Flex Plan in each case in accordance with the provisions of Rule 12b-1 under the 1940 Act, which Rule regulates circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares. Continuance of the Investor Plan and the Flex Plan must be approved annually by a majority of the Trustees of the Trust and by a majority of the disinterested Trustees. The Investor Plan and the Flex Plan require that quarterly written reports of amounts spent under the Investor Plan and the Flex Plan, respectively, and the purposes of such expenditures be furnished to and reviewed by the Trustees. The Investor Plan and the Flex Plan may not be amended to increase materially the amount which may be spent thereunder without approval by a majority of the outstanding shares of the affected class of shares of the Trust. All material amendments of the Plans will require approval by a majority of the Trustees of the Trust and of the disinterested Trustees. There is no sales charge on purchases of Flex Shares, but Flex Shares are subject to a contingent deferred sales charge if they are redeemed within one year of purchase. Pursuant to the Distribution Agreement and the Flex Plan, Flex Shares are subject to an ongoing distribution and service fee calculated on each of the Bond Funds', B-52 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, 1999, 1998 and 1997, the Funds paid the following amounts pursuant to the Investor Plan:
- ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ DISTRIBUTION FEES - AMOUNT PAID ---------------------------------------- 1999 1998 1997 FUND - ------------------------------------------------------------------------------------------ Balanced Fund $ 23,800 $ 5,628 $ 2,390 - ------------------------------------------------------------------------------------------ Capital Appreciation Fund $1,788,277 $1,442,648 $1,109,436 - ------------------------------------------------------------------------------------------ Core Equity Fund * * * - ------------------------------------------------------------------------------------------ E-Commerce Opportunity Fund * * * - ------------------------------------------------------------------------------------------ Growth and Income Fund $ 9,546 $ 0 $ 323,215 - ------------------------------------------------------------------------------------------ International Equity Fund $ 44,271 $ 34,499 $ 10,778 - ------------------------------------------------------------------------------------------ International Equity Index Fund $ 17,681 $ 7,582 $ 8,005 - ------------------------------------------------------------------------------------------ Mid-Cap Equity Fund $ 83,377 $ 70,254 $ 56,187 - ------------------------------------------------------------------------------------------ Sunbelt Equity Fund $ 90,209 $ 91,069 $ 80,282 - ------------------------------------------------------------------------------------------ Value Income Stock Fund $ 638,471 $ 630,527 $ 437,882 - ------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund $ 4,353 $ 0 $ 0 - ------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------ Investment Grade Bond Fund $ 106,142 $ 96,090 $ 94,495 - ------------------------------------------------------------------------------------------ Investment Grade Tax-Exempt Bond Fund $ 103,735 $ 76,472 $ 100,819 - ------------------------------------------------------------------------------------------ Limited-Term Federal Mortgage Securities Fund $ 4,211 $ 161 $ 0 - ------------------------------------------------------------------------------------------ Short-Term Bond Fund $ 0 $ 33 $ 0 - ------------------------------------------------------------------------------------------ Short-Term U.S. Treasury Securities Fund $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------ U.S. Government Securities Fund $ 9,461 $ 385 $ 1,150 - ------------------------------------------------------------------------------------------ Virginia Intermediate Municipal Bond Fund $ 0 $ 0 - ------------------------------------------------------------------------------------------ Prime Quality Money Market Fund $ 969,143 $ 465,411 $ 342,798 - ------------------------------------------------------------------------------------------ U.S. Government Securities Money Market Fund $ 55,233 $ 69,957 $ 66,016 - ------------------------------------------------------------------------------------------ Tax-Exempt Money Market Fund $ 156,035 $ 125,986 $ 89,912 - ------------------------------------------------------------------------------------------ Tax-Free Money Market Fund $ 0 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
B-53 For the fiscal years ended May 31, 1999, 1998 and 1997, the Funds paid the following amounts pursuant to the Flex Plan:
- ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ DISTRIBUTION FEES - AMOUNT PAID ---------------------------------------- 1999 1998 1997 FUND - ------------------------------------------------------------------------------------------ Balanced Fund $ 427,125 $ 125,786 $ 28,723 - ------------------------------------------------------------------------------------------ Capital Appreciation Fund $1,276,420 $ 672,585 $ 201,520 - ------------------------------------------------------------------------------------------ Core Equity Fund * * * - ------------------------------------------------------------------------------------------ E-Commerce Opportunity Fund * * * - ------------------------------------------------------------------------------------------ Growth and Income Fund $ 9,115 $ 52 - ------------------------------------------------------------------------------------------ Mid-Cap Equity Fund $ 146,976 $ 123,932 $ 53,907 - ------------------------------------------------------------------------------------------ International Equity Fund $ 142,491 $ 148,500 $ 18,519 - ------------------------------------------------------------------------------------------ International Equity Index Fund $ 8,488 $ 2,090 $ 0 - ------------------------------------------------------------------------------------------ Small Cap Equity Fund $ 210,796 $ 155,949 * - ------------------------------------------------------------------------------------------ Small Cap Growth Stock Fund $ 4,174 * * - ------------------------------------------------------------------------------------------ Sunbelt Equity Fund $ 43,891 $ 50,902 $ 27,568 - ------------------------------------------------------------------------------------------ Tax Sensitive Growth Stock Fund $ 134,651 * * - ------------------------------------------------------------------------------------------ Value Income Stock Fund $1,661,859 $1,234,587 $ 433,655 - ------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund $ 67,973 $ 30,177 $ 5,962 - ------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund $ 58,863 $ 30,028 $ 20,094 - ------------------------------------------------------------------------------------------ Investment Grade Bond Fund $ 135,936 $ 56,167 $ 29,558 - ------------------------------------------------------------------------------------------ Investment Grade Tax-Exempt Bond Fund $ 66,139 $ 39,461 $ 36,489 - ------------------------------------------------------------------------------------------ Limited-Term Federal Mortgage Securities Fund $ 0 $ 533 $ 0 - ------------------------------------------------------------------------------------------ Maryland Municipal Bond Fund $ 24,464 $ 17,000 - ------------------------------------------------------------------------------------------ Short-Term Bond Fund $ 0 $ 379 $ 0 - ------------------------------------------------------------------------------------------ Short-Term U.S. Treasury Securities Fund $ 0 $ 170 $ 510 - ------------------------------------------------------------------------------------------ U.S. Government Securities Fund $ 32,173 $ 17,051 $ 15,260 - ------------------------------------------------------------------------------------------ Virginia Municipal Bond Fund $ 25,146 $ 25,000 - ------------------------------------------------------------------------------------------
*Not in operation during the period. B-54 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 Funds except for the Emerging Markets, International Equity and International Equity Index Funds. The Bank of New York, One Wall Street, New York, NY 10286 serves as custodian for the Emerging Markets, International Equity and International Equity Index Funds. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP serves as independent public accountants for the Trust. LEGAL COUNSEL Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust. TRUSTEES AND OFFICERS OF THE TRUST The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. The business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers of some or all of the following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds -Registered Trademark-, CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Advantage Fund, The Pillar Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, and TIP Funds, each of which is an open-end management investment company managed by SEI Investments Mutual Funds Services or its affiliates and 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. B-55 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. 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, Controller, Treasurer and Chief Financial Officer - President of the Administrator and Senior Vice President of SEI Investments Mutual Funds Services Operations Group since 1998. Vice President of the Administrator and Vice President of Fund Accounting and Administration of SEI Investments Mutual Funds Services, 1996-1998. Vice President of the Distributor since December 1997. Senior Vice President, Fund Administration, BISYS Fund Services, September 1995-November 1996. Senior Vice President and Site Manager, Fidelity Investments 1981- September 1995. JAMES R. FOGGO (DOB 02/14/66) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of SEI Investments since 1998. Vice President and Assistant Secretary of the Administrator and the Distributor since May 1999. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law firm), 1993-1995. LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange, 1989-1998. B-56 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. 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. RICHARD W. GRANT (10/25/45) - Secretary - 1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1989. JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary -1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1993. - -------------------------- * Messrs. Looney, Goodrum, McNair, 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, 1999, 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, $16,000 N/A N/A $18,000 for service on Trustee two boards - ---------------------------------------------------------------------------------------------------------------------------- Wilton Looney, Trustee $18,000 N/A N/A $18,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- Champney A. McNair, $16,000 N/A N/A $18,000 for service on Trustee two boards - ---------------------------------------------------------------------------------------------------------------------------- F. Wendell Gooch, Trustee $16,000 N/A N/A $18,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- T. Gordy Germany, $16,000 N/A N/A $18,000 for service on Trustee two boards - ---------------------------------------------------------------------------------------------------------------------------- Dr. Bernard F. Sliger, Trustee $16,000 N/A N/A $18,000 for service on two boards - ----------------------------------------------------------------------------------------------------------------------------
B-57
- ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------------------------- Jonathan T. Walton, Trustee $11,500 N/A N/A $13,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- William H. Cammack, N/A N/A N/A $ 0 for service on Trustee* two boards - ---------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
* Messr. Cammack is an "interested person" of the Trust as defined in the Investment Company Act of 1940. 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 B-58 Period Return + 1) TO THE POWER OF 365/7] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. The Tax-Exempt Money Market Fund's "tax equivalent yield" and "tax equivalent effective yield" are calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that E equals the interest exempt from federal income tax earned during the period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: (E) TAX EQUIVALENT YIELD = ------- + T (1 - P) E = the portion of the yield which is tax-exempt P = stated income tax rate T = the portion of the yield which is taxable For the 7-day period ended May 31, 1999, 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 OF 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD SHARES - ----------------------------------------------------------------------------------------------------------------------------- Prime Quality Money Trust 4.40% 4.49% N/A N/A Market Fund ------------------------------------------------------------------------------------------------- Investor 4.23% 4.32% N/A N/A - ----------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Trust 2.70% 2.74% 4.47% 4.54% Market Fund ------------------------------------------------------------------------------------------------- Investor 2.60% 2.63% 4.30% 4.35% - ----------------------------------------------------------------------------------------------------------------------------- Tax-Free Money Trust 2.96% 3.00% 4.90% 4.97% Market Fund ------------------------------------------------------------------------------------------------- Investor 2.80% 2.84% 4.64% 4.70% - ----------------------------------------------------------------------------------------------------------------------------- U.S. Government Trust 4.20% 4.29% N/A N/A Securities Money ------------------------------------------------------------------------------------------------- Market Fund Investor 4.06% 4.15% N/A N/A - ----------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Money Trust 4.35% 4.44% N/A N/A Market Fund - ----------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------
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. B-59 THIRTY-DAY YIELD The Bond, Short-Term U.S. Treasury, Tax-Exempt Bond, Equity Funds and Life Vision Portfolios may advertise a 30-day yield. In particular, yield will be calculated according to the following formula: Yield = (2 (a-b/cd + 1) TO THE POWER OF 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, 1999, yields on the Funds other than the Money Market Funds were as follows:
- ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ FUND CLASS OF SHARES YIELD - ------------------------------------------------------------------------------------ Balanced Fund Trust Shares 2.12% ----------------------------------------------- Investor Shares 1.75% ----------------------------------------------- Flex Shares 1.05% - ------------------------------------------------------------------------------------ Capital Appreciation Fund Trust Shares 0.00% ----------------------------------------------- Investor Shares 0.00% ----------------------------------------------- Flex Shares 0.00% - ------------------------------------------------------------------------------------ Core Equity Fund Trust Shares * ----------------------------------------------- Investor Shares * ----------------------------------------------- Flex Shares * - ------------------------------------------------------------------------------------ E-Commerce Opportunity Fund Trust Shares * ----------------------------------------------- Investor Shares * ----------------------------------------------- Flex Shares * - ------------------------------------------------------------------------------------ Emerging Markets Equity Fund Trust Shares -- - ------------------------------------------------------------------------------------ Growth and Income Fund Trust Shares 0.32% ----------------------------------------------- Investor Shares 0.32% ----------------------------------------------- Flex Shares 0.00% - ------------------------------------------------------------------------------------ International Equity Fund Trust Shares -- ----------------------------------------------- Investor Shares -- ----------------------------------------------- Flex Shares -- - ------------------------------------------------------------------------------------
B-60
- ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ FUND CLASS OF SHARES YIELD - ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ International Equity Index Fund Trust Shares -- ----------------------------------------------- Investor Shares -- ----------------------------------------------- Flex Shares -- - ------------------------------------------------------------------------------------ Mid-Cap Equity Fund Trust Shares 0.00% ----------------------------------------------- Investor Shares 0.00% ----------------------------------------------- Flex Shares 0.00% - ------------------------------------------------------------------------------------ Small Cap Equity Fund Trust Shares 1.10% ----------------------------------------------- Flex Shares 0.07% - ------------------------------------------------------------------------------------ Small Cap Growth Stock Fund Trust Shares 0.00% ----------------------------------------------- Investor Shares * ----------------------------------------------- Flex Shares 0.00% - ------------------------------------------------------------------------------------ Sunbelt Equity Fund Trust Shares 0.00% ----------------------------------------------- Investor Shares 0.00% ----------------------------------------------- Flex Shares 0.00% - ------------------------------------------------------------------------------------ Tax Sensitive Growth Stock Fund Trust Shares 0.26% ----------------------------------------------- Flex Shares 0.00% - ------------------------------------------------------------------------------------ Value Income Stock Fund Trust Shares 1.86% ----------------------------------------------- Investor Shares 1.43% ----------------------------------------------- Flex Shares 0.73% - ------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund Trust Shares 3.80% ----------------------------------------------- Investor Shares 3.45% ----------------------------------------------- Flex Shares 3.14% - ------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund Trust Shares 3.74% ----------------------------------------------- Investor Shares 3.40% ----------------------------------------------- Flex Shares 3.05% - ------------------------------------------------------------------------------------
B-61
- ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ FUND CLASS OF SHARES YIELD - ------------------------------------------------------------------------------------ Investment Grade Bond Fund Trust Shares 5.91% ----------------------------------------------- Investor Shares 5.42% ----------------------------------------------- Flex Shares 5.20% - ------------------------------------------------------------------------------------ Investment Grade Tax-Exempt Bond Trust Shares 3.61% Fund ----------------------------------------------- Investor Shares 3.10% ----------------------------------------------- Flex Shares 2.76% - ------------------------------------------------------------------------------------ Limited-Term Federal Mortgage Trust Shares 5.33% Securities Fund ----------------------------------------------- Investor Shares 4.93% ----------------------------------------------- Flex Shares 4.73% - ------------------------------------------------------------------------------------ Maryland Municipal Bond Fund Trust Shares 3.47% ----------------------------------------------- Flex Shares 2.59% - ------------------------------------------------------------------------------------ Short-Term Bond Fund Trust Shares 5.15% ----------------------------------------------- Investor Shares 4.92% ----------------------------------------------- Flex Shares 4.67% - ------------------------------------------------------------------------------------ Short-Term U.S. Treasury Securities Trust Shares 4.49% Fund ----------------------------------------------- Investor Shares 4.30% ----------------------------------------------- Flex Shares 4.14% - ------------------------------------------------------------------------------------ U.S. Government Securities Fund Trust Shares 6.09% ----------------------------------------------- Investor Shares 5.87% ----------------------------------------------- Flex Shares 5.46% - ------------------------------------------------------------------------------------ Virginia Intermediate Municipal Trust Shares 3.83% Bond Fund ----------------------------------------------- Investor Shares 3.77% - ------------------------------------------------------------------------------------ Virginia Municipal Bond Fund Trust Shares 4.17% ----------------------------------------------- Flex Shares 3.27% - ------------------------------------------------------------------------------------
B-62
- ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ FUND CLASS OF SHARES YIELD - ------------------------------------------------------------------------------------ Life Vision Balanced Portfolio Trust Shares 1.85% - ------------------------------------------------------------------------------------ Life Vision Growth and Income Trust Shares 1.38% Portfolio - ------------------------------------------------------------------------------------ Life Vision Maximum Growth Trust Shares 0.02% Portfolio - ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------
*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: E TAX EQUIVALENT YIELD = ------- + T (1 - P) E = the portion of the yield which is tax-exempt P = stated income tax rate T = the portion of the yield which is taxable Tax equivalent yields assume the payment of federal income taxes at a rate of 39.6%, for the Georgia Tax-Exempt Bond Fund, Georgia income taxes at a rate of 6.0%, for the Maryland Municipal Bond Fund, Maryland taxes at a rate of 7.9%, and for the Virginia Intermediate Municipal and Virginia Municipal Bond Funds, Virginia taxes at a rate of 5.75%. For the 30-day period ended May 31, 1999, the tax-equivalent yields for the Trust Shares were as follows: for the Florida Tax-Exempt Bond Fund - 6.29%, Georgia Tax-Exempt Bond Fund - 6.88%, Investment Grade Tax-Exempt Bond Fund - 5.98%, Maryland Municipal Bond Fund - 6.61%, Virginia Intermediate Municipal Bond Fund - 7.01%, and Virginia Municipal Bond Fund - 7.63%. For the 30-day period ended May 31, 1999, the tax-equivalent yields for the Investor Shares of the Tax-Exempt Funds were as follows: for the Florida Tax-Exempt Bond Fund - 5.71%, Georgia Tax-Exempt Bond Fund - 6.25%, Investment Grade Tax-Exempt Bond Fund - 5.13%, and Virginia Intermediate Municipal Bond Fund - 6.90%. For the 30-day period ended May 31, 1998, the tax-equivalent yields for the Flex Shares of the Tax-Exempt Funds were as follows: for the, Florida Tax-Exempt Bond Fund - 5.20%, Georgia Tax-Exempt Bond Fund - 5.61%, Investment Grade Tax-Exempt Bond Fund - 4.57% Maryland Municipal Bond Fund - 4.94%, and Virginia Municipal Bond Fund - 5.98%. B-63 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) to the power of n = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. From time to time, the Trust may include the names of clients of the Advisers 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, 1999 and for the one-year, five-year and ten-year periods ended May 31, 1999 were as follows:
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FUND ------------------------------------------------------- CLASS OF SHARES ONE YEAR FIVE TEN SINCE YEARS YEARS INCEPTION - ------------------------------------------------------------------------------------------------------------------------- Balanced Fund Trust Shares(47) 10.98% 15.05% * 13.46% ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(47) 6.56% 13.80% * 12.25% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(47) 10.70% 14.67% * 13.05% ----------------------------------------------------------------------------------------------------- Flex Share--With Sales Load(2) 7.84% * * 15.41% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(2) 9.84% * * 15.41% - ------------------------------------------------------------------------------------------------------------------------- Capital Trust Shares(3) 17.83% 21.21% * 18.10% Appreciation ----------------------------------------------------------------------------------------------------- Fund Investor Shares--With Sales Load(4) 12.80% 19.52% * 17.16% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(4) 17.20% 20.44% * 17.81% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(5) 14.51% * * 23.82% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(5) 16.50% * * 23.82% - -------------------------------------------------------------------------------------------------------------------------
B-64
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FUND -------------------------------------------------------- CLASS OF SHARES ONE YEAR FIVE TEN SINCE YEARS YEARS INCEPTION - ------------------------------------------------------------------------------------------------------------------------- Core Equity Trust Shares * * * * Fund ----------------------------------------------------------------------------------------------------- Investor Shares-- With Load * * * * ----------------------------------------------------------------------------------------------------- Investor Shares-- Without Load * * * * ----------------------------------------------------------------------------------------------------- Flex Shares-- With Load * * * * ----------------------------------------------------------------------------------------------------- Flex Shares-- Without Load * * * * - ------------------------------------------------------------------------------------------------------------------------- E-Commerce Trust Shares * * * * Opportunity ----------------------------------------------------------------------------------------------------- Fund Investor Shares-- With Load * * * * ----------------------------------------------------------------------------------------------------- Investor Shares-- Without Load * * * * ----------------------------------------------------------------------------------------------------- Flex Shares-- With Load * * * * ----------------------------------------------------------------------------------------------------- Flex Shares-- Without Load * * * * - ------------------------------------------------------------------------------------------------------------------------- Emerging Trust Shares(52) (6.22)% * * (6.62)%*** Markets Equity Fund - ------------------------------------------------------------------------------------------------------------------------- Growth and Trust Shares(6) 15.58% 20.70% * 17.68% Income Fund ----------------------------------------------------------------------------------------------------- Investor Shares-- With Load(7) 11.30% 19.77% * 16.76% ----------------------------------------------------------------------------------------------------- Investor Shares-- Without Load(7) 15.66% 20.69% * 17.50% ----------------------------------------------------------------------------------------------------- Flex Shares-- With Load(8) 12.76% * * 21.65% ----------------------------------------------------------------------------------------------------- Flex Shares-- Without Load(8) 14.76% * * 21.65% - ------------------------------------------------------------------------------------------------------------------------- International Trust Shares(9) (7.43)% * * 14.12%*** Equity Fund ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(9) (11.27)% * * 11.36%*** ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(49) (7.82)% * * 12.62%*** ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(49) (10.19)% * * 11.89% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(49) (8.48)% * * 11.89%*** - ------------------------------------------------------------------------------------------------------------------------- International Trust Shares(50) 7.87% * * 10.39% Equity Index ----------------------------------------------------------------------------------------------------- Fund Investor Shares--With Sales Load(50) 3.34% * * 9.08% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(50) 7.33% * * 9.92% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(11) 4.90% * * 11.28% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(11) 6.68% * * 11.28% - -------------------------------------------------------------------------------------------------------------------------
B-65
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FUND ---------------------------------------------------------- CLASS OF SHARES ONE YEAR FIVE TEN SINCE YEARS YEARS INCEPTION - ------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Trust Shares(12) 1.61% 14.72% * 13.46% Fund ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(44) (2.61%) 13.32% * 12.10% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(44) 1.17% 14.18% * 12.90% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(13) (1.25%) * * 13.79% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(13) 0.56% * * 13.79% - ------------------------------------------------------------------------------------------------------------------------- Small Cap Trust Shares(14) (18.72%) * * 14.77%*** Equity Fund ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(14) (21.03%) * * 2.09*** ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(14) (19.52%) * * 2.09*** - ------------------------------------------------------------------------------------------------------------------------- Small Cap Trust Shares(15) * * * * Growth Stock ----------------------------------------------------------------------------------------------------- Fund Flex Shares--With Sales Load(15) * * * * ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(15) * * * * - ------------------------------------------------------------------------------------------------------------------------- Sunbelt Trust Shares(16) (20.46%) 8.25% 12.49% 7.00%*** Equity Fund ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(16) (23.81%) 6.90% 11.92% 5.75%*** ----------------------------------------------------------------------------------------------------- Investor--Without Sales Load(16) (20.82%) 7.73% 12.35% 6.50%*** ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(16) (22.80%) 7.33% 12.46% 7.82%*** ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(16) (21.36%) 7.33% 12.46% 7.82%*** - ------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Trust Shares(17) 29.40% * * * Growth Stock ----------------------------------------------------------------------------------------------------- Fund Flex Shares--With Sales Load(17) 26.86% * * * ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(17) 28.86% * * * - ------------------------------------------------------------------------------------------------------------------------- Value Trust Shares(18) 11.13% 20.55% * 18.52%*** Income Stock ----------------------------------------------------------------------------------------------------- Fund Investor Shares--With Sales Load(18) 6.56% 19.20% * 17.62%*** ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(18) 10.71% 20.11% * 18.34%*** ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(18) 8.06% 19.50% * 19.67%*** ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(18) 9.91% 19.50% * 19.67%*** - -------------------------------------------------------------------------------------------------------------------------
B-66 - ------------------------------------------------------------------------------------------------------------------------- Florida Trust Shares(19) 3.72% 6.54% * 5.87% Tax-Exempt Bond ---------------------------------------------------------------------------------------------------- Fund Investor Shares--With Sales Load(20) (0.29%) 5.54% * 4.91% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(20) 3.62% 6.35% * 5.66% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(5) 1.16% * * 5.23% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(5) 3.13% * * 5.23% - ------------------------------------------------------------------------------------------------------------------------- Georgia Trust Shares(20) 3.33% 5.85% * 4.55% Tax-Exempt Bond ----------------------------------------------------------------------------------------------------- Fund Investor Shares--With Sales Load(21) (0.69%) 4.82% * 3.64% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(21) 3.13% 5.63% * 4.38% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(22) 0.64% * * 4.67% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(22) 2.63% * * 4.69% - ------------------------------------------------------------------------------------------------------------------------- Investment Grade Trust Shares(23) 4.25% 7.28% * 6.63% Bond Fund ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(24) 0.01% 6.05% * 5.73% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(24) 3.86% 6.87% * 6.31% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(25) 1.41% * * 5.49% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(25) 3.35% * * 5.49% - ------------------------------------------------------------------------------------------------------------------------- Investment Grade Trust Shares(26) 4.67% 7.26% * 6.23% Tax-Exempt Bond ----------------------------------------------------------------------------------------------------- Fund Investor Shares--With Sales Load(27) 0.48% 6.04% * 6.74% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(27) 4.35% 6.86% * 7.33% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(5) 1.85% * * 5.60% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(5) 3.78% * * 5.60% - ------------------------------------------------------------------------------------------------------------------------- Limited-Term Trust Shares(48) 4.75% * * 6.14% Federal Mortgage ----------------------------------------------------------------------------------------------------- Securities Fund Investor Shares--With Sales Load(28) 1.85% * * 5.52% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(28) 4.47% * * 6.08% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(25) 2.18% * * 5.14% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(25) 4.14% * * 5.14% - ------------------------------------------------------------------------------------------------------------------------- Maryland Trust Shares(29) 4.19% * * 4.52% Municipal Bond ----------------------------------------------------------------------------------------------------- Fund Flex Shares-- With Sales Load(30) 1.25% * * 5.28% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(30) 3.25% * * 5.28% - -------------------------------------------------------------------------------------------------------------------------
B-67 - ------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Trust Shares(31) 4.06% 5.93% * 5.24% Fund ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(32) 1.76% 5.31% * 4.61% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(32) 3.88% 5.73% * 4.94% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(33) 1.53% * * 4.94% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(33) 3.50% * * 4.93% - ------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Trust Shares(31) 4.59% 5.50% * 4.84% Treasury ----------------------------------------------------------------------------------------------------- Securities Fund Investor Shares--With Sales Load(34) 3.50% 5.13% * 4.51% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(34) 4.54% 5.34% * 4.68% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(33) 2.32% * * 4.81% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(33) 4.32% * * 4.81% - ------------------------------------------------------------------------------------------------------------------------- U.S. Government Trust Shares(35) 3.90% * * 6.92% Securities Fund ----------------------------------------------------------------------------------------------------- Investor Shares--With Sales Load(10) (0.35%) * * 5.58% ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(10) 3.56% * * 6.39% ----------------------------------------------------------------------------------------------------- Flex Shares--With Sales Load(25) 1.02% * * 5.17% ----------------------------------------------------------------------------------------------------- Flex Shares--Without Sales Load(25) 2.99% * * 5.17% - ------------------------------------------------------------------------------------------------------------------------- Virginia Trust Shares(36) 3.47% 5.65% * 4.95% Intermediate ----------------------------------------------------------------------------------------------------- Municipal Bond Investor Shares--With Sales Load(37) (0.35%) 4.84% * 3.92% Fund ----------------------------------------------------------------------------------------------------- Investor Shares--Without Sales Load(37) 3.50% 5.65% * 4.58% - ------------------------------------------------------------------------------------------------------------------------- Virginia Trust Shares(38) 3.75% * * 6.03% Municipal Bond ----------------------------------------------------------------------------------------------------- Fund Flex Shares-- With Sales Load(39) (0.92%) * * 5.02% ----------------------------------------------------------------------------------------------------- Flex Shares-- Without Sales Load(39) 2.90% * * 5.02% - ------------------------------------------------------------------------------------------------------------------------- Prime Quality Trust Shares(45) 4.83% 5.02% * 4.42% Money Market Fund ----------------------------------------------------------------------------------------------------- Investor Shares(45) 4.66% 4.85% * 4.24% - ------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Trust Shares(45) 2.81% 3.10% * 2.81% Market Fund ----------------------------------------------------------------------------------------------------- Investor Shares(45) 2.69% 2.98% * 2.69% - ------------------------------------------------------------------------------------------------------------------------- Tax-Free Money Trust Shares(40) 2.73% 2.97% * 3.41% Market Fund ----------------------------------------------------------------------------------------------------- Investor Shares(37) 2.72% 2.96% * 2.72% - -------------------------------------------------------------------------------------------------------------------------
B-68 - ------------------------------------------------------------------------------------------------------------------------- U.S. ----------------------------------------------------------------------------------------------------- Government Trust Shares(45) 4.57% 4.85% * 4.26% Securities ----------------------------------------------------------------------------------------------------- Money Investor Shares(45) 4.41% 4.70% * 4.11% Market Fund - ------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Trust Shares(42) 4.49% 4.78% 4.95% 5.34% Money Market Fund - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- PORTFOLIO 1 YEAR SINCE PORTFOLIO INCEPTION - ------------------------------------------------------------------------------------------------------------------------- Life Vision Balanced Portfolio(46) 6.47% 10.59% - ------------------------------------------------------------------------------------------------------------------------- Life Vision Growth and Income Portfolio(46) 6.64% 11.07% - ------------------------------------------------------------------------------------------------------------------------- Life Vision Maximum Growth Portfolio(46) 7.22% 12.95% - -------------------------------------------------------------------------------------------------------------------------
(1) Commenced operations 1/3/94 (16) Commenced operations 12/11/98 (31) Commenced operations 3/15/93 (2) Commenced operations 6/14/95 (17) Commenced operations 12/15/95 (32) Commenced operations 3/22/93 (3) Commenced operations 7/1/92 (18) Commenced operations 2/17/93 (33) Commenced operations 6/20/95 (4) Commenced operations 6/9/92 (19) Commenced operations 1/25/94 (34) Commenced operations 3/18/93 (5) Commenced operations 6/1/95 (20) Commenced operations 1/18/94 (35) Commenced operations 7/31/94 (6) Commenced operations 9/28/92 (21) Commenced operations 1/19/94 (36) Commenced operations 1/11/93 (7) Commenced operations 5/7/93 (22) Commenced operations 6/6/95 (37) Commenced operations 5/5/93 (8) Commenced operations 4/19/95 (23) Commenced operations 7/16/92 (38) Commenced operations 4/5/95 (9) Commenced operations 12/1/95 (24) Commenced operations 6/11/92 (39) Commenced operations 4/17/95 (10) Commenced operations 6/9/94 (25) Commenced operations 6/7/95 (40) Commenced operations 6/15/89 (11) Commenced operations 6/8/95 (26) Commenced operations 10/21/93 (41) Commenced operations 2/12/93 (12) Commenced operations 2/2/94 (27) Commenced operations 6/9/92 (42) Commenced operations 2/18/87 (13) Commenced operations 6/5/95 (28) Commenced operations 7/17/94 (43) Commenced operations 1/31/97 (14) Commenced operations 6/5/97 (29) Commenced operations 3/1/96 (44) Commenced operations 2/1/94 (15) Commenced operations 10/8/98 (30) Commenced operations 4/25/96 (45) Commenced operations 6/8/92 (46) Commenced operations 6/30/97 (47) Commenced operations 1/4/94 (48) Commenced operations 6/7/94 (49) Commenced operations 6/6/94 (50) Commenced operations 6/22/95
* Fund not in operation for entire period. *** The performance for the periods prior to November 1997 for the Emerging Markets Equity Fund, December 1995 for the International Equity Fund, January 1994 for the Sunbelt Equity Fund, and February 1993 for the Value Income Stock Fund represent the performance of a common trust fund managed by the Adviser. B-69 PURCHASING SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. REDEEMING SHARES A Shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the NYSE is restricted, or during the existence of an emergency (as determined by the Securities and Exchange Commission by rule or regulation) as a result of disposal or valuation of a Fund's securities is not reasonably practicable, or for such other periods as the Securities and Exchange Commission has by order permitted. The Trust also reserves the right to suspend sales of shares of a Fund for any period during which the NYSE, an Adviser, the Administrator and/or, the Custodian are not open for business. A number of Fund shareholders are institutions with significant share holdings that may be redeemed at any time. 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 B-70 regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds current net asset value per share calculated using available market quotations from the Funds amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Funds in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Fund must annually distribute at least 90% of its investment company taxable income. The securities of the Bond, Short-Term U.S. Treasury Securities and Equity Funds are valued by the Administrator pursuant to valuations provided by an independent pricing service. The pricing service relies primarily on prices of actual market transactions as well as trader quotations. However, the service may also use a matrix system to determine valuations of fixed income securities, which system considers such factors as security prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Trust under the general supervision of the Trustees. Although the methodology and procedures are identical, the net asset value per share of Trust Shares, Flex Shares and Investor Shares of the Bond, Short-Term U.S. Treasury Securities and Equity Funds may differ because of variations in the distribution and service fees and transfer agent fees charged to Investor Shares. 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 B-71 meet several additional requirements. Among these requirements are the following: (i) at least 90% of a Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or certain other income; (ii) at the close of each quarter of a Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RIC's and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a Fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. Government securities or the securities of other RIC's) of any one issuer, or of two or more issuers engaged in same or similar businesses if the Fund owns at least 20% of the voting power of such issuers. In addition, each Fund will distribute by the end of any calendar year 98% of its ordinary income for that year and 98% of its capital gain net income for the one-year period ending on October 31 of that calendar year, plus certain other amounts. Each Fund intends to make sufficient distributions prior to the end of each calendar year to avoid liability for the federal excise tax applicable to regulated investment companies. If, at the close of each quarter of its taxable year, at least 50% of the value of a Fund's total assets consists of obligations the interest on which is excludable from gross income, a Fund may pay "exempt-interest dividends," as defined in Section 852(b)(5) of the Code, to its shareholders. As noted in the Prospectus, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the Investment Grade Tax-Exempt Bond Fund, and the State Tax-Exempt Bond Funds intend to pay exempt-interest dividends. Exempt-interest dividends are excludable from a Shareholder's gross income for regular Federal income tax purposes, but may nevertheless be subject to the alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of the Code. imposed by Section 59A of the Code. The Alternative Minimum Tax is imposed at a maximum rate of 28% in the case of non-corporate taxpayers and at the rate of 20% in the case of corporate taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The Alternative Minimum Tax may be imposed in two circumstances. First, exempt-interest dividends derived from certain "private activity bonds" issued after August 7, 1986, will generally be an item of tax preference and therefore potentially subject to the Alternative Minimum Tax for both corporate and non-corporate taxpayers. Second, in the case of exempt-interest dividends received by corporate Shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporation's alternative minimum taxable income for purposes of determining the Alternative Minimum Tax. Distributions of exempt-interest dividends may result in additional Federal income tax consequences to shareholders in Tax-Exempt Funds. For example, interest on indebtedness incurred by Shareholders to purchase or carry shares of a Tax-Exempt Fund will not be deductible for Federal income tax purposes to the extent that the Fund distributes exempt interest dividends during the taxable year. The deduction otherwise allowable to property and casualty insurance companies for "losses incurred" will be reduced by an amount equal to a portion of exempt-interest dividends received or accrued during any taxable year. Certain foreign corporations engaged in a trade or business in the 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 B-72 adjusted gross income" (which includes exempt-interest dividends) plus one-half of the Social Security benefits or railroad retirement benefits received by such individual during that taxable year exceeds the base amount described in Section 86 of the Code. A Tax-Exempt Fund may not be an appropriate investment for persons (including corporations and other business entities) who are "substantial users" (or persons related to such users) of facilities financed by industrial development or private activity bonds. A "substantial user" is defined generally to include certain persons who regularly use in a trade or business a facility financed from the proceeds of industrial development bonds or private activity bonds. Such entities or persons should consult their tax Advisers 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, 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 Emerging Markets, International Equity Index and International 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-73 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 Emerging Markets, International Equity Index and International Equity Funds= transactions in foreign currencies and forward foreign currency contracts will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized 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 Adviser is responsible for placing the orders to execute transactions for a Fund. In placing orders, it is the policy of the Trust to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While an Adviser generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, an Adviser will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. TRADING PRACTICES AND BROKERAGE The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors B-74 affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the funds and accounts under management by an Adviser, brokerage business to brokers or dealers who provide brokerage and research services. These research services include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by an Adviser in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the funds receiving the pricing service. An Adviser may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of each Adviser and the Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. It is expected that the Trust may execute brokerage or other agency transactions through the Distributor or an affiliate of an Adviser, both of which are registered broker-dealers, for a commission in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor or an affiliate of an Adviser is permitted to receive and retain compensation for effecting portfolio transactions for the Trust on an B-75 exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor or an affiliate of an Adviser to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other renumeration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Trust may direct commission business to one or more designated broker-dealers in connection with such broker/dealer's provision of services to the Trust or payment of certain Trust expenses (E.G., custody, pricing and professional fees). The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor, and will review these procedures periodically. For the fiscal year ended May 31, 1999, the Funds paid the following brokerage commissions with respect to portfolio transactions:
- ------------------------------------------------------------------------------------------------------------------------ TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED COMMISSIONS PAID IN COMMISSIONS PAID AFFILIATED BROKERS IN THROUGH AFFILIATED FYE TO AFFILIATES IN FYE 5/31/99(2) BROKERS FYE 5/31/99 FYE 5/31/99(1) 5/31/99(3) FUND - ------------------------------------------------------------------------------------------------------------------------ Balanced Fund $ 489,552 $ 24,180 5.94% 61.2% - ------------------------------------------------------------------------------------------------------------------------ Capital Appreciation Fund $ 5,657,513 $ 223,859 3.96% 25.2% - ------------------------------------------------------------------------------------------------------------------------ Core Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------ E-Commerce Opportunity * * * * Fund - ------------------------------------------------------------------------------------------------------------------------ Emerging Markets Equity $ 110,951 $ 0 0% 0% Fund - ------------------------------------------------------------------------------------------------------------------------ Growth and Income Fund + $ 1,026,236 $ 659 0.06% 34.8% - ------------------------------------------------------------------------------------------------------------------------ International Equity $ 98,874 $ 0 0% 0% Index Fund - ------------------------------------------------------------------------------------------------------------------------ International Equity Fund $ 4,698,091 $ 0 0% 0% - ------------------------------------------------------------------------------------------------------------------------ Mid-Cap Equity Fund $ 612,170 $ 7,281 1.19% 19.8% - ------------------------------------------------------------------------------------------------------------------------ Small Cap Equity Fund $ 986,430 $ 3,666 0.37% 23.8% - ------------------------------------------------------------------------------------------------------------------------
B-76
- ------------------------------------------------------------------------------------------------------------------------ TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED COMMISSIONS PAID IN COMMISSIONS PAID AFFILIATED BROKERS IN THROUGH AFFILIATED FYE TO AFFILIATES IN FYE 5/31/99(2) BROKERS FYE 5/31/99 FYE 5/31/99(1) 5/31/99(3) FUND - ------------------------------------------------------------------------------------------------------------------------ Small Cap Growth $ 141,859 $ 907 0.64% 33.2% Stock Fund - ------------------------------------------------------------------------------------------------------------------------ Sunbelt Equity Fund $ 952,393 $ 1,964 0.21% 38.3% - ------------------------------------------------------------------------------------------------------------------------ Tax Sensitive Growth $ 203,872 $ 3,859 1.89% 52.4% Stock Fund - ------------------------------------------------------------------------------------------------------------------------ Value Income Stock Fund $ 3,804,109 $ 58,623 1.54% 37.3% - ------------------------------------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond $ 27 $ 27 100% 100% Fund - ------------------------------------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond $ 205 $ 205 100% 100% Fund - ------------------------------------------------------------------------------------------------------------------------ Investment Grade Bond $ 28,802 $ 28,802 100% 100% Fund - ------------------------------------------------------------------------------------------------------------------------ Investment Grade $ 3,108 $ 3,108 100% 100% Tax-Exempt Bond Fund - ------------------------------------------------------------------------------------------------------------------------ Limited-Term Federal $ 3,151 $ 3,151 100% 100% Mortgage Securities Fund - ------------------------------------------------------------------------------------------------------------------------ Maryland Municipal Bond N/A N/A N/A N/A Fund + - ------------------------------------------------------------------------------------------------------------------------ Short-Term Bond $ 205 $ 205 100% 100% Fund - ------------------------------------------------------------------------------------------------------------------------ Short-Term U.S. Treasury N/A N/A N/A N/A Securities Fund - ------------------------------------------------------------------------------------------------------------------------ U.S. Government N/A N/A N/A N/A Securities Fund - ------------------------------------------------------------------------------------------------------------------------ Virginia Intermediate N/A N/A N/A N/A Municipal Bond Fund + - ------------------------------------------------------------------------------------------------------------------------
B-77
- ------------------------------------------------------------------------------------------------------------------------ TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED COMMISSIONS PAID IN COMMISSIONS PAID AFFILIATED BROKERS IN THROUGH AFFILIATED FYE TO AFFILIATES IN FYE 5/31/99(2) BROKERS FYE 5/31/99 FYE 5/31/99(1) 5/31/99(3) FUND - ------------------------------------------------------------------------------------------------------------------------ Virginia Municipal Bond N/A N/A N/A N/A Fund + - ------------------------------------------------------------------------------------------------------------------------ Prime Quality Money $ 151,369 $ 151,369 100% 100% Market Fund - ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market Fund - ------------------------------------------------------------------------------------------------------------------------ Tax-Free Money Market Fund + - ------------------------------------------------------------------------------------------------------------------------ U.S. Government $ 193,216 $ 193,216 100% 100% Securities Money Market Fund - ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Money $ 25,484 $ 25,484 100% 100% Market Fund + - ------------------------------------------------------------------------------------------------------------------------
1. These amounts refer to brokerage commissions paid to, or brokered transactions effected through, SEI Investments Distribution Co., the Trust's principal underwriter. + Prior to May 24, 1999, brokerage fees were paid by the predecessor to this fund pursuant to an agreement between the CrestFunds and the Adviser for the fiscal years ended November 30, 1999. For the fiscal years ended May 31, 1998 and 1997, 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 ------------------------------------------------------------------------------------- 1998 1997 1998 1997 ------------------------------------------------------------------------------------- Balanced Fund $ 169,222 $ 195,918 $ 4,280 $ 195,918 - ------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund $ 3,339,393 $ 3,228,364 $ 34,827 $ 3,228,364 - -------------------------------------------------------------------------------------------------------------------------------
B-78
- ------------------------------------------------------------------------------------------------------------------------------- TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES FUND ------------------------------------------------------------------------------------- 1998 1997 1998 1997 ------------------------------------------------------------------------------------- Core Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------- Emerging Markets Equity Fund $ 241,272 $ 144,635 - ------------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund $ 1,031,949 $ 1,248,896 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- International Equity Index Fund $ 21,888 $ 94,672 $ 71 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- International Equity Fund $ 3,098,063 $ 2,875,911 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund $ 191,298 $ 1,090,559 $ 18,224 $ 1,090,559 - -------------------------------------------------------------------------------------------------------------------------------- Small Cap Equity Fund * $ 229,856 * $ 229,856 - -------------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Fund * * * * - -------------------------------------------------------------------------------------------------------------------------------- Sunbelt Equity Fund $ 904,698 $ 903,669 $ 5,202 $ 903,669 - -------------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund * * * * - -------------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund $ 4,325,977 $ 4,600,079 $ 37,379 $ 4,600,079 - ------------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund $ 0 $ 169 $ 200 $ 169 - ------------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund $ 0 $ 201 $ 135 $ 201 - ------------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 0 $ 17,502 $ 0 $ 17,502 - ------------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund $ 0 $ 3,552 $ 0 $ 3,552 - ------------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage $ 0 $ 2,053 $ 73 $ 2,053 Securities Fund - ------------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Fund N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund $ 0 $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund $ 0 $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Fund $ 0 $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Municipal Bond N/A N/A N/A N/A Fund + - ------------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Fund N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------- Prime Quality Money Market Fund $ 0 $ 122,053 $ 0 $ 122,053 - -------------------------------------------------------------------------------------------------------------------------------
B-79
- -------------------------------------------------------------------------------------------------------------------------------- TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES FUND ------------------------------------------------------------------------------------- 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Money Market $ 0 $ 141,850 $ 0 $ 141,850 Fund - ------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market Fund $ 0 $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------- Tax-Free Money Market Fund N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Money Market Fund + N/A N/A N/A N/A - -------------------------------------------------------------------------------------------------------------------------------
*Not in operation during the period. + Prior to May 24, 1999, brokerage fees were paid by the predecessor to this fund pursuant to an agreement between the CrestFunds and the Adviser for the fiscal years ended November 30, 1998 and November 30, 1997, respectively. For the fiscal years ended May 31, 1999 and 1997, the portfolio turnover rate for each of the non-money market Funds was as follows:
- --------------------------------------------------------------------------------------------------------------------- TURNOVER RATE -------------------------------------------- FUND 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- Balanced Fund 179% 154% 197% - ----------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund 147% 194% 141% - ----------------------------------------------------------------------------------------------------------------------- Core Equity Fund * * * - ----------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Fund * * * - ----------------------------------------------------------------------------------------------------------------------- Emerging Markets Equity Fund 67% 74% 72% - ----------------------------------------------------------------------------------------------------------------------- Growth and Income Fund 71% 100% 82% - ----------------------------------------------------------------------------------------------------------------------- International Equity Fund 161% 108% 139% - ----------------------------------------------------------------------------------------------------------------------- International Equity Index Fund 32% 1% 2% - ----------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund 76% 129% 152% - ----------------------------------------------------------------------------------------------------------------------- Small Cap Equity Fund 63% 55% 27% - ----------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Fund * * * - ----------------------------------------------------------------------------------------------------------------------- Sunbelt Equity Fund 84% 70% 72% - ----------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund * * * - -----------------------------------------------------------------------------------------------------------------------
B-80
- ---------------------------------------------------------------------------------------------------------------------- TURNOVER RATE FUND -------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund 69% 99% 105% - ---------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund 72% 69% 135% - ---------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund 12% 7% 15% - ---------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund 221% 109% 298% - ---------------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund 224% 378% 489% - ---------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 379% 163% 133% - ---------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Fund 19% 12% 5% - ---------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund 108% 87% 118% - ---------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 57% 39% 93% - ---------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Fund 19% 14% 21% - ---------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Municipal Bond Fund 19% 30% 25% - ---------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Fund 28% 39% 24% - ----------------------------------------------------------------------------------------------------------------------
*Not in operation during the period. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. Shares are entitled upon liquidation to a PRO RATA share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any Shareholder held personally liable for the obligations of the Trust. B-81 LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. 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 mission critical 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 has sought and received assurances from each from each that its system is expected to accommodate the year 2000 without material adverse consequences to the Trust. While such assurances have been received, the Trust and its shareholders may experience losses if these assurances prove to be incorrect or as a result of year 2000 computer difficulties experienced by issuers of portfolio securities or third parties, such as custodians, banks, broker-dealers or others with which the Trust does business. 5% AND 25% SHAREHOLDERS As of September 1, 1999, 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
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Balanced Fund Trustman - 400450-7 4,370,451.0500 23.51% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-82
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- SunTrust Bank Atlanta Trustee 930,002.9290 5.00% FBO Genuine Partnership Plan C/O Fascorp 8515 E Orchard Rd #2T2 Englewood, CO 80111-5002 Capital Appreciation Fund Trustman -400450-7 42,753,336.0910 39.52% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman -400452-3 20,490,770.8700 18.94% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman -400453-6 10,740,012.0310 9.93% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 SunTrust Bank Central Florida 6,717,110.4390 6.21% FBO Florida Rock Industries Inc. P/S & Deferred Earnings Plan C/O Fascorp 8515 E. Orchard Rd. #2T2 Englewood, CO 80111-5002
B-83
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman -400451-0 6,309,850.0130 5.83% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Emerging Markets Equity Fund Trustman - 400450-7 2,304,207.6580 76.73% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 342,881.4230 11.42% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 International Equity Fund Trustman - 400450-7 25,545,283.2270 58.59% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 12,531,603.6870 28.74% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 3,165,647.8090 7.26% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 International Equity Index Fund Trustman - 400450-7 5,285,827.2620 74.52% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-84
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 40052-3 551,387.3980 7.77% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 439,979.5740 6.20% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Mid-Cap Equity Fund Trustman - 400450-7 9,852,150.6920 49.01% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 6,874,574.3360 34.20% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 1,592,306.6360 7.92% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Small Cap Equity Fund Trustman - 400450-7 23,008,174.8530 67.05% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-85
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400452-3 6,666,101.2740 19.43% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Small Cap Growth Stock Fund Trustman - 400450-7 5,815,085.9200 48.26% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 2,406,227.5720 19.97% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-3 1,533,451.5800 12.73% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400453-6 4,484.782.7850 12.32% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Sunbelt Equity Fund Trustman - 400450-7 6,174,205.0670 49.26% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-86
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400452-3 1,643,573.2380 13.11% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 838,804.1000 6.69% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Tax Sensitive Growth Stock Fund Trustman - 400452-3 3,249,894.4640 38.18% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400450-7 2,765,742.8090 32.49% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 2,494,015.4860 29.30% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Value Income Stock Fund Trustman - 400450-7 84,435,886.3800 58.94% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-87
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400452-3 27,374,584.3090 19.11% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Florida Tax-Exempt Bond Fund Trustman - 400452-3 6,881,985.7110 66.40% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 2,260,863.4580 21.81% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400450-7 1,221,370.2230 11.78% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Investment Grade Bond Fund Trustman - 400450-7 46,474,618.8200 43.24% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 34,438,046.0270 30.72% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-88
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400451-0 15,692,781.5260 14.24% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Georgia Tax-Exempt Bond Fund Trustman - 400451-0 4,531,481.6710 50.91% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400450-7 3,174,483.7900 35.66% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 1,195,693.5090 13.43% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Investment Grade Tax-Exempt Bond Fund Trustman - 400452-3 6,821,583.7490 51.86% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400450-7 3,252,868.1700 24.77% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-89
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400451-0 3,069,472.8510 23.77% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Limited-Term Federal Mortgage Trustman - 400450-7 7,375,225.0770 54.23% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 4,526,381.9400 33.28% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 2,294,629.2980 9.52% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Short-Term Bond Fund Trustman - 400452-3 5,966,017.3340 29.00% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-90
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400451-0 5,706,381.9520 27.74% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400450-7 5,632,669.6180 27.38% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400453-6 1,259,377.9700 6.12% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Short-Term U.S. Treasury Trustman - 400450-7 2,466,823.7630 43.28% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-91
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Trustman - 400452-3 1,969,162.7700 34.55% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400451-0 891,603.8630 15.64% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 U.S. Government Securities Fund Trustman - 400451-0 3,184,943.1860 34.18% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400452-3 3,096,357.4090 33.22% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman - 400450-7 1,598,603.5840 17.15% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Hamac & Co. - 500001-8 1,061,832.6820 11.39% Attn: Barbara Holloway P.O. Box 26665 HDQ 5706 Richmond, VA 23261-6665 Prime Quality Money Market Fund SunTrust Bank 3,300,149,241.2900 91.37% Attn: Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504
B-92
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Tax-Exempt Money Market Fund SunTrust Bank 651,526,589.2800 100.00% Attn: Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 U.S. Government Securities Money SunTrust Bank 324,930,712.1800 91.10% Market Fund Attn: Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 SunTrust Bank Atlanta NA 27,462,899.1700 7.70% Trustee FBO Anderson Companies Profit Sharing 401(k) Plan c/o Fascorp 8515 E. Orchard Road 2T2 Englewood, CO 80111-5002
INVESTOR SHARES
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Mid-Cap Equity Fund Anthony R. Gray 85,643.6620 5.84% 460 Virginia Drive Winter Park, FL 32789-5805 Florida Tax-Exempt Bond Fund Mildred Meinhard Rast 32,904.8560 10.37% 821 Lake Port Blvd. Apt. #A404 Leesburg, FL 34746-7698 NFSC FEBO # 1FR-027120 17,581.9140 5.54% Arline A. Wollenhaupt Gary Wollenhaupt 2313 Runyon Court Orlando, FL 32837-5216 Georgia Tax-Exempt Bond Fund NFSC FEBO # G1R-162566 86,093.9560 23.36% M C Tatro 5360 Deer Run Dr. Conyers, GA 30094-4706 Patrick J. Doran & 31,983.8270 8.68% Norma R. Doran Jtten 2024 Fisher Trail NE Atlanta, GA 30345-3429
B-93
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- NFSC FEBO # G1R-159913 18,740.8400 5.09% Jean D. Brooks 3774 Wedgewood Chase Norcross, GA 30092-4528 Limited-Term Federal Mortgage SunTrust Bank Central Florida NA 10,730.7570 5.10% Securities Fund Collateral Account Greater Orlando Assoc. Of Realtors 621 E. Central Blvd. Orlando, FL 32801-2916 Short-Term Bond Fund NFSC FEBO # G1R-184632 26,052.6840 13.50% NFSC/FMTC IRA Rollover FBO Dewey L. Haggard 549 Hollydale Ct NW Atlanta, GA 30342-3633 Bartow Memorial Hospital 13,537.7910 7.29% Foundation Inc. P.O. Box 877 Bartow, FL 33831-0877 Short-Term U.S. Treasury Clarence A. Rittenhouse 67,657.0380 23.51% Securities Fund Margaret S. Rittehnouse JT Wros 12993 Lampadaire Drive Creve Couer, MO 63141-7361 NFSC FEBO # G2R-002933 34,932.3700 12.14% Hans Ernst TTEE Graphic Art Svc Inc 401K 550 Commerce Park Drive Marietta, GA 30060-2763 NFSC FEBO #P1R-047546 21,963.0380 7.62% NFSC/FMTC IRA FBO Douglas E. Phillips 2070 Goldwater court Maitland, FL 32751-3914 U.S. Government Securities Fund NFSC FEBO #1F1R-055778 20,805.4070 9.02% NFSC/FMTC IRA FBO Dona M. Bray 22 Little John Lane Rockledge, FL 23955-2411
B-94
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Tax-Exempt Money Market Fund National Financial Services Corp. 116,878,679.3000 86.57% For the Exclusive Benefit of Our Customers Attn: Mutual Funds Dept. One World Financial Center 200 Liberty St. Floor 5 New York, NY 10281-5500 Prime Quality Money Market Fund National Financial Services Corp. 860,484,803.6700 88.81% For the Exclusive Benefit of Our Customers Attn: Mutual Funds Dept. One World Financial Center 200 Liberty St. Floor 5 New York, NY 10281-5500 U.S. Government Securities Money National Financial Services Corp. 28,031,008.8000 44.53% Market Fund For the Exclusive Benefit of Our Customers Attn: Mutual Funds Dept. One World Financial Center 200 Liberty St. Floor 5 New York, NY 10281-5500 Albecca Inc. 9,377,661.5800 14.90% Attn: Cheryl George 3900 Steve Reynolds Blvd. Norcross, GA 30093-3061 Akerman, Senterfitt & Eidson 5,829,844.9900 9.26% Attorney Account P.O. Box 231 Orlando, FL 32802-0231
FLEX SHARES
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- International Equity Index Fund NFSC FEBO # G2R-003018 8,807.0360 5.82% Rex Miller TTEE Nale Inc. 401K P.O. Box 2410 Kennesaw, GA 30144-9106
B-95
NUMBER OF FUND NAME AND ADDRESS SHARES % OF CLASS - ---- ---------------- ---------------- ---------- Sunbelt Equity Fund NFSC FEBO # G2R-003018 29,570.4010 8.47% Rex Miller TTEE Nale Inc. 401K P.O. Box 2410 Kennesaw, GA 30144-9106 Georgia Tax-Exempt Bond Fund NFSC FEBO # G1R-103721 72,931.9080 5.39% Bruce Philip Vineyard 1460 Iris Dr. Conyers, GA 30094-5142 Short-Term Bond Fund NFSC FEBO # G2R-003018 20,415.0890 8.77% Rex Miller TTEE Nale Inc. 401K P.O. Box 2410 Kennesaw, GA 30144-9106 Short-Term U.S. Treasury NFSC FEBO # 1GR-094986 44,000.4620 7.17% Securities Fund L B Roane Doris S. Roane 673 Sugar Creek Trail SE Conyers, GA 30094-3812
EXPERTS Following are the audited financial statements for the fiscal year ended May 31, 1999 and the reports of Arthur Andersen, LLP, independent public accountants, dated July 23, 1999, relating to the financial statements and financial highlights. Deloitte & Touche LLP served as independent public accountants to the STI Classic Growth and Income Fund, STI Classic Life Vision Balanced Portfolio, STI Life Vision Growth and Income Fund, STI Classic Life Vision Maximum Growth Portfolio, STI Classic Maryland Municipal Bond Fund, STI Classic Virginia Municipal Bond Fund (each formerly a series of the CrestFunds) for the fiscal periods ended prior to May 31, 1999. APPENDIX A: FINANCIAL STATEMENTS B-96 STATEMENT OF NET ASSETS STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 FLORIDA TAX-EXEMPT BOND FUND
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- MUNICIPAL BONDS (92.9%) FLORIDA (85.2%) Brevard County, School Board, Ser A, COP (AMBAC) 5.400%, 07/01/12 $1,500 $1,573 Brevard County, State Health Facilities Authority, Holmes Regional Medical Center Project, RB, Callable 10/01/03 @ 102 (MBIA) 5.700%, 10/01/08 3,000 3,239 Brevard County, State Health Facilities Authority, Wuesthoff Memorial Hospital Project, Ser A, RB (MBIA) 6.250%, 04/01/06 930 1,033 Broward County, School District, Ser B, COP, Callable 07/01/07 @ 101 (AMBAC) 5.100%, 07/01/09 1,465 1,527 Citrus County, Pollution Control, Florida Power, Crystal River Project, RB, Callable 08/01/02 @ 102 6.350%, 02/01/22 335 360 Dade County, Aviation Revenue, Miami International Airport, Ser B, RB, AMT, Callable 10/01/07 @ 101.50 (FSA) 5.125%, 10/01/13 2,255 2,256 Dade County, Aviation Revenue, RB, AMT, Callable 10/01/02 @ 102 (MBIA) 6.600%, 10/01/22 825 898 Dade County, Aviation Revenue, Ser A, RB, Callable 10/01/05 @ 102 (AMBAC) 6.000%, 10/01/09 500 550 Dade County, Educational Facility, University of Miami, Ser A, RB (MBIA) 5.500%, 04/01/01 2,465 2,544 Dade County, School Board, Ser B, COP (AMBAC) 5.750%, 08/01/03 250 267 Dade County, Seaport, RB (MBIA) 6.200%, 10/01/08 750 846 6.500%, 10/01/09 1,000 1,158 6.200%, 10/01/10 1,000 1,132 Dade County, State Educational Facilities Authority, University of Miami, RB, Callable 04/01/06 @ 102 (MBIA) 5.750%, 04/01/20 2,000 2,108
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- FLORIDA--CONTINUED Dade County, State Educational Facilities Authority, University of Miami, Ser A, RB (MBIA) 6.000%, 04/01/08 $ 755 $ 836 Dade County, Water & Sewer, RB (FGIC) 6.250%, 10/01/07 1,000 1,124 Daytona Beach, Water & Sewer, ETM, RB, Callable 11/15/1999 @ 102 (F) 6.750%, 11/15/07 1,000 1,106 Deerfield Beach, Water & Sewer, RB (FGIC) 6.125%, 10/01/06 250 274 Gainesville, Utility Systems, Ser A, RB 5.750%, 10/01/04 1,300 1,404 5.750%, 10/01/09 750 826 Gulf Breeze, Local Government Lien, Ser B, RB, Mandatory Tender 12/01/08 (FGIC) 5.650%, 12/01/15 460 491 Gulf Breeze, Local Government Lien, Ser B, RB, Mandatory Tender 12/01/09 (FGIC) 5.750%, 12/01/15 410 440 Hillsborough County, Capital Improvement Program, ETM, RB (FGIC) (F) 5.900%, 08/01/04 300 325 Hillsborough County, School Board Revenue, COP, Callable 07/01/06 @ 100 (MBIA) 5.875%, 07/01/08 1,000 1,098 Hillsborough County, University Community Hospital, RB (MBIA) 6.500%, 08/15/19 145 170 Indian Trace Community, Water Management Split Benefit, Ser A-1, RB, Callable 05/01/05 @ 102 (MBIA) 5.500%, 05/01/07 455 487 Jacksonville, Electric Authority, Bulk Power Supply, RB, Prerefunded 10/01/00 @ 101.5 (F) 6.750%, 10/01/16 250 265 Jacksonville, Excise Tax, Ser B, RB, AMT, Callable 10/01/03 @ 100 (FGIC) 5.200%, 10/01/04 1,500 1,546 24
- ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- FLORIDA--CONTINUED Jacksonville, River City Renaissance Project, RB (FGIC) 6.000%, 10/01/04 $2,430 $2,653 Jacksonville, State Health Facilities Authority, Charity Obligation Group, Ser A, RB , Callable 08/15/07 @ 101 (MBIA) 5.250%, 08/15/15 1,465 1,481 Jacksonville, Water & Sewer, RB, Prerefunded 09/30/08 @ 101 (MBIA) (G) 5.000%, 10/01/20 610 637 Lakeland, Electric & Water, Ser A, RB, Callable 10/01/09 @ 101 (MBIA) 5.000%, 10/01/36 3,000 2,868 Lakeland, Electric & Water, Ser B, RB (FSA) 6.550%, 10/01/05 2,590 2,926 Lakeland, Electric & Water, Ser C, RB (FSA) 6.050%, 10/01/07 1,000 1,116 Lee County, Industrial Development Authority, Bonita Springs Utilities Project, RB, Callable 11/01/06 @ 101 (MBIA) 5.750%, 11/01/10 1,480 1,576 Lee County, Water & Sewer, Ser A, RB, Callable 10/01/09 @ 101 (AMBAC) 4.750%, 10/01/19 3,720 3,507 Manatee County, Community Redevelopment Administration, Center Project, RB, Callable 04/01/00 @ 102 (MBIA) 7.000%, 04/01/08 1,000 1,049 Martin County, State Health Facilities Authority, Martin Memorial Medical Center, Ser B, RB, Callable 11/15/07 @ 102 (MBIA) 5.150%, 11/15/11 1,070 1,097 Miami, Packaging Facility, RB (MBIA) 5.250%, 10/01/15 1,000 1,033 Miami-Dade County, School District, GO (FSA) 5.375%, 08/01/12 5,000 5,283 Miami-Dade County, School District, Ser C, COP, Callable 08/01/08 @ 101 (FSA) 5.250%, 08/01/13 1,910 1,957
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- FLORIDA--CONTINUED Miami-Dade County, Special Obligation, RB, Callable 04/01/08 @ 86.60 (MBIA) (A) 0.000% 10/01/11 $1,635 $ 881 Miami-Dade County, USMA Public Improvements, RB, Callable 10/01/09 @ 101 (FSA) 5.125%, 10/01/13 2,515 2,565 North Broward, Hospital District, ETM, RB (MBIA) (G) 5.950%, 01/01/01 1,000 1,034 Orange County, Public Facilities, Ser A, RB, Callable 10/01/04 @ 102 (AMBAC) 5.650%, 10/01/07 200 215 Orange County, State Housing Finance Authority, Single Family Mortgage, Ser B, RB, Callable 9/01/07 @ 102 5.800%, 09/01/17 655 676 Orlando, Aviation Authority, Airport Facilities, RB, AMT (FGIC) 5.250%, 10/01/13 1,725 1,770 5.500%, 10/01/17 1,810 1,882 Orlando, Aviation Authority, Airport Facilities, Ser A, RB, AMT, Callable 10/01/03 @ 102 (AMBAC) 5.400%, 10/01/06 1,340 1,409 Orlando, Electric & Water, Ser D, RB 6.750%, 10/01/17 5,385 6,430 Osceola County, COP (AMBAC) 6.250%, 06/01/01 1,080 1,133 Palm Beach County, Apartment System, RB, Callable 10/01/01 @ 102 (MBIA) 7.625%, 10/01/04 1,410 1,550 Palm Beach County, Criminal Justice Facilities, RB (FGIC) 5.375%, 06/01/09 1,500 1,600 5.750%, 06/01/12 2,000 2,184 Palm Beach County, Solid Waste Authority, Ser A, ETM, RB (AMBAC) (F) 6.000%, 10/01/09 300 338
25 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 FLORIDA TAX-EXEMPT BOND FUND--CONCLUDED
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- FLORIDA--CONTINUED Palm Beach County, Solid Waste Authority, Ser A, RB (AMBAC) 6.000%, 10/01/09 $2,225 $2,471 Pensacola, Airport, Ser A, RB, AMT, Callable 10/01/08 @ 102 (MBIA) 6.250%, 10/01/09 505 565 6.000%, 10/01/12 1,075 1,170 Pinellas County, Morton Plant Health Systems Project, RB, Callable 11/15/03 @ 102 (MBIA) 5.500%, 11/15/08 1,500 1,580 Pinellas County, State Housing Finance Authority, Single Family Mortgage, Ser C, RB, Callable 03/01/07 @ 102 5.050%, 09/01/07 215 221 5.100%, 09/01/08 230 236 Plant City, Utility System, RB (MBIA) 6.000%, 10/01/15 400 448 Polk County, Utility System, ETM, RB (FGIC) (G) 6.000%, 10/01/08 2,250 2,468 Reedy Creek, Utility System, Ser 1991-1, RB, Prerefunded 10/01/01 @ 101 (MBIA) (F) 6.250%, 10/01/11 405 432 South Broward, Hospital District, RB, Callable 05/01/03 @ 102 (AMBAC) 7.500%, 05/01/08 1,000 1,137 St. Lucie County, School District, GO, Callable 07/01/02 @ 102 (AMBAC) 6.000%, 07/01/04 500 537 State, Aqueduct Authority, RB, Prerefunded 09/01/01 @ 101 (AMBAC) 6.750%, 09/01/21 170 183 State, Board of Education, Capital Outlay, GO 6.100%, 06/01/00 125 127 State, Board of Education, Capital Outlay, Ser A, GO, Callable 06/01/00 @ 102 7.250%, 06/01/23 355 374 State, Board of Education, Capital Outlay, Ser A, GO, Callable 01/01/08 @ 101 5.250%, 01/01/12 2,495 2,571
- ------------------------------------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------------------------------------- FLORIDA--CONTINUED State, Board of Education, Capital Outlay, Ser A, GO, Callable 01/01/09 @ 101 4.750%, 01/01/19 $2,000 $1,885 State, Board of Education, Capital Outlay, Ser B, GO (F) 6.000%, 06/01/02 1,000 1,054 State, Board of Education, Capital Outlay, Ser B, GO, Callable 06/01/02 @ 101 5.900%, 06/01/12 450 480 6.000%, 06/01/15 170 182 State, Board of Education, Ser B, GO, Callable 06/01/01 @ 101 6.000%, 06/01/22 500 535 State, Board of Education, Ser C, ETM, GO (F) 7.100%, 06/01/07 190 192 State, Department of General Services, Preservation 2000, Ser A , RB, Callable 07/01/09 @ 101 (FGIC) 5.250%, 07/01/12 2,000 2,066 State, Finance Department, Department of Natural Resources, Preservation 2000, Ser A, RB, Prerefunded 07/01/01 @ 102 (AMBAC) (F) 6.750%, 07/01/06 80 86 State, Finance Department, General Services, Environmental Protection, Preservation 2000, Ser B, RB,Callable 07/01/08 @ 101 (FSA) 5.250%, 07/01/12 3,000 3,092 State, Municipal Power Agency, Saint Lucie Project, ETM, RB (F) 5.000%, 10/01/17 500 496 Sunrise, Utility System, RB, Callable 10/01/18 @ 100 (AMBAC) 5.200%, 10/01/22 2,000 2,010 5.000%, 10/01/28 1,500 1,457 Sunrise, Utility System, Ser A, RB (AMBAC) (A) 0.000%, 10/01/09 1,000 617 Tallahassee, Utility System, Ser B, RB, Prerefunded 10/01/99 @ 102 (F) 6.900%, 10/01/14 240 248
26
- ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- FLORIDA--CONTINUED Tampa, Health System, Catholic Health, Ser A-1, RB, Callable 11/15/08 @ 102 (MBIA) 5.250%, 11/15/11 $2,300 $2,362 Tampa, Health System, Catholic Health, Ser A-2, RB, Callable 11/15/08 @ 102 (AMBAC) 5.250%, 11/15/10 2,030 2,074 Tampa, Refunding Bond, RB, Callable 10/1/01 @ 102 (AMBAC) 7.050%, 10/01/07 1,000 1,089 Tampa, Special Tax Allocation, Callable 10/01/01 @ 102 (AMBAC) 6.900%, 10/01/09 1,500 1,626 ------- 116,804 ------- PUERTO RICO (7.7%) Commonwealth, Aqueduct & Sewer Authority, RB (MBIA) 6.250%, 07/01/12 1,000 1,147 Commonwealth, GO (MBIA) 5.650%, 07/01/15 1,000 1,084 Commonwealth, Electric Power Authority, Ser S, RB 5.500%, 07/01/00 200 205 Commonwealth, Highway & Transportation Authority, Ser X, RB (MBIA) 5.500%, 07/01/15 1,690 1,804 Commonwealth, Highway & Transportation Authority, Ser Z, RB (MBIA) 6.250%, 07/01/14 3,000 3,460 Commonwealth, Housing Finance, Homeowner Mortgage, Ser A, AMT, Callable 12/01/08 @ 101 (GNMA) 5.100%, 12/01/18 2,000 2,002 Commonwealth, Public Buildings Authority, Guaranteed Government Facilities, Ser A, RB (AMBAC) 6.250%, 07/01/14 750 865 ------ 10,567 ------ Total Municipal Bonds (Cost $126,082) 127,371 ------
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- CASH EQUIVALENTS (7.7%) Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,390,405 outstanding shares of beneficial interest 14,763 Overdistributed net investment income (5) Accumulated net realized gain on investments 432 Net unrealized appreciation on investments 1,289 ------------ Total Net Assets (100.0%) $137,170 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.59 ------------ ------------ Net Asset Value and Redemption Price Per Share-- Investor Shares $ 10.60 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($10.60 / 96.25%) $ 11.01 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Shares-- Flex Shares (1) $ 10.62 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 27 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) FACE AMOUNT (000) VALUE (000) FACE AMOUNT (000) VALUE (000) FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- MUNICIPAL BONDS (94.3%) GEORGIA (94.3%) Albany-Dougherty County, State Hospital Authority, Ser B, Prerefunded 09/01/00 @ 102 (AMBAC) (F) 7.500%, 09/01/20 $ 255 $ 273 Alpharetta, GO 5.000%, 05/01/07 1,650 1,718 Athens, Water & Sewer, ETM, RB (F) 5.700%, 07/01/00 165 169 Atlanta, Airport Facility, RB (AMBAC) 6.000%, 01/01/03 1,000 1,066 6.000%, 01/01/04 500 539 6.500%, 01/01/06 1,000 1,122 Augusta, Water & Sewer, RB, Prerefunded 05/01/02 @ 102 (F) 6.200%, 05/01/03 130 140 Bibb County, GO 7.000%, 01/01/04 985 1,099 Carroll County, Water and Sewer, RB, Callable 07/01/09 @ 102 (AMBAC) 5.000%, 07/01/10 720 739 5.000%, 07/01/11 805 819 Cartersville, Water & Sewer, RB, Callable 07/01/08 @102 (FSA) 5.000%, 07/01/12 1,255 1,259 Cherokee County, School District, GO 5.000%, 02/01/12 1,690 1,717 5.000%, 02/01/13 1,370 1,389 Clarke County, Athens Regional Medical Center Project, RB 5.375%, 01/01/07 1,425 1,508 Clayton County, GO 5.000%, 08/01/02 1,000 1,034 Clayton County, Water & Sewer Authority, RB (MBIA) 5.000%, 05/01/11 600 611 Clayton County, Water Authority, RB, Callable 05/01/06 @ 102 (AMBAC) 5.350%, 05/01/09 1,500 1,586 Cobb County, GO 5.000%, 02/01/03 1,025 1,063 Cobb County & Marietta, Coliseum & Exhibit Hall Authority, RB (MBIA) 5.500%, 10/01/12 940 1,004
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- GEORGIA--CONTINUED Cobb County & Marietta, Water Authority, RB 5.000%, 11/01/03 $1,255 $1,306 5.100%, 11/01/04 1,000 1,049 Columbia County, Courthouse/ Detention Center Projects, GO, Callable 02/01/08 @ 102 5.000%, 02/01/10 920 931 Dalton, Utilities Revenue, RB (MBIA) 6.000%, 01/01/08 3,240 3,581 Dalton-Whitfield County, Hospital Authority, RB, Prerefunded 07/01/00 @ 102 (F) 7.000%, 07/01/03 355 375 DeKalb County, Development Authority, Emory University Project, Ser A, RB 5.375%, 11/01/05 1,650 1,762 DeKalb County, Development Authority, Emory University Project, Ser A, RB, Callable 11/01/05 @ 101 5.200%, 11/01/08 500 524 DeKalb County, School District, Ser A, GO 6.250%, 07/01/11 1,500 1,708 Douglasville - Douglas County, Water & Sewer Authority, RB (AMBAC) 5.625%, 06/01/15 1,370 1,467 East Point, Building Authority, RB, Callable 02/01/06 @ 102 (AMBAC) 4.800%, 02/01/07 535 548 Fayette County, School District, GO 6.250%, 03/01/07 450 498 Fayette County, School District, GO, Callable 03/01/09 @ 102 4.625%, 03/01/12 1,000 977 4.625%, 03/01/13 1,000 969 Fayette County, Water Authority, ETM, RB (MBIA) (F) 8.550%, 10/01/01 300 332 Forsyth County, School District, GO 6.400%, 07/01/05 750 835 6.500%, 07/01/06 1,000 1,128 Forsyth County, School District, GO (MBIA) 5.350%, 07/01/10 780 839 Forsyth County, Water & Sewer Authority, RB 5.000%, 04/01/04 1,000 1,040
28
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- GEORGIA--CONTINUED Forsyth County, Water & Sewer Authority, RB, Callable 04/01/08 @ 101 5.000%, 04/01/09 $1,120 $1,160 5.000%, 04/01/10 460 472 Fulco, Hospital Authority, Catholic Health East, Ser A, RB, Callable 11/15/08 @ 102 (MBIA) 5.250%, 11/15/12 1,000 1,022 Fulton County, Hospital Authority, Northside Hospital Project, Ser B, RB, Prerefunded 10/01/02 @ 102 (MBIA) (F) 6.600%, 10/01/11 2,000 2,203 Fulton County, School District, GO 5.250%, 01/01/12 1,000 1,044 Gwinnett County, Recreation Authority, RB 5.800%, 02/01/06 785 851 5.875%, 02/01/07 1,390 1,520 Gwinnett County, School District, GO 6.400%, 02/01/06 500 560 Gwinnett County, School District, Ser B, GO 6.400%, 02/01/07 1,500 1,691 Gwinnett County, Water & Sewer Authority, RB, Callable 08/01/08 @ 102 5.000%, 08/01/13 800 810 Hall County, School District, Ser B, GO 6.300%, 12/01/ 675 753 Henry County, GO 6.300%, 08/01/08 300 340 Henry County, Henry Medical Center Project, RB, Callable 07/01/07 @ 102 (AMBAC) 5.500%, 07/01/08 2,460 2,629 Henry County, School District, Ser A, GO 6.150%, 08/01/06 150 166 6.450%, 08/01/11 500 575 Henry County, School District, Ser B, GO (MBIA) 5.500%, 08/01/01 350 363 Henry County, Water & Sewer Authority, RB (AMBAC) 6.150%, 02/01/20 1,750 1,983
FACE AMOUNT (000) VALUE (000) GEORGIA--CONTINUED Houston County, School District, Intergovernmental Contract, COP, Prerefunded 03/01/04 @ 102 (MBIA) 6.000%, 03/01/14 $2,000 $2,197 Jackson County, School District, GO, Callable 07/01/08 @ 101 5.000%, 07/01/10 1,020 1,046 Medical Center Hospital Authority, Columbus Regional Healthcare System, RB, Callable 08/01/05 @ 102, (MBIA) 6.000%, 08/01/06 1,340 1,471 Meriwether County, School District, GO (FSA) 7.000%, 02/01/06 740 850 Metro Atlanta, Rapid Transportation Authority, Ser N, RB 6.000%, 07/01/07 1,000 1,097 Metro Atlanta, Rapid Transportation Authority, Ser P, RB (AMBAC) 6.250%, 07/01/08 1,000 1,131 Milledgeville, Water & Sewer, RB (FSA) 6.000%, 12/01/16 1,000 1,117 6.000%, 12/01/21 1,000 1,118 Paulding County, School District, GO (MBIA) 6.000%, 02/01/10 1,000 1,110 Paulding County, School District, Ser A, GO 6.625%, 02/01/07 1,000 1,139 6.625%, 02/01/08 500 574 Private Colleges & Universities, Agnes Scott College Project, RB, Callable 06/01/09 @ 101 (MBIA) 5.250%, 06/01/10 1,360 1,423 Private Colleges & Universities, Emory University Project, Ser A, RB 5.500%, 11/01/06 525 563 Private Colleges & Universities, Emory University Project, Ser A, RB, Callable 11/01/07 @ 100 5.000%, 11/01/10 1,000 1,021 Private Colleges & Universities, Emory University Project, Ser C, RB, Callable 10/01/02 @ 102 5.900%, 10/01/04 305 328
29 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 GEORGIA TAX-EXEMPT BOND FUND--CONCLUDED
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- GEORGIA--CONTINUED Private Colleges & Universities, Mercer University Project, RB (MBIA) 6.400%, 10/01/11 $ 500 $ 580 Private Colleges & Universities, Mercer University Project, Ser A, RB, Callable 10/01/09 @ 101 5.250%, 10/01/13 1,000 1,016 Private Colleges & Universities, Spelman College Project, RB (FGIC) 6.000%, 06/01/09 475 520 Putnam County, School District, GO, Callable 2/01/08 @ 102 4.500%, 02/01/12 930 916 Savannah, Hospital Authority, St. Josephs/Candler Health System, Ser B, RB, Callable 01/01/09 @ 101 5.250%, 07/01/12 1,040 1,063 Savannah, Water & Sewer, ETM, RB (F) 6.450%, 12/01/04 1,000 1,115 Smyrna, Development Authority, RB 5.600%, 02/01/20 735 774 State, Fulco Hospital, Health System, Catholic Health East, Ser A, RB, Callable 11/15/08 @ 102 (MBIA) 5.250%, 11/15/13 2,000 2,034 State, GO 6.250%, 08/01/13 650 748 State, Housing & Financial Authority, Single Family Mortgage, Ser B, RB, Callable 06/01/05 @ 102 5.550%, 12/01/07 550 579 State, Housing & Financial Authority, Single Family Mortgage, Ser B, RB, Callable 06/01/06 @ 102 (FHA) 5.550%, 12/01/10 325 339 5.600%, 12/01/11 450 469 State, Housing & Financial Authority, Single Family Mortgage, Ser C, RB, Callable 12/01/07 @ 101.50 5.550%, 12/01/16 500 518 State, Municipal Electric Authority, ETM, RB, Callable 01/12/98 @ 101 (F) 8.000%, 01/01/15 1,900 2,509
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- GEORGIA--CONTINUED State, Ser A, GO 6.250%, 04/01/11 $1,000 $1,141 State, Ser C, GO 6.500%, 04/01/08 1,000 1,148 6.250%, 08/01/08 1,360 1,544 State, Ser D, GO 6.700%, 08/01/10 2,250 2,661 5.250%, 10/01/14 780 816 State, Tollway Authority, Georgia 400 Project, RB 5.000%, 07/01/09 1,280 1,334 Upper Oconee Basin, Water Authority, RB, Callable 07/01/08 @ 102 (FGIC) 5.000%, 07/01/12 500 503 Vidalia, Water & Sewer, ETM, RB (F) 6.000%, 07/01/07 605 671 Walker County, School District, GO 5.000%, 02/01/03 1,000 1,035 Walker, Dade & Catoosa Counties, Hutchinson Medical Center Project, Ser A, RB, Callable 10/01/07 @ 102 (FSA) 5.500%, 10/01/08 1,370 1,453 ------ Total Municipal Bonds (Cost $97,514) 98,537 ------ CASH EQUIVALENTS (6 8%) AIM Management Institutional Tax-Free Portfolio 2,297 2,297 SEI Tax-Exempt Trust Institutional Tax-Free Portfolio 4,812 4,812 ------ Total Cash Equivalents (Cost $7,109) 7,109 ------ Total Investments (101.1% ) (Cost $104,623) 105,646 ------ OTHER ASSETS AND LIABILITIES, NET (-1.1%) (1,160) ------ NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 8,715,572 outstanding shares of beneficial interest 86,243 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 365,831 outstanding shares of beneficial interest 3,562
30 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------------------------- Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,330,702 outstanding shares of beneficial interest $ 13,302 Undistributed net investment income 2 Accumulated net realized gain on investments 354 Net unrealized appreciation on investments 1,023 ------------ Total Net Assets (100.0%) $104,486 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.03 ------------ ------------ Net Asset Value and Redemption Price Per Share-- Investor Shares $ 10.05 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($10.05 / 96.25%) $ 10.44 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 10.04 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 31 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 INVESTMENT GRADE BOND FUND
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (40.4%) U.S. Treasury Bonds 7.500%, 11/15/16 $80,000 $91,592 8.125%, 08/15/19 75,750 93,066 6.125%, 11/15/27 35,000 35,378 5.250%, 11/15/28 3,150 2,851 5.250%, 02/15/29 14,550 13,354 U.S. Treasury Notes 4.625%, 12/31/00 9,000 8,901 5.000%, 04/30/01 103,000 102,255 6.250%, 04/30/01 12,300 12,485 6.500%, 05/31/01 15,435 15,746 6.625%, 06/30/01 3,480 3,559 6.250%, 06/30/02 1,000 1,018 5.750%, 10/31/02 7,215 7,239 4.750%, 02/15/04 15,000 14,475 6.125%, 08/15/07 65,350 66,630 4.750%, 11/15/08 22,000 20,459 ------ Total U.S. Treasury Obligations (Cost $484,065) 489,008 ------ CORPORATE OBLIGATIONS (39.2%) FINANCE (24.0%) Americal Financial Group 7.125%, 12/15/07 7,000 6,956 Central Fidelity 8.150%, 11/15/02 3,000 3,180 Conseco 6.800%, 06/15/05 16,000 14,960 6.400%, 06/15/11 11,500 11,270 Countrywide Home Loan, Ser F, MTN 6.510%, 02/11/05 23,300 22,572 Donaldson Lufkin Jenrette 5.875%, 04/01/02 16,500 16,232 Donaldson Lufkin Jenrette, MTN 6.150%, 05/04/04 8,400 8,148 Finova Capital 6.250%, 11/01/02 11,625 11,509 6.110%, 02/18/03 18,750 18,445 6.750%, 03/09/09 6,100 5,963 Ford Motor Credit 6.500%, 02/28/02 14,600 14,691 Goldman Sachs 6.650%, 05/15/09 9,400 9,259 Great Western Financial 8.600%, 02/01/02 9,800 10,167 Household Finance 6.250%, 08/15/03 5,825 5,738 5.875%, 02/01/09 18,750 17,414
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- FINANCE--CONTINUED Merrill Lynch, Ser B, MTN 5.710%, 01/15/02 $12,750 $12,591 Paine Webber Group, Ser C, MTN 6.020%, 04/22/02 20,250 19,794 Provident 7.000%, 07/15/18 30,600 29,797 Reliastar Financial 6.500%, 11/15/08 16,750 15,996 Salomon 7.300%, 05/15/02 16,000 16,400 6.250%, 01/15/05 20,000 19,100 ------- 290,182 -------
INDUSTRIAL (15.2%) AT&T 6.000%, 03/15/09 17,275 16,476 6.500%, 03/15/29 10,200 9,473 AT&T Capital, MTN 6.890%, 01/25/02 23,325 23,354 Bausch & Lomb 6.750%, 12/15/04 11,800 11,549 Bausch & Lomb (C) 6.150%, 08/01/99 12,000 11,940 Corning 6.300%, 03/01/09 4,000 3,874 Dillards 6.430%, 08/01/04 27,000 26,123 Ford Motor 6.625%, 10/01/28 2,085 1,931 Ikon Capital, MTN 6.730%, 06/15/01 13,000 12,838 Philip Morris 7.250%, 09/15/01 13,500 13,770 7.500%, 04/01/04 14,500 14,953 Sprint Capital 5.875%, 05/01/04 11,500 11,141 6.125%, 11/15/08 2,705 2,543 6.375%, 05/01/09 10,270 9,808 6.900%, 05/01/19 14,850 14,200 ------- 183,973 ------- Total Corporate Obligations (Cost $484,858) 474,155 -------
32
- ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (15.3%) FHLMC 7.000%, 01/01/11 $1,430 $1,452 7.000%, 02/01/12 8,192 8,318 FNMA 4.750%, 11/14/03 3,500 3,330 6.500%, 01/01/13 1,702 1,695 6.500%, 02/01/13 6,262 6,236 6.500%, 03/01/13 4,304 4,285 7.500%, 12/01/26 139 143 7.000%, 01/01/27 6,902 6,906 7.500%, 03/01/27 48 50 7.500%, 05/01/27 386 395 7.500%, 06/01/27 65 67 7.500%, 07/01/27 451 461 7.500%, 08/01/27 138 142 7.500%, 09/01/27 366 375 7.500%, 10/01/27 1,099 1,124 7.500%, 11/01/27 121 124 7.500%, 12/01/27 623 637 7.500%, 01/01/28 1,152 1,179 7.500%, 02/01/28 236 242 7.500%, 04/01/28 1,466 1,500 7.500%, 05/01/28 693 710 7.500%, 06/01/28 103 106 FNMA REMIC, Ser 1997-63, Cl PC 6.500%, 03/18/26 9,160 9,024 GNMA 8.000%, 11/15/09 5,825 6,064 7.000%, 12/15/22 208 209 8.000%, 12/15/22 83,154 86,453 7.000%, 09/15/23 215 216 6.500%, 12/15/23 6,166 6,018 7.000%, 09/15/25 472 474 7.000%, 03/15/26 282 283 7.000%, 04/15/26 1,047 1,049 7.000%, 11/15/26 485 486 7.000%, 01/15/27 744 746 7.000%, 02/15/27 970 972 7.000%, 03/15/27 1,872 1,878 7.000%, 04/15/27 409 411 7.000%, 08/15/27 548 549 7.000%, 10/15/27 1,134 1,138 7.000%, 11/15/27 2,107 2,111 7.000%, 12/15/27 6,084 6,095 7.000%, 01/15/28 170 170 6.500%, 02/15/28 1,477 1,442 6.500%, 03/15/28 8,061 7,870 7.000%, 03/15/28 511 513 6.500%, 04/15/28 395 386
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS--CONTINUED 7.000%, 04/15/28 $ 626 $ 627 6.500%, 05/15/28 451 441 7.000%, 06/15/28 37 37 6.500%, 08/15/28 193 189 7.000%, 08/15/28 46 47 6.500%, 09/15/28 1,502 1,468 6.500%, 10/15/28 249 243 6.500%, 11/15/28 1,041 1,017 6.500%, 12/15/28 5,823 5,685 6.500%, 02/15/29 984 961 ------- Total U.S. Agency Mortgage-Backed Obligations (Cost $185,683) 184,749 ------- ASSET-BACKED SECURITIES (1.5%) American Express Master Trust, Ser 1992-2, Cl A 6.600%, 05/15/00 6,350 6,361 Chase Commercial Mortgage Securities, Ser 1998-1, Cl A2, CMO 6.560%, 05/18/08 3,495 3,460 Discover Card Master Trust I, Ser 1998-4, Cl A 5.750%, 10/16/03 8,190 8,077 EQCC Home Equity Loan Trust, Ser 1994-1, Cl A 5.800%, 03/15/09 457 449 Merrill Lynch Mortgage Investors, Ser 1998-C1 A1, CMO 6.310%, 11/15/26 394 392 Olympic Automobile Receivables Trust, Ser 1995-D, Cl A4 6.050%, 11/15/00 62 62 ------- Total Asset-Backed Securities (Cost $18,986) 18,801 ------- CASH EQUIVALENT (1.0%) AIM Liquid Assets Portfolio 12,160 12,160 ------- Total Cash Equivalent (Cost $12,160) 12,160 ------- REPURCHASE AGREEMENTS (3.0%) Deutsche Bank 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $19,945,118 (collateralized by various U.S. Treasury obligations: total market value $20,333,418) (H) 19,935 19,935
33 STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999
INVESTMENT GRADE BOND FUND--CONCLUDED - ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED SBC Warburg 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $15,991,506 (collateralized by U.S. Treasury Bond: total market value $16,307,771) (H) $15,983 $15,983 ------- Total Repurchase Agreements (Cost $35,918) 35,918 ------- Total Investments (100.4% ) (Cost $1,221,671) 1,214,791 ------- OTHER ASSETS AND LIABILITIES, NET (-0.4%) (4,790) ------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 110,931,510 outstanding shares of beneficial interest 1,160,025 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 3,371,284 outstanding shares of beneficial interest 35,499 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 2,510,327 outstanding shares of beneficial interest 26,536 Overdistributed net investment income (145) Accumulated net realized loss on investments (5,034) Net unrealized depreciation on investments (6,880) ------- Total Net Assets (100.0%) $1,210,001 ------- ------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $10.36 ------ ------ Net Asset Value and Redemption Price Per Share-- Investor Shares $10.36 ------ ------ Maximum Offering Price Per Share -- Investor Shares ($10.36 / 96.25%) $10.76 ------ ------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $10.37 ------ ------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 34 - ------------------------------------------------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------- MUNICIPAL BONDS (88.5%) ALABAMA (2.1%) Huntsville, Ser B, GO 4.000%, 11/01/01 $1,660 $1,671 Montgomery, Baptist Methodist Church, Special Care Facilities Financing Authority, Baptist Health, Ser B, RB, Callable 11/15/08 @ 101 (MBIA) 5.250%, 11/15/12 1,450 1,470 State Docks Authority, Docks Facility, RB (MBIA) 5.250%, 10/01/00 1,000 1,024 ------ 4,165 ------ ARIZONA (4.3%) Maricopa County, Community College Project, Ser C, GO, 5.250%, 07/01/01 5,000 5,158 Maricopa County, School District No. 80, Chandler, GO, Partially Prerefunded 07/01/01 @ 101 (FGIC) (F) 6.400%, 07/01/10 3,050 3,224 ------ 8,382 ------ CALIFORNIA (1.8%) Orange County, Loma Ridge Data Center Project, COP, Prerefunded 06/01/19 @ 100 (AMBAC) (F) 6.000%, 06/01/21 2,075 2,299 State, GO (FGIC) 5.750%, 02/01/11 1,000 1,098 ------ 3,397 ------ CONNECTICUT (0.4%) State, Special Tax Obligation, Transportation Infrastructure, Ser A, RB (FGIC) 5.500%, 10/01/12 800 854 ------ DISTRICT OF COLUMBIA (1.1%) District of Columbia, American College Obstetricians, RB, Prerefunded 8/15/01 @ 102 (AMBAC) (F) 6.500%, 08/15/18 1,930 2,078 ------ FLORIDA (7.3%) Miami-Dade County, School District, GO (FSA) 5.375%, 08/01/12 5,000 5,283
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Palm Beach County, Criminal Justice Facilities, RB (FGIC) 5.750%, 06/01/12 $5,000 $5,461 State, Finance Department, General Services, Environmental Protection, Preservation 2000, Ser B, RB, Callable 07/01/08 @ 101 (FSA) 5.250%, 07/01/12 3,500 3,608 ------ 14,352 ------ GEORGIA (4.1%) Atlanta, Water & Sewer, RB, Prerefunded 01/01/04 @ 100 (FGIC-TCRS) (F) 4.500%, 01/01/18 2,500 2,543 State, Electric Authority, Ser X, RB (MBIA) 6.500%, 01/01/12 4,700 5,419 ------ 7,962 ------ HAWAII (0.5%) State, Ser CR, GO, Callable 04/01/08 @ 101 (MBIA) 5.250%, 04/01/13 1,000 1,020 ------ ILLINOIS (13.3%) Chicago, School Finance Authority, GO, Callable 6/01/02 @ 102 (FGIC) 6.250%, 06/01/09 6,000 6,454 Chicago, Midway Airport, Ser C, RB (MBIA) 5.500%, 01/01/13 2,380 2,515 5.500%, 01/01/14 2,520 2,660 State, Financial Authority, Provena Health, Ser A, RB, Callable 05/15/08 @ 101 (MBIA) 5.500%, 05/15/11 2,500 2,607 State, Health Facilities Authority, Trinity Medical Center Project, RB, Callable 07/01/02 @ 102 (FSA) 7.000%, 07/01/12 5,000 5,506 State, Regional Transportation Authority, RB (FGIC) 6.000%, 06/01/15 2,000 2,216 State, Regional Transportation Authority, Ser A, RB, Callable 06/01/02 @ 102 (AMBAC) 6.500%, 06/01/15 3,830 4,151 ------ 26,109 ------
SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONTINUED
- ------------------------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------ INDIANA (1.1%) State, Transportation Finance Authority, Ser A, RB, Callable 12/01/08 @ 101 (MBIA) 5.250%, 12/01/12 $2,000 $2,050 ------ MARYLAND (1.5%) Baltimore, Water Project, Ser A, RB, Callable 07/01/06 @ 101 (FGIC) 5.800%, 07/01/15 2,800 2,985 ------ MASSACHUSETTS (0.7%) Boston, City Hospital Project, RB, Partially Prerefunded 08/15/99 @ 100 (FHA) (F) 7.650%, 02/15/10 1,260 1,347 ------ MICHIGAN (1.6%) State, Building Authority, Ser II, RB, Callable 10/01/01 @ 102 6.750%, 10/01/11 2,950 3,182 ------ MISSOURI (1.5%) St. Louis, Water Utility Improvements, RB, Callable 07/01/04 @ 102 (FGIC) 5.950%, 07/01/06 1,170 1,287 State, Health & Educational Facilities Authority, Healthcare Project, Ser B, ETM, RB, Callable 06/01/00 @ 102 (MBIA) (F) 7.000%, 06/01/05 1,500 1,581 ------ 2,868 ------ NEBRASKA (4.3%) American Public Energy Agency, Public Gas Agency Project, Ser A, RB (AMBAC) 5.000%, 06/01/05 1,000 1,034 5.250%, 06/01/09 2,250 2,339 5.250%, 06/01/11 2,800 2,898 State, Public Power District, Power Supply System, Ser C, RB, Prerefunded 07/01/04 @ 101 (F) 4.750%, 01/01/07 2,000 2,078 ------ 8,349 ------
35
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------- ----------------------- NEVADA (3.7%) Clark County, School District, GO, Callable 06/01/03 @ 101 (FGIC) 5.250%, 06/01/07 $7,000 $7,260 ------ NEW JERSEY (1.5%) State, Transportation System, Ser A, RB, Callable 6/15/08 @ 100 5.000%, 06/15/12 3,000 3,024 ------ NEW YORK (6.2%) Oneida-Herkimer, Solid Waste Management Authority, RB (FSA) 5.500%, 04/01/14 1,285 1,356 State, Dormitory Authority, RB, Callable 07/01/14 @ 100 (FSA) 5.750%, 07/01/18 1,800 1,951 State, Dormitory Authority, Ser A, RB (AMBAC) 6.000%, 07/01/10 1,550 1,724 State, Environmental Facilities, Corporate Pollution Control, Ser E, RB (MBIA) 6.000%, 06/15/12 3,050 3,408 Triborough Bridge & Tunnel Authority, Ser V, RB, Callable 01/01/01 @ 102 (FGIC-TCRS) 6.875%, 01/01/05 3,500 3,728 ------ 12,167 ------ NORTH CAROLINA (2.2%) State, Eastern Municipal Power Agency, Ser A, RB, Prerefunded 01/01/22 @ 100 (F) 6.000%, 01/01/26 1,550 1,735 State, Medical Care Community Hospital, Mercy Hospital Project, RB, ETM, Callable 08/01/02 @ 102 (F) 6.500%, 08/01/15 1,000 1,096 State, Medical Care Community Hospital, Rex Hospital Project, RB 5.100%, 06/01/00 1,500 1,525 ------ 4,356 ------
36
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- OHIO (0.9%) Cleveland, City School District, Ser A, GO, Callable 12/01/02 @ 102 (FGIC) 5.875%, 12/01/11 $1,650 $1,769 ------ OREGON (1.1%) Clackamas County, School District No. 12, RB, Callable 06/01/09 @ 100 (FGIC) 5.250%, 06/01/13 2,000 2,052 ------ PENNSYLVANIA (2.1%) Allegheny County, Hospital Development Authority, Ohio Valley General, RB, Callable 04/01/03 @ 100 (MBIA) 5.875%, 04/01/11 1,500 1,577 State, University of Pennsylvania, Health Services, Ser A, RB, Callable 07/01/08 @ 100 (MBIA) 5.250%, 01/01/12 2,450 2,503 ------ 4,080 ------ PUERTO RICO (0.2%) Commonwealth, Telecom Authority, RB, Prerefunded 01/01/03 @ 101.5 (MBIA) (F) 5.250%, 01/01/05 300 317 ------ SOUTH DAKOTA (3.6%) State, Health & Educational Facility Authority, St Lukes Midland Regional Medical Center, RB, Callable 07/01/01 @ 102 (MBIA) 6.625%, 07/01/11 6,675 7,132 ------ TENNESSEE (3.2%) Metropolitan Nashville Airport, Ser C, RB, Callable 07/01/01 @ 102 (FGIC) 6.600%, 07/01/15 3,900 4,176 Shelby County, GO, Prerefunded 12/01/00 @ 102 (G) 6.250%, 12/01/09 2,000 2,121 ------ 6,297 ------ TEXAS (8.5%) Amarillo, Health Facilities Corporation, Baptist Saint Anthonys Hospital, RB (FSA) 5.500%, 01/01/13 $1,000 $1,049 Austin, Independent School District, GO, Prerefunded 08/01/06 @ 100 (F) 5.750%, 08/01/14 2,100 2,287 Corpus Christi, Utility Systems, RB, Callable 7/15/09 @ 100 (FSA) 5.250%, 07/15/12 2,780 2,852 5.250%, 07/15/13 2,200 2,247 Harris County, Memorial Hermann Hospital System Project, RB (FSA) 5.500%, 06/01/13 6,280 6,594 University, Ser B, RB, Callable 08/15/01 @ 102 6.750%, 08/15/13 1,475 1,589 16,618 ------ VERMONT (1.1%) Burlington, Ser A, Callable 07/01/02 @102 (MBIA) 6.250%, 07/01/14 2,000 2,156 ------ WASHINGTON (8.1%) Snohomish County, School District No. 015 Edmonds, GO, Callable 6/01/09 @100 (FGIC) 5.250%, 12/01/15 2,000 2,017 Spokane County, School District No. 356, Ser A, GO, Callable 06/01/08 @ 100 (FGIC) 5.250%, 12/01/12 1,740 1,781 State, Ser B, GO, Callable 05/01/04 @ 100 5.750%, 05/01/14 5,600 5,921 Whatcom County, School District No. 501, Bellingham, GO (FSA) 5.250%, 12/01/13 3,110 3,229 Yakima & Benton Countys, School District, GO, Callable 06/01/09 @ 100 (AMBAC) 5.250%, 12/01/13 1,315 1,339 5.250%, 12/01/15 1,530 1,543 ------ 15,830 ------
37
SCHEDULE OF INVESTMENTS/STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONCLUDED - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- WEST VIRGINIA (0.5%) West Virginia University, University Projects, Ser A, RB (MBIA) 5.500%, 04/01/14 $1,000 $1,059 ------ Total Municipal Bonds (Cost $173,797) 173,217 ------ REPURCHASE AGREEMENT (0.6%) Deutsche Bank 4.78%, dated 05/28/99, matures 06/01/99, repurchase price $1,209,350 (collateralized by U.S. Treasury Bond: total market value $1,233,463) (H) 1,209 1,209 ------ Total Repurchase Agreement (Cost $1,209) 1,209 ------ CASH EQUIVALENTS (9 8%) AIM Management Institutional Tax-Free Portfolio 9,630 9,630 SEI Tax-Exempt Trust Institutional Tax-Free Portfolio 9,643 9,643 ------ Total Cash Equivalents (Cost $19,273) 19,273 ------ Total Investments (98.9% ) (Cost $194,279) 193,699 ------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 38
- ------------------------------------------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (27.7%) U.S. Treasury Notes 5.750%, 11/30/02 $26,000 $26,065 5.250%, 05/15/04 12,800 12,611 ------- Total U.S. Treasury Obligations (Cost $38,963) 38,676 ------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (69.5%) FHLMC 8.000%, 12/01/02 1,198 1,228 7.000%, 03/01/04 6,383 6,471 6.500%, 06/01/13 9,325 9,282 FHLMC REMIC, Ser 1614-H 6.000%, 06/15/20 4,550 4,537 FHLMC REMIC, Ser 1624-KC 6.000%, 06/15/08 11,084 10,949 FHLMC REMIC, Ser 1666-E 6.000%, 12/15/19 5,000 4,973 FHLMC REMIC, Ser 29-Q 7.500%, 06/25/20 15,000 15,345 FNMA 7.000%, 03/01/04 7,313 7,411 8.500%, 04/01/17 543 570 7.000%, 03/01/29 2,977 2,978 FNMA REMIC, Ser 1993-206G 6.000%, 04/25/19 11,000 10,962 FNMA REMIC, Ser 1993-223PH 6.050%, 10/25/22 5,375 5,270 GNMA 9.000%, 11/15/17 741 800 8.000%, 12/15/22 15,542 16,160 ------- Total U.S. Agency Mortgage-Backed Obligations (Cost $96,801) 96,936 ------- REPURCHASE AGREEMENT (2.1%) Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $2,967,059 (collateralized by FNMA obligation: total market value $3,058,818) (H) 2,965 2,965 ------- Total Repurchase Agreement (Cost $2,965) 2,965 ------- Total Investments (99.3% ) (Cost $138,729) 138,577 ------- OTHER ASSETS AND LIABILITIES, NET (0.7%) 1,012 -------
- ------------------------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 13,606,488 outstanding shares of beneficial interest $136,690 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 223,041 outstanding shares of beneficial interest 2,240 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 213,079 outstanding shares of beneficial interest 2,155 Overdistributed net investment income (40) Accumulated net realized loss on investments (1,304) Net unrealized depreciation on investments (152) ------------ Total Net Assets (100.0%) $139,589 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 9.94 ------------ ------------ Net Asset Value and Redemption Price Per Share-- Investor Shares $ 9.93 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($9.93 / 97.50%) $ 10.18 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 9.94 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 39 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 MARYLAND MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- MUNICIPAL BONDS (95.3%) MARYLAND (72.5%) Anne Arundel County, Water Utility Improvements, GO, Callable 02/01/08 @ 101 5.125%, 02/01/24 $ 750 $ 743 Baltimore County, Construction & Public Improvements, GO, Callable 06/01/06 @ 101 5.500%, 06/01/16 250 260 Baltimore County, Oak Crest Village Project, Retirement Facilities, RB (C) (E) 3.250%, 06/02/99 1,000 1,000 Baltimore County, Pension Funding, GO, Callable 08/01/08 @ 101 5.125%, 08/01/15 500 507 Baltimore County, Public Improvements, GO, Callable 07/01/08 @ 101 4.750%, 07/01/09 500 510 Baltimore County, Revenue Authority, RB, Prerefunded 07/01/99 @ 102 (F) 7.200%, 07/01/19 200 205 Baltimore, Emergency Telecommunication Facilities, Ser A, COP, Callable 10/01/07 @ 102 (AMBAC) 5.000%, 10/01/17 400 399 Baltimore, Parking Authority, City Parking System Facilities, RB (FGIC) 4.350%, 07/01/02 200 203 Baltimore, Pollution Control, General Motors Corporate Project, RB 5.350%, 04/01/08 250 265 Calvert County, Economic Development Authority, Asbury- Solomons Project, RB, Callable 01/01/08 @ 102 (MBIA) 5.000%, 01/01/17 250 246 5.000%, 01/01/27 250 243 Calvert County, Pollution Control, Baltimore Gas & Electric Company Project, RB, Callable 07/15/04 @ 102 5.550%, 07/15/14 250 257 Carroll County, Public Improvements, GO, Callable 12/01/06 @ 101 5.125%, 12/01/14 500 507 Elkton, Highway Service Ventures, RB (C) (E) 3.300%, 06/02/99 705 705
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- Howard County, Metropolitan District, Public Improvements, Ser A, GO, Prerefunded 02/15/05 @ 101 (G) 5.650%, 02/15/16 $ 100 $ 108 Montgomery County, Economic Development, Genomic Research Facility, RB (C) (E) 3.250%, 06/03/99 700 700 Montgomery County, Housing Authority, Kensington Park, RB (MBIA) (C) 3.400%, 06/02/99 1,600 1,600 Montgomery County, Human Services Headquarters Project, RB 5.400%, 08/01/06 200 214 Montgomery County, Pollution Control, Potomac Electric Power Company Project, RB, Callable 02/15/04 @ 102 5.375%, 02/15/24 100 101 Montgomery County, Ser A, GO 5.800%, 07/01/07 500 549 Northeast Maryland, Waste Disposal Authority, Montgomery County Resource Recovery Project, RB, Callable 07/01/03 @ 102 6.200%, 07/01/10 275 294 Prince Georges County, Public Improvements, Ser A, GO, Callable 03/01/02 @ 102 (MBIA) 5.625%, 09/01/04 250 265 Queen Annes County, Public Facilities, GO (FGIC) 5.125%, 11/15/06 350 369 Saint Mary's County, Public Facilities, GO, Callable 11/01/03 @ 102 (AMBAC) 5.500%, 11/01/07 150 160 Saint Mary's County, Public Improvements, GO (MBIA) 4.500%, 09/01/00 500 507 State, Aviation Administration Facilities, COP, AMT, Callable 05/01/09 @101 4.750%, 05/01/13 1,500 1,469 State, Community Development, RB, AMT, Callable 03/01/09 @ 101 5.250%, 09/01/19 1,000 1,000 State, Economic Development, Chesapeake Bay Foundation, RB (C) (E) 3.250%, 06/03/99 1,000 1,000 State, Economic Development, Dietz & Watson Project, RB (C) (E) 3.400%, 06/02/99 1,000 1,000
40
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- State, GO (C) 3.320%, 06/03/99 $ 700 $ 700 State, Health & Higher Educational Facilities Authority, Anne Arundel Medical Center Project, RB, Callable 7/01/08 @ 101 (FSA) 5.125%, 07/01/28 1,500 1,472 State, Health & Higher Educational Facilities Authority, Broadmead Project, RB, Callable 07/01/07 @ 102 5.500%, 07/01/17 300 300 State, Health & Higher Educational Facilities Authority, Calvert Memorial Hospital Project, RB, Callable 07/01/08 @ 102 5.000%, 07/01/13 400 396 State, Health & Higher Educational Facilities Authority, Johns Hopkins Health System Project, RB, Callable 07/01/07 @ 102 (AMBAC) 5.250%, 07/01/17 350 351 State, Health & Higher Educational Facilities Authority, Loyola College Project, Ser A, RB, Callable 10/01/06 @ 102 (MBIA) 5.500%, 10/01/16 250 259 State, Health & Higher Educational Facilities Authority, Pickersgill Project, Ser A, RB, Callable 01/01/07 @ 102 6.000%, 01/01/15 350 365 State, Health & Higher Educational Facilities Authority, Pooled Loan Project, Ser D, RB (C) (E) 3.200%, 06/03/99 500 500 State, Health & Higher Educational Facilities Authority, University of Maryland Medical Systems Project, Ser A, RB, Prerefunded 07/01/01 @ 100 (FGIC) (F) 6.500%, 07/01/21 200 211 State, Health & Higher Educational Facilities Authority, Upper Chesapeake Hospital Project, RB, Callable 01/01/08 @ 101 (FSA) 5.125%, 01/01/33 1,500 1,461 State, Housing & Community Development, RB (C) 3.320%, 06/03/99 675 675 State, Housing & Community Development, Ser B, RB, AMT, Callable 03/01/07 @ 101.50 (E) 5.875%, 09/01/25 500 518
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------- State, Housing & Community Development, Single Family Housing, First Ser, RB, Callable 04/01/07 @ 101.50 (E) 5.600%, 04/01/18 $ 430 $ 441 State, Housing & Community Development, Single Family Program, Second Series, RB, Callable 04/01/09 @ 101 5.000%, 04/01/17 1,000 990 State, Industrial Development Authority, Holy Cross Health System, RB, Callable 12/01/03 @ 102 5.500%, 12/01/15 100 101 State, Public Improvements, First Ser, GO, Callable 02/15/06 @ 101.50 4.700%, 02/15/10 300 302 State, Public Improvements, Third Ser, GO 5.500%, 10/15/04 500 536 State, Stadium Authority, Sports Facility Project, RB, Callable 03/01/06 @ 101 (AMBAC) 5.800%, 03/01/26 250 265 State, Transportation Authority, Transportation Facilities Project, ETM, RB 6.800%, 07/01/16 120 141 University of Maryland, System Auxiliary Facility & Tuition Revenue, Ser A, RB, Callable 04/01/08 @ 100 5.000%, 04/01/19 500 491 University of Maryland, University & College Improvements, Ser A, RB 5.000%, 04/01/05 400 417 University of Maryland, University & College Improvements, Ser A, RB, Callable 04/01/05 @ 102 5.400%, 04/01/09 100 106 University of Maryland, University & College Improvements, Ser A, RB, Callable 04/01/06 @ 101 5.500%, 04/01/08 100 107 University of Maryland, University & College Improvements, Ser C, RB 4.350%, 10/01/03 250 254 Washington County, Public Improvements, GO, Callable 01/01/03 @ 102 (FGIC) 5.250%, 01/01/07 100 104
41 STATEMENT OF NET ASSETS
- -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 MARYLAND MUNICIPAL BOND FUND--CONCLUDED - -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Washington County, Suburban Sanitation District, GO, Callable 06/01/06 @ 100 5.600%, 06/01/19 $ 250 $ 260 ------- 27,109 ------- PUERTO RICO (22.2%) Commonwealth, Electric Power Authority, RB (C) 3.390%, 06/03/99 1,600 1,600 Commonwealth, Government Development, RB (MBIA) (C) 3.000%, 06/02/99 1,600 1,600 Commonwealth, Highway & Transportation Authority, RB (C) 3.120%, 06/03/99 1,600 1,600 Commonwealth, Highway & Transportation Authority, Ser Y, RB, Callable 07/01/06 @ 101.50 5.500%, 07/01/26 300 306 Commonwealth, Public Finance, RB (C) 3.120%, 06/03/99 1,600 1,600 Commonwealth, RB (C) 3.120%, 06/03/99 1,600 1,600 ------- 8,306 ------- TEXAS (0.6%) Grapevine, Industrial Development Authority, American Airlines Project, Ser A2, RB (C) (D) (E) 3.250%, 06/01/99 200 200 ------- Total Municipal Bonds (Cost $35,360) 35,615 ------- CASH EQUIVALENTS (4.0%) AIM Tax Free Institutional Cash Reserve 763 763 Federated Maryland Municipal Cash Trust 731 731 ------- Total Cash Equivalents (Cost $1,494) 1,494 ------- Total Investments (99.3% ) (Cost $36,854) 37,109 ------- OTHER ASSETS AND LIABILITIES, NET (0.7%) 272 -------
- -------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- NET ASSETS: Portfolio Shares of Trust Class ($.001 par value -- .9 billion shares authorized) based on 2,948,238 outstanding shares $ 29,388 Portfolio Shares of Flex Class ($.001 par value -- 50 million shares authorized)based on 766,159 outstanding shares 7,759 Overdistributed net investment income (2) Accumulated net realized loss on investments (19) Net unrealized appreciation on investments 255 --------- Total Net Assets (100.0%) $ 37,381 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.06 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 10.08 --------- --------- (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 42
- ------------------------------------------------------------------------------- SHORT-TERM BOND FUND - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (34.1%) U.S. Treasury Notes 5.625%, 10/31/99 $ 3,000 $ 3,009 5.000%, 04/30/01 15,000 14,892 6.500%, 08/31/01 7,000 7,150 6.375%, 09/30/01 8,000 8,152 6.250%, 10/31/01 4,750 4,830 7.500%, 11/15/01 9,000 9,405 6.250%, 02/28/02 3,250 3,304 6.250%, 06/30/02 2,000 2,036 6.000%, 07/31/02 8,000 8,089 6.250%, 08/31/02 6,000 6,107 5.750%, 10/31/02 1,280 1,284 5.250%, 08/15/03 1,000 984 4.750%, 02/15/04 2,850 2,750 U.S. Treasury STRIPS 0.000%, 08/15/03 1,250 988 ------- Total U.S. Treasury Obligations (Cost $73,499) 72,980 ------ CORPORATE OBLIGATIONS (40.8%) FINANCE (15.4%) American Express 6.750%, 06/23/04 3,000 3,019 American General 5.900%, 01/15/03 2,000 1,962 6.250%, 03/15/03 1,100 1,089 Associates Corporation 5.750%, 11/01/03 2,000 1,942 Associates Corporation, MTN 7.080%, 04/15/03 1,500 1,532 Bank One Arizona 6.000%, 09/15/05 2,270 2,185 Chrysler Financial 9.500%, 12/15/99 1,000 1,023 CIT Group Holdings 6.375%, 08/01/02 1,345 1,345 Commercial Credit 6.375%, 09/15/02 2,500 2,503 Conoco 5.900%, 04/15/04 1,150 1,121 Ford Motor Credit 6.500%, 02/28/02 725 730 General Motors Acceptance 5.950%, 03/14/03 1,000 984 Household Finance, MTN 7.080%, 06/03/02 2,500 2,547 International Lease, MTN 5.500%, 09/29/03 2,000 1,925 Merrill Lynch, Ser B, MTN 5.640%, 01/27/03 3,750 3,656
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- FINANCE--CONTINUED Morgan Stanley Dean Witter, Ser C 5.625%, 04/12/02 $ 1,750 $ 1,719 Salomon Brothers 7.125%, 08/01/99 1,300 1,304 Sears Roebuck Acceptance, MTN 6.920%, 06/17/04 2,250 2,267 ------- 32,853 ------- INDUSTRIAL (15.7%) American Home Products 7.900%, 02/15/05 2,000 2,132 Clark Equipment 9.750%, 03/01/01 1,750 1,844 Computer Associates 6.375%, 04/15/05 2,300 2,194 Dayton Hudson 6.800%, 10/01/01 1,500 1,524 5.950%, 06/15/10 500 501 General Foods 6.000%, 06/15/01 500 494 IBM, MTN 5.800%, 05/15/01 1,250 1,247 Norfolk Southern 7.875%, 02/15/04 1,500 1,577 Philip Morris 7.250%, 09/15/01 1,000 1,020 7.500%, 01/15/02 500 512 Raytheon 6.450%, 08/15/02 2,900 2,904 RJR Nabisco 6.800%, 09/01/01 1,500 1,509 Tenneco 10.075%, 02/01/01 3,000 3,180 TRW (B) 6.500%, 06/01/02 3,000 2,996 TRW, MTN 9.000%, 02/09/01 1,000 1,041 Union Pacific 7.060%, 05/15/03 1,500 1,519 USAA, Cl B, MTN (B) 8.880%, 09/21/99 2,000 2,019 Walt Disney, MTN 5.600%, 01/13/00 2,500 2,497 Waste Management 6.500%, 12/15/02 3,000 2,992 ------- 33,702 ------- UTILITIES (9.7%) Baltimore Gas and Electric 6.125%, 07/01/03 1,750 1,730
43
STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 SHORT-TERM BOND FUND--CONCLUDED - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- UTILITIES--CONTINUED Bellsouth Savings 9.125%, 07/01/03 $1,506 $1,582 Indiana & Michigan Power, MTN 6.400%, 03/01/00 2,250 2,258 Northern States Power 6.125%, 12/01/05 5,000 4,875 NYNEX Credit, MTN 6.900%, 06/15/99 2,000 2,001 Pacific Gas and Electric 5.875%, 10/01/05 3,500 3,373 Philadelphia Electric 7.125%, 09/01/02 2,000 2,040 Southern New England Telephone, Ser C, MTN 6.125%, 12/15/03 3,000 2,974 ------ 20,833 ------ Total Corporate Obligations (Cost $88,238) 87,388 ------ U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (12.2%) FHLB 5.510%, 02/06/01 2,750 2,745 FHLMC 8.000%, 01/01/00 241 243 6.500%, 12/01/00 1,271 1,277 FNMA 8.500%, 11/01/01 8 9 6.500%, 06/01/13 4,534 4,517 6.500%, 09/01/13 2,902 2,893 7.500%, 09/01/26 657 672 7.000%, 01/01/27 1,733 1,735 7.500%, 09/01/27 709 725 7.500%, 10/01/27 673 687 7.500%, 11/01/27 604 617 7.500%, 12/01/27 1,862 1,903 7.500%, 01/01/28 765 782 7.500%, 03/01/28 780 796 7.500%, 06/01/28 304 311 FNMA REMIC, Ser 1996-30, Cl PC 7.000%, 11/25/20 2,600 2,641 GNMA 8.000%, 11/15/09 1,358 1,414 7.500%, 01/15/24 49 51 7.500%, 04/15/24 53 55 7.500%, 10/15/25 273 280 7.500%, 11/15/25 335 343 7.500%, 07/15/26 247 253 ------
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS--CONTINUED 7.500%, 10/15/26 $ 385 $ 395 7.500%, 02/15/27 453 464 7.500%, 07/15/27 297 304 ------- Total U.S. Agency Mortgage-Backed Obligations (Cost $26,173) 26,112 ------- U.S. GOVERNMENT AGENCY OBLIGATION (0.5%) FFCB 7.125%, 06/01/01 1,000 1,028 ------- Total U.S. Government Agency Obligation (Cost $1,002) 1,028 ------- ASSET-BACKED SECURITIES (7.4%) American Express Master Trust, Ser 1992-2, Cl A 6.600%, 05/15/00 2,000 2,003 Arcadia Automobile Receivables Trust, Ser 1998-E, Cl A1 5.429%, 07/15/02 2,526 2,527 Chase Manhattan Grantor Trust, Ser 1995-B, Cl A 5.900%, 11/15/01 138 139 CoreStates Home Equity Trust, Ser 1994-1, Cl A 6.650%, 05/15/09 629 636 Discover Card Master Trust I, Ser 1998-4, Cl A 5.750%, 10/16/03 1,990 1,962 Discover Card Master Trust I, Ser 1999-2, Cl A 5.900%, 10/15/04 3,000 2,961 EQCC Home Equity Loan Trust, Ser 1994-1, Cl A 5.800%, 03/15/09 553 545 Equivantage Home Equity Loan Trust, Ser 1996-1, Cl A 6.550%, 10/25/25 667 666 Fleet Credit Card Master Trust Ser 1995-F, Cl A1 6.050%, 08/01/03 1,000 994 Metris Master Trust, Ser 1997-1, Cl A 6.870%, 10/20/05 2,000 2,026 Money Store Home Equity Trust, Cl B 6.290%, 01/15/06 375 375
44 - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--CONTINUED Spiegel Master Trust, Ser 1995-A, Cl A 7.500%, 09/15/04 $ 1,000 $ 1,018 -------- Total Asset-Backed Securities (Cost $15,911) 15,852 -------- CASH EQUIVALENT (3.9%) AIM Liquid Assets Portfolio 8,298 8,298 -------- Total Cash Equivalent (Cost $8,298) 8,298 -------- Total Investments (98.9% ) (Cost $213,121) 211,658 -------- OTHER ASSETS AND LIABILITIES, NET (1.1%) 2,412 --------
NET ASSETS: Fund shares of the Trust Class unlimited authorization -- no par value) based on 21,170,603 outstanding shares of beneficial interest 213,955 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 183,767 outstanding shares of beneficial interest 1,837 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 235,594 outstanding shares of beneficial interest 2,374 Undistributed net investment income (2 Accumulated net realized loss on investments (2,631) Net unrealized depreciation on investments (1,463) --------- Total Net Assets (100.0%) $ 214,070 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 9.91 --------- --------- Net Asset Value and Redemption Price Per Share-- Investor Shares $ 9.93 --------- --------- Maximum Offering Price Per Share -- Investor Shares ($9.93 / 98.00%) $ 10.13 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 9.93 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 45 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 SHORT-TERM U.S. TREASURY SECURITIES FUND--CONCLUDED - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (92.2%) U.S. Treasury Notes 5.875%, 11/15/99 $ 2,000 $ 2,009 5.625%, 12/31/99 11,500 11,544 5.875%, 02/15/00 2,250 2,264 6.875%, 03/31/00 1,250 1,268 5.500%, 04/15/00 2,500 2,508 6.125%, 07/31/00 2,250 2,273 6.125%, 09/30/00 2,000 2,020 5.750%, 10/31/00 2,000 2,012 5.375%, 02/15/01 12,800 12,796 6.250%, 10/31/01 3,000 3,051 7.500%, 11/15/01 7,500 7,838 6.250%, 01/31/02 4,500 4,576 6.625%, 03/31/02 4,500 4,620 ------- Total U.S. Treasury Obligations (Cost $58,986) 58,779 ------- CASH EQUIVALENT (3.4%) SEI Daily Income Trust Treasury II Portfolio 2,150 2,150 ------- Total Cash Equivalent (Cost $2,150) 2,150 ------- Total Investments (95.6% ) (Cost $61,136) 60,929 ------- OTHER ASSETS AND LIABILITIES, NET (4.4%) 2,828 -------
- ------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 5,631,770 outstanding shares of beneficial interest $ 56,173 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 281,282 outstanding shares of beneficial interest 2,843 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 496,670 outstanding shares of beneficial interest 4,969 Overdistributed net investment income (53) Accumulated net realized gain on investments 32 Net unrealized depreciation on investments (207) -------- Total Net Assets (100.0%) $ 63,757 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 9.95 -------- -------- Net Asset Value and Redemption Price Per Share-- Investor Shares $ 9.95 -------- -------- Maximum Offering Price Per Share -- Investor Shares ($9.95 / 99.00%) $ 10.05 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 9.93 -------- --------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 46 - ------------------------------------------------------------------------------- U.S GOVERNMENT SECURITIES FUND - ------------------------------------------------------------------------------ FACE AMOUNT (000) VALUE (000)
U.S. TREASURY OBLIGATIONS (42.0%) - ------------------------------------------------------------------------------- U.S. Treasury Bonds 7.250%, 05/15/16 $ 1,000 $ 1,118 7.625%, 02/15/25 400 480 6.875%, 08/15/25 1,000 1,104 6.000%, 02/15/26 2,000 1,985 6.625%, 02/15/27 1,000 1,075 6.125%, 11/15/27 8,545 8,637 5.250%, 11/15/28 2,350 2,127 5.250%, 02/15/29 1,000 918 U.S. Treasury Notes 8.500%, 11/15/00 950 992 4.625%, 12/31/00 1,260 1,246 6.250%, 04/30/01 6,700 6,801 8.000%, 05/15/01 200 209 6.625%, 06/30/01 580 593 7.500%, 05/15/02 750 788 6.250%, 06/30/02 550 560 5.750%, 10/31/02 845 848 4.750%, 02/15/04 6,700 6,466 7.250%, 05/15/04 500 532 7.875%, 11/15/04 275 302 7.500%, 02/15/05 500 541 6.500%, 10/15/06 8,500 8,836 6.625%, 05/15/07 1,050 1,103 4.750%, 11/15/08 1,700 1,581 ------- Total U.S. Treasury Obligations (Cost $49,415) 48,842 ------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (52.7%) FHLMC 6.000%, 02/01/01 59 59 7.000%, 01/01/09 72 73 7.000%, 04/01/09 228 233 7.000%, 08/01/10 476 484 7.000%, 01/01/11 282 287 7.000%, 02/01/12 974 990 6.500%, 03/01/12 2,707 2,699 7.000%, 05/01/12 722 733 6.500%, 12/01/12 1,361 1,357 FHLMC REMIC, Ser 2039, Cl PC 6.000%, 05/15/09 1,000 984 FNMA 6.000%, 11/25/07 741 738 7.500%, 06/01/11 385 396 7.000%, 09/17/11 580 589 7.000%, 05/01/12 627 636 7.000%, 06/01/12 522 530
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS--CONTINUED 7.000%, 07/01/12 $ 616 $ 625 6.500%, 06/01/13 1,619 1,614 6.500%, 09/01/13 194 193 7.000%, 10/25/16 566 567 6.500%, 07/01/18 1,015 998 6.290%, 08/01/18 1,477 1,440 6.500%, 08/01/18 933 913 6.000%, 12/01/18 1,963 1,868 7.000%, 01/01/27 866 867 7.500%, 04/01/27 496 507 6.000%, 03/01/28 998 950 6.500%, 03/02/28 790 773 6.500%, 03/01/29 3,992 3,903 FNMA REMIC, Ser 1990-143, Cl J 8.750%, 12/25/20 64 67 FNMA REMIC, Ser 1993-156, Cl B 6.500%, 04/25/18 100 99 FNMA REMIC, Ser 1996-30, Cl PC 7.000%, 11/25/20 2,000 2,032 FNMA REMIC, Ser 1996-68, Cl C 6.500%, 08/18/18 1,000 999 FNMA REMIC, Ser 1996-9, Cl H 6.500%, 11/25/13 1,337 1,313 FNMA REMIC, Ser 1997-34, Cl VC 7.500%, 05/01/12 1,000 1,025 FNMA REMIC, Ser 1997-6, Cl H 7.000%, 08/18/08 1,058 1,066 FNMA REMIC, Ser 1997-63, Cl PC 6.500%, 03/18/26 1,140 1,123 FNMA REMIC, Ser G93-40, Cl VC 6.500%, 08/25/10 261 258 GNMA 7.500%, 10/20/09 38 40 8.000%, 11/15/09 878 915 8.250%, 01/15/12 64 68 6.000%, 07/15/13 975 952 6.000%, 01/15/14 1,947 1,902 9.000%, 04/15/17 205 220 8.500%, 05/15/17 633 669 10.000%, 06/15/19 1 2 7.500%, 05/15/22 314 322 7.000%, 11/15/22 348 349 8.000%, 02/15/23 17 18 8.500%, 03/15/23 33 36 7.500%, 04/15/23 104 107 7.500%, 09/15/23 663 678 6.500%, 10/15/23 845 826 6.500%, 11/15/23 1,122 1,096
47 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 U.S GOVERNMENT SECURITIES FUND--CONCLUDED - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000)
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS--CONTINUED - ------------------------------------------------------------------------------ 7.000%, 01/15/24 $ 110 $ 111 7.500%, 04/15/24 586 600 7.000%, 06/15/24 650 652 8.000%, 08/15/24 58 60 8.000%, 09/15/24 13 14 8.000%, 10/15/24 19 21 8.000%, 11/15/24 15 16 8.500%, 12/15/24 44 47 8.500%, 02/15/25 10 11 7.000%, 12/15/25 367 368 7.500%, 01/15/26 400 410 7.500%, 09/15/26 598 612 7.000%, 03/15/27 236 236 7.000%, 04/15/27 762 764 7.500%, 07/15/27 333 341 7.000%, 09/15/27 63 63 7.000%, 10/15/27 769 772 7.500%, 10/15/27 43 45 7.000%, 11/15/27 1,047 1,049 7.000%, 12/15/27 844 846 7.000%, 01/15/28 1,212 1,215 7.500%, 01/15/28 334 342 6.500%, 02/15/28 949 927 6.500%, 03/15/28 137 134 6.500%, 04/15/28 85 83 6.500%, 05/20/28 1,899 1,843 6.500%, 06/15/28 40 40 6.500%, 09/15/28 2,968 2,898 6.250%, 10/15/28 1,985 1,910 6.500%, 02/15/29 704 687 GNMA REMIC, Ser 1995-6A, Cl E 7.500%, 05/20/23 1,000 1,022 GNMA REMIC, Ser 1998-9, Cl D 6.500%, 08/20/24 1,000 972 ------- Total U.S. Agency Mortgage-Backed Obligations (Cost $61,794) 61,299 ------- ASSET-BACKED SECURITIES (0.1%) EQCC Home Equity Loan Trust, Ser 1994-1, Cl A 5.800%, 03/15/09 57 56 Olympic Auto Receivables Trust, Ser 1995-D, Cl A4 6.050%, 11/15/00 12 12 -- Total Asset-Backed Securities (Cost $69) 68 --
FACE AMOUNT (000) VALUE (000) CASH EQUIVALENTS (4.7%) AIM Liquid Assets Portfolio $ 3 $ 3 SEI Daily Income Trust Government II Portfolio 4,224 4,224 SEI Daily Income Trust Treasury II Portfolio 1,240 1,240 --------- Total Cash Equivalents (Cost $5,467) 5,467 --------- Total Investments (99.5%) (Cost $116,744) 115,676 --------- OTHER ASSETS AND LIABILITIES, NET (0.5%) 545 --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 9,935,496 outstanding shares of beneficial interest 104,017 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 246,587 outstanding shares of beneficial interest 2,490 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,120,289 outstanding shares of beneficial interest 11,737 Undistributed net investment income 4 Accumulated net realized loss on investments (959) Net unrealized depreciation on investments (1,068) --------- Total Net Assets (100.0%) $ 116,221 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.28 --------- --------- Net Asset Value and Redemption Price Per Share-- Investor Shares $ 10.28 --------- --------- Maximum Offering Price Per Share -- Investor Shares ($10.28 / 96.25%) $ 10.68 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 10.28 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 48
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- MUNICIPAL BONDS (98.4%) VIRGINIA (98.4%) Abingdon, Industrial Development Authority, Johnston Memorial Hospital Project, RB, Callable 07/01/08 @102 5.250%, 07/01/16 $2,000 $1,956 Alexandria, Public Improvement, GO 4.500%, 01/01/15 2,000 1,915 Arlington County, Industrial Development, Resource Recovery, Alexandria/Arlington Waste, Ogden Martin, Ser A, RB (FSA) 5.250%, 01/15/05 4,000 4,177 Arlington County, Industrial Development, Resource Recovery, Alexandria/Arlington Waste, Ogden Martin, Ser B, RB, AMT, Callable 07/01/08 @ 101 (FSA) 5.375%, 01/01/11 3,000 3,082 Arlington County, Public Improvements, GO, Callable 10/01/08 @ 101 5.000%, 10/01/11 3,220 3,298 Chesapeake Bay, Bridge & Tunnel Authority, RB, Prerefunded 07/01/01 @ 102 (MBIA) 6.375%, 07/01/22 7,000 7,504 Chesapeake, GO 5.400%, 12/01/08 2,500 2,664 Chesapeake, Hospital Authority, General Hospital Project, RB, Callable 07/01/00 @ 102 8.200%, 07/01/05 1,000 1,064 Chesterfield County, Health Center Community Project, Lucy Corr Nursing Home Project, RB, Callable 12/01/06 @ 102 (E) 5.875%, 12/01/21 500 527 Chesterfield County, Public Improvements, Ser A, GO, Callable 01/01/08 @ 100 (E) 4.700%, 01/01/12 3,215 3,193 Danville, Industrial Development Authority, Danville Regional Medical Center Project, RB (AMBAC) 5.250%, 10/01/28 4,250 4,256 Fairfax County, Industrial Development, Inova Health System Project, RB, Callable 08/15/06 @ 102 5.300%, 08/15/07 1,500 1,574
- ------------------------------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------------ Fairfax County, Industrial Development, Inova Health System Project, Ser A, RB, Callable 02/15/08 @ 101 5.000%, 08/15/10 $2,890 $2,923 Fairfax County, Public Improvement, Ser A, GO, Callable 06/01/07 @ 102 4.500%, 06/01/10 3,000 2,967 Fairfax County, School & Transit Improvements, Ser B, GO, Callable 06/01/01 @ 102 (E) 5.200%, 06/01/13 5,000 5,238 Fairfax County, Sewer Authority, RB, Callable 11/15/03 @ 102 (AMBAC) 5.500%, 11/15/09 3,000 3,146 Fairfax County, Water Authority, RB, Callable 04/01/07 @ 102 (AMBAC) 6.000%, 04/01/22 5,000 5,433 Fluvanna County, Industrial Development, Elementary School Project, RB, Callable 07/26/99 @ 100 4.150%, 01/15/01 3,465 3,466 Fredericksburg, Industrial Development, Hospital Facilities, Medicorp Health System, RB, Callable 06/15/07 @ 102 (AMBAC) 5.250%, 06/15/16 5,000 4,980 Harrisonburg, Industrial Development, Rockingham Memorial Hospital Project, RB, Callable 12/01/02 @ 102 (MBIA) 5.750%, 12/01/13 3,000 3,200 Henrico County, Industrial Development, Educational Facilities, Collegiate Schools, RB, Callable 10/15/08 @ 102 5.000%, 10/15/19 2,250 2,158 Henrico County, Industrial Development, Government Projects, RB, Callable 06/01/06 @ 102 5.150%, 06/01/07 2,500 2,619 Henrico County, Industrial Development, Residential & Healthcare Facility, Our Lady of Hope Project, RB, Callable 07/01/03 @ 102 (E) 6.150%, 07/01/26 2,000 2,011 Henrico County, Industrial Development, Residential Care Facility, Westminister- Canterbury Project, RB, Callable 08/16/99 @ 100.5 7.300%, 10/01/99 1,060 1,067
49
STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND--CONTINUED FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- Henrico County, Industrial Development, Solid Waste Facility, Browning Ferris Project, RB, Mandatory Put 12/01/05 @ 100 (C) 5.300%, 06/01/99 $1,000 $ 996 Henry County, Public Improvements, GO, Callable 07/15/04 @ 102 6.000%, 07/15/14 1,000 1,079 Henrico County, Water & Sewer, RB, Callable 05/01/09 @ 102 4.625%, 05/01/17 1,900 1,777 Loudoun County, Sanitation Authority, Water & Sewer, RB (FGIC) 5.900%, 01/01/02 1,000 1,049 Loudoun County, Sanitation Authority, Water & Sewer, RB, Callable 01/01/03 @ 102 (FGIC) 6.100%, 01/01/04 1,250 1,352 Loudoun County, Sanitation Authority, Water & Sewer, RB, Callable 01/01/09 @ 102 (MBIA) 4.750%, 01/01/30 4,450 4,069 Loudoun County, School & Public Improvement, Ser A, GO, Callable 08/01/07 @ 102 (E) 5.000%, 08/01/17 2,000 1,965 Lynchburg, GO, Callable 04/01/03 @ 102 5.250%, 04/01/08 2,000 2,075 Lynchburg, Industrial Development, Healthcare Facility, Central Health Project, RB, Callable 01/01/08 @ 101 5.200%, 01/01/23 3,000 2,909 Martinsville, GO 3.600%, 01/15/01 1,500 1,499 Newport News, Recreational Facility Improvements, Ser A, GO, Callable 07/01/05 @ 102 (MBIA) 5.500%, 07/01/12 2,500 2,606 Newport News, Ser A, GO 4.000%, 07/01/07 2,000 1,943 Newport News, Water, Utility & Public Improvements, GO, Callable 01/15/07 @ 102 5.250%, 01/15/14 3,530 3,597 Norfolk, Industrial Development, Bon Secours Health Project, RB, Callable 08/15/07 @ 102 (MBIA) 5.250%, 08/15/26 4,200 4,128 Norfolk, Industrial Development, Children's Hospital Project, RB (AMBAC) 6.900%, 06/01/06 1,000 1,140
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- Norfolk, Industrial Development, Children's Hospital Project, RB, Callable 06/01/04 @ 102 (AMBAC) 5.100%, 06/01/07 $1,000 $1,034 Norfolk, Industrial Development, Public Health Center Project, RB, Callable 09/15/06 @ 102 5.625%, 09/15/17 1,600 1,655 Norfolk, Industrial Development, Sentara Hospital Project, Ser A, B, Callable 11/01/04 @ 102 4.900%, 11/01/07 2,500 2,551 5.000%, 11/01/08 2,500 2,551 Norfolk, Redevelopment & Housing Authority, Educational Facilities Revenue, Tidewater Community College Campus Project, RB, Callable 11/01/05 @ 102 5.800%, 11/01/08 700 753 Peninsula Ports, Hospital Authority, Mary Immaculate Project, ETM, RB, 8.000%, 08/01/99 245 247 Peumansend Creek, Regional Jail Authority, Grant Anticipation Note, RB, Callable 09/01/99 @ 100 4.550%, 04/01/00 5,000 5,004 Portsmouth, GO, Callable 08/01/03 @ 102 5.450%, 08/01/07 2,000 2,095 Portsmouth, Public Improvements, GO, Prerefunded 08/01/00 @ 102 6.750%, 08/01/04 1,500 1,587 Prince William County, Park Authority, Recreational Facility Improvement, RB 5.500%, 10/15/99 500 504 5.800%, 10/15/01 500 522 Prince William County, Park Authority, Recreational Facility Improvement, RB, Callable 10/15/04 @ 102 6.200%, 10/15/05 500 550 Prince William County, Ser C, RB, Callable 08/01/03 @ 102 (E) 5.000%, 08/01/07 5,000 5,158 Prince William County, Water & Sewer Improvements, RB, Prerefunded 07/01/01 @ 102 (FGIC) 6.500%, 07/01/21 1,000 1,075 Richmond, Metropolitan Expressway Authority, Ser A, RB, Callable 07/15/02 @ 102 (FGIC) 5.900%, 07/15/03 1,500 1,609
50
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- Richmond, Public Improvements, Ser A, GO, Callable 01/15/05 @ 102 5.300%, 01/15/09 $1,500 $1,563 Richmond, Redevelopment & Housing Authority, Richmeade Project, RB, AMT (C) 4.000%, 06/24/99 500 500 Roanoke, Industrial Development, Roanoke Memorial Hospital Project, Ser B, RB, Callable 07/01/02 @ 102 5.900%, 07/01/06 2,500 2,641 Roanoke, Public Improvements, GO 4.900%, 02/01/06 1,000 1,033 Roanoke, Public Improvements, GO, Callable 02/01/06 @ 102 5.000%, 02/01/12 3,165 3,187 Roanoke Valley, Solid Waste System Authority, Resource Recovery Improvements, RB 5.400%, 09/01/02 1,450 1,504 Southeastern Public Service Authority, Ser A, RB (MBIA) 5.150%, 07/01/09 5,000 5,179 State, College Building Authority, Public Higher Education Financing, Ser A, RB, Callable 09/01/08 @ 100 4.625%, 09/01/15 3,080 2,926 4.800%, 09/01/17 1,500 1,435 State, College Building Authority, University of Richmond Project, RB, Callable 11/01/02 @ 102 6.250%, 11/01/12 2,000 2,168 State, College Building Authority, University of Richmond Project, RB, Optional Put 11/01/04 @ 100 5.550%, 11/01/19 6,500 6,896 State, Commonwealth University, Ser A, RB, Callable 05/01/06 @ 102 5.625%, 05/01/16 2,500 2,620 State, Education Loan Authority, Ser B, RB, AMT, Prerefunded to Various Call Dates @ 100 (E) 5.550%, 09/01/10 1,800 1,905 State, Education Loan Authority, Student Loan Program, Ser B, ETM, RB, AMT 4.850%, 09/01/01 520 532 State, Education Loan Authority, Student Loan Program, Ser D, ETM, RB, AMT 5.600%, 03/01/03 2,500 2,619
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- State, GO 5.600%, 06/01/02 $4,750 $4,995 State, Housing Development Authority, Commonwealth Mortgage, Ser B, RB, Callable 01/01/06 @ 102 6.350%, 01/01/15 3,000 3,217 State, Housing Development Authority, Commonwealth Mortgage, Ser E, RB, Callable 07/01/08 @ 101 4.950%, 01/01/11 1,250 1,249 State, Housing Development Authority, Multi Family Housing, RB, Callable 01/01/2008 @ 102 5.350%, 11/01/11 1,250 1,306 State, Housing Development Authority, Multi Family Housing, Ser B, RB, Callable 05/01/00 @ 102 7.375%, 05/01/05 1,000 1,039 State, Housing Development Authority, Multi Family Housing, Ser I, RB, AMT, Callable 01/01/09 @ 101 4.875%, 11/01/12 1,950 1,936 State, Housing Development Authority, Multi Family Housing, Ser I, RB, Callable 01/01/08 @ 102 5.450%, 05/01/18 2,000 2,040 State, Housing Development Authority, Ser C, RB, Callable 01/01/02 @ 102 6.000%, 07/01/06 2,000 2,051 State, Housing Development Authority, Ser C, RB, Callable 01/01/08 @ 102 4.850%, 07/01/09 1,600 1,619 State, Housing Development Authority, Single Family Housing, Ser C, RB, Callable 01/01/02 @ 102 5.550%, 01/01/11 3,000 3,050 State, Polytechnic Institute & University, Ser A, RB, Callable 06/01/06 @ 102 5.450%, 06/01/13 2,500 2,591 5.500%, 06/01/16 5,435 5,610 State, Polytechnic Institute & University, University & College Improvements, Ser A, RB, Callable 06/01/06 @ 102 5.350%, 06/01/09 2,000 2,107
51
STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND--CONCLUDED FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- State, Public Building Authority, RB, > Callable 08/01/05 @ 101 5.200%, 08/01/15 $1,500 $1,511 State, Public Building Authority, RB, Callable 08/01/08 @ 100 4.375%, 08/01/10 1,000 972 State, Public Building Authority, Ser A, RB 6.000%, 08/01/06 6,000 6,600 State, Public Building Authority, Ser B, RB 5.600%, 08/01/01 4,000 4,155 State, Public School Authority, RB 4.375%, 08/01/10 1,000 969 State, Public School Authority, RB, Callable 01/01/02 @ 102 6.250%, 01/01/08 2,000 2,143 State, Public School Authority, School Financing, Ser B, RB, Callable 01/01/03 @ 102 (E) 5.600%, 01/01/05 1,600 1,701 State, Public School Authority, School Improvements, Ser B, RB, Callable 01/01/00 @ 102 5.850%, 01/01/02 1,500 1,546 Suffolk, GO 5.200%, 08/01/02 1,500 1,558 Suffolk, GO, Callable 08/01/03 @ 102 5.600%, 08/01/06 2,000 2,125 5.700%, 08/01/07 2,000 2,141 Tazewell County, Industrial Development, Courthouse Project, RB, Callable 01/01/07 @ 102 (MBIA) 5.300%, 01/01/27 1,000 1,003 University of Virginia, Hospital Authority, Ser E, RB, Prerefunded 06/01/99 @ 102 (F) 6.900%, 06/01/04 1,815 1,852 Virginia Beach, Development Authority, Residential & Healthcare Facility Project, 1st Mortgage, Our Lady of Perpetual Hope Project, RB, Callable 07/01/07 @102 6.050%, 07/01/20 1,500 1,506
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- Virginia Beach, Development Authority, Sentara Bayside Hospital Project, RB, Callable 11/01/01 @ 102 > 6.300%, 11/01/21 1,750 1,883 Virginia Beach, Refunding Bond, GO 5.300%, 07/15/07 $ 2,000 $ 2,130 5.250%, 08/01/08 2,000 2,112 5.450%, 07/15/11 1,000 1,061 Virginia Beach, Refunding Bond, GO, Prerefunded 11/01/04 @ 102 (E) 5.750%, 11/01/10 3,500 3,829 -------- 243,812 -------- Total Municipal Bonds (Cost $238,743) 243,812 -------- CASH EQUIVALENT (0.9%) AIM Tax Free Institutional Cash Reserve 2,120 2,120 -------- Total Cash Equivalent (Cost $2,120) 2,120 -------- Total Investments (99.3% ) (Cost $240,863) 245,932 -------- OTHER ASSETS AND LIABILITIES, NET (0.7%) 1,857 -------- NET ASSETS: Portfolio Shares of Trust Class ($.001 par value -- .75 billion shares authorized) based on 23,543,767 outstanding shares 233,739 Portfolio Shares of Investor Class ($.001 par value -- .25 billion shares authorized) based on 755,319 outstanding shares 7,754 Undistributed net investment income 51 Accumulated net realized gain on investments 1,176 Net unrealized appreciation on investments 5,069 -------- Total Net Assets (100.0%) $247,789 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.20 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Investor Shares $ 10.20 -------- -------- Maximum Offering Price Per Share -- Investor Shares ($10.20 / 96.25%) $ 10.60 -------- --------
- -------------------------------------------------------------------------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 52 VIRGINIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- MUNICIPAL BONDS (90.1%) VIRGINIA (90.1%) Albemarle County, Industrial Development Authority, Martha Jefferson Hospital Project, RB, Callable 10/01/03 @ 102 5.800%, 10/01/09 $ 500 $ 524 Albemarle County, Industrial Development Authority, Our Lady of Peace Project, Ser A, RB, Callable 07/01/05 @102 5.800%, 07/01/25 500 488 Alexandria, Industrial Development Authority, Episcopal High School Project, RB, Callable 01/01/06 @ 102 5.300%, 01/01/11 500 516 Alexandria, Industrial Development Authority, Potomac Electric Project, Ser A, RB, Callable 02/15/04 @ 102 (MBIA) 5.375%, 02/15/24 400 403 Alexandria, Redevelopment & Housing Authority, Buckingham Village Apartments Project, RB, Callable 01/01/06 @ 102 6.050%, 07/01/16 250 260 Alexandria, Redevelopment & Housing Authority, Essex House Project, Ser A, RB, AMT, Callable 01/01/08 @ 102 5.550%, 07/01/28 1,000 1,017 Arlington County, Industrial Development Authority, Headquarters Facility Project, Ser A, RB, Callable 07/01/07 @ 102 5.250%, 07/01/12 300 307 Arlington County, Public Improvements, GO, Callable 06/01/05 @ 101.50 5.400%, 06/01/12 250 260 Brunswick County, Industrial Development Authority, Correctional Facility Lease, RB, Callable 07/01/06 @ 102 (MBIA) 5.500%, 07/01/17 400 411 Chesapeake, Refunding Bond, GO 5.250%, 12/01/06 500 530 Chesapeake, Water & Sewer, Ser A, GO, Callable 12/01/05 @ 102 5.000%, 12/01/25 475 458 Chesapeake Bay, Bridge & Tunnel Commission, RB, Callable 07/01/05 @ 102 (MBIA) 5.000%, 07/01/22 1,000 964
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Dinwiddie County, Industrial Development Authority, County School Completion Project, Ser A, RB, Callable 02/01/08 @ 102 (MBIA) 5.000%, 02/01/19 $1,500 $1,445 Fairfax County, Industrial Development Authority, Fairfax Hospital, Ser A, RB (C) 3.300%, 06/02/99 100 100 Fairfax County, Industrial Development Authority, Inova Health System Project, RB (FSA) 5.250%, 08/15/19 500 507 Fairfax County, Public Improvements, Ser A, GO, Callable 06/01/03 @ 102 5.000%, 06/01/07 500 517 Fairfax County, Redevelopment & Housing Authority, Mott & Gum Springs Community Centers, RB, Callable 06/01/06 @ 102 5.500%, 06/01/12 425 441 Fairfax County, Redevelopment & Housing Authority, Paul Spring Center Project, Ser A, RB, Callable 12/01/06 @ 103 (C) 5.900%, 06/15/17 250 264 Fairfax County, Water Authority, Refunding Bond, RB, Callable 04/01/07 @ 102 (AMBAC) 6.000%, 04/01/22 315 342 Fredericksburg, Industrial Development Authority, Hospital Facilities Project, Medicorp Health System Obligation, RB, Callable 06/15/07 @ 102 (AMBAC) 5.300%, 06/15/10 500 516 5.250%, 06/15/23 300 295 Giles County, Industrial Development Authority, Hoechst Celanese, RB, AMT, Callable 05/01/06 @ 102 6.450%, 05/01/26 500 542 Hampton Roads, Regional Jail Facilities, Ser B, RB (C) (E) 3.300%, 06/02/99 100 100 Henrico County, Industrial Development Authority, Collegiate Schools, RB, Callable 10/15/08 @ 102 5.000%, 10/15/19 1,000 959 Henrico County, Industrial Development Authority, Our Lady of Hope Project, RB, Callable 07/01/03 @102 6.100%, 07/01/20 1,000 1,006
53
STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 VIRGINIA MUNICIPAL BOND FUND--CONCLUDED - -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Henry County, Industrial Development Authority, Martinsville & Henry Hospital Project, RB, Callable 01/01/07 @ 101 6.000%, 01/01/17 $ 500 $ 525 James City County, Public Improvements, GO, Callable 12/15/05 @ 102 (FGIC) 5.250%, 12/15/14 250 255 King George County, Industrial Development Authority, Birchwood Power Partners, Ser A, RB, AMT (C) (E) 3.500%, 06/01/99 1,500 1,500 Leesburg, Public Improvements, GO, Callable 06/01/05 @ 102 (AMBAC) 5.400%, 06/01/10 250 261 Leesburg, Utility Systems, RB, Callable 07/01/07 @ 102 (MBIA) 5.000%, 07/01/10 750 766 Loudoun County, Sanitation Authority, Water & Sewer Project, RB, Callable 01/01/07 @ 102 (FGIC) 5.125%, 01/01/26 750 736 Loudoun County, School Improvements, Ser A, GO, Callable 06/01/06 @ 102 (C) 5.600%, 06/01/10 250 266 Lynchburg, Industrial Development Authority, Healthcare Facility, Centra Health Project, RB, Callable 01/01/08 @ 101 5.200%, 01/01/23 500 485 5.200%, 01/01/28 1,000 960 Lynchburg, Public Improvements, GO, Callable 05/01/06 @ 102 5.100%, 05/01/11 500 510 Manassas, Water Utility Improvements, Ser A, GO, Callable 01/01/08 @ 102 5.000%, 01/01/18 500 491 Manassas Park, GO, Callable 04/01/09 @ 101 (FSA) 5.100%, 04/01/22 500 491
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Newport News, Redevelopment & Housing Authority, Mortgage Financing, Ser A, RB, Callable 08/20/07 @102 (GNMA) (C) 5.850%, 12/20/30 500 525 Norfork, GO
5.500%, 02/01/13 475 496 Norfolk, Industrial Development Authority, Bon Secours Healthcare Project, RB, Callable 08/15/07 @ 102 (MBIA) 5.250%, 08/15/17 $ 750 $ 744 Norfolk, Public Improvements, GO, Callable 06/01/06 @ 101 5.250%, 06/01/09 500 522 Portsmouth, Public Improvements, GO, Callable 08/01/06 @ 101 (FGIC) 5.250%, 08/01/21 500 500 Prince William County, Industrial Development Authority, Residential Care Facilities, A, RB, Callable 01/01/07 @ 102 6.625%, 01/01/26 200 212 Roanoke County, Industrial Development Authority, Roanoke Memorial Hospital Project, Ser C, RB (C) (E) 3.200%, 06/01/99 1,000 1,000 Roanoke, Public Improvements, GO, Callable 08/01/04 @ 102 5.150%, 08/01/12 250 254 Spotsylvania County, GO (FSA) 5.000%, 07/15/14 1,000 1,013 Spotsylvania County, Water & Sewer System, RB, Callable 06/01/07 @ 102 (MBIA) 5.250%, 06/01/12 500 513 State, Biotechnology Research Park Authority, Biotech Two Project, RB, Callable 09/01/06 @ 101 5.250%, 09/01/18 500 502 State, College Building Authority, Educational Facilites, Marymount University Project, RB, Callable 07/01/08 (C) 5.100%, 07/01/18 1,000 976 State, Housing Development Authority, Commonwealth Mortgage Project, Ser E, GO 5.125%, 07/01/17 2,000 1,989 State, Housing Development Authority, Commonwealth Mortgage Project, Ser A, RB, Callable 01/01/03 @ 102 6.400%, 07/01/17 985 1,036 State, Housing Development Authority, Commonwealth Mortgage Project, Ser A, RB, AMT, Callable 01/01/06 @ 102 (MBIA) 6.350%, 07/01/18 150 160
54
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- State, Polytechnic Institute & State University, University Service Systems, RB, Callable 06/01/06 @ 102
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- CASH EQUIVALENTS (8.3%) AIM Tax Free Institutional Cash Reserve $ 1,588 $ 1,588 Federated Virginia Municipal Cash Trust 1,637 1,637 ------- Total Cash Equivalents (Cost $3,225) 3,225 ------- Total Investments (98.4% ) (Cost $37,902) 38,262 ------- OTHER ASSETS AND LIABILITIES, NET (1.6%) 616 ------- NET ASSETS: Portfolio Shares of Trust Class ($.001 par value -- .75 billion shares authorized) based on 3,061,763 outstanding shares 31,515 Portfolio Shares of Investor Class B ($.001 par value -- .125 billion shares authorized) based on 662,147 outstanding shares 6,972 Accumulated net realized gain on investments 31 Net unrealized appreciation on investments 360 ------- Total Net Assets (100.0%) $38,878 ------- ------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.43 ------- ------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 10.48 ------- -------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 55 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS AMBAC Security insured by the American Municipal Bond Assurance Corporation AMT Alternative Minimum Tax Cl Class CMO Collateralized Mortgage Obligation COP Certificate of Participation ETM Escrowed to Maturity FFCB Federal Farm Credit Bank FGIC Security insured by the Financial Guaranty Insurance Company FHA Federal Housing Authority FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association FSA Security insured by Financial Security Assurance GNMA Government National Mortgage Association GO General Obligation MBIA Security insured by the Municipal Bond Insurance Association MTN Medium Term Note RB Revenue Bond REMIC Real Estate Mortgage Investment Conduit Ser Series STRIPS Separately Traded Registered Interest and Principal Security TCRS Transferrable Custodial Receipts (A) Zero Coupon Bond (B) Private Placement Security (C) Adjustable rate security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 1999. The date shown is the next scheduled reset date. (D) Put and demand features exist requiring the issuer to repurchase the instrument prior to maturity. (E) Securities are held in connection with a letter of credit issued by a major bank. (F) Collateralized by U.S. government Securities (G) Collateralized by State and Local Government Securities (H) Tri-Party Repurchase Agreement 56
STATEMENT OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 INVESTMENT GRADE TAX-EXEMPT BOND FUND ----------- ASSETS: Investments at value (Cost $194,279) $193,699 Cash 104 Accrued income 3,615 Receivable for investment securities sold 6,559 Receivable for portfolio shares purchased 21 Other Assets 16 ----------- Total Assets 204,014 -----------
STATEMENT OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999
INVESTMENT GRADE TAX-EXEMPT BOND FUND --------------- ASSETS: Investments at value (Cost $194,279) $ 193,699 Cash 104 Accrued income 3,615 Receivable for investment securities sold 6,559 Receivable for portfolio shares purchased 21 Other Assets 16 --------- Total Assets 204,014 --------- LIABILITIES: Payable for investment securities purchased 7,095 Accrued expenses 225 Payable for portfolio shares redeemed 271 Distributions payable 587 --------- Total liabilities 8,178 --------- Net Assets $ 195,836 --------- --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 13,880,127 outstanding shares of beneficial interest 153,346 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 2,266,151 outstanding shares of beneficial interest 23,958 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,487,506 outstanding shares of beneficial interest 16,800 Undistributed net investment income 4 Accumulated net realized gain on investments 2,308 Net unrealized depreciation on investments (580) --------- Total Net Assets $ 195,836 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 11.10 --------- --------- Net Asset Value and Redemption Price Per Share-- Investor Shares $ 11.12 --------- --------- Maximum Offering Price Per Share-- Investor Shares ($11.12 / 96.25%) $ 11.55 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 11.10 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. 57
INVESTMENT GRADE TAX-EXEMPT BOND FUND ------------- ASSETS: Investments at value (Cost $194,279) $ 193,699 Cash 104 Accrued income 3,615 Receivable for investment securities sold 6,559 Receivable for portfolio shares purchased 21 Other Assets 16 --------- Total Assets 204,014 --------- LIABILITIES: Payable for investment securities purchased 7,095 Accrued expenses 225 Payable for portfolio shares redeemed 271 Distributions payable 587 --------- Total liabilities 8,178 --------- Net Assets $ 195,836 --------- --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 13,880,127 outstanding shares of beneficial interest 153,346 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 2,266,151 outstanding shares of beneficial interest 23,958 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,487,506 outstanding shares of beneficial interest 16,800 Undistributed net investment income 4 Accumulated net realized gain on investments 2,308 Net unrealized depreciation on investments (580) --------- Total Net Assets $ 195,836 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 11.10 --------- --------- Net Asset Value and Redemption Price Per Share-- Investor Shares $ 11.12 --------- --------- Maximum Offering Price Per Share-- Investor Shares ($11.12 / 96.25%) $ 11.55 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 11.10 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
INVESTMENT FLORIDA GEORGIA INVESTMENT GRADE TAX-EXEMPT TAX-EXEMPT GRADE BOND TAX-EXEMPT BOND FUND BOND FUND FUND BOND FUND - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- 06/01/98- 06/01/98- 06/01/98- 06/01/98- 05/31/99 05/31/99 05/31/99 05/31/99 - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- Interest Income $ 5,658 $ 4,015 $ 52,830 $ 8,431 -------- -------- -------- -------- Expenses: Investment Advisory Fees 804 575 6,499 1,381 Less: Investment Advisory Fees Waived/Reimbursed (133) (96) (743) (191) Administrator Fees 96 69 683 146 Less: Administrative Fees Waived -- -- -- -- Transfer Agent Fees-- Trust Shares 13 15 20 13 Transfer Agent Fees-- Investor Shares 13 11 28 6 Transfer Agent Fees-- Flex Shares 14 13 27 18 Transfer Agent Out of Pocket Fees 11 8 98 21 Printing Expenses 6 4 46 23 Custody Fees 2 1 30 9 Professional Fees 5 4 38 15 Trustee Fees 2 1 9 5 Registration Fees 12 8 43 8 Distribution Fees-- Trust Shares -- -- -- -- Less: Distribution Fees Waived-- Trust Shares -- -- -- -- Distribution Fees-- Investor Shares 7 6 142 115 Less: Distribution Fees Waived-- Investor Shares (2) (6) (36) (12) Distribution Fees-- Flex Shares 115 100 183 107 Less: Distribution Fees Waived-- Flex Shares (48) (42) (47) (30) Insurance and Other Fees 3 -- 29 4 Amortization of Deferred Organization Costs 1 -- -- -- -------- -------- -------- -------- Total Expenses 921 671 7,049 1,638 -------- -------- -------- -------- Net Investment Income 4,737 3,344 45,781 6,793 -------- -------- -------- -------- Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain (Loss) on Securities Sold 1,160 414 15,248 4,833 Net Change in Unrealized Appreciation (Depreciation) on Investments (1,845) (1,241) (27,720) (3,278) -------- -------- -------- -------- Total Net Realized and Unrealized Gain (Loss) on Investments (685) (827) (12,472) 1,555 -------- -------- -------- -------- Net Increase (Decrease) in Net Assets from Operations $ 4,052 $ 2,517 $ 33,309 $ 8,348 -------- -------- -------- -------- -------- -------- -------- -------- Amounts designated as "--" are either $0 or round to $0
LIMITED- TERM FEDERAL SHORT-TERM MORTGAGE MARYLAND U.S. TREASURY U.S. SECURITIES MUNICIPAL SHORT-TERM SECURITIES GOVERNMENT FUND BOND FUND BOND FUND FUND SECURITIES FUND 06/01/98- 12/01/98- 12/01/97- 06/01/98- 06/01/98- 06/01/98- 05/31/99 05/31/99 11/30/98 05/31/99 05/31/99 05/31/99 Interest Income $ 8,743 $ 616 $ 826 $ 7,921 $ 2,903 $ 3,247 -------- -------- -------- -------- -------- -------- Expenses: Investment Advisory Fees 955 84 105 890 352 380 Less: Investment Advisory Fees Waived/Reimbursed (153) (49) (61) (139) (62) (57) Administrator Fees 115 33 26 106 42 40 Less: Administrative Fees Waived -- -- -- -- -- -- Transfer Agent Fees-- Trust Shares 15 5 9 14 17 14 Transfer Agent Fees-- Investor Shares 13 -- -- 11 12 11 Transfer Agent Fees-- Flex Shares 11 2 -- 12 13 13 Transfer Agent Out of Pocket Fees 12 -- -- 13 4 5 Printing Expenses 4 1 1 3 -- 2 Custody Fees 2 3 5 5 -- 1 Professional Fees 8 6 2 7 -- 3 Trustee Fees 2 -- -- -- -- 1 Registration Fees 9 1 4 9 -- -- Distribution Fees-- Trust Shares -- 41 30 -- -- -- Less: Distribution Fees Waived-- Trust Shares -- (35) (29) -- -- -- Distribution Fees-- Investor Shares 6 -- -- 4 5 11 Less: Distribution Fees Waived-- Investor Shares (1) -- -- (4) (5) (2) Distribution Fees-- Flex Shares 18 24 18 21 27 54 Less: Distribution Fees Waived-- Flex Shares (18) -- (1) (21) (27) (22) Insurance and Other Fees 1 1 16 -- -- -- Amortization of Deferred Organization Costs 3 -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total Expenses 1,002 119 125 931 378 454 -------- -------- -------- -------- -------- -------- Net Investment Income 7,741 497 701 6,990 2,525 2,793 -------- -------- -------- -------- -------- -------- Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain (Loss) on Securities Sold 88 (19) 58 414 243 15 Net Change in Unrealized Appreciation (Depreciation) on Investments (1,037) (437) 406 (2,357) (388) (1,299) -------- -------- -------- -------- -------- -------- Total Net Realized and Unrealized Gain (Loss) on Investments (949) (456) 464 (1,943) (145) 1,509 -------- -------- -------- -------- -------- -------- Net Increase (Decrease) in Net Assets from Operations $ 6,792 $ 41 $ 1,165 $ 5,047 $ 2,380 $ (1,284) -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Amounts designated as "--" are either $0 or round to $0
VIRGINIA INTERMEDIATE VIRGINIA MUNICIPAL MUNICIPAL BOND FUND BOND FUND 12/01/98- 12/01/97- 12/01/98- 12/01/97- 05/31/99 11/30/98 05/31/99 11/30/98 Interest Income $ 6,288 $ 12,776 $ 895 $ 1,419 -------- -------- -------- -------- Expenses: Investment Advisory Fees 641 1,248 110 167 Less: Investment Advisory Fees Waived/Reimbursed -- -- (20) (28) Administrator Fees 185 375 27 42 Less: Administrative Fees Waived -- -- (20) (36) Transfer Agent Fees-- Trust Shares 84 125 8 13 Transfer Agent Fees-- Investor Shares 3 1 -- -- Transfer Agent Fees-- Flex Shares -- -- 2 1 Transfer Agent Out of Pocket Fees -- -- -- -- Printing Expenses 5 24 2 1 Custody Fees 47 92 6 10 Professional Fees 25 29 5 5 Trustee Fees 2 6 -- -- Registration Fees 2 11 2 5 Distribution Fees-- Trust Shares 469 464 59 48 Less: Distribution Fees Waived-- Trust Shares (410) (445) (52) (46) Distribution Fees-- Investor Shares 6 13 -- -- Less: Distribution Fees Waived-- Investor Shares (6) (13) -- -- Distribution Fees-- Flex Shares -- -- 25 26 Less: Distribution Fees Waived-- Flex Shares -- -- -- (1) Insurance and Other Fees 13 37 7 9 Amortization of Deferred Organization Costs -- -- -- -- -------- -------- -------- -------- Total Expenses 1,066 1,967 161 216 -------- -------- -------- -------- Net Investment Income 5,222 10,809 734 1,203 -------- -------- -------- -------- Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain (Loss) on Securities Sold 1,177 1,725 31 175 Net Change in Unrealized Appreciation (Depreciation) on Investments (5,509) 2,380 (722) 507 -------- -------- -------- -------- Total Net Realized and Unrealized Gain (Loss) on Investments (4,332) 4,105 (691) 682 -------- -------- -------- -------- Net Increase (Decrease) in Net Assets from Operations $ 890 $ 14,914 $ 43 $ 1,885 -------- -------- -------- -------- -------- -------- -------- -------- Amounts designated as "--" are either $0 or round to $0
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 58 & 59 STATEMENT OF CHANGES IN NET ASSETS (000) - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30,
FLORIDA TAX-EXEMPT GEORGIA TAX-EXEMPT BOND FUND BOND FUND --------------------------- -------------------------- 06/01/98- 06/01/97- 06/01/98- 06/01/97- 05/31/99 05/31/98 05/31/99 05/31/98 ---------- --------- --------- ------- Operations: Net Investment Income $ 4,737 $ 3,410 $ 3,344 $ 2,430 Net Realized Gain (Loss) on Investments 1,160 720 414 195 Net Change in Unrealized Appreciation (Depreciation) on Investments (1,845) 2,334 (1,241) 1,962 --------- ------- ------- ------- Increase in Net Assets from Operations 4,052 6,464 2,517 4,587 --------- ------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares (4,235) (3,070) (2,897) (2,075) Investor Shares (134) (128) (128) (147) Flex Shares (369) (211) (318) (207) Capital Gains: Trust Shares (1,037) (42) (162) (61) Investor Shares (37) (2) (8) (4) Flex Shares (122) (3) (20) (7) --------- ------- ------- ------- Total Distributions (5,934) (3,456) (3,533) (2,501) --------- ------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 51,929 59,209 36,255 34,479 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions 1,663 420 1,180 924 Cost of Shares Repurchased (27,307) (18,838) (11,514) (14,516) --------- ------- ------- ------- Increase in Net Assets From Trust Share Transactions 26,285 40,791 25,921 20,887 --------- ------- ------- ------- Investor Shares: Proceeds from Shares Issued 1,105 870 1,195 1,508 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions 143 101 118 131 Cost of Shares Repurchased (780) (955) (1,586) (1,314) --------- ------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions 468 16 (273) 325 --------- ------- ------- ------- Flex Shares: Proceeds from Shares Issued 11,906 6,969 5,982 4,983 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions 433 172 304 186 Cost of Shares Repurchased (5,520) (2,189) (1,034) (1,770) --------- ------- ------- ------- Increase in Net Assets From Flex Share Transactions 6,819 4,952 5,252 3,399 --------- ------- ------- ------- Increase in Net Assets From Share Transactions 33,572 45,759 30,900 24,611 --------- ------- ------- ------- Total Increase (Decrease) in Net Assets 31,690 48,767 29,884 26,697 --------- ------- ------- ------- Net Assets: Beginning of Period 105,480 56,713 74,602 47,905 --------- ------- ------- ------- End of Period $137,170 $105,480 $104,486 $74,602 --------- ------- ------- ------- --------- ------- ------- ------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 4,807 5,591 3,562 3,445 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions 154 40 116 92 Shares Redeemed (2,530) (1,777) (1,128) (1,456) --------- ------- ------- ------- Net Trust Share Transactions 2,431 3,854 2.550 2,081 --------- ------- ------- ------- Investor Shares: Shares Issued 102 82 117 149 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions 13 10 12 13 Shares Redeemed (72) (90) (155) (131) --------- ------- ------- ------- Net Investor Share Transactions 43 2 (26) 31 --------- ------- ------- ------- Flex Shares: Shares Issued 1,102 658 586 495 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions 40 16 30 19 Shares Redeemed (512) (205) (102) (176) --------- ------- ------- ------- Net Flex Share Transactions 630 469 514 338 --------- ------- ------- ------- --------- ------- ------- ------- Net Change in Capital Shares 3,104 4,325 3,038 2,450 --------- ------- ------- -------
INVESTMENT GRADE INVESTMENT GRADE TAX- BOND FUND EXEMPT BOND FUND ------------------------- ------------------------- 06/01/98- 06/01/97- 06/01/98- 06/01/97- 05/31/99 05/31/98 05/31/99 05/31/98 --------- -------- --------- --------- Operations: Net Investment Income $ 45,781 $ 43,082 $ 6,793 $ 6,699 --------- -------- ------- ------- Net Realized Gain (Loss) on Investments 15,248 10,888 4,833 6,478 Net Change in Unrealized Appreciation (Depreciation) on Investments (27,720) 24,005 (3,278) 1,225 --------- -------- ------- ------- Increase in Net Assets from Operations 33,309 77,975 8,348 14,402 --------- -------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares (43,474) (40,937) (5,587) (5,523) Investor Shares (1,621) (1,729) (901) (1,002) Flex Shares (807) (416) (305) (173) Capital Gains: Trust Shares (13,468) -- (4,790) (3,989) Investor Shares (547) -- (914) (799) Flex Shares (306) -- (323) (152) --------- -------- ------- ------- Total Distributions (60,223) (43,082) (12,820) (11,638) --------- -------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 310,338 258,775 58,516 39,596 Shares Issued in Connection with Crestar Merger 314,362 -- -- -- Reinvestment of Cash Distributions 42,773 30,522 5,421 4,599 Cost of Shares Repurchased (286,648) (162,448) (52,929) (38,924) --------- -------- ------- ------- Increase in Net Assets From Trust Share Transactions 380,825 126,849 11,008 5,271 --------- -------- ------- ------- Investor Shares: Proceeds from Shares Issued 8,100 5,860 2,158 2,484 Shares Issued in Connection with Crestar Merger 2,385 -- -- -- Reinvestment of Cash Distributions 2,052 1,609 1,627 1,614 Cost of Shares Repurchased (9,990) (8,920) (6,100) (8,284) --------- -------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions 2,547 (1,451) (2,315) (4,186) --------- -------- ------- ------- Flex Shares: Proceeds from Shares Issued 19,438 9,584 10,543 6,179 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions 1,002 351 551 296 Cost of Shares Repurchased (6,765) (2,932) (2,643) (2,842) --------- -------- ------- ------- Increase in Net Assets From Flex Share Transactions 13,675 7,003 8,451 3,633 --------- -------- ------- ------- Increase in Net Assets From Share Transactions 397,047 132,401 17,144 4,718 --------- -------- ------- ------- Total Increase (Decrease) in Net Assets 370,133 167,294 12,672 7,482 --------- -------- ------- ------- Net Assets: Beginning of Period 839,868 672,574 183,164 175,682 --------- -------- ------- ------- End of Period $1,210,001 $839,868 $195,836 $183,164 --------- -------- ------- ------- --------- -------- ------- ------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 28,937 24,713 5,150 3,486 Shares Issued in Connection with Crestar Merger 30,233 -- -- -- Shares Issued in Lieu of Cash Distributions 3,979 2,915 479 407 Shares Redeemed (26,711) (15,497) (4,614) (3,425) --------- -------- ------- ------- Net Trust Share Transactions 36,438 12,131 1,015 468 --------- -------- ------- ------- Investor Shares: Shares Issued 758 557 190 218 Shares Issued in Connection with Crestar Merger 229 -- -- -- Shares Issued in Lieu of Cash Distributions 191 154 143 142 Shares Redeemed (931) (852) (535) (727) --------- -------- ------- ------- Net Investor Share Transactions 247 (141) (202) (367) --------- -------- ------- ------- Flex Shares: Shares Issued 1,821 908 936 544 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions 93 33 49 26 Shares Redeemed (634) (278) (234) (250) --------- -------- ------- ------- Net Flex Share Transactions 1,280 663 751 320 --------- -------- ------- ------- --------- -------- ------- ------- Net Change in Capital Shares 37,965 12,653 1,564 421 --------- -------- ------- -------
LIMITED-TERM FEDERAL MARYLAND MUNICIPAL MORTGAGE SECURITIES FUND BOND FUND ------------------------ ---------------------------------- 06/01/98- 06/01/97- 12/01/98- 12/01/97- 12/01/96- 05/31/99 05/31/98 05/31/99 11/30/98 11/30/97 --------- --------- --------- --------- --------- Operations: Net Investment Income $ 7,741 $ 7,936 $ 497 $ 701 $ 374 --------- ------- ------- --------- -------- Net Realized Gain (Loss) on Investments 88 502 (19) 58 (5) Net Change in Unrealized Appreciation (Depreciation) on Investments (1,037) 1,031 (437) 406 241 --------- ------- ------- --------- -------- Increase in Net Assets from Operations 6,792 9,469 41 1,165 610 --------- ------- ------- --------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares (7,568) (7,721) (425) (645) (363) Investor Shares (125) (135) -- -- -- Flex Shares (83) (78) (77) (56) (11) Capital Gains: Trust Shares (1,611) (194) (24) -- -- Investor Shares (28) (3) -- -- -- Flex Shares (19) (2) (4) -- -- --------- ------- ------- --------- -------- Total Distributions (9,434) (8,133) (530) (701) (374) --------- ------- ------- --------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 54,404 43,610 15,770 13,041 6,495 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Reinvestment of Cash Distributions 6,287 5,346 14 11 2 Cost of Shares Repurchased (60,354) (36,666) (4,854) (5,813) (1,067) --------- ------- ------- --------- -------- Increase in Net Assets From Trust Share Transactions 337 12,290 10,930 7,239 5,430 --------- ------- ------- --------- -------- Investor Shares: Proceeds from Shares Issued 853 1,128 -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- -- -- Reinvestment of Cash Distributions 151 131 -- -- -- Cost of Shares Repurchased (1,458) (1,006) -- -- -- --------- ------- ------- --------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions (454) 253 -- -- -- --------- ------- ------- --------- -------- Flex Shares: Proceeds from Shares Issued 1,082 691 4,739 2,772 518 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Reinvestment of Cash Distributions 96 75 66 41 9 Cost of Shares Repurchased (566) (647) (226) (177) (92) --------- ------- ------- --------- -------- Increase in Net Assets From Flex Share Transactions 612 119 4,579 2,636 435 --------- ------- ------- --------- -------- Increase in Net Assets From Share Transactions 495 12,662 15,509 9,875 5,865 --------- ------- ------- --------- -------- Total Increase (Decrease) in Net Assets (2,147) 13,998 15,020 10,339 6,101 --------- ------- ------- --------- -------- Net Assets: Beginning of Period 141,736 127,738 22,361 12,022 5,921 --------- ------- ------- --------- -------- End of Period $139,589 $141,736 $37,381 $22,361 $12,022 --------- ------- ------- --------- -------- --------- ------- ------- --------- -------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 5,379 4,313 1,556 1,292 667 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 620 529 2 1 -- Shares Redeemed (5,979) (3,626) (479) (575) (110) --------- ------- ------- --------- -------- Net Trust Share Transactions 20 1,216 1,079 718 557 --------- ------- ------- --------- -------- Investor Shares: Shares Issued 84 112 -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 15 13 -- -- -- Shares Redeemed (144) (100) -- -- -- --------- ------- ------- --------- -------- Net Investor Share Transactions (45) 25 -- -- -- --------- ------- ------- --------- -------- Flex Shares: Shares Issued 107 68 464 274 53 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 10 7 7 4 1 Shares Redeemed (56) (64) (22) (17) (9) --------- ------- ------- --------- -------- Net Flex Share Transactions 61 11 449 261 45 --------- ------- ------- --------- -------- --------- ------- ------- --------- -------- Net Change in Capital Shares 36 1,252 1,528 979 602 --------- ------- ------- --------- -------- Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 60 & 61 STATEMENT OF CHANGES IN NET ASSETS (000) - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31 AND NOVEMBER 30.
SHORT-TERM SHORT-TERM U.S. TREASURY U. S. GOVERNMENT BOND FUND SECURITIES FUND SECURITIES FUND ------------------------ ----------------------- --------------------- 06/01/98- 06/01/97- 06/01/98- 06/01/97- 06/01/98- 06/01/97- 05/31/99 05/31/98 05/31/99 05/31/98 05/31/99 05/31/98 --------- --------- --------- --------- --------- --------- Operations: Net Investment Income $ 6,990 $ 6,036 $ 2,525 $ 1,816 $ 2,793 $ 1,894 Net Realized Gain on Investments 414 502 243 47 15 55 Net Change in Unrealized Appreciation (Depreciation) on Investments (2,357) 1,163 (388) 211 (1,299) 1,207 --------- --------- --------- --------- --------- --------- Increase in Net Assets from Operations 5,047 7,701 2,380 2,074 1,509 3,156 --------- --------- --------- --------- --------- --------- Distributions to Shareholders: Net Investment Income: Trust Shares (6,805) (5,864) (2,281) (1,575) (2,385) (1,585) Investor Shares (92) (106) (133) (178) (153) (141) Flex Shares (95) (67) (111) (63) (252) (168) Capital Gains: Trust Shares (356) (100) -- -- -- -- Investor Shares (4) (2) -- -- -- -- Flex Shares (5) (1) -- -- -- -- --------- --------- --------- --------- --------- --------- Total Distributions (7,357) (6,140) (2,525) (1,816) (2,790) (1,894) --------- --------- --------- --------- --------- --------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 57,981 59,682 17,499 33,653 23,161 20,160 Shares Issued in Connection with Crestar Merger 72,757 -- -- -- 56,128 -- Reinvestment of Cash Distributions 3,614 3,238 951 661 520 380 Cost of Shares Repurchased (42,626) (33,705) (9,243) (9,594) (11,462) (6,142) --------- --------- --------- --------- --------- --------- Increase (Decrease) in Net Assets From Trust Share Transactions 91,726 29,215 9,207 24,720 68,347 14,398 --------- --------- --------- --------- --------- --------- Investor Shares: Proceeds from Shares Issued 589 190 1,382 479 956 1,625 Shares Issued in Connection with Crestar Merger -- -- -- -- -- -- Reinvestment of Cash Distributions 94 103 133 180 152 134 Cost of Shares Repurchased (781) (560) (1,983) (1,338) (1,762) (880) --------- --------- --------- --------- --------- --------- Increase (Decrease) in Net Assets From Investor Share Transactions (98) (267) (468) (679) (654) 879 --------- --------- --------- --------- --------- --------- Flex Shares: Proceeds from Shares Issued 2,540 1,392 5,314 1,012 5,920 2,695 Shares Issued in Connection with Crestar Merger -- -- -- -- 3,174 -- Reinvestment of Cash Distributions 96 65 94 56 206 145 Cost of Shares Repurchased (2,365) (441) (1,855) (757) (1,637) (1,748) --------- --------- --------- --------- --------- --------- Increase (Decrease) in Net Assets From Flex Share Transactions 271 1,016 3,553 311 7,663 1,092 --------- --------- --------- --------- --------- --------- Increase (Decrease) in Net Assets From Share Transactions 91,899 29,964 12,292 24,352 75,356 16,369 --------- --------- --------- --------- --------- --------- Total Increase (Decrease) in Net Assets 89,589 31,525 12,147 24,610 74,075 17,631 --------- --------- --------- --------- --------- --------- Net Assets: Beginning of Period 124,481 92,956 51,610 27,000 42,146 24,515 --------- --------- --------- --------- --------- --------- End of Period $ 214,070 $ 124,481 $ 63,757 $ 51,610 $ 116,221 $ 42,146 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 5,746 5,955 1,750 3,381 2,197 1,949 Shares Issued in Connection with Crestar Merger 7,308 -- -- -- 5,439 -- Shares Issued in Lieu of Cash Distributions 357 323 95 66 49 37 Shares Redeemed (4,219) (3,364) (921) (965) (1,087) (592) --------- --------- --------- --------- --------- --------- Net Trust Share Transactions 9,192 2,914 924 2,482 6,598 1,394 --------- --------- --------- --------- --------- --------- Investor Shares: Shares Issued 58 19 138 48 91 157 Shares Issued in Connection with Crestar Merger -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 9 10 13 18 15 13 Shares Redeemed (77) (56) (198) (134) (167) (85) --------- --------- --------- --------- --------- --------- Net Investor Share Transactions (10) (27) (47) (68) (61) 85 --------- --------- --------- --------- --------- --------- Flex Shares: Shares Issued 251 139 531 102 564 260 Shares Issued in Connection with Crestar Merger -- -- -- -- 308 -- Shares Issued in Lieu of Cash Distributions 10 6 9 6 19 14 Shares Redeemed (235) (44) (185) (76) (156) (169) --------- --------- --------- --------- --------- --------- Net Flex Share Transactions 26 101 355 32 735 105 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net Change in Capital Shares 9,208 2,988 1,232 2,446 7,272 1,584 --------- --------- --------- --------- --------- ---------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 12/01/98- 12/01/97- 12/01/96- 05/31/99 11/30/98 11/30/97 Operations: Net Investment Income $ 5,222 $ 10,809 $ 11,260 Net Realized Gain on Investments 1,177 1,725 1,641 Net Change in Unrealized Appreciation (Depreciation) on Investments (5,509) 2,380 490 --------- --------- --------- Increase in Net Assets from Operations 890 14,914 13,391 --------- --------- --------- Distributions to Shareholders: Net Investment Income: Trust Shares (5,069) (10,471) (10,835) Investor Shares (166) (364) (353) Flex Shares -- -- -- Capital Gains: Trust Shares (1,670) (793) -- Investor Shares (56) (28) -- Flex Shares -- -- -- --------- --------- --------- Total Distributions (6,961) (11,656) (11,188) --------- --------- --------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 26,357 36,891 35,373 Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions 43 629 22 Cost of Shares Repurchased (24,041) (34,155) (43,571) --------- --------- --------- Increase (Decrease) in Net Assets From Trust Share Transactions 2,359 3,365 (8,176) --------- --------- --------- Investor Shares: Proceeds from Shares Issued 653 2,174 938 Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions 164 289 274 Cost of Shares Repurchased (821) (2,503) (1,639) --------- --------- --------- Increase (Decrease) in Net Assets From Investor Share Transactions (4) (40) (427) --------- --------- --------- Flex Shares: Proceeds from Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions -- -- -- Cost of Shares Repurchased -- -- -- --------- --------- --------- Increase (Decrease) in Net Assets From Flex Share Transactions -- -- -- --------- --------- --------- Increase (Decrease) in Net Assets From Share Transactions 2,355 3,325 (8,603) --------- --------- --------- Total Increase (Decrease) in Net Assets (3,716) 6,583 (6,400) --------- --------- --------- Net Assets: Beginning of Period 251,505 244,922 251,322 --------- --------- --------- End of Period $ 247,789 $ 251,505 $ 244,922 --------- --------- --------- --------- --------- --------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 2,543 3,557 3,476 Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions 4 61 2 Shares Redeemed (2,327) (3,293) (4,278) --------- --------- --------- Net Trust Share Transactions 220 325 (800) --------- --------- --------- Investor Shares: Shares Issued 62 210 92 Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions 16 28 27 Shares Redeemed (79) (241) (161) --------- --------- --------- Net Investor Share Transactions (1) (3) (42) --------- --------- --------- Flex Shares: Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions -- -- -- Shares Redeemed -- -- -- --------- --------- --------- Net Flex Share Transactions -- -- -- --------- --------- --------- --------- --------- --------- Net Change in Capital Shares 219 322 (842) --------- --------- ---------
VIRGINIA MUNICIPAL BOND FUND 12/01/98- 12/01/97- 12/01/96- 05/31/99 11/30/98 11/30/97 Operations: Net Investment Income $ 734 $ 1,203 $ 832 Net Realized Gain on Investments 31 175 67 Net Change in Unrealized Appreciation (Depreciation) on Investments (722) 507 278 --------- --------- --------- Increase in Net Assets from Operations 43 1,885 1,177 --------- --------- --------- Distributions to Shareholders: Net Investment Income: Trust Shares (650) (1,116) (792) Investor Shares -- -- -- Flex Shares (88) (87) (40) Capital Gains: Trust Shares (155) (50) (12) Investor Shares -- -- -- Flex Shares (20) (4) (1) --------- --------- --------- Total Distributions (913) (1,257) (845) --------- --------- --------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 7,281 13,751 9,497 Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions 29 60 26 Cost of Shares Repurchased (3,890) (5,172) (5,693) --------- --------- --------- Increase (Decrease) in Net Assets From Trust Share Transactions 3,420 8,639 3,830 --------- --------- --------- Investor Shares: Proceeds from Shares Issued -- -- Shares Issued in Connection with Crestar Merger -- -- Reinvestment of Cash Distributions -- -- -- Cost of Shares Repurchased -- -- -- --------- --------- --------- Increase (Decrease) in Net Assets From Investor Share Transactions -- -- -- --------- --------- --------- Flex Shares: Proceeds from Shares Issued 3,816 2,474 743 Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions 77 64 31 Cost of Shares Repurchased (514) (376) (115) --------- --------- --------- Increase (Decrease) in Net Assets From Flex Share Transactions 3,379 2,162 659 --------- --------- --------- Increase (Decrease) in Net Assets From Share Transactions 6,799 10,801 4,489 --------- --------- --------- Total Increase (Decrease) in Net Assets 5,929 11,429 4,821 --------- --------- --------- Net Assets: Beginning of Period 32,949 21,520 16,699 --------- --------- --------- End of Period $ 38,878 $ 32,949 $ 21,520 --------- --------- --------- --------- --------- --------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 688 1,302 928 Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions 3 6 2 Shares Redeemed (368) (488) (559) --------- --------- --------- Net Trust Share Transactions 323 820 371 --------- --------- --------- Investor Shares: Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions -- -- -- Shares Redeemed -- -- -- --------- --------- --------- Net Investor Share Transactions -- -- -- --------- --------- --------- Flex Shares: Shares Issued 359 233 73 Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions 7 6 3 Shares Redeemed (49) (35) (11) --------- --------- --------- Net Flex Share Transactions 317 204 65 --------- --------- --------- --------- --------- --------- Net Change in Capital Shares 640 1,024 436 --------- --------- --------- Amounts designated as "--" are either $0 or round to $0
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 62 & 63 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, UNLESS OTHERWISE INDICATED. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD --------- ------------- ---------------- ------------- ------------- --------- FLORIDA TAX-EXEMPT BOND FUND Trust Shares 1999 $10.72 $ 0.42 $(0.02) $(0.42) $(0.11) $10.59 1998 10.28 0.44 0.45 (0.44) (0.01) 10.72 1997 10.06 0.46 0.25 (0.46) (0.03) 10.28 1996 10.18 0.46 (0.07) (0.46) (0.05) 10.06 1995 9.75 0.44 0.43 (0.44) -- 10.18 Investor Shares 1999 $10.72 $ 0.40 $(0.01) $(0.40) $(0.11) $10.60 1998 10.29 0.42 0.44 (0.42) (0.01) 10.72 1997 10.07 0.44 0.25 (0.44) (0.03) 10.29 1996 10.18 0.44 (0.06) (0.44) (0.05) 10.07 1995 9.75 0.42 0.43 (0.42) -- 10.18 Flex Shares 1999 $10.74 $ 0.35 $(0.01) $(0.35) $(0.11) $10.62 1998 10.30 0.37 0.45 (0.37) (0.01) 10.74 1997 10.08 0.39 0.25 (0.39) (0.03) 10.30 1996(1) 10.19 0.39 (0.06) (0.39) (0.05) 10.08 GEORGIA TAX-EXEMPT BOND FUND Trust Shares 1999 $10.11 $ 0.39 $(0.06) $(0.39) $(0.02) $10.03 1998 9.73 0.41 0.39 (0.41) (0.01) 10.11 1997 9.56 0.42 0.22 (0.42) (0.05) 9.73 1996 9.63 0.43 (0.05) (0.43) (0.02) 9.56 1995 9.42 0.42 0.21 (0.42) -- 9.63 Investor Shares 1999 $10.13 $ 0.37 $(0.06) $(0.37) $(0.02) $10.05 1998 9.74 0.39 0.40 (0.39) (0.01) 10.13 1997 9.58 0.40 0.21 (0.40) (0.05) 9.74 1996 9.65 0.41 (0.05) (0.41) (0.02) 9.58 1995 9.44 0.40 0.21 (0.40) -- 9.65 Flex Shares 1999 $10.12 $ 0.32 $(0.06) $(0.32) $(0.02) $10.04 1998 9.73 0.34 0.40 (0.34) (0.01) 10.12 1997 9.56 0.35 0.22 (0.35) (0.05) 9.73 1996(2) 9.72 0.36 (0.14) (0.36) (0.02) 9.56 INVESTMENT GRADE BOND FUND Trust Shares 1999 $10.65 $ 0.56 $(0.11) $(0.56) $(0.18) $10.36 1998 10.16 0.60 0.49 (0.60) -- 10.65 1997 10.07 0.60 0.09 (0.60) -- 10.16 1996 10.26 0.60 (0.19) (0.60) -- 10.07 1995 9.89 0.61 0.37 (0.61) -- 10.26 Investor Shares 1999 $10.65 $ 0.52 $(0.11) $(0.52) $(0.18) $10.36 1998 10.16 0.55 0.49 (0.55) -- 10.65 1997 10.06 0.56 0.10 (0.56) -- 10.16 1996 10.26 0.56 (0.20) (0.56) -- 10.06 1995 9.89 0.57 0.38 (0.58) -- 10.26 Flex Shares 1999 $10.66 $ 0.47 $(0.11) $(0.47) $(0.18) $10.37 1998 10.17 0.51 0.49 (0.51) -- 10.66 1997 10.07 0.51 0.10 (0.51) -- 10.17 1996 (3) 10.33 0.52 (0.26) (0.52) -- 10.07
RATIO OF NET ASSETS RATIO OF NET INVESTMENT TOTAL END OF EXPENSES TO INCOME (LOSS) TO RETURN (+) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS ---------- ------------ ------------------- ------------------- FLORIDA TAX-EXEMPT BOND FUND Trust Shares 1999 3.72% $ 118,609 0.67% 3.90% 1998 8.77 93,939 0.66 4.16 1997 7.22 50,487 0.65 4.48 1996 3.87 30,790 0.65 4.49 1995 9.26 10,118 0.65 4.63 Investor Shares 1999 3.62% $ 3,799 0.87% 3.71% 1998 8.46 3,381 0.86 3.98 1997 7.00 3,226 0.85 4.28 1996 3.76 4,025 0.85 4.28 1995 9.04 3,320 0.85 4.36 Flex Shares 1999 3.13% $ 14,762 1.37% 3.21% 1998 8.04 8,160 1.36 3.45 1997 6.48 3,000 1.35 3.78 1996(1) 3.27 2,692 1.35 3.79 GEORGIA TAX-EXEMPT BOND FUND Trust Shares 1999 3.33% $ 87,452 0.67% 3.87% 1998 8.37 62,363 0.66 4.09 1997 6.79 39,732 0.65 4.31 1996 3.89 22,950 0.65 4.36 1995 6.94 13,187 0.65 4.56 Investor Shares 1999 3.13% $ 3,676 0.87% 3.67% 1998 8.26 3,975 0.86 3.89 1997 6.47 3,511 0.85 4.10 1996 3.69 3,418 0.85 4.17 1995 6.70 3,268 0.85 4.31 Flex Shares 1999 2.63% $ 13,358 1.37% 3.19% 1998 7.74 8,264 1.36 3.39 1997 6.06 4,662 1.35 3.60 1996(2) 2.25* 4,207 1.35 3.66 INVESTMENT GRADE BOND FUND Trust Shares 1999 4.25% $1,149,068 0.77% 5.25% 1998 10.92 793,488 0.76 5.67 1997 6.99 633,646 0.75 5.89 1996 4.02 599,514 0.75 5.81 1995 10.39 543,308 0.75 6.22 Investor Shares 1999 3.86% $ 34,913 1.17% 4.87% 1998 10.49 33,269 1.14 5.29 1997 6.66 33,165 1.15 5.48 1996 3.50 36,155 1.15 5.40 1995 10.04 33,772 1.15 5.79 Flex Shares 1999 3.35% $ 26,020 1.66% 4.40% 1998 9.99 13,111 1.65 4.76 1997 6.16 5,763 1.64 5.00 1996 (3) 2.50 4,621 1.64 4.84
RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------- ------------------- --------- FLORIDA TAX-EXEMPT BOND FUND Trust Shares 1999 0.77% 3.80% 72% 1998 0.80 4.02 69 1997 0.80 4.33 135 1996 0.88 4.26 63 1995 1.13 4.15 105 Investor Shares 1999 1.31% 3.27% 72% 1998 1.34 3.50 69 1997 1.31 3.82 135 1996 1.36 3.77 63 1995 1.50 3.71 105 Flex Shares 1999 1.88% 2.70% 72% 1998 2.01 2.80 69 1997 2.28 2.85 135 1996(1) 2.54 2.60 63 GEORGIA TAX-EXEMPT BOND FUND Trust Shares 1999 0.78% 3.76% 12% 1998 0.81 3.94 7 1997 0.81 4.15 15 1996 0.89 4.12 60 1995 0.98 4.23 25 Investor Shares 1999 1.25% 3.29% 12% 1998 1.30 3.45 7 1997 1.33 3.62 15 1996 1.41 3.61 60 1995 1.43 3.73 25 Flex Shares 1999 1.89% 2.67% 12% 1998 2.02 2.73 7 1997 2.07 2.88 15 1996(2) 2.35 2.66 60 INVESTMENT GRADE BOND FUND Trust Shares 1999 0.85% 5.17% 221% 1998 0.86 5.57 109 1997 0.85 5.79 298 1996 0.87 5.69 184 1995 0.88 6.09 238 Investor Shares 1999 1.36% 4.68% 221% 1998 1.38 5.05 109 1997 1.41 5.22 298 1996 1.44 5.11 184 1995 1.49 5.45 238 Flex Shares 1999 2.00% 4.06% 221% 1998 2.11 4.30 109 1997 2.20 4.44 298 1996 (3) 2.49 3.99 184
Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 6, 1995. All ratios for the period have been annualized. (3) Commenced operations on June 7, 1995. All ratios for the period have been annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 64 & 65 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ----------- --------------- ----------------- ------------- ------------- --------- INVESTMENT GRADE TAX-EXEMPT BOND FUND Trust Shares 1999 $11.40 $ 0.43 $ 0.10 $(0.43) $(0.40) $11.10 1998 11.22 0.44 0.50 (0.44) (0.32) 11.40 1997 11.10 0.44 0.33 (0.44) (0.21) 11.22 1996 11.28 0.45 0.19 (0.45) (0.37) 11.10 1995 10.68 0.46 0.60 (0.46) -- 11.28 Investor Shares 1999 $11.41 $ 0.38 $ 0.11 $(0.38) $(0.40) $11.12 1998 11.24 0.39 0.49 (0.39) (0.32) 11.41 1997 11.12 0.40 0.33 (0.40) (0.21) 11.24 1996 11.30 0.41 0.19 (0.41) (0.37) 11.12 1995 10.69 0.42 0.61 (0.42) -- 11.30 Flex Shares 1999 $11.40 $ 0.33 $ 0.10 $(0.33) $(0.40) $11.10 1998 11.23 0.33 0.49 (0.33) (0.32) 11.40 1997 11.11 0.35 0.33 (0.35) (0.21) 11.23 1996(1) 11.30 0.37 0.18 (0.37) (0.37) 11.11 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Trust Shares 1999 $10.12 $ 0.54 $(0.06) $(0.54) $(0.12) $ 9.94 1998 10.02 0.58 0.11 (0.58) (0.01) 10.12 1997 9.99 0.58 0.04 (0.58) (0.01) 10.02 1996 10.11 0.62 (0.14) (0.60) -- 9.99 1995(2) 10.00 0.58 0.13 (0.60) -- 10.11 Investor Shares 1999 $10.11 $ 0.51 $(0.06) $(0.51) $(0.12) $ 9.93 1998 10.00 0.56 0.12 (0.56) (0.01) 10.11 1997 9.97 0.56 0.04 (0.56) (0.01) 10.00 1996 10.11 0.60 (0.14) (0.60) -- 9.97 1995(3) 9.98 0.58 0.13 (0.58) -- 10.11 Flex Shares 1999 $10.12 $ 0.48 $(0.06) $(0.48) $(0.12) $ 9.94 1998 10.02 0.52 0.11 (0.52) (0.01) 10.12 1997 9.99 0.52 0.04 (0.52) (0.01) 10.02 1996(4) 10.14 0.55 (0.15) (0.55) -- 9.99 MARYLAND MUNICIPAL BOND FUND (A) Trust Shares 1999(5) $10.22 $ 0.20 $(0.15) $(0.20) $(0.01) $10.06 For the years ended November 30: 1998 9.95 0.42 0.27 (0.42) -- 10.22 1997 9.76 0.43 0.19 (0.43) -- 9.95 1996(6) 10.00 0.31 (0.24) (0.31) -- 9.76 Flex Shares 1999 $10.24 $ 0.15 $(0.15) $(0.15) $(0.01) $10.08 For the years ended November 30: 1998 9.96 0.33 0.28 (0.33) -- 10.24 1997 9.76 0.34 0.20 (0.34) -- 9.96 1996(7) 9.53 0.20 0.23 (0.20) -- 9.76 SHORT-TERM BOND FUND Trust Shares 1999 $10.05 $ 0.51 $(0.10) $(0.52) $(0.03) $ 9.91 1998 9.90 0.55 0.16 (0.55) (0.01) 10.05 1997 9.86 0.53 0.07 (0.53) (0.03) 9.90 1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 1995 9.79 0.53 0.19 (0.53) -- 9.98 Investor Shares 1999 $10.07 $ 0.49 $(0.10) $(0.50) $(0.03) $ 9.93 1998 9.91 0.53 0.17 (0.53) (0.01) 10.07 1997 9.88 0.51 0.06 (0.51) (0.03) 9.91 1996 10.01 0.52 (0.10) (0.53) (0.02) 9.88 1995 9.81 0.51 0.19 (0.50) -- 10.01 Flex Shares 1999 $10.07 $ 0.47 $(0.11) $(0.47) $(0.03) $ 9.93 1998 9.91 0.50 0.17 (0.50) (0.01) 10.07 1997 9.88 0.48 0.06 (0.48) (0.03) 9.91 1996(8) 10.02 0.47 (0.12) (0.47) (0.02) 9.88
RATIO OF NET ASSETS RATIO OF NET INVESTMENT TOTAL END OF EXPENSES TO INCOME (LOSS) TO RETURN (+) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS ---------- ------------ ------------------ ------------------ INVESTMENT GRADE TAX-EXEMPT BOND FUND Trust Shares 1999 4.67% $ 154,123 0.77% 3.75% 1998 8.57 146,606 0.76 3.83 1997 7.13 139,144 0.75 3.96 1996 5.82 124,507 0.75 4.01 1995 10.21 78,208 0.75 4.34 Investor Shares 1999 4.35% $ 25,195 1.17% 3.36% 1998 8.05 28,159 1.16 3.43 1997 6.69 31,857 1.15 3.56 1996 5.40 37,427 1.15 3.61 1995 9.91 41,693 1.15 3.88 Flex Shares 1999 3.78% $ 16,518 1.65% 2.86% 1998 7.50 8,399 1.64 2.95 1997 6.19 4,681 1.63 3.08 1996(1) 4.91 5,536 1.63 3.12 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Trust Shares 1999 4.75% $ 135,256 0.67% 5.28% 1998 7.12 137,488 0.66 5.75 1997 6.43 123,903 0.65 5.81 1996 4.84 73,370 0.65 6.04 1995(2) 7.50 41,823 0.65 6.43 Investor Shares 1999 4.47% $ 2,214 0.92% 5.03% 1998 6.95 2,705 0.91 5.50 1997 6.17 2,426 0.90 5.55 1996 4.59 2,512 0.90 5.75 1995(3) 7.45 623 0.90 6.27 Flex Shares 1999 4.14% $ 2,119 1.27% 4.69% 1998 6.49 1,543 1.26 5.16 1997 5.80 1,409 1.25 5.20 1996(4) 4.10 1,349 1.25 5.38 MARYLAND MUNICIPAL BOND FUND (A) Trust Shares 1999(5) 0.48% $ 29,658 0.70% 3.83% For the years ended November 30: 1998 7.03 19,115 0.62 4.11 1997 6.50 11,461 0.63 4.38 1996(6) 1.07 5,808 0.71 4.30 Flex Shares 1999 0.05% $ 7,723 1.59% 2.94% For the years ended November 30: 1998 6.17 3,246 1.57 3.16 1997 5.64 561 1.54 3.43 1996(7) 7.67 113 1.55 3.42 SHORT-TERM BOND FUND Trust Shares 1999 4.06% $ 209,904 0.67% 5.12% 1998 7.31 120,422 0.66 5.47 1997 6.30 89,701 0.65 5.37 1996 4.45 91,156 0.65 5.39 1995 7.60 60,952 0.65 5.49 Investor Shares 1999 3.88% $ 1,825 0.87% 4.92% 1998 7.19 1,949 0.86 5.27 1997 5.97 2,182 0.85 5.16 1996 4.23 2,700 0.85 5.20 1995 7.44 2,609 0.85 5.24 Flex Shares 1999 3.50% $ 2,341 1.22% 4.55% 1998 6.84 2,110 1.21 4.93 1997 5.62 1,073 1.20 4.82 1996(8) 3.73 966 1.20 4.77
EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------- ------------------- --------- INVESTMENT GRADE TAX-EXEMPT BOND FUND Trust Shares 1999 0.87% 3.65% 224% 1998 0.88 3.71 378 1997 0.86 3.85 489 1996 0.89 3.87 514 1995 0.91 4.18 592 Investor Shares 1999 1.32% 3.21% 224% 1998 1.43 3.16 378 1997 1.38 3.33 489 1996 1.42 3.34 514 1995 1.43 3.60 592 Flex Shares 1999 2.03% 2.48% 224% 1998 2.10 2.49 378 1997 2.15 2.56 489 1996(1) 2.25 2.50 514 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Trust Shares 1999 0.77% 5.18% 379% 1998 0.77 5.64 163 1997 0.78 5.68 133 1996 0.84 5.85 83 1995(2) 0.93 6.15 68 Investor Shares 1999 1.52% 4.43% 379% 1998 1.51 4.90 163 1997 1.48 4.97 133 1996 2.25 4.40 83 1995(3) 7.74 (0.57) 68 Flex Shares 1999 2.42% 3.54% 379% 1998 2.72 3.70 163 1997 2.66 3.79 133 1996(4) 3.59 3.04 83 MARYLAND MUNICIPAL BOND FUND (A) Trust Shares 1999(5) 1.37% 3.16% 19% For the years ended November 30: 1998 1.15 3.58 12 1997 1.16 3.85 5 1996(6) 1.36 3.65 9 Flex Shares 1999 1.98% 2.55% 19% For the years ended November 30: 1998 1.96 2.77 12 1997 2.00 2.97 5 1996(7) 2.20 2.77 9 SHORT-TERM BOND FUND Trust Shares 1999 0.77% 5.02% 108% 1998 0.79 5.34 87 1997 0.78 5.24 118 1996 0.81 5.23 163 1995 0.85 5.29 200 Investor Shares 1999 1.59% 4.20% 108% 1998 1.71 4.42 87 1997 1.58 4.43 118 1996 1.72 4.33 163 1995 1.56 4.53 200 Flex Shares 1999 2.33% 3.44% 108% 1998 2.85 3.29 87 1997 3.02 3.00 118 1996(8) 4.06 1.91 163
Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 7, 1994. All ratios for the period have been annualized. (3) Commended operations on July 17, 1994. All ratios for the period have been annualized. (4) Commended operations on June 7, 1995. All ratios for the period have been annualized. (5) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (6) Commenced operations on March 1, 1996. All ratios for the period have been annualized. (7) Commenced operations on April 25, 1996. All ratios for the period have been annualized. (8) Commenced operations on June 20, 1995. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Maryland Municipal Bond Fund exchanged all of its assets and certain liabilities for shares of the Maryland Municipal Bond Fund. The Crestar Maryland Municipal Bond Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 66 & 67 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ----------- -------------- ---------------- ------------- ------------- --------- SHORT-TERM U.S. TREASURY SECURITIES FUND Trust Shares 1999 $ 9.97 $ 0.47 $(0.02) $(0.47) $ -- $ 9.95 1998 9.88 0.51 0.10 (0.52) -- 9.97 1997 9.84 0.51 0.04 (0.51) -- 9.88 1996 9.93 0.55 (0.09) (0.55) -- 9.84 1995 9.82 0.47 0.11 (0.47) -- 9.93 Investor Shares 1999 $ 9.96 $ 0.46 $(0.01) $(0.46) $ -- $ 9.95 1998 9.88 0.49 0.09 (0.50) -- 9.96 1997 9.84 0.50 0.04 (0.50) -- 9.88 1996 9.94 0.54 (0.10) (0.54) -- 9.84 1995 9.83 0.46 0.11 (0.46) -- 9.94 Flex Shares 1999 $ 9.94 $ 0.44 $(0.02) $(0.43) $ -- $ 9.93 1998 9.85 0.47 0.10 (0.48) -- 9.94 1997 9.82 0.47 0.03 (0.47) -- 9.85 1996(1) 9.96 0.48 (0.14) (0.48) -- 9.82 U.S. GOVERNMENT SECURITIES FUND Trust Shares 1999 $10.46 $ 0.59 $(0.18) $(0.59) $ -- $10.28 1998 10.02 0.61 0.44 (0.61) -- 10.46 1997 9.91 0.62 0.11 (0.62) -- 10.02 1996 10.27 0.62 (0.33) (0.62) (0.03) 9.91 1995(2) 9.98 0.53 0.29 (0.53) -- 10.27 Investor Shares 1999 $10.45 $ 0.54 $(0.17) $(0.54) $ -- $10.28 1998 10.02 0.57 0.43 (0.57) -- 10.45 1997 9.90 0.58 0.12 (0.58) -- 10.02 1996 10.26 0.59 (0.33) (0.59) (0.03) 9.90 1995(3) 10.00 0.56 0.26 (0.56) -- 10.26 Flex Shares 1999 $10.46 $ 0.49 $(0.18) $(0.49) $ -- $10.28 1998 10.02 0.52 0.44 (0.52) -- 10.46 1997 9.91 0.53 0.11 (0.53) -- 10.02 1996(4) 10.31 0.52 (0.37) (0.52) (0.03) 9.91 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) Trust Shares 1999(5) $10.44 $ 0.21 $(0.17) $(0.21) $(0.07) $10.20 For years ended November 30: 1998 10.31 0.45 0.17 (0.45) (0.04) 10.44 1997 10.22 0.46 0.09 (0.46) -- 10.31 1996 10.24 0.42 (0.02) (0.42) -- 10.22 1995 9.21 0.43 1.03 (0.43) -- 10.24 1994 10.33 0.44 (1.10) (0.44) (0.02) 9.21 Investor Shares 1999(5) $10.45 $ 0.22 $(0.18) $(0.22) $(0.07) $10.20 For years ended November 30: 1998 10.31 0.46 0.17 (0.45) (0.04) 10.45 1997 10.21 0.47 0.09 (0.46) -- 10.31 1996 10.23 0.42 (0.02) (0.42) -- 10.21 1995 9.20 0.43 1.03 (0.43) -- 10.23 1994 10.32 0.44 (1.10) (0.44) (0.02) 9.20 VIRGINIA MUNICIPAL BOND FUND (A) Trust Shares 1999(5) $10.68 $ 0.22 $(0.19) $(0.22) $(0.06) $10.43 For years ended November 30: 1998 10.44 0.47 0.27 (0.47) (0.03) 10.68 1997 10.28 0.48 0.17 (0.48) (0.01) 10.44 1996 10.40 0.47 (0.12) (0.47) -- 10.28 1995(6) 10.00 0.31 0.44 (0.31) (0.04) 10.40 Flex Shares 1999(5) $10.73 $ 0.17 $(0.18) $(0.18) $(0.06) $10.48 For years ended November 30: 1998 10.48 0.37 0.28 (0.37) (0.03) 10.73 1997 10.31 0.39 0.18 (0.39) (0.01) 10.48 1996 10.43 0.38 (0.12) (0.38) -- 10.31 1995(7) 10.06 0.24 0.41 (0.24) (0.04) 10.43
RATIO OF NET ASSETS RATIO OF NET INVESTMENT TOTAL END OF EXPENSES TO INCOME (LOSS) TO TURN (+) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS -------- ------------ ------------------ ------------------ SHORT-TERM U.S. TREASURY SECURITIES FUND Trust Shares 1999 4.59% $ 56,027 0.67% 4.69% 1998 6.30 46,920 0.66 5.19 1997 5.76 21,988 0.65 5.23 1996 4.73 10,149 0.65 5.56 1995 6.11 9,599 0.65 4.91 Investor Shares 1999 4.54% $ 2,799 0.82% 4.54% 1998 6.04 3,277 0.81 5.07 1997 5.59 3,921 0.80 5.05 1996 4.52 4,192 0.80 5.43 1995 6.03 7,144 0.80 4.74 Flex Shares 1999 4.32% $ 4,931 1.07% 4.22% 1998 5.90 1,413 1.06 4.81 1997 5.19 1,091 1.05 4.75 1996(1) 3.72 2,423 1.05 5.03 U.S. GOVERNMENT SECURITIES FUND Trust Shares 1999 3.90% $ 102,167 0.77% 5.58% 1998 10.76 34,899 0.76 5.93 1997 7.54 19,471 0.75 6.19 1996 2.77 10,277 0.75 6.05 1995(2) 8.64 3,291 0.75 6.67 Investor Shares 1999 3.56% $ 2,534 1.17% 5.17% 1998 10.23 3,225 1.16 5.53 1997 7.21 2,243 1.15 5.76 1996 2.47 2,396 1.15 5.68 1995(3) 8.61 589 1.15 6.08 Flex Shares 1999 2.99% $ 11,520 1.68% 4.66% 1998 9.78 4,022 1.67 5.02 1997 6.57 2,801 1.66 5.26 1996(4) 1.42 2,826 1.66 5.18 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) Trust Shares 1999(5) 0.42% $ 240,083 0.84% 4.12% For years ended November 1998 6.10 243,606 0.79 4.33 1997 5.55 237,096 0.78 4.57 1996 4.01 243,137 0.78 4.35 1995 16.09 43,373 0.72 4.34 1994 (6.53) 41,365 0.65 4.48 Investor Shares 1999(5) 0.35% $ 7,706 0.79% 4.17% For years ended November 1998 6.19 7,899 0.79 4.33 1997 5.65 7,826 0.79 4.56 1996 4.01 8,185 0.79 4.12 1995 16.10 8,649 0.73 4.33 1994 (6.56) 7,481 0.66 4.47 VIRGINIA MUNICIPAL BOND FUND (A) Trust Shares 1999(5) 0.27% $ 31,939 0.76% 4.20% For years ended November 1998 7.19 29,252 0.69 4.41 1997 6.46 20,044 0.69 4.65 1996 3.48 15,911 0.71 4.61 1995(6) 7.67 6,247 0.71 4.61 Flex Shares 1999(5) (0.16)% $ 6,939 1.65% 3.32% For years ended November 1998 6.24 3,697 1.64 3.46 1997 5.58 1,476 1.60 3.73 1996 2.58 787 1.57 3.73 1995(7) 6.51 628 1.57 3.76
EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------- ------------------- --------- SHORT-TERM U.S. TREASURY SECURITIES FUND Trust Shares 1999 0.78% 4.58% 57% 1998 0.84 5.01 39 1997 0.92 4.96 93 1996 1.00 5.21 94 1995 1.08 4.48 88 Investor Shares 1999 1.34% 4.02% 57% 1998 1.33 4.55 39 1997 1.35 4.50 93 1996 1.32 4.91 94 1995 1.33 4.21 88 Flex Shares 1999 2.25% 3.04% 57% 1998 2.87 3.00 39 1997 2.51 3.29 93 1996(1) 2.97 3.11 94 U.S. GOVERNMENT SECURITIES FUND Trust Shares 1999 0.88% 5.47% 19% 1998 0.92 5.77 14 1997 1.02 5.92 21 1996 1.25 5.55 83 1995(2) 3.33 4.09 30 Investor Shares 1999 1.60% 4.74% 19% 1998 1.76 4.93 14 1997 1.79 5.12 21 1996 2.50 4.33 83 1995(3) 6.84 0.39 30 Flex Shares 1999 2.08% 4.26% 19% 1998 2.32 4.37 14 1997 2.42 4.50 21 1996(4) 2.86 3.98 83 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) Trust Shares 1999(5) 1.18% 3.78% 19% For years ended Nove 1998 0.97 4.15 24 1997 0.93 4.42 30 1996 0.93 4.20 25 1995 0.94 4.12 28 1994 0.77 4.36 24 Investor Shares 1999(5) 0.93% 4.03% 19% For years ended November 1998 0.94 4.18 24 1997 0.94 4.41 30 1996 0.94 3.97 25 1995 0.95 4.11 28 1994 0.80 4.33 24 VIRGINIA MUNICIPAL BOND FUND (A) Trust Shares 1999(5) 1.30% 3.66% 7% For years ended November 1998 1.10 4.00 28 1997 1.09 4.25 39 1996 1.11 4.21 24 1995(6) 1.11 4.21 35 Flex Shares 1999(5) 1.91% 3.06% 7% For years ended November 1998 1.92 3.18 28 1997 2.00 3.33 39 1996 1.97 3.33 24 1995(7) 1.97 3.36 35
Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 22, 1995. All ratios for the period have been annualized. (2) Commenced operations on July 31, 1994. All ratios for the period have been annualized. (3) Commenced operations on June 9, 1994. All ratios for the period have been annualized. (4) Commenced operations on June 7, 1995. All ratios for the period have been annualized. (5) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (6) Commenced operations on April 5, 1995. All ratios for the period have been annualized. (7) Commenced operations on April 17, 1995. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Virginia Intermediate Bond and the Crestar Virginia Municipal Bond Funds exchanged all of their assets and certain liabilities for shares of the Virginia Intermediate Bond and the Virginia Municipal Bond Funds, respectively. The Crestar Virginia Intermediate Bond and the Crestar Virginia Municipal Bond Funds are the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 68 & 69 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-four portfolios as of May 31, 1999: the Balanced Fund, the Capital Appreciation Fund (formerly Capital Growth Fund), the Emerging Markets Equity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Balanced Portfolio, the Life Vision Growth and Income Portfolio, the Life Vision Maximum Growth Portfolio, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Small Cap Growth Stock Fund, the Sunbelt Equity Fund, the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds" or the "Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each fund's prospectus provides a description of the fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Fixed Income Funds. The financial statements of the Equity Funds, the Retail Money Market Funds and the Institutional Money Market Funds are not presented herein, but are presented separately. On February 17, 1999 and February 22, 1999, respectively, the Board of Trustees of the STI Classic Funds Inc. and Board of Directors of the CrestFunds Inc. ("CrestFunds") approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and liabilities of the CrestFunds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 8). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 8, the STI Classic Funds acquired certain Crestar Funds in a tax-free business combination. While each Fund now exists as a STI Classic Fund, a number of the surviving funds for accounting purposes are Crestar Funds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Operations, Statements of Changes in Net Assets and Financial Highlights presented reflect periods beginning on the first day of the accounting survivor's fiscal year. SECURITY VALUATION -- Investment securities held by the Funds that are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price each business day. If there is no such reported sale, these securities and unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Debt obligations with sixty days or less remaining until maturity may be valued at their amortized cost. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest method. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the coun 70 - -------------------------------------------------------------------------------- terparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each fund is calculated each business day, by dividing the total value of each fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for Investor shares of the Florida Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the Investment Grade Bond, the Investment Grade Tax-Exempt Bond, the U.S. Government Securities, and the Virginia Intermediate Municipal Bond Funds is equal to the net asset value per share plus a sales load of 3.75%. The maximum offering price per share for Investor shares of the Short-Term U.S. Treasury Securities Fund is equal to the net asset value per share plus a sales load of 1.00%. The maximum offering price per share for Investor shares of the Short-Term Bond Fund is equal to the net asset value per share plus a sales load of 2.00%. The maximum offering price per share for Investor shares of the Limited-Term Federal Mortgage Securities Fund is equal to the net asset value per share plus a sales load of 2.50%. Flex Shares of the Funds may be purchased at their net asset value. Shares redeemed within the first year after purchase will be subject to a contingent deferred sales charge ("CDSC") equal to 2.00% of the net asset value of the shares at the time of redemption. The CDSC will not apply to shares redeemed after such time. TBA PURCHASE COMMITMENTS -- The Funds may enter into "TBA" (To Be Announced) purchase commitments to purchase securities for a fixed price at a future date beyond customary settlement time. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which risk is in addition to the risk of decline in the value of the funds' other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Security Valuation." OTHER -- Expenses that are directly related to a specific fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income for each of the Fixed Income Funds are declared daily and paid monthly. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent differences, primarily attributable to the classification of short-term capital gains and ordinary income for tax purposes related to the other funds, has been reclassified to/from the following accounts:
ACCUMULATED UNDISTRIBUTED PAID-IN REALIZED NET INVESTMENT CAPITAL GAIN (LOSS) INCOME (LOSS) (000) (000) (000) Florida Tax-Exempt Bond Fund $-- $ 5 $ (5) Investment Grade Bond Fund 236 (162) (74) Investment Grade Tax-Exempt Bond Fund -- (3) 3 Limited-Term Federal Mortgage Securities Fund -- 3 (3) Maryland Municipal Bond Fund (3) -- 3 Short-Term Bond Fund (25) 144 (119) U.S. Government Securities Fund (9) (2) 11 Virginia Intermediate Municipal Bond Fund (20) -- 20 Virginia Municipal Bond Fund (3) -- 3
These reclassifications have no effect on net assets or net asset values per share. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 71 NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 3. Organization Costs and Transactions with Affiliates: In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." This SOP provides guidance on the financial reporting of start-up costs and organization costs and requires costs of start-up activities and organization costs to be expensed as incurred. Investment companies that began operations prior to June 30, 1998 can adopt the SOP prospectively. Therefore, previously capitalized organization costs will continue to be amortized over a period of 60 months. Any future start-up or organization costs will be expensed as incurred. Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration, Transfer Agency Servicing and Distribution Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 23, 1999, administrative and accounting services were provided to the CrestFunds by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the CrestFunds. The Administrator had voluntarily agreed to waive a portion of its fee for Government Bond Fund and Virginia Municipal Bond Fund in order to limit operating expenses. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. The Trust and the Distributor are parties to a Distribution Agreement dated May 29, 1995 regarding the Flex Shares and a Distribution Agreement dated November 21, 1995 with respect to the Trust and Investor shares. The Distributor will receive no fees for its distribution services under this agreement for the Trust Shares of any fund. With respect to the Investor Shares and Flex Shares, the Distributor receives amounts, pursuant to a Distribution Plan and (in the case of Flex Shares) a Distribution and Service Plan, as outlined in the table in footnote 5 under the column titled "Distribution Fee". Prior to May 23, 1999, the Distributor, a wholly owned subsidiary of SEI Investments Co., served as distributor of each of the CrestFunds shares pursuant to an agreement with the CrestFunds. The Trust Class and Investors Class A shares of the CrestFunds had a separate distribution plan (the 12b-1 Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the 12b-1 Plan, the Trust Class and Investors Class A shares of the CrestFunds paid the Distributor as compensation for its services .15% of the aggregate average daily net assets of such classes of the CrestFunds. The Distributor had voluntarily agreed to waive any fees payable pursuant to the 12b-1 Plan. Additionally, the Investors Class B Shares of the CrestFunds had a distribution plan (the B Shares Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the B Shares Plan, the Investors Class B Shares of the CrestFunds paid the Distributor as compensation for its services .75% of the aggregate average daily net assets of such class of the CrestFunds. In addition, pursuant to the B Shares Plan, the Distributor was compensated at an annual rate of .25% of the B shares' average net assets for providing ongoing shareholder support services to investors in B shares. The Distributor had agreed to waive the portion of its fees pursuant to the B Shares Plan in order to limit distribution fees to .95% for each of the CrestFunds. Prior to May 23, 1999, the CrestFunds had adopted a shareholder service plan (the "Plan") for Trust Class Shares of the Limited Term Bond Fund, Intermediate Bond Fund, Government Bond Fund, Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund. Under the Plan, the CrestFunds paid the Distributor a negotiated fee at a rate of up to .25% annually of the average daily net assets of such Fund attributable to the shares that are subject to the arrangement in return for provision of a broad range of shareholder and administrative services. The Distributor had agreed to waive a portion of its shareholder service plan for trust class shares in order to limit shareholder service fees to .05%. 5. Investment Advisory and Custodian Agreements: The Trust and STI Capital Management, N.A., ("STI Capital Management, N.A."), Trusco Capital Management ("Trusco") and the SunTrust Bank, Atlanta have entered into advisory agreements dated May 29, 1992, June 15, 1993, and December 20, 1993 respectively. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets: 72 - --------------------------------------------------------------------------------
MAXIMUM FLEX SHARE MAXIMUM DISTRI- MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX ANNUAL SHARE SHARE SHARE AND SHARE ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE -------- ------- ---------- ------- -------- ------- TRUSCO: Maryland Municipal Bond Fund .65% .68% -- -- 1.00% 1.59% Short-Term Bond Fund .65% .67% .23% .87% 1.00% 1.22% Short-Term U.S. Treasury Securities Fund .65% .67% .18% .82% 1.00% 1.07% U.S. Government Securities Fund .74% .77% .38% 1.17% 1.00% 1.68% Virginia Intermediate Municipal Bond Fund .65% .76% .15% .79% -- -- Virginia Municipal Bond Fund . .65% .74% -- -- 1.00% 1.65% STI CAPITAL MANAGEMENT, N.A.: Florida Tax-Exempt Bond Fund .65% .67% .18% .87% 1.00% 1.37% Investment Grade Bond Fund .74% .77% .43% 1.17% 1.00% 1.66% Investment Grade Tax-Exempt Bond Fund .74% .77% .43% 1.17% 1.00% 1.65% Limited-Term Federal Mortgage Securities Fund .65% .67% .23% .92% 1.00% 1.27% SUNTRUST BANK, ATLANTA: Georgia Tax-Exempt Bond Fund .65% .67% .18% .87% 1.00% 1.37%
The investment advisors, the Administrator and the Distributor have voluntarily agreed to waive all or a portion of their fees (and to reimburse funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 24, 1999 Crestar Asset Management Company ("CAMCO") provided Investment Advisory services to the CrestFunds. CAMCO was paid for advisory services at an annual rate of .50% of average daily net assets for the Limited Term Bond Fund and Virginia Intermediate Municipal Bond Fund, and .60% of average daily net assets for the Intermediate Bond Fund, Government Bond Fund, Maryland Municipal Bond Fund and Virginia Municipal Bond Fund. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for all of the funds. Fees of the Custodian are paid on the basis of net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the funds. 6. Investment Transactions: The cost of purchases and the proceeds from sales of securities, excluding short-term investments and U.S. Government Securities, for the period ended May 31, 1999, were as follows:
PURCHASES SALES (000) (000) -------------------- Florida Tax-Exempt Bond Fund $109,044 $ 84,195 Georgia Tax-Exempt Bond Fund 41,881 9,957 Investment Grade Bond Fund 790,041 501,981 Investment Grade Tax-Exempt Bond Fund 384,981 392,218 Limited-Term Federal Mortgage Securities Fund -- -- Maryland Municipal Bond Fund 4,476 3,679 Short-Term Bond Fund 78,478 58,853 Short-Term U.S. Treasury Securities Fund -- -- U.S. Government Securities Fund -- -- Virginia Intermediate Municipal Bond Fund 50,485 46,578 Virginia Municipal Bond Fund 4,270 2,217
The cost of purchases and proceeds from sales of U.S. Government Securities were:
PURCHASES SALES (000) (000) --------------------- Florida Tax-Exempt Bond Fund $ -- $ -- Georgia Tax-Exempt Bond Fund -- -- Investment Grade Bond Fund 1,453,066 1,342,296 Investment Grade Tax-Exempt Bond Fund -- -- Limited-Term Federal Mortgage Securities Fund 537,297 532,443 Maryland Municipal Bond Fund -- -- Short-Term Bond Fund 81,928 74,867 Short-Term U.S. Treasury Securities Fund 38,693 29,515 U.S. Government Securities Fund 25,478 9,512 Virginia Intermediate Municipal Bond Fund -- -- Virginia Municipal Bond Fund -- --
The Investment Grade Bond and U.S. Government Securities Funds had cumulative wash sales for the fiscal year ended May 31, 1999 amounting to $1,727,191 and 169,083, respectively. These wash sales cannot be used in the current year for federal income tax purposes, therefore they are deferred. 73 NOTES TO FINANCIAL STATEMENTS (concluded) - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 At May 31, 1999, the total cost of securities and the net realized gains or losses on securities sold for Federal income tax purposes were not materially different from amounts reported for financial reporting purposes.The aggregate gross unrealized appreciation anddepreciation for securities held by the funds at May 31, 1999, were as follows:
AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION DEPRECIATION Florida Tax-Exempt Bond Fund $2,225 (936) $ 1,289 Georgia Tax-Exempt Bond Fund 1,675 (652) 1,023 Investment Grade Bond Fund 9,705 (16,585) (6,880) Investment Grade Tax-Exempt Bond Fund 957 (1,537) (580) Limited-Term Federal Mortgage Securities Fund 357 (508) (152) Maryland Municipal Bond Fund 327 (72) (255) Short-Term Bond Fund 316 (1,779) (1,463) Short-Term U.S. Treasury Securities Fund 111 (318) (207) U.S. Government Securities Fund 618 (1,686) (1,068) Virginia Intermediate Municipal Bond Fund 6,524 (1,455) 5,069 Virginia Municipal Bond Fund 615 (255) 360
Subsequent to October 31, 1998, the Funds recognized net capital losses for tax purposes that have been deferred to 1999 and can be used to offset future capital gains at May 31, 1999. The Funds also had capital loss carryforwards at May 31, 1999 as follows:
POST CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES 10/31 5/31/99 2002 2003 2004 2005 2006 2007 DEFERRED (000) (000) (000) (000) (000) (000) (000) LOSS Investment Grade Bond Fund $3,656 $ -- $ -- $ -- $ -- $3,029 $ -- $7,178 Maryland Municipal Bond Fund -- -- -- -- -- -- 19 -- Short-Term Bond Fund 2,899 528 254 555 284 1,134 -- -- U.S. Government Securities Fund 797 -- -- -- -- 792 -- --
For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. 7. Concentration of Credit Risk: The Investment Grade Bond Fund and the Short-Term Bond Fund invest primarily in investment grade obligations rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated, are determined by the investment advisor to be of comparable quality. The Investment Grade Tax-Exempt Fund invests primarily in investment grade municipal securities. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2 or P-1, P-2 in the case of commercial paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The Short-Term U.S. Treasury Securities Fund invests exclusively in obligations issued by the U.S. Treasury with a maximum remaining maturity of 3 years or less. The Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the Maryland Municipal Bond Fund, the Virginia Intermediate Municipal Bond Fund, and the Virginia Municipal Bond Fund invest primarily in municipal bonds concentrated in each of their respective states. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; A-1, A-2 or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The U.S. Government Securities Fund invests primarily in obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage backed securities. The Limited-Term Federal Mortgage Securities Fund invests in mortgage related securities issued or guaranteed by U.S. Government agencies. Up to 35% of the U.S. Government Securities Fund and the Limited-Term Federal Mortgage Securities Fund may be invested in corporate, or government bonds that carry a rating of BBB or better by S&P or Baa or better by Moody's. The ability of the issuers of the securities held by the funds to meet their obligations may be affected by economic developments in a specific industry, state or region, or by changing business conditions. 8. CrestFunds Merger The Board of Directors and shareholders of the CrestFunds approved a reorganization of the CrestFunds into STI Classic Funds which took place at the close of business on May 17, 1999 (May 24, 1999 for Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund, and Virginia Municipal Bond Fund) 74 - ------------------------------------------------------------------------------- The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations on May 17, 1999 and May 24, 1999 and is unaudited:
OUTSTANDING UNREALIZED ON MERGER APPRECIATION CRESTFUNDS DATE (DEPRECIATION) Intermediate Bond Trust Shares $32,817,534 $(3,403,150) Investor Class A 248,950 (67,865) Investor Class B -- -- Limited Term Bond Trust Shares 7,494,047 31,650 Investor Class A -- -- Investor Class B -- -- Government Bond Trust Shares 5,608,897 (698,071) Investor Class A -- -- Investor Class B -- -- Maryland Municipal Bond (1) Trust Shares 2,941,190 305,068 Investor Class A 764,740 (31,446) Virginia Intermediate Municipal Bond (1) Trust Shares 23,538,137 5,880,351 Investor Class B 753,539 76,972 Virginia Municipal Bond (1) Trust Shares 3,019,996 511,586 Investor Class B 647,089 (13,152)
SHARES ISSUED NET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUND COMBINATION COMBINATION SHARE Investment Grade Bond (1) Trust Shares $30,232,924 $1,152,435,532 $10.40 Investor Shares 229,458 35,442,645 10.40 Flex Shares -- 25,684,095 10.41 Short-Term Bond (1) Trust Shares 7,307,720 209,577,527 9.96 Investor Shares -- 1,817,569 9.97 Flex Shares -- 2,447,180 9.98 U.S. Government Securities (1) Trust Shares 5,438,788 101,799,419 10.32 Investor Shares -- 2,563,370 10.31 Flex Shares -- 11,288,553 10.32 Maryland Municipal Bond Trust Shares 2,941,190 29,603,005 10.06 Flex Shares 764,740 7,712,932 10.09 Virginia Intermediate Municipal Bond Trust Shares 23,538,137 240,886,726 10.23 Investor Shares 753,539 7,715,363 10.24 Virginia Municipal Bond Trust Shares 3,019,996 31,617,660 10.47 Flex Shares 647,089 6,805,221 10.52
(1) Represents the accounting survivor in this business combination. 75 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, Investment Grade Bond, Limited-Term Federal Mortgage Securities, Maryland Municipal Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, U.S. Government Securities, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds and the statement of assets and liabilities, including the schedule of investments, of the Investment Grade Tax-Exempt Bond Fund of STI Classic Funds (the "Trust") as of May 31, 1999, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of operations for the year ended November 30, 1998, statements of changes for the years ended November 30, 1998 and November 30, 1997, and financial highlights for the periods prior to May 31, 1999, for the Maryland Municipal Bond, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds were audited by other auditors whose report dated January 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 1999, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, Investment Grade Bond, Investment Grade Tax-Exempt Bond, Limited-Term Federal Mortgage Securities, Maryland Municipal Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, U.S. Government Securities, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds, of STI Classic Funds as of May 31, 1999, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 23, 1999 76 NOTICE TO SHAREHOLDERS - -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 1999 UNAUDITED For shareholders that do not have a May 31, 1999 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 1999 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended May 31, 1999, each portfolio is designating the following items with regard to distributions paid during the year:
LONG TERM (20% RATE) ORDINARY CAPITAL GAINS INCOME TAX-EXEMPT TOTAL FUND DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS Investment Grade Tax-Exempt Bond 5.16% 43.80% 51.04% 100.00% Investment Grade Bond 10.72% 89.28% 0.00% 100.00% Florida Tax-Exempt Bond 5.35% 15.18% 79.47% 100.00% Georgia Tax-Exempt Bond 4.38% 1.65% 93.97% 100.00% Short-Term Bond 3.62% 96.38% 0.00% 100.00% Short-Term U.S. Treasury Securities 0.00% 100.00% 0.00% 100.00% Limited-Term Federal Mortgage Securities 1.66% 98.34% 0.00% 100.00% U.S. Government Securities 0.00% 100.00% 0.00% 100.00% Virginia Intermediate Municipal Bond 24.00% 2.00% 74.00% 100.00% Virginia Municipal Bond 16.00% 4.00% 80.00% 100.00% Maryland Municipal Bond 6.00% 2.00% 92.00% 100.00%
77 NOTES NOTES NOTES INVESTMENT ADVISORS STI Capital Management, N.A. Trusco Capital Management, Inc. SunTrust Bank, Atlanta STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 BALANCED FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (56.1%) BASIC MATERIALS (1.2%) Air Products & Chemicals 75,200 $ 3,083 Morton International 22,200 866 ---------- 3,949 ---------- CAPITAL GOODS (6.8%) Allied Waste Industries* 36,100 672 Browning Ferris Industries 3,000 124 General Electric 75,500 7,677 Honeywell 20,800 1,968 Lockheed Martin 14,700 594 Maytag 6,200 437 Raytheon , Cl B 4,100 279 Republic Services, Cl A* 39,800 935 Tenneco 3,000 70 Textron 7,300 650 Tyco International 51,659 4,514 United Technologies 34,000 2,110 Waste Management* 62,161 3,287 ---------- 23,317 ---------- COMMUNICATION SERVICES (2.4%) Airtouch Communications* 4,900 492 AT&T 26,284 1,459 Centurytel 43,100 1,651 Fox Entertainment Group, Cl A* 16,900 431 GTE 24,600 1,551 MCI WorldCom* 19,543 1,688 Nextel Communications, Cl A* 500 18 Nokia, Cl A ADR 12,200 866 ---------- 8,156 ---------- CONSUMER CYCLICALS (11.9%) Bed Bath & Beyond* 500 17 Carnival 60,600 2,485 Cendant* 88,358 1,629 Comcast* 5,400 477 Costco* 45,700 3,313 CVS 63,400 2,916 Dayton Hudson 19,900 1,254 Dollar General 1,625 43 Federated Department Stores* 8,900 485 Gannett 20,800 1,503 Hasbro 47,200 1,351 Home Depot 7,800 444 Interpublic Group 12,500 947 Kroger* 53,800 3,151 Lear* 27,900 1,372 Lowe's Companies 83,500 4,337 Masco 106,300 3,036 Mattel 51,900 1,372
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- CONSUMER CYCLICALS--CONTINUED New York Times, Cl A 22,200 $ 758 Office Depot* 141,350 2,951 Promus Hotel* 11,700 292 Royal Caribbean Cruises 2,700 106 Saks* 43,300 1,196 SPX* 9,100 706 Starwood Hotels and Resorts* 17,655 578 Tandy 35,000 2,887 United Rentals* 25,400 762 Young & Rubicam* 4,300 162 ---------- 40,530 ---------- CONSUMER STAPLES (5.6%) American Stores 15,200 502 Anheuser Busch 6,500 475 Avon Products 25,600 1,266 Clorox 12,500 1,262 Coca Cola 11,200 406 ConAgra 16,600 433 Flowers Industries 18,500 412 Fort James 19,200 703 Gillette 1,200 61 McDonald's 13,900 535 Newell Rubbermaid 3,200 130 Pepsi Bottling Group* 25,700 596 PepsiCo 42,800 1,533 Philip Morris 12,600 486 Procter & Gamble 10,200 952 Ralston Purina 45,500 1,240 Rite Aid 77,700 1,942 Safeway* 29,500 1,372 Sara Lee 75,400 1,810 Seagram 4,400 229 Unilever NV* 4,721 308 US Foodservice* 31,380 1,396 Viacom, Cl B* 23,200 893 ---------- 18,942 ---------- ENERGY (1.9%) Anadarko Petroleum 13,400 502 Atlantic Richfield 8,700 728 Halliburton 20,900 865 Mobil 6,400 648 Niagara Mohawk Holdings* 17,700 263 Texaco 31,400 2,057 Union Pacific Resources Group 20,822 290 Unocal 25,100 998 ---------- 6,351 ----------
32 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FINANCIALS (8.0%) Ace Ltd 21,700 $ 662 Allstate 11,800 430 American International Group 17,883 2,044 Associates First Capital 25,500 1,046 Bank of America 28,831 1,865 Bank of New York 11,900 425 Bank One 26,789 1,515 Bank United, Cl A 11,300 468 BankBoston 27,600 1,308 Citigroup 5,200 345 CMAC Investment 4,000 202 Compass Bancshares 18,550 549 Conseco 46,000 1,406 Cullen/Frost Bankers 1,400 79 Fannie Mae 1,500 102 First Security 27,600 523 Freddie Mac 14,300 834 Hartford Life, Cl A 2,900 138 Household International 41,699 1,809 Mellon Bank 74,900 2,673 Merchantile Bancorp 3,200 187 Merrill Lynch 10,000 840 North Fork Bancorporation 20,300 433 PNC Bank 29,100 1,666 Providian Financial 3,900 374 Torchmark 42,700 1,425 U.S. Bancorp 22,500 731 UnionBanCal 14,900 551 Unum 18,400 990 Washington Mutual 39,676 1,515 ---------- 27,135 ---------- HEALTH CARE (7.2%) Abbott Laboratories 52,900 2,390 Alza, Cl A* 24,900 889 American Home Products 24,700 1,423 Baxter International 30,400 1,963 Becton Dickinson 25,000 969 Bristol-Myers Squibb 41,900 2,875 Cardinal Health 26,265 1,586 Eli Lilly 20,000 1,429 Forest Laboratories* 13,100 624 Health Management Associates, Cl A* 20,100 261 Healthsouth* 47,528 636 Johnson & Johnson 3,400 315 Medtronic 11,294 802 Merck 56,000 3,780 Schering Plough 13,300 599 Tenet Healthcare* 37,000 907
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- HEALTH CARE--CONTINUED Warner Lambert 47,700 $ 2,957 Watson Pharmaceuticals* 7,100 272 ---------- 24,677 ---------- TECHNOLOGY (10.5%) 3Com* 9,400 257 Analog Devices* 21,500 826 Ascend Communications* 19,800 1,835 BMC Software* 4,200 208 Ceridian* 70,600 2,330 Cisco Systems* 37,300 4,066 Compaq Computer 20,900 495 Computer Sciences* 13,000 841 EMC* 21,900 2,182 Hewlett Packard 21,700 2,047 IBM 58,200 6,769 Intel 26,900 1,454 Lucent Technologies 6,916 393 Microsoft* 63,100 5,091 Networks Associates* 36,386 534 Nortel Networks 17,700 1,328 Sun Microsystems* 29,100 1,739 Texas Instruments 12,800 1,400 Xerox 37,200 2,090 ---------- 35,885 ---------- TRANSPORTATION (0.6%) AMR* 4,300 280 Burlington Northern Santa Fe 23,700 735 Delta Air Lines 13,100 752 Trans World Air* 4,100 146 ---------- 1,913 ---------- Total Common Stocks (Cost $152,557) 190,855 ---------- PREFERRED STOCK (0.1%) FINANCE (0.1%) Conseco Financial Trust, CV to 0.9363 Shares* 10,000 409 ---------- Total Preferred Stock (Cost $500) 409 ----------
33 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 BALANCED FUND--CONCLUDED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS (15.6%) FINANCE (9.6%) Conseco 6.800%, 06/15/05 $ 1,800 $ 1,683 6.400%, 06/15/11 1,350 1,323 Countrywide Home Loan, Ser F, MTN 6.510%, 02/11/05 2,300 2,228 Donaldson Lufkin 5.875%, 04/01/02 2,000 1,968 Donaldson Lufkin, MTN 6.150%, 05/04/04 1,250 1,213 Finova Capital 6.250%, 11/01/02 1,200 1,187 6.110%, 02/18/03 2,250 2,213 6.750%, 03/09/09 850 831 Ford Motor Credit 6.500%, 02/28/02 2,100 2,113 Goldman Sachs 6.650%, 05/15/09 1,250 1,231 Great Western Financial 8.600%, 02/01/02 800 830 Household Finance 5.875%, 02/01/09 2,300 2,136 Merrill Lynch, MTN 5.710%, 01/15/02 3,000 2,963 Paine Webber Group, MTN 6.020%, 04/22/02 3,000 2,933 Provident 7.000%, 07/15/18 2,550 2,483 Reliastar Financial 6.500%, 11/15/08 2,000 1,910 Salomon 7.300%, 05/15/02 1,750 1,794 Salomon Smith Barney 6.250%, 01/15/05 1,750 1,671 ---------- 32,710 ---------- INDUSTRIAL (6.0%) AT&T 6.000%, 03/15/09 2,250 2,146 6.500%, 03/15/29 1,250 1,161 AT&T Capital, MTN 6.890%, 01/25/02 2,750 2,753 Bausch & Lomb 6.150%, 08/01/01 1,200 1,194 6.750%, 12/15/04 1,000 979 Dillards 6.430%, 08/01/04 2,700 2,612
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- INDUSTRIAL--CONTINUED Ikon Capital, MTN 6.730%, 06/15/01 $ 1,000 $ 988 Philip Morris 7.250%, 09/15/01 2,100 2,142 7.500%, 04/01/04 1,000 1,031 Sprint Capital 5.875%, 05/01/04 2,200 2,131 6.375%, 05/01/09 1,350 1,289 6.900%, 05/01/19 2,000 1,913 ---------- 20,339 ---------- Total Corporate Obligations (Cost $54,249) 53,049 ---------- CONVERTIBLE BONDS (0.3%) Network Associates, CV to 8.5380 Shares, Callable 02/13/03 @ 49.45 (A) 0.000%, 02/13/18 1,000 305 WMX Technologies, CV to 18.9065 Shares, Callable 03/15/00 @ 84.30 2.000%, 01/24/05 700 751 ---------- Total Convertible Bonds (Cost $1,188) 1,056 ---------- U.S. AGENCY MORTGAGE-BACKED OBLIGATION (2.7%) GNMA 8.000%, 12/15/22 8,704 9,049 ---------- Total U.S. Agency Mortgage-Backed Obligation (Cost $9,047) 9,049 ---------- U.S. TREASURY OBLIGATIONS (14.4%) U.S. Treasury Bonds 7.500%, 11/15/16 8,000 9,159 8.125%, 08/15/19 16,175 19,872 U.S. Treasury Notes 5.750%, 10/31/00 8,250 8,298 5.000%, 04/30/01 2,250 2,234 6.125%, 08/15/07 9,100 9,278 ---------- Total U.S. Treasury Obligations (Cost $48,155) 48,841 ----------
34 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (10.7%) Greenwich 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $36,557,959 (collateralized by various FNMA obligations: total market value $37,269,725) (D) $36,538 $ 36,538 ---------- Total Repurchase Agreement (Cost $36,538) 36,538 ---------- Total Investments (99.9% ) (Cost $302,234) 339,797 ---------- OTHER ASSETS AND LIABILITIES, NET (0.1%) 443 ---------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 18,984,001 outstanding shares of beneficial interest 212,913 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 1,123,159 outstanding shares of beneficial interest 13,301 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 5,582,438 outstanding shares of beneficial interest 71,393 Undistributed net investment income 1,009 Accumulated net realized gain on investments 4,061 Net unrealized appreciation on investments 37,563 ---------- Total Net Assets 100.0% $340,240 ---------- ----------
- -------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 13.26 -------- -------- Net Asset Value and Redemption Price Per Share-- Investor Shares $ 13.32 -------- -------- Maximum Offering Price Per Share --- Investor Shares ($13.32 / 96.25%) $ 13.84 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 13.17 -------- --------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 35 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 CAPITAL APPRECIATION FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (92.8%) BASIC MATERIALS (1.8%) Air Products & Chemicals 859,900 $ 35,256 Morton International 246,200 9,602 -------- 44,858 -------- CAPITAL GOODS (10.8%) Allied Waste Industries* 438,000 8,158 Browning Ferris Industries 32,700 1,357 General Electric 868,900 88,356 Honeywell 242,300 22,928 Illinois Tool Works 50,000 3,837 Koninklijke Philips El 50,000 4,300 Republic Services, Cl A* 455,200 10,697 Tenneco 34,300 800 Textron 83,400 7,428 Tyco International 631,652 55,191 United Technologies 340,800 21,151 Waste Management 727,079 38,444 -------- 262,647 -------- COMMUNICATION SERVICES (5.0%) Airtouch Communications* 56,800 5,708 AT&T 308,032 17,096 Centurytel 506,750 19,415 Fox Entertainment Group, Cl A* 195,100 4,975 GTE 287,300 18,118 MCI WorldCom* 542,169 46,830 Nextel Communications, Cl A* 5,100 188 Nokia, Cl A ADR 93,600 6,646 SBC Communications 33,000 1,687 -------- 120,663 -------- CONSUMER CYCLICALS (18.2%) Abercrombie & Fitch, Cl A* 10,000 841 Bed Bath & Beyond* 6,300 215 Carnival 712,700 29,221 Costco* 533,700 38,693 CVS 704,700 32,416 Dayton Hudson 227,500 14,332 Dollar General 20,000 531 Federated Department Stores* 102,700 5,597 Gannett 267,300 19,312 Hasbro 548,700 15,707 Home Depot 91,600 5,210 Interpublic Group 144,900 10,976 Lear* 323,400 15,907 Lowe's Companies 997,900 51,828 Masco 1,244,500 35,546 Mattel 580,100 15,336 Maytag 69,000 4,869 New York Times, Cl A 243,800 8,320 Newell Rubbermaid 36,600 1,482
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- CONSUMER CYCLICALS--CONTINUED Office Depot* 1,643,350 $ 34,305 Promus Hotel* 130,300 3,257 Rite Aid 857,500 21,437 Royal Caribbean Cruises 31,600 1,236 Saks* 410,800 11,348 SPX* 105,400 8,182 Starwood Hotels and Resorts 168,134 5,506 Tandy 399,700 32,975 Viacom, Cl B* 253,800 9,771 Wal-Mart Stores 60,000 2,557 Walgreen 130,000 3,022 Walt Disney 90,000 2,621 Young & Rubicam 49,800 1,905 -------- 444,461 -------- CONSUMER STAPLES (10.1%) American Stores 173,500 5,725 Anheuser Busch 75,800 5,538 Avon Products 245,500 12,137 Cendant* 1,002,823 18,490 Clorox 135,200 13,647 Coca Cola Enterprises 130,300 4,723 Coca-Cola 30,000 2,049 ConAgra 181,300 4,725 Flowers Industries 206,100 4,586 Fort James 224,600 8,226 Gillette 13,400 683 Kroger* 629,100 36,842 McDonald's 107,200 4,127 Paychex 57,000 1,689 Pepsi Bottling Group* 285,600 6,622 PepsiCo 488,900 17,509 Philip Morris 168,950 6,515 Procter & Gamble 119,100 11,121 Ralston Purina 532,500 14,511 Safeway* 327,100 15,210 Sara Lee 861,700 20,681 Seagram 51,700 2,685 Sysco 60,000 1,781 Unilever NV 54,664 3,570 United Rentals* 243,400 7,302 US Foodservice* 359,650 16,004 -------- 246,698 -------- ENERGY (3.1%) Anadarko Petroleum 149,700 5,614 Atlantic Richfield 100,000 8,369 Halliburton 245,500 10,158 Mobil 70,200 7,108 Niagara Mohawk Holdings* 204,900 3,048 Schlumberger 40,000 2,407
36 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- ENERGY--CONTINUED Texaco 368,500 $ 24,137 Union Pacific Resources Group 243,759 3,397 Unocal 293,100 11,651 -------- 75,889 -------- FINANCIALS (13.1%) Ace Ltd 252,100 7,689 Allstate 134,600 4,904 American International Group 213,096 24,360 Associates First Capital 293,200 12,021 Bank of America 329,438 21,311 Bank of New York 139,200 4,976 Bank One 313,536 17,734 Bank United, Cl A 131,800 5,453 BankBoston 335,100 15,875 Citigroup 60,400 4,001 CMAC Investment 46,300 2,341 Compass Bancshares 215,650 6,382 Conseco 526,400 16,088 Cullen/Frost Bankers 63,100 3,549 Fannie Mae 38,100 2,591 Fifth Third Bancorp 39,000 2,659 First Security 202,600 3,837 Freddie Mac 158,000 9,213 Hartford Life, Cl A 33,900 1,610 Household International 483,322 20,964 Jefferson-Pilot 29,000 1,963 Mellon Bank 835,800 29,828 Merchantile Bancorp 37,200 2,174 Merrill Lynch 87,700 7,367 North Fork Bancorporation 235,900 5,028 PNC Bank 340,800 19,511 Providian Financial 44,900 4,308 State Street 35,000 2,669 Torchmark 500,200 16,694 U.S. Bancorp 212,800 6,916 UnionBanCal 171,200 6,329 Unum 210,600 11,333 Waddell & Reed Financial, Cl A 17 -- Washington Mutual 441,924 16,876 Wells Fargo 40,000 1,600 -------- 320,154 -------- HEALTH CARE (11.4%) Abbott Laboratories 496,100 22,418 Alza, Cl A* 271,200 9,678 American Home Products 289,000 16,654 Baxter International 354,800 22,907 Becton Dickinson 285,400 11,059
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- HEALTH CARE--CONTINUED Bristol-Myers Squibb 479,400 $ 32,899 Cardinal Health 307,353 18,556 Eli Lilly 211,200 15,088 Forest Laboratories* 153,700 7,320 Health Management Associates, Cl A* 235,200 3,058 Healthsouth* 707,119 9,458 Johnson & Johnson 39,200 3,631 Medtronic 132,210 9,387 Merck 642,164 43,346 Pfizer 13,000 1,391 Schering Plough 154,700 6,971 Tenet Healthcare* 409,500 10,033 Warner Lambert 500,700 31,043 Watson Pharmaceuticals* 87,200 3,341 --------- 278,238 --------- TECHNOLOGY (18.5%) 3Com* 115,900 3,166 Analog Devices* 246,100 9,459 Amgen* 50,000 3,162 Ascend Communications* 248,200 23,005 BMC Software* 119,700 5,918 Ceridian* 803,500 26,516 Cisco Systems* 472,100 51,459 Compaq Computer 239,100 5,664 Computer Sciences* 148,800 9,626 EMC* 245,600 24,468 Hewlett Packard 253,600 23,918 IBM 681,000 79,209 Intel 358,000 19,354 Lockheed Martin 171,100 6,919 Lucent Technologies 102,728 5,843 Microsoft* 761,800 61,468 Networks Associates* 442,853 6,504 Nortel Networks 205,600 15,420 Raytheon , Cl B 46,700 3,179 Sun Microsystems* 385,600 23,040 Tellabs* 56,000 3,276 Texas Instruments 149,200 16,319 Xerox 427,400 24,015 --------- 450,907 --------- TRANSPORTATION (0.8%) AMR* 48,400 3,149 Burlington Northern Santa Fe 263,000 8,153 Delta Air Lines 128,200 7,355 Trans World Air* 14,400 511 --------- 19,168 --------- Total Common Stocks (Cost $1,713,451) 2,263,683 ---------
37 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 CAPITAL APPRECIATION FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- PREFERRED STOCKS (0.2%) FINANCE (0.0%) Conseco Financial Trust, CV to 0.9363 Shares* 5,500 $ 225 ------ TECHNOLOGY (0.2%) Qwest Trends Trust, CV to 1.6394 Shares (B)* 65,000 4,656 ------ Total Preferred Stocks (Cost $2,931) 4,881 ------ CONVERTIBLE BONDS (1.1%) Comcast, CV to 1.425 Shares, Callable 07/09/99 @ 86.28 59,800 5,285 3.350% 5/15/29 Elan Finance, CV to 6.875 Shares, Callable 12/14/03 @ 61.66 (A) (B) 0.000%, 12/14/18 9,000 4,568 Healthsouth, CV to 27.3 Shares, Callable 04/05/01 @ 101.300 3.250%, 04/01/03 2,500 2,106 Molten Metal Technology, CV to 25.8065 Shares, Callable 05/01/99 @ 102.750 (B) (I) 5.500%, 05/01/06 10,000 50 Network Associates,* CV to 8.5380 Shares, Callable 02/13/03 @ 49.45 (A) 0.000%, 02/13/18 1,500 458 Network Associates,* CV to 8.5380 Shares, Callable 02/13/03 @ 49.452 (A) (B) 0.000%, 02/13/18 10,000 3,050 Potomac Electric Power, CV to 29.5 Shares, Callable 08/16/99 @ 94.37 5.000%, 09/01/02 4,740 4,550 Waste Mangement, CV to 22.959 Shares, Callable 02/01/00 @ 101.60 4.000%, 02/01/02 3,000 3,889 WMX Technologies, CV to 18.9065 Shares, Callable 03/15/00 @ 84.303 2.000%, 01/24/05 2,800 3,003 ------ Total Convertible Bonds (Cost $33,448) 26,959 ------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- CASH EQUIVALENT Aim Liquid Assets Portfolio (C) $ 7,942 $ 7,942 ------------ Total Cash Equivalent (Cost $7,942) 7,942 ------------ REPURCHASE AGREEMENTS (5.3%) Deutsche Bank 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $65,793,297 (collateralized by FHLMC obligation: total market value $67,073,168) (D) 65,758 65,758 Greenwich 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $63,423,296 (collateralized by various FNMA obligations: total market value $64,661,178) (D) 63,389 63,389 ------------ Total Repurchase Agreements (Cost $129,147) 129,147 ------------ Total Investments (99.7%) (Cost $1,886,919) 2,432,612 ----------- OTHER ASSETS AND LIABILITIES, NET (0.3%) 7,450 ------------ NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 118,328,583 outstanding shares of beneficial interest 1,485,183 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 18,826,950 outstanding shares of beneficial interest 227,945 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 10,016,114 outstanding shares of beneficial interest 153,453 Undistributed net investment income 1,207 Accumulated net realized gain on investments 26,581 Net unrealized appreciation on investments 545,693 ------------ Total Net Assets 100.0% $2,440,062 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 16.62 ------------ ------------ Net Asset Value and Redemption Price Per Share -- Investor Shares $ 16.53 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($16.53 / 96.25%) $ 17.17 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 16.18 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 38 - -------------------------------------------------------------------------------- EMERGING MARKETS EQUITY FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS (86.6%) ARGENTINA (2.5%) Capex, Cl A* 33,700 $ 169 Metrogas ADR 32,204 252 Quilmes Industrial 22,000 249 -------- 670 -------- BRAZIL (6.7%) Petrobras ADR 13,500 190 Souza Cruz 63,500 388 Tele Centro Sul Participacoes ADR 5,200 281 Tele Norte Leste Participacoes ADR 25,600 419 Telec De Sao Paulo 4,434,000 313 Unibanco 9,100 205 -------- 1,796 -------- CHILE (5.2%) Administradora de Fondos de Pensiones Provida ADR 29,500 601 Banco De A. Edwards 17,000 242 Quinenco ADR 25,000 263 Quimica Y Minera Chile ADR 8,300 289 -------- 1,395 -------- CZECH REPUBLIC (2.1%) SPT Telecom* 33,000 548 -------- GREECE (5.1%) Alpha Credit Bank 900 61 Alpha Credit Bank Rights* 900 3 Hellenic Telecommunication Organization 21,583 468 Panafon Hellenic Telecom* 33,310 830 -------- 1,362 -------- HONG KONG (4.1%) China Hong Kong Photo 790,000 110 Guangdong Kelon Electric Holding 188,000 144 Li & Fung 104,000 245 Seoul Horizon Trust 17,000 157 Techtronic Industries 1,290,000 233 VTech Holdings 72,000 210 -------- 1,099 -------- HUNGARY (3.1%) Egis 3,925 80 Matav 60,000 336 North American Business Industries* 17,500 252 Pick Szeged Rt GDR 144A 28,000 165 -------- 833 -------- INDIA (3.9%) Hindalco Industries GDR 10,500 135 Mahanagar Telephone Nigam GDR 36,500 333
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- INDIA--CONTINUED Mahanagar Telephone Nigam ADR 6,500 $ 52 Videsh Sanchar Nigam GDR 45,000 512 -------- 1,032 -------- INDONESIA (3.1%) Citra Marga Nusaphala, F 944,000 52 Indonesian Satellite ADR* 10,500 208 Modern Photo Film, F* 356,000 76 PT Indosat, F 96,000 196 PT Jaya Real Property, F* 754,000 81 PT Timbang Timah 200,000 220 -------- 833 -------- ISRAEL (5.4%) Bank Leumi Le-Israel 152,000 287 Blue Square Stores* 13,100 210 ECI Telecommunications 14,900 516 Israel Chemicals 274,000 327 Nice Systems ADR* 4,000 102 -------- 1,442 -------- MALAYSIA (0.7%) (1) Aluminium Company of Malaysia 154,000 66 Petronas Dagangan 114,000 117 -------- 183 -------- MEXICO (11.9%) Cemex, ADR 23,300 207 Grupo Carso, Cl A* 78,000 319 Grupo Continental 335,500 544 Grupo Financiero Banorte, Cl B* 216,935 277 Grupo Industrial Maseca ADR 17,000 161 Grupo Mexico, Cl B 65,000 228 Grupo Televisa GDR* 10,800 452 Herdez, Cl B* 518,000 155 Panamerican Beverages 12,500 290 Telefonos de Mexico ADR 6,800 544 -------- 3,177 -------- PANAMA (0.3%) Banco Latinamericano de Exportaciones 2,800 80 -------- PHILIPPINES (3.2%) Bacnotan Consolidated 160,000 81 First Philippine Holdings, Cl B 134,250 170 La Tondena Distillers 160,000 186 Manila Electric, Cl B 72,000 249 Queenbee Resourses Jollibee Warrant, F* 310,000 176 -------- 862 -------- POLAND (1.1%) Bank Handlowy 25,000 294 --------
39 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 EMERGING MARKETS EQUITY FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- PORTUGAL (7.2%) Banco Pinto & Sotto Mayor 34,200 $ 678 Cimpor-Cimentos de Portugal 15,720 419 Electricidade de Portugal 12,500 450 Portugal Telecom ADR 8,200 371 -------- 1,918 -------- SINGAPORE (0.7%) Amtek Engineering 246,000 201 -------- SOUTH AFRICA (6.9%) ABSA Group 56,235 257 Amalgamated Beverage 13,855 91 Kersaf Investments 73,516 294 Liberty Life Association of Africa 23,983 322 Nedcor 15,273 305 South African Breweries 73,616 590 -------- 1,859 -------- SOUTH KOREA (13.4%) Dae Duck Electronics Rights* 11,865 39 Dae Duck Electronics 49,440 475 Hite Brewery* 11,000 273 Hite Brewery Rights* 1,508 15 Korea Electric Power ADR 10,000 171 Korea Telecom ADR* 4,000 127 Pohang Iron & Steel 5,000 390 Samsung* 27,000 421 Samsung Electronics 3,400 237 Samsung Electronics Rights* 272 3 Shinhan Bank 25,000 244 Sk Telecom 513 563 Sk Telecom ADR 43,560 621 -------- 3,579 -------- Total Foreign Common Stocks (Cost $24,910) 23,163 -------- FOREIGN PREFERRED STOCKS (7.6%) BRAZIL (7.6%) Banco do Estada de Sao Paulo 5,540,000 238 Banco Itau 900,000 456 Brahma 600,000 306 Cemig 22,483,067 474 Fertilizantes Fosfatados 70,700,000 230 Gerdau 21,700,000 328 -------- Total Foreign Preferred Stocks (Cost $2,387) 2,032 --------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- TIME DEPOSITS (3.7%) Cayman Time Deposit 4.375%, 06/01/99 $ 1,000 $ 1,000 -------- Total Time Deposits (Cost $1,000) 1,000 -------- Total Investments (97.9% ) (Cost $28,297) 26,195 -------- OTHER ASSETS AND LIABILITIES, NET (2.1%) 556 -------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 3,293,687 outstanding shares of beneficial interest 36,352 Undistributed net investment income 52 Accumulated net realized loss on investments (7,538) Net unrealized depreciation on investments (2,102) Net unrealized depreciation on foreign currency and translation of other assets and liabilities in foreign currency investments (13) -------- Total Net Assets 100.0% $26,751 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 8.12 -------- --------
(1) THE REPATRIATION OF PROCEEDS RECEIVED FROM THE SALE OF THESE SECURITIES ARE SUBJECT TO A LEVY DEPENDING UPON THE LENGTH OF TIME THE POSITION HAS BEEN HELD. THIS LEVY IS APPLICABLE TO SECURITIES PURCHASED BEFORE FEBRUARY 15, 1999. THE LEVY RANGES FROM 30% TO 0% AND IS BASED ON THE DATE THE PROCEEDS ARE REPATRIATED. AS A RESULT, THESE SECURITIES ARE BEING TREATED AS ILLIQUID UNTIL SEPTEMBER 1, 1999, WHEN THE LEVY IS NO LONGER IN EFFECT. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 40 - -------------------------------------------------------------------------------- GROWTH AND INCOME FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (95.1%) BASIC MATERIALS (4.5%) Great Lakes Chemical 200,000 $ 9,037 International Paper 450,000 22,500 --------- 31,537 --------- CAPITAL GOODS (8.6%) Deere 300,000 11,419 Ingersoll-Rand 200,000 12,737 General Electric 125,000 12,711 Koninklijke Philips El 200,000 17,200 Textron 75,000 6,680 --------- 60,747 --------- COMMUNICATION SERVICES (3.9%) AT&T 262,500 14,569 SBC Communications 250,000 12,781 --------- 27,350 --------- CONSUMER CYCLICALS (9.5%) Dayton Hudson 175,000 11,025 Federated Department Stores* 250,000 13,625 Ford Motor 50,000 2,853 Lowes 100,000 5,194 UAL* 100,000 6,725 Warnaco Group, Cl A 550,000 16,225 Walt Disney 400,000 11,650 --------- 67,297 --------- CONSUMER STAPLES (13.1%) Coca-Cola 125,000 8,539 Kellogg 500,000 17,344 Modis Professional Services* 574,000 8,467 PepsiCo 325,000 11,639 Philip Morris 400,000 15,425 Quaker Oats 200,000 13,212 Sara Lee 750,000 18,000 --------- 92,626 --------- ENERGY (7.8%) Exxon 200,000 15,975 Mobil 130,000 13,163 Texaco 150,000 9,825 Schlumberger 275,000 16,552 --------- 55,515 --------- FINANCIALS (16.0%) American International Group 115,000 13,146 Bank of America 200,000 12,937 BankBoston 225,000 10,659 Berkshire Hathaway Cl B* 7 16,632 Fannie Mae 200,000 13,600
- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- FINANCIALS--CONTINUED Morgan Stanley, Dean Witter, Discover 75,000 $ 7,238 KeyCorp 500,000 17,375 Washington Mutual 300,000 11,456 Wells Fargo 250,000 10,000 ---------- 113,043 ---------- HEALTH CARE (7.9%) Aetna 200,000 18,163 Johnson & Johnson 200,000 18,525 Merck 100,000 6,750 Schering Plough 275,000 12,392 ---------- 55,830 ---------- TECHNOLOGY (18.2%) Adaptec* 650,000 20,070 Amgen* 250,000 15,813 Boeing 225,000 9,506 Cisco Systems* 100,000 10,900 Hewlett Packard 175,000 16,505 IBM 120,000 13,957 Intel 200,000 10,812 Microsoft* 150,000 12,103 Quantum* 500,000 9,906 Sun Microsystems* 150,000 8,962 ---------- 128,534 ---------- TRANSPORTATION (1.3%) Canadian Pacific Limited 400,000 9,150 ---------- UTILITIES (4.3%) Duke Power 131,800 7,949 Midamerican Energy Holdings 241,500 8,151 Southern 500,000 14,187 ---------- 30,287 ---------- Total Common Stocks (Cost $494,745) 671,916 ---------- PREFERRED STOCK (0.5%) Calenergy Cap Trust III, CV to 1.0471 Shares* 75,000 3,478 ---------- Total Preferred Stock (Cost $3,253) 3,478 ---------- CASH EQUIVALENT (0.0%) Aim Liquid Assets Portfolio (C) $ 39 39 ---------- Total Cash Equivalent (Cost $39) 39 ----------
41 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 GROWTH AND INCOME FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (3.3%) JP Morgan 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $23,414,976 (collateralized by various GNMA obligations: total market value $23,870,492) (H) 23,595 $ 23,595 -------- Total Repurchase Agreement (Cost $23,595) 23,595 -------- Total Investments (98.9%) (Cost $521,631) 699,028 -------- OTHER ASSETS AND LIABILITIES, NET (1.1%) 7,372 -------- NET ASSETS: Fund Shares of Trust Class (unlimited authorization -- no par value) based on 39,415,860 outstanding shares 420,958 Fund Shares of Investor Class (unlimited authorization -- no par value) based on 2,279,338 outstanding shares 28,578 Fund Shares of Flex Class (unlimited authorization -- no par value) based on 2,183,767 outstanding shares 31,216 Undistributed net investment income 614 Accumulated net realized gain on investments 47,637 Net unrealized appreciation on investments 177,397 -------- Total Net Assets 100.0% $706,400 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 16.09 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Investor Shares $ 16.21 -------- -------- Maximum Offer Price Per Share -- Investor Shares ($16.22 / 96.25%) $ 16.84 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 16.10 -------- --------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THEFINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 42 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS (96.2%) AUSTRALIA (4.0%) AMP 767,600 $ 8,349 Broken Hill Proprietary 344,300 3,531 Leighton Holdings 1,031,813 3,936 National Australia Bank 382,100 6,182 QBE Insurance 502,267 1,965 --------- 23,963 --------- AUSTRIA (1.0%) Erste Bank* 107,400 5,949 --------- BRAZIL (0.6%) Tele Norte Leste Participacoes ADR 231,400 3,789 --------- CANADA (3.2%) Nortel Networks 152,250 11,427 Royal Bank of Canada 55,200 2,530 Teleglobe 168,300 5,070 --------- 19,027 --------- DENMARK (0.7%) Novo-Nordisk, Cl B 42,280 4,311 --------- FINLAND (2.8%) Merita 1,283,700 7,606 Nokia ADR, Cl A 51,400 3,649 Sonera Group Oyj 303,100 5,929 --------- 17,184 --------- FRANCE (13.4%) Accor 22,500 5,521 Assurances Generales de France 102,800 5,098 Axa 73,985 8,529 Dexia France 53,380 7,417 Elf Aquitane 42,600 6,168 Equant* 58,400 4,813 Lafarge 60,750 5,476 Michelin, Cl B 96,450 4,254 SEITA 86,847 5,268 Societe Generale D'Entreprises 86,009 4,103 STMicroelectonics* 25,400 2,941 Suez Lyonnaise des Eaux 36,030 5,973 Technip 51,300 5,566 Vivendi 131,010 9,704 Vivendi Rights* 131,010 135 --------- 80,966 --------- GERMANY (8.4%) Allianz 10,210 2,791 Bayerische Vereinsbank 89,200 4,820 Mannesmann 71,670 9,794 Metallgesellschaft 340,150 6,121 MobilCom 8,220 647 Preussag 162,859 8,410
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- GERMANY--CONTINUED RWE 275,550 $ 12,317 Veba 102,300 5,838 -------- 50,738 -------- GREECE (2.9%) Hellenic Telecom Organization 383,502 8,320 Panafon Hellenic Telecom* 358,490 8,929 -------- 17,249 -------- INDONESIA (0.1%) Modern Photo Film, F* 1,440,000 307 -------- IRELAND (3.0%) Allied Irish Bank 326,600 4,321 Bank of Ireland 746,718 13,848 -------- 18,169 -------- ISRAEL (1.1%) ECI Telecommunications 197,180 6,827 -------- ITALY (5.7%) Banca Intesa 688,000 3,503 Banca Intesa Rights* 688,000 15 Banca Nazionale del Lavoro* 1,361,150 4,189 ENI 1,028,800 6,429 Mediaset 321,250 2,604 San Paolo-IMI 596,100 8,053 Telecom Italia 920,000 9,482 -------- 34,275 -------- JAPAN (9.6%) Bank of Tokyo Mitsubishi 363,000 4,836 Canon 134,000 3,361 Eisai 148,300 2,750 FamilyMart 64,700 2,687 Honda Motor 149,000 6,078 Nippon Telegraph & Telephone 276 2,679 NTT Mobile Communication Network 201 10,927 Olympus Optical 413,000 5,095 Sumitomo Bank 337,000 4,055 Takefuji 74,700 6,543 TDK 78,400 6,693 Terumo 106,000 2,485 -------- 58,189 -------- NETHERLANDS (9.1%) Ahold 150,500 5,252 ASM Lithography Holding* 81,000 3,570 ING Groep 158,203 8,458 KPN 259,310 12,525 Philips Electronics 90,850 8,151 TNT Post Group 291,700 7,334
43 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 INTERNATIONAL EQUITY FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- NETHERLANDS--CONTINUED Unique International 264,710 $ 6,048 Wolters Kluwer 95,200 3,829 -------- 55,167 -------- NEW ZEALAND (1.6%) Fletcher Challenge Building 1,877,298 2,915 Telecom of New Zealand 1,530,000 6,602 -------- 9,517 -------- NORWAY (1.1%) Petroleum Geo Services* 367,390 5,934 Petroleum Geo Services ADR* 45,900 740 -------- 6,674 -------- PANAMA (0.7%) Banco Latinamericano de Exportaciones 150,400 4,277 -------- PORTUGAL (1.9%) Banco Espirito Santo 144,480 3,542 Banco Pinto & Sotto Mayor 127,244 2,522 BPI-SGPS 91,466 1,956 BPI-SGPS Rights* 68,600 46 Portugal Telecom ADR 72,760 3,292 -------- 11,358 -------- SPAIN (2.5%) Argentaria 390,000 8,743 Telefonica Bonus Rights* 133,100 129 Telefonica de Espana 133,100 6,384 -------- 15,256 -------- SWEDEN (2.2%) Castellum 406,600 3,643 Drott, Cl B 136,100 1,164 Electrolux 243,800 4,723 Swedish Match 1,107,700 4,034 -------- 13,564 -------- UNITED KINGDOM (19.1%) Allied Zurich 711,650 9,084 AstraZeneca Group 130,950 5,210 Bass 247,982 3,663 BP Amoco 395,300 7,081 British Energy 879,400 7,862 British Steel 2,855,000 6,066 Diageo 632,800 6,662 Gallaher Group 1,063,500 6,728 Glaxo Wellcome 137,000 3,849 Granada Group 231,400 4,742 Imperial Tobacco Group 624,700 7,032 J Sainsbury 1,040,900 6,335 Lloyds TSB Group 465,449 6,158 National Westminster Bank 270,013 6,200 Railtrack Group 310,300 6,364 Reckitt & Colman 436,300 4,873
- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- UNITED KINGDOM--CONTINUED Securicor 775,600 $ 6,965 Smithkline Beecham 463,058 6,044 South African Breweries* 548,630 4,408 ------- 115,326 ------- UNITED STATES (1.5%) Global TeleSystems Group* 121,251 9,215 ------- Total Foreign Common Stocks (Cost $544,016) 581,297 ------- TIME DEPOSITS (3.6%) Cayman Time Deposit 4.375%, 06/01/99 $22,000 22,000 ------- Total Time Deposits (Cost $22,000) 22,000 ------- Total Investments (99.8% ) (Cost $566,016) 603,297 ------- OTHER ASSETS AND LIABILITIES, (NET 0.2%) 1,206 ------- NET ASSETS: Fund shares of the Trust Class ( unlimited authorization -- no par value) based on 44,211,314 outstanding shares of beneficial interest 513,228 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 1,094,862 outstanding shares of beneficial interest 13,578 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,356,567 outstanding shares of beneficial interest 18,315 Undistributed net investment income 1,810 Accumulated net realized gain on investments 20,388 Net unrealized appreciation on investments 37,281 Net unrealized depreciation on foreign currency and translation of other assets and liabilities in foreign currency investments (97) -------- Total Net Assets 100.0% $604,503 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 12.97 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Investor Shares $ 12.89 -------- -------- Maximum Offering Per Share -- Investor Shares ($12.89 / 96.25%) $ 13.39 -------- -------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 12.58 -------- --------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 44 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY INDEX FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS (98.0%) AUSTRALIA (3.0%) Amcor 18,995 $ 101 AMP 12,551 137 Brambles Industries 3,313 88 Broken Hill Proprietary 21,354 219 Coles Myer 30,235 158 CSR 43,040 115 Lend Lease 10,599 134 Mount Isa Mines Holdings 70,425 38 National Australia Bank 16,622 269 Newscorp 33,881 280 Pacific Dunlop 48,287 86 Rio Tinto 8,449 118 Telstra 61,083 302 Westpac Banking 36,880 252 WMC 33,829 125 --------- 2,422 --------- AUSTRIA (1.2%) Bank Austria 5,449 279 Generali Holding Vienna 519 96 Oest Elektrizatswirts, Cl A 2,027 265 OMV 1,907 159 Universale Bau 165 5 Wienerberger Baustoff 731 128 --------- 932 --------- BELGIUM (1.5%) Bekaert 162 68 Cie Maritime Belge 224 10 Delhaize Freres 1,000 86 Electrabel 660 203 Fortis CVG* 861 5 Fortis, Cl B 6,768 217 Groupe Bruxelles Lambert 673 117 KBC Bancassurance Holding 2,900 176 Petrofina 292 157 Solvay, Cl A 1,496 100 Tractebel 165 22 Union Miniere 952 35 --------- 1,196 --------- DENMARK (1.0%) Carlsberg, Cl B 1,127 52 D/S 1912, Cl B 25 210 D/S Svendborg, Cl B 8 96 Danisco 1,610 77 Den Danske Bank 600 64 Novo-Nordisk, Cl B 1,270 130 Tele Danmark, Cl B 1,408 144 --------- 773 ---------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FINLAND (1.5%) Merita 12,800 $ 76 Nokia Oyj, Cl A 12,800 911 Outokumpu Oy Akt, Cl A 3,100 32 Sonera Group Oyj 2,600 51 UPM-Kymmene 3,500 103 -------- 1,173 -------- FRANCE (9.9%) Accor 508 125 Air Liquide 1,221 184 Alcatel Alsthom 2,122 252 Axa 3,588 414 Banque National Paris, Cl A 2,161 182 Bouygues 403 107 Canal Plus 343 99 Cap Gemini 788 114 Carrefour 2,569 337 Casino Guichard-Perrachon 806 77 Cie de Saint Gobain 1,143 179 Compagnie Financiere de Paribas 2,411 262 Elf Aquitane 2,882 417 Eridania Beghin-Say 775 113 France Telecom 10,924 838 Groupe Danone 839 231 L'Oreal 771 464 Lafarge 1,032 93 Legrand 370 77 Louis Vuitton-Moet Hennessy 984 274 Michelin, Cl B 2,803 124 Pernod-Ricard 1,228 82 Peugeot 565 84 Pinault-Printemps-Redoute 1,744 297 Promodes 231 151 Rhone Poulenc, Cl A 4,070 193 Sanofi-Synthelabo* 12,962 546 Schneider 1,765 105 SEITA 1,128 68 Skis Rossignol 2,648 39 Societe Generale 1,075 195 Suez Lyonnaise des Eaux 1,740 288 Total, Cl B 2,637 320 Unibail 798 108 Valeo 1,330 109 Vivendi 6,348 470 Vivendi Rights* 6,348 7 -------- 8,025 -------- GERMANY (12.8%) Aachener & Munchener Bete 810 87 Allianz 3,380 924 BASF 9,800 381
45 SCHEDULEOFINVESTMENTS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 INTERNATIONAL EQUITY INDEX FUND--CONTINUED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- GERMANY--CONTINUED Bayer 11,360 $ 442 Bayerische Vereinsbank 6,072 328 Beiersdorf 1,140 74 DaimlerChrysler 14,066 1,214 Degussa* 990 39 Deutsche Bank 8,670 452 Deutsche Telekom 32,100 1,281 Dresdner Bank Frankfurt 7,500 279 Heidelberger Zement 1,274 103 Hochtief 1,060 47 Karstadt 175 72 Linde 291 170 Lufthansa 7,330 158 Man Muenchen 2,960 87 Mannesmann 5,380 735 Merck KGaA 2,900 100 Metro 3,951 249 Muenchener Rueckvers* 1,110 188 Muenchener Rueckvers, Registered 2,510 429 Preussag 2,810 145 RWE 6,190 277 SAP 900 313 Schering 1,810 194 Siemens 8,340 561 Thyssen* 8,210 162 Veba 6,610 377 Viag 533 243 Volkswagen 4,610 286 --------- 10,397 --------- HONG KONG (1.8%) Cathay Pacific Airways 39,000 59 Cheung Kong Holdings 21,000 171 CLP Holdings 18,500 89 Hang Seng Bank 14,900 159 Hong Kong & China Gas 44,000 62 Hong Kong Telecommunications 100,800 233 Hutchison Whampoa 28,800 240 Johnson Electric Holdings 13,000 48 New World Development 22,000 54 Shangri-La Asia 46,000 49 Sun Hung Kai Properties 28,600 229 Swire Pacific 15,000 72 --------- 1,465 --------- IRELAND (0.7%) Allied Irish Banks 23,400 309 CRH 16,100 275 --------- 584 ---------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- ITALY (8.2%) Alitalia* 37,439 $ 110 Assicurazioni Generali 19,000 676 Banca Commerciale Italiana 34,000 244 Banca Intesa 49,603 253 Benetton Group 67,500 132 Edison 11,000 96 ENI 155,500 972 Fiat 82,000 264 Fiat RNC 47,000 77 INA 78,000 182 Italgas 15,000 64 Mediaset 24,500 199 Mediobanca 10,500 119 Mondadori Editore 3,734 65 Montedison 132,500 118 Olivetti* 60,000 187 Parmalat Finanziaria 60,000 81 Pirelli 61,000 171 Riunione Adriatica di Sicurta 10,385 101 San Paolo-IMI 26,236 354 Sirti 16,000 80 Telecom Italia 67,500 696 Telecom Italia 16,000 87 Telecom Italia Mobile 30,000 101 Telecom Italia Mobile 128,500 756 Unicredito Italiano 93,000 438 Unione Immobiliare 109,000 51 ------------ 6,674 ------------ JAPAN (34.3%) Acom 2,100 149 Advantest 1,600 126 Ajinomoto 10,000 106 Aoki* 11,000 7 Aoyamma Trading 1,200 36 Asahi Bank 39,000 184 Asahi Breweries 10,000 126 Asahi Chemical Industry 24,000 129 Asahi Glass 24,000 155 Autobacs Seven 900 35 Bank of Tokyo - Mitsubishi 70,000 933 Bank of Yokohama 17,000 45 Bridgestone 12,000 313 Canon 15,000 376 Chiba Bank 17,000 67 Chiyoda* 5,000 10 Citizen Watch 11,000 81 Cosmo Oil 24,000 43 Chugai Pharmaceutical 2,000 22 Daiichi Pharmaceutical 4,000 64 Dai Nippon Printing 10,000 149
46 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- JAPAN--CONTINUED Daicel Chemical Industries 8,000 $ 26 Daiei* 25,000 72 Daikyo* 4,000 11 Daimaru 4,000 16 Daito Trust Construction 2,000 22 Daiwa House Industry 6,000 64 Daiwa Kosho Lease 17,000 65 Daiwa Securities 23,000 121 Denso 14,000 257 East Japan Railway 58 334 Ebara 11,000 123 Eisai 4,000 74 Fanuc 5,000 214 Fuji Bank 52,000 327 Fuji Photo Film 9,000 320 Fujita* 17,000 12 Fujita Kanko 9,000 90 Fujitsu 33,000 548 Furukawa Electric 24,000 94 Gakken* 5,000 7 Gunze 15,000 36 Hankyu 31,000 127 Hankyu Department Stores 6,000 40 Haseko* 15,000 12 Hazama* 20,000 16 Hitachi 63,000 461 Hokuriko Bank* 17,000 32 Honda Motor 15,000 612 Hoya 2,000 102 Industrial Bank of Japan 43,000 302 Isetan 4,000 36 Ito Yokado 6,000 356 Itochu* 55,000 124 Itoham Foods 16,000 67 Japan Airlines 39,000 121 Japan Energy 37,000 43 Japan Metals & Chemicals* 4,000 6 Japan Steel Works* 3,000 4 Joyo Bank 25,300 102 Jusco 7,000 132 Kajima 10,000 30 Kaken Pharmaceutical 4,000 24 Kamigumi 9,000 42 Kandenko 4,000 25 Kanebo* 10,000 16 Kansai Electric Power 18,200 372 Kao 9,000 246 Kawasaki Heavy Industries 22,000 49 Kawasaki Kisen Kaisha 10,000 22 Kawasaki Steel 48,000 85
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- JAPAN--CONTINUED Kinki Nippon Railway 42,000 $ 209 Kirin Brewery 19,000 217 Kissei Pharmacutical 1,000 21 Komatsu 22,000 130 Konami 600 20 Koyo Seiko 5,000 31 Kubota 33,000 96 Kumagai Gumi* 18,000 19 Kurabo Industries 7,000 8 Kyocera 4,000 209 Kyudenko 3,000 19 Maeda Road Contruction 4,000 27 Marubeni 16,000 33 Maruha 8,000 9 Marui 6,000 90 Matsushita Electric 30,000 540 Minebea 9,000 89 Misawa Homes 7,000 25 Mitsubishi 26,000 157 Mitsubishi Chemical 50,000 141 Mitsubishi Electric 42,000 133 Mitsubishi Estate 22,000 208 Mitsubishi Heavy Industries 49,000 190 Mitsubishi Materials 44,000 87 Mitsubishi Trust & Banking 19,000 171 Mitsui 35,000 223 Mitsui Fudosan 10,000 83 Mitsui O.S.K. Lines 19,000 43 Mitsui Trust & Banking 37,000 56 Mitsui 1,000 3 Mitsukoshi 17,000 59 Murata Manufacturing 4,000 219 Mycal 9,000 50 Namco 2,300 56 NEC 26,000 287 New Oji Paper 17,000 98 NGK Spark Plug 7,000 74 Nichido Fire & Marine Insurance 15,000 76 Niigata Engineering* 2,000 2 Nikon 6,000 78 Nippon Beet Sugar Manufacturing 6,000 11 Nippon Express 13,000 74 Nippon Oil 54,000 215 Nippon Paper Industries 20,000 98 Nippon Sharyo 5,000 14 Nippon Sheet Glass 13,000 43 Nippon Shinpan 6,000 19 Nippon Steel 102,000 213 Nippon Suisan Kaisha 6,000 9 Nippon Telegraph & Telephone 194 1,883
47 SCHEDULEOFINVESTMENTS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 INTERNATIONAL EQUITY INDEX FUND--CONTINUED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- JAPAN--CONTINUED Nippon Yusen 45,000 $ 181 Nishimatsu Construction 3,000 16 Nissan Motor 42,000 184 NKK* 125,000 97 Nomura Securities 26,000 258 Noritake 11,000 53 NSK 10,000 48 NTN 13,000 40 Obayashi 27,000 127 Odakyu Electric Railway 24,000 81 Okumura 5,000 20 Olympus Optical 10,000 123 Orient 9,000 25 Orix 1,000 79 Osaka Gas 38,000 123 Oyo 2,200 41 Penta-Ocean Construction* 12,000 20 Renown* 8,000 11 Rohm 2,000 260 Sakura Bank 58,000 196 Sanden 7,000 53 Sankyo 7,000 164 Sanrio 2,000 45 Sanyo Electric 47,000 168 Sato Kogyo* 20,000 17 Secom 1,000 95 Sega Enterprises 3,600 59 Seino Transportation 9,000 55 Seiyu* 6,000 36 Sekisui Chemical 9,000 55 Sekisui House 14,000 151 Sharp 20,000 221 Shimachu 1,000 23 Shimano 3,000 74 Shimizu 29,000 102 Shin-Etsu Chemical 12,000 370 Shiseido 5,000 74 Shizuoka Bank 12,000 125 Skylark 3,000 56 SMC 1,100 100 Snow Brand Milk Products 8,000 39 Sony 6,400 598 Sumitomo 7,000 48 Sumitomo Bank 46,000 553 Sumitomo Chemical 29,000 122 Sumitomo Electric 14,000 156 Sumitomo Marine & Fire Insurance 6,000 39 Sumitomo Metal* 76,000 99 Taisei 35,000 79 Taisho Pharmaceutical 4,000 127
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- JAPAN--CONTINUED Takara Shuzo 4,000 $ 27 Takashimaya 4,000 36 Takeda Chemical 20,000 883 Toa 10,000 17 Tobu Railway 26,000 74 Toei 10,000 42 Tohoku Electric Power 8,500 131 Tokai Bank 29,000 168 Tokio Marine & Fire Insurance 23,000 250 Tokyo Dome* 9,000 49 Tokyo Electric Power 21,000 455 Tokyo Electronics 3,000 165 Tokyo Gas 55,000 139 Tokyo Tatemono 7,000 15 Tokyotokeiba 21,000 34 Tokyu 23,000 59 Toppan Printing 14,000 156 Toray 32,000 155 Tostem 5,000 96 Toto 12,700 97 Toyo Engineering* 6,000 7 Trans Cosmos 300 14 Toyo Seikan Kaisha 6,300 119 Toyoda Automatic Loom 5,000 89 Toyota Motor 58,000 1,573 Ube Industries 31,000 58 Uny 4,000 60 Yamaha 6,000 61 Yamaichi Securities* 15,000 -- Yamanouchi Pharmaceutical 8,000 274 Yamato Transport 5,000 82 Yasuda Trust & Banking* 56,000 67 --------- 27,798 --------- MALAYSIA (0.8%) (1) Rothmans of Pall Mall 13,000 96 Telekom Malaysia 80,000 274 Tenaga Nasional 134,000 305 --------- 675 --------- NETHERLANDS (2.4%) ABN Amro Holding 6,040 134 Aegon 1,947 157 Ahold 905 32 Akzo Nobel 1,180 49 Buhrmann 768 13 Heineken 1,599 89 ING Groep 4,204 225 KPN 2,386 115 Philips Electronics 2,517 226
48 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------------------------------ NETHERLANDS--CONTINUED Royal Dutch Petroleum 9,620 $ 536 TNT Post Group 2,086 52 Unilever 2,844 189 Wolters Kluwer 2,288 92 ------ 1,909 ------ NEW ZEALAND (0.4%) Carter Holt Harvey 101,800 117 Telecom of New Zealand 46,100 199 ------ 316 ------ NORWAY (1.0%) Bergesen, Cl A 4,850 73 Christiana Bank 30,500 123 Den Norske Bank, Cl B 34,600 120 Hafslund Nycomed, Cl B 2,200 9 Kvaerner* 2,500 41 Kvaerner Rights* 1,400 1 Norsk Hydro 6,525 257 Orkla, Cl A 8,600 136 Uni Storebrand* 9,987 67 ------ 827 ------ PORTUGAL (0.5%) Banco Comercial Portugues 4,463 122 Electricidade de Portugal 7,440 135 Portugal Telecom 4,072 184 Soares Da Costa* 2,528 8 ------ 449 ------ SINGAPORE (0.8%) Development Bank of Singapore `F' 2,000 21 Overseas Chinese Bank 27,000 211 Singapore International Airlines, `F' 28,000 250 Singapore Telecommunications 105,000 177 ------ 659 ------ SPAIN (3.7%) Argentaria 6,500 146 Autopistas CESA 9,104 116 Banco Bilbao Vizcaya 24,311 351 Banco Santander Central Hispano 28,592 597 Dragados Construccion 5,100 59 Endesa 10,000 213 Formento de Construcciones y Contratas 900 52 Gas Natural 1,650 128 Iberdrola 11,159 160 Mapfre 3,800 79 Repsol 14,543 263 Sociedad General Aguas de Barcelona 1,474 78 Tabacalera, Cl A 4,150 81
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- SPAIN--CONTINUED Telefonica de Espana 12,088 $ 580 Union Electrica Fenosa 4,282 56 ------ 2,959 ------ SWEDEN (1.4%) ABB, Cl A 4,900 67 AstraZeneca 3,817 150 Diligentia 1,350 10 Drott, Cl B 1,400 12 Electrolux 3,300 64 Ericsson, Cl B 10,100 270 ForeningsSparbaken, Cl A 3,000 61 Granges 550 9 Hennes & Mauritz, Cl B 6,800 153 Skandinaviska Enskilda Banken 4,300 52 Skanska, Cl B 1,400 49 Svenska Cellulosa, Cl B 2,100 49 Svenska Handelsbanken, Cl A 1,600 58 Swedish Match 16,400 60 Volvo, Cl B 2,450 62 ------ 1,126 ------ SWITZERLAND (1.6%) Adecco 50 26 Credit Suisse Group 690 120 Nestle 162 291 Novartis, Registered 144 209 Roche Holdings, Bearer 5 87 Roche Holdings, Genusschein 15 159 Swiss Re 35 66 Swisscom* 210 76 UBS 759 220 Zurich Allied 110 65 ------ 1,319 ------ UNITED KINGDOM (9.5%) Abbey National 7,124 147 Allied Zurich 8,498 108 AstraZeneca Group 4,255 169 Associated British Foods 4,109 31 Barclays Bank 7,549 229 Bass 10,173 150 BG 18,252 100 Blue Circle Industries 12,219 76 Boots 7,687 101 BP Amoco 45,607 817 British American Tobacco 10,823 99 British Sky Broadcasting 9,683 92 British Telecommunications 30,208 504 Cable & Wireless 12,419 153 Cadbury Schweppes 22,149 150 Centrica* 20,906 42
49 SCHEDULEOFINVESTMENTS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 INTERNATIONAL EQUITY INDEX FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- UNITED KINGDOM --CONTINUED CGU 8,305 $ 121 Diageo 18,459 194 General Electric 18,477 175 Glaxo Wellcome 15,591 438 Granada Group 7,191 147 Great Universal Stores 9,649 103 Halifax 19,993 258 Hanson 7,986 72 HSBC Holdings 8,842 296 HSBC Holdings 4,105 137 Imperial Chemical 8,890 98 Invensys 46,336 211 J Sainsbury 15,927 97 Kingfisher 6,674 84 Legal & General Group 37,656 110 Lloyds TSB Group 25,483 337 Marks & Spencer 22,886 145 National Power 8,684 68 Prudential 13,456 178 Rentokil Group 19,812 80 Reuters Group 8,867 123 Rio Tinto 10,039 147 RMC Group 4,283 57 Royal & Sun Alliance 10,696 88 Royal Bank of Scotland Group 4,518 96 Smithkline Beecham 24,544 320 Tesco 42,363 123 Unilever 14,448 127 Vodafone Group 14,771 282 ------ 7,680 ------ Total Foreign Common Stocks (Cost $65,129) 79,358 ------
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FOREIGN PREFERRED STOCKS (0.7%) AUSTRALIA (0.2%) News Corporation 22,157 $ 169 ------- GERMANY (0.4%) RWE 1,280 38 SAP 630 252 Volkswagen 1,970 70 ------- 360 ------- ITALY (0.1%) Fiat 50,000 77 ------- Total Foreign Preferred Stocks (Cost $438) 606 ------- Total Investments (98.7% ) (Cost $65,567) $79,964 ------- -------
(1) THE REPATRIATION OF PROCEEDS RECEIVED FROM THE SALE OF THESE SECURITIES ARE SUBJECT TO A LEVY DEPENDING UPON THE LENGTH OF TIME THE POSITION HAS BEEN HELD. THIS LEVY IS APPLICABLE TO SECURITIES PURCHASED BEFORE FEBRUARY 15, 1999. THE LEVY RANGES FROM 30% TO 0% AND IS BASED ON THE DATE THE PROCEEDS ARE REPATRIATED. AS A RESULT, THESE SECURITIES ARE BEING TREATED AS ILLIQUID UNTIL SEPTEMBER 1, 1999, WHEN THE LEVY IS NO LONGER IN EFFECT. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 50 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- EQUITY FUNDS (58.7%) STI Classic Capital Appreciation Fund, Trust Class 1,028,515 $17,094 STI Classic Growth & Income Fund, Trust Class 1,606,704 25,852 STI Classic Small Cap Growth Stock Fund, Trust Class 604,900 8,807 ------------ Total Equity Funds (Cost $45,999) 51,753 ------------ FIXED INCOME FUNDS (36.8%) STI Classic Investment Grade Bond Fund, Trust Class 1,694,503 17,555 STI Classic Short Term Bond Fund, Trust Class 443,271 4,393 STI Classic U.S. Government Securities Fund, Trust Class 1,025,059 10,538 ------------ Total Fixed Income Funds (Cost $33,196) 32,486 ------------ MONEY MARKET FUND (4.5%) STI Classic Prime Quality Money Market Fund, Trust Class 3,958,202 3,958 ------------ Total Money Market Fund (Cost $3,958) 3,958 ------------ Total Investments (100.0% ) (Cost $83,153) 88,197 ------------ OTHER ASSETS AND LIABILITIES, NET (0.0%) (9) ------------ NET ASSETS: Fund Shares of Trust Class (unlimited authorization -- no par value) based on 8,167,633 outstanding shares 81,210 Undistributed net investment income 185 Accumulated net realized gain on investments 1,749 Net unrealized appreciation on investments 5,044 ------------ Total Net Assets 100.0% $88,188 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.80 ------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 51 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 LIFE VISION GROWTH AND INCOME PORTFOLIO
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- EQUITY FUNDS (69.7%) STI Classic Capital Appreciation Fund, Trust Class 260,334 $ 4,327 STI Classic Growth & Income Fund, Trust Class 474,419 7,633 STI Classic Small Cap Growth Stock Fund, Trust Class 229,699 3,345 --------- Total Equity Funds (Cost $13,847) 15,305 --------- FIXED INCOME FUNDS (27.4%) STI Classic Investment Grade Bond Fund, Trust Class 321,684 3,333 STI Classic Short-Term Bond Fund, Trust Class 112,229 1,112 STI Classic U.S. Government Securities Fund, Trust Class 151,500 1,557 --------- Total Fixed Income Funds (Cost $6,115) 6,002 --------- MONEY MARKET FUND (3.0%) STI Classic Prime Quality Money Market Fund, Trust Class 655,867 656 --------- Total Money Market Fund (Cost $656) 656 --------- Total Investments (100.1% ) (Cost $20,618) 21,963 --------- OTHER ASSETS AND LIABILITIES, NET (-0.1%) (13) --------- NET ASSETS: Fund Shares of Trust Class (unlimited authorization -- no par value) based on 2,124,432 outstanding shares 20,565 Undistributed net investment income 2 Accumulated net realized gain on investments 38 Net unrealized appreciation on investments 1,345 --------- Total Net Assets 100.0% $21,950 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 10.33 --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 52 - -------------------------------------------------------------------------------- LIFE VISION MAXIMUM GROWTH PORTFOLIO
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- EQUITY FUNDS (90.1%) STI Classic Capital Appreciation Fund, Trust Class 334,348 $ 5,557 STI Classic Growth & Income Fund, Trust Class 464,213 7,469 STI Classic Small Cap Growth Stock Fund, Trust Class 262,172 3,817 --------- Total Equity Funds (Cost $15,000) 16,843 --------- MONEY MARKET FUND (9.8%) STI Classic Prime Quality Money Market Fund, Trust Class 1,835,878 1,836 --------- Total Money Market Fund (Cost $1,836) 1,836 --------- Total Investments (99.9% ) (Cost $16,836) 18,679 --------- OTHER ASSETS AND LIABILITIES, NET (0.1%) 20 --------- NET ASSETS: Fund Shares of Trust Class (unlimited authorization -- no par value) based on 1,653,936 outstanding shares 16,789 Undistributed net investment income 5 Accumulated net realized gain on investments 62 Net unrealized appreciation on investments 1,843 --------- Total Net Assets 100.0% $18,699 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 11.31 --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 53 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 MID-CAP EQUITY FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (90.2%) BASIC MATERIALS (1.1%) Stillwater Mining* 100,800 $ 3,219 --------- CAPITAL GOODS (6.2%) Allied Waste Industries* 438,700 8,171 Herman Miller 226,600 4,574 Watsco 263,800 5,095 --------- 17,840 --------- CONSUMER CYCLICALS (14.4%) BJ's Wholesale Club* 211,300 5,494 Ethan Allen Interiors* 203,400 6,483 Family Dollar Stores 372,100 8,302 Just for Feet* 131,900 1,006 Men's Wearhouse* 364,850 9,315 Ralph Lauren* 212,200 4,377 Staff Leasing* 230,000 2,602 Tandy 48,600 4,009 --------- 41,588 --------- CONSUMER STAPLES (17.9%) Avis Rent A Car* 118,300 3,394 CBRL Group 96,900 1,678 Dial 64,000 2,000 Flowers Industries 247,600 5,509 Imax* 333,300 7,333 Interstate Bakeries 274,800 6,011 Keebler Foods* 76,200 2,553 McCormick 158,900 4,827 Nordstrom 53,100 1,885 Norrell 143,300 2,660 Papa John's International* 155,500 6,142 US Foodservice* 177,500 7,899 --------- 51,891 --------- ENERGY (6.4%) Anadarko Petroleum 84,800 3,180 Ensco International 115,900 2,057 Ensearch Exploration* 106,932 728 Global Marine* 144,800 2,036 Nabors Industries* 105,100 2,102 National-Oilwell* 51,300 619 Precision Drilling* 84,500 1,537 Smith International* 75,300 3,257 Tosco 35,000 895 Weatherford International* 65,000 2,145 --------- 18,556 --------- FINANCE (11.4%) Colonial Bancgroup 317,100 4,083 Dime Bancorp* 182,000 3,708 First Security 188,062 3,561
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- FINANCE--CONTINUED First Virginia Banks 73,700 $ 3,662 Hibernia, Cl A 298,500 4,254 North Fork Bancorporation 268,500 5,722 Peoples Heritage 207,700 3,894 Western Bancorp 96,700 3,934 --------- 32,818 --------- HEALTH CARE (12.5%) Acuson* 148,000 2,294 Centocor* 66,600 2,893 Forest Laboratories* 131,700 6,272 Jones Pharmaceuticals 100,300 3,567 Mylan Laboratories 218,700 5,550 Quintiles Transnational* 177,300 7,203 Renal Care* 129,700 3,599 Watson Pharmaceuticals* 121,300 4,647 --------- 36,025 --------- TECHNOLOGY (19.4%) ADC Telecommunications* 126,100 6,163 Ceridian* 167,900 5,541 Citrix Systems* 71,600 3,540 Fiserv* 158,850 5,957 Flextronics International* 69,200 3,460 Intuit* 35,900 2,921 New Era of Networks* 72,700 3,235 Nova* 127,430 2,835 Sanmina* 63,200 4,739 Sawtek* 165,800 6,570 Siebel Systems* 67,100 3,055 SkyTel Communications* 46,800 951 Teradyne* 136,800 7,225 --------- 56,192 --------- TRANSPORTATION (0.9%) CNF Transportation 65,600 2,722 --------- Total Common Stocks (Cost $232,453) 260,851 --------- PREFERRED STOCKS (2.2%) COMMUNICATION SERVICES (2.2%) Adelphia Communications, CV to 2.4555 shares* 16,700 3,673 Skytel Communications, CV to 1.1111 shares* 83,900 2,569 --------- Total Preferred Stocks (Cost $5,870) 6,242 ---------
54 - -------------------------------------------------------------------------------- MID-CAP EQUITY FUND--CONCLUDED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- CONVERTIBLE BONDS (3.4%) Chiron, CV to 34.59 shares, Callable 08/16/99 @ 95.08 (B) 1.900%, 11/17/00 $2,500 $ 2,422 Citrix Systems, CV to 7.0306 shares, Callable 03/22/04 @ 45.96 (A) (B)* 0.000%, 03/22/19* 8,700 3,491 Sanmina, CV to 11.278 shares, Callable 05/06/02 @ 101.70 (B) 4.250%, 05/01/04 1,750 1,925 Sepracor, CV to 21.111 shares, Callable 02/18/01 @ 103.57 6.250%, 02/15/05 1,235 1,896 --------- Total Convertible Bonds (Cost $9,406) 9,734 --------- REPURCHASE AGREEMENT (1.9%) Deutsche Bank 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $5,633,784 (collateralized by U.S. Treasury Notes: total market value $5,743,770) (D) $5,631 5,631 --------- Total Repurchase Agreement (Cost $5,631) 5,631 --------- Total Investments (97.7% ) (Cost $253,360) 282,458 --------- OTHER ASSETS AND LIABILITIES, NET (2.3%) 6,631 ---------
- -------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 20,034,481 outstanding shares of beneficial interest $214,160 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 1,538,670 outstanding shares of beneficial interest 17,043 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,298,359 outstanding shares of beneficial interest 16,595 Undistributed net investment income 3 Accumulated net realized gain on investments 12,190 Net unrealized appreciation on investments 29,098 ------------ Total Net Assets 100.0% $289,089 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 12.68 ------------ ------------ Net Asset Value and Redemption Price Per Share-- Investor Shares $ 12.50 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($12.50 / 96.25%) $ 12.99 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 12.17 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 55 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 SMALL CAP EQUITY FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (89.4%) BASIC MATERIALS (11.0%) Calgon Carbon 554,300 $ 3,153 Carpenter Technology 244,300 6,963 Commonwealth Industries 138,700 1,491 HB Fuller 18,700 1,187 Lilly Industries, Cl A 362,400 6,908 Quixote 182,000 2,343 Texas Industries 246,400 8,963 Wausau-Mosinee Paper 232,700 4,189 ------------ 35,197 ------------ CAPITAL GOODS (13.4%) Ameron 18,100 779 American Woodmark 126,200 4,654 Belden 149,200 3,516 Furon 195,900 3,575 Gerber Scientific 208,500 4,874 Kaman 249,500 3,306 Kaydon 65,400 2,179 Lindberg 172,700 2,008 LSI Industries 182,400 4,053 Pittway, Cl A 162,200 4,562 Precision Castparts 157,700 6,387 Smith (A.O.) 137,000 3,339 ------------ 43,232 ------------ CONSUMER CYCLICALS (19.5%) Angelica 141,200 2,392 Bush Industries 396,300 5,870 Chemed 99,000 3,211 Harman International 220,900 9,802 Heilig-Meyers 979,600 6,796 Interface 1,168,900 9,059 K2 282,400 2,806 Midas 101,500 3,178 Oshkosh Truck 92,900 3,693 Pep Boys 173,400 3,273 Pillowtex 245,100 3,983 Sturm Ruger 177,200 1,982 Tag Heuer International ADR 349,500 3,189 Toro 102,600 3,444 ------------ 62,678 ------------ CONSUMER STAPLES (20.3%) Bowne & Company 298,700 5,003 Ingles Markets, Cl A 237,000 2,903 Norrell 825,800 15,329 Pittston Services Group 44,000 1,254 Polaroid 605,700 12,795 Smucker (J.M.), Cl B 58,200 1,018 Standard Register 228,300 6,792 - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- CONSUMER STAPLES--CONTINUED Universal Foods 335,700 $ 7,700 WD-40 107,900 2,772 Wolverine World Wide 537,100 7,251 York Group 320,200 2,482 ------------ 65,299 ------------ ENERGY (0.7%) Fletcher Challenge Energy ADR 95,700 2,321 ------------ FINANCIALS (8.3%) Administradora de Fondos de Pensiones Provida ADR 118,300 2,410 Banco Latinamericano de Exportaciones 78,700 2,238 Chicago Title 107,000 3,939 Downey Financial 74,600 1,641 Klamath First Bancorp 130,100 2,065 Scottish Annuity & Life 326,500 3,183 Seacoast Banking of Florida 59,000 1,947 Stirling Cooke Brown Holdings 116,500 481 Student Loan 97,300 3,886 West Coast Bancorp 128,800 2,246 Westerfed Financial 159,200 2,657 ------------ 26,693 ------------ HEALTH CARE (6.3%) Block Drug, Cl A 70,502 2,626 Medeva PLC ADR 570,900 4,139 Mentor 651,600 10,385 Vital Signs 154,100 2,957 ------------ 20,107 ------------ TECHNOLOGY (1.8%) Innovex 222,300 2,973 Pioneer-Standard Electronics 289,000 2,836 ------------ 5,809 ------------ TRANSPORTATION (6.0%) Bandag 176,200 6,068 Knightsbridge Tankers Limited 176,100 3,170 Pittston Burlington 26,000 281 Sea Containers 259,600 8,761 Western Star Truck Holdings 53,600 884 ------------ 19,164 ------------ UTILITIES (2.1%) NUI 182,000 4,527 United Water Resources 108,400 2,358 ------------ 6,885 ------------ Total Common Stocks (Cost $303,154) 287,385 ------------ 56 - -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (14.2%) Deutsche Bank 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $47,819,808 (collateralized by FHLMC obligation: total market value $46,771,137) (D) $45,795 $ 45,795 ------------ Total Repurchase Agreement (Cost $45,795) 45,795 ------------ Total Investments (103.6%) (Cost $348,949) 333,180 ------------ OTHER ASSETS AND LIABILITIES, NET (-3.6%) (11,731) ------------ NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 31,125,084 outstanding shares of beneficial interest 356,281 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 2,016,491 outstanding shares of beneficial interest 28,964 Undistributed net investment income 587 Accumulated net realized loss on investments (48,614) Net unrealized depreciation on investments (15,769) ------------ Total Net Assets 100.0% $321,449 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 9.70 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 9.65 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 57 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 SMALL CAP GROWTH STOCK FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (99.6%) BASIC MATERIALS (6.9%) Alpha Industries* 23,000 $ 801 Astec Industries* 23,660 884 Bel Fuse, Cl A* 25,800 851 Boise Cascade 37,000 1,466 Centex Construction Products 23,020 826 Florida Rock Industries 10,000 399 Granite Construction 24,000 673 Jacobs Engineering Group* 10,300 383 LTV 45,000 276 NCI Building Systems* 47,570 1,201 Solutia 35,000 785 Stillwater Mining* 36,500 1,166 US Liquids* 20,900 376 U.S. Plastics Lumber 90,000 816 ------------ 10,903 ------------ CAPITAL GOODS (15.1%) AFC Cable Systems* 37,085 1,275 American Woodmark 18,000 664 Anaren Microwave* 38,400 823 Avondale Industries* 20,000 730 Borg-Warner Automotive 13,000 721 Briggs & Stratton 11,800 737 Concord Communications* 21,000 934 Corsair Communications* 20,000 91 Crane 15,000 451 DM Management* 25,000 403 Dycom Industry* 29,475 1,422 Elcor 19,130 772 Genesis Microchip* 58,100 1,053 Intervoice* 93,000 1,035 Kellstrom Industries* 14,000 254 Manitowoc 20,722 705 Miami Computer Supply* 39,550 744 Mobile Mini* 68,000 897 Motivepower Industries* 27,150 460 National R.V. Holdings* 31,470 808 Navistar International* 30,000 1,481 Simpson Manufacturing* 19,500 865 Sps Technologies* 12,070 511 Syncor International* 32,000 1,088 Transwitch* 27,500 1,272 UNIFAB International* 49,000 505 United Stationers* 33,000 619 Universal Corp. 15,000 392 USG 7,775 440 Varian Medical Associates* 15,000 282 Varlen 39,176 1,479 ------------ 23,913 ------------ - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMUNICATION SERVICES (3.1%) Broadvision* 20,000 $ 1,040 Flashnet Communications* 11,000 217 Genesys Telecom Labs* 52,000 1,202 Gilat Communications Limited* 54,500 804 Polycom* 61,695 1,581 ------------ 4,844 ------------ CONSUMER CYCLICALS (25.1%) American Eagle Outfitters* 27,000 1,102 Analytical Surveys* 25,500 625 Ann Taylor Stores* 26,500 1,144 Arvin Industries 23,000 903 Brinker International* 22,985 645 Buckle* 54,865 1,519 CDW Computer Centers* 19,000 826 Centex 18,000 667 Chicos* 50,000 1,134 Claire's Stores 35,000 1,024 Consolidated Graphics* 16,310 752 Cost Plus* 25,000 934 Craftmade International 46,640 624 Cutter & Buck* 25,760 763 DR Horton 75,800 1,289 Delia's* 19,000 252 Dollar Tree Stores* 29,000 975 Empi* 12,000 294 First Years 24,010 384 Foodmaker* 20,000 540 Fossil* 32,530 1,364 Gentex* 27,000 811 Jakks Pacific* 30,000 831 K-Swiss, Cl A 46,740 2,682 La-Z-Boy 26,800 533 Labor Ready* 29,500 1,051 Liberty Property Trust 25,270 610 Mohawk Industries* 36,115 1,052 Monaco Coach* 37,510 1,125 Movado Group 9,175 221 Oshkosh B'gosh, Cl A 16,655 327 Oshkosh Truck 6,000 238 Pre Paid Legal Services* 10,000 266 Programmer's Paradise* 8,000 86 Quiksilver* 34,000 969 Racing Champions* 64,000 1,096 Rare Hospitality International* 24,000 552 Salton/Maxim Housewares* 21,500 919 Southdown 24,900 1,578 Standard Pacific 54,145 711 Steven Madden Ltd* 81,365 870 Superior Industries International 27,000 673 Tarrant Apparel Group* 33,330 1,010 58 - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- CONSUMER CYCLICALS--CONTINUED Triumph Group* 23,395 $ 716 Urs* 28,325 697 Wet Seal, Cl A* 17,000 472 Winnebago Industries 54,000 891 Zale* 28,000 1,080 ------------ 39,827 ------------ CONSUMER STAPLES (4.8%) Canandaigua Wine, Cl A* 13,100 652 Earthgrains 20,000 469 Flowers Industries 44,600 992 Mail-Well* 65,000 963 Papa John's International* 38,900 1,537 Rent-A-Center* 35,000 903 Smithfield Foods* 43,000 1,148 Suiza Foods* 25,000 916 ------------ 7,580 ------------ ENERGY (2.3%) Eagle Geophysical* 1,280 4 Oceaneering International* 50,000 772 Santa Fe Snyder Corp* 80,000 680 Seacor Holdings* 3,000 149 Seitel* 40,000 632 Transocean Offshore 61,800 1,522 ------------ 3,759 ------------ FINANCIALS (7.6%) American Heritage 39,300 914 Amerin* 21,057 566 Annuity & Life Re Holdings 12,000 309 Bank of Commerce/San Diego 16,000 312 Corporate Executive Board* 17,000 498 Cullen/Frost Bankers 9,550 537 Dime Community Bancorp 35,200 779 Doral Financial 42,000 709 E.W. Blanch Holdings 16,900 1,082 Enhance Financial Services Group 30,000 587 Financial Security Assurance Holdings 7,385 419 Fremont General 55,000 1,165 Investment Technology Group 16,880 748 NVR* 13,975 673 PFF Bancorp* 32,000 580 Pilgrim America Cap Corp* 19,600 390 Protective Life 38,000 1,375 Ryland Group 16,165 450 ------------ 12,093 ------------ HEALTH CARE (8.2%) Alpharma, Cl A 24,000 640 Barr Laboratories* 18,475 609 - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- Biomatrix* 28,000 $ 857 Capital Senior Living* 70,000 761 Colorado Medtech* 65,340 923 D&K Healthcare Resources* 24,400 576 Interim Services* 35,000 763 Ivax* 40,000 537 Laser Vision Centers* 15,000 855 Liposome* 78,000 1,116 Optical Coating Laboratories 3,000 195 Osteotech* 23,917 849 Rehabcare Group* 33,000 710 Resmed* 43,000 1,207 Roberts Pharmaceutical* 63,000 1,197 Steris* 25,000 414 Trigon Healthcare* 15,000 572 Varian 15,000 150 ------------ 12,931 ------------ TECHNOLOGY (19.1%) American Management Systems* 25,000 794 Business Objects ADR* 30,000 862 Checkpoint Software* 20,000 885 Ciber* 52,230 1,120 Commscope* 50,000 1,313 Computer Network Technology* 29,000 732 Cordant Technologies 18,000 873 Cybex Computer Products* 61,944 1,405 Electronic Arts* 16,000 783 Fair Isaac 5,000 164 Flextronics International* 7,000 350 4front Technologies* 60,000 600 Henry (Jack) & Associates 7,000 247 Herley Industries* 52,000 673 Hyperion Telecommunications, Cl A* 60,000 1,013 Insight Enterprises* 38,557 978 Javelin Systems* 60,000 776 Kronos* 29,200 1,081 Landmark Systems* 24,000 231 Mastech* 62,900 1,207 Metamor Worldwide* 27,000 739 Micros Systems* 40,000 1,250 Overland Data* 65,000 423 Pinnacle Systems* 19,000 984 Perot Systems, Cl A* 14,800 401 Powerhouse Technologies* 15,000 278 Progress Software* 66,930 1,744 Quantum* 20,000 396 Sunquest* 44,000 578
59 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 SMALL CAP GROWTH STOCK FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- TECHNOLOGY--CONTINUED Sybase* 55,000 $ 533 Sykes Enterprises* 10,435 325 T-HQ* 46,290 1,091 Talk.com* 25,000 259 Technomatrix Technologies* 51,000 854 Timberline Software 54,000 918 USWeb* 25,000 634 Varian Semiconductor Equiptment* 15,000 187 Xircom* 52,000 1,313 Zomax* 41,000 1,081 ------------ 30,075 ------------ TRANSPORTATION (6.2%) Aeroflex* 61,000 888 Alaska Airgroup* 10,000 415 American Freightways* 82,500 1,444 Amtran Inc* 14,525 341 Atlas Air* 48,000 1,290 Eagle USA Airfreight* 9,000 424 Forward Air* 10,000 274 Frontier Airlines* 62,000 961 Landstar System* 10,000 376 Skywest 38,680 899 Swift Transportation* 45,000 823 USFreightways 43,300 1,706 ------------ 9,841 ------------ UTILITIES (1.2%) El Paso Electric* 80,000 685 Kinder Morgan Energy Partners 18,000 671 Public Service of North Carolina 5,000 145 Public Service of New Mexico 20,000 415 ------------ 1,916 ------------ Total Common Stocks (Cost $144,302) 157,682 ------------ REPURCHASE AGREEMENT (2.9%) Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $4,658,357 (collateralized by various FNMA obligations: total market value $4,767,582) (D) $ 4,656 4,656 ------------ Total Repurchase Agreement (Cost $4,656) 4,656 ------------ Total Investments (102.5% ) (Cost $148,958) 162,338 ------------ OTHER ASSETS AND LIABILITIES, NET (-2.5%) (3,890) ------------ - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 10,464,063 outstanding shares of beneficial interest $137,985 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 425,752 outstanding shares of beneficial interest 6,037 Accumulated net realized gain on investments 1,046 Net unrealized appreciation on investments 13,380 ------------ Total Net Assets 100.0% $158,448 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 14.55 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 14.46 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 60 - -------------------------------------------------------------------------------- SUNBELT EQUITY FUND
- -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (98.0%) CAPITAL GOODS (11.9%) Artesyn Technologies* 122,296 $ 2,584 Blount International 133,355 3,717 Kellstrom Industries* 169,924 3,080 Maverick Tube* 175,995 2,277 Miller Industries* 435,896 2,098 National Service Industries 41,874 1,541 Palm Harbor Homes* 150,106 3,227 Sensormatic Electronics 104,358 1,396 Tristar Aerospace* 80,923 749 UNIFAB International* 331,835 3,422 Watsco 106,090 2,049 ------------ 26,140 ------------ COMMUNICATION SERVICES (3.7%) Alltel 40,176 2,880 MCI WorldCom* 39,356 3,399 Superior TeleCom 58,516 1,734 ------------ 8,013 ------------ CONSUMER CYCLICALS (17.8%) AHL Services* 118,826 3,149 Central Parking 40,931 1,330 Circuit City 58,725 4,217 Dollar General 75,487 2,005 Family Dollar Stores 124,318 2,774 Lowe's Companies 63,365 3,291 Modis Professional Services* 189,582 2,796 O'Charleys* 157,453 2,057 Pier 1 Imports 156,478 1,731 Policy Management Systems* 66,492 2,419 Quest Education* 211,639 2,381 Rare Hospitality International* 77,431 1,781 Tandy 64,310 5,306 Tractor Supply* 44,927 1,337 Trex* 48,519 1,064 V.F. 27,688 1,274 ------------ 38,912 ------------ CONSUMER STAPLES (6.1%) Flowers Industries 108,415 2,412 Outback Steakhouse* 113,665 4,078 Sonic* 247,259 6,807 ------------ 13,297 ------------ ENERGY (18.4%) Anadarko Petroleum 117,354 4,401 BJ Services* 179,297 4,942 Core Laboratories N.V.* 245,141 3,830 Diamond Offshore Drilling 128,263 3,495 Global Industries* 662,783 7,373 - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- ENERGY--CONTINUED Nuevo Energy* 140,422 $ 2,141 Oceaneering International* 111,937 1,728 Stone Energy* 185,441 6,989 Transocean Offshore 124,176 3,058 World Fuel Services 174,223 2,254 ------------ 40,211 ------------ FINANCIALS (15.9%) Capital One Financial 26,774 4,035 CCB Financial 60,942 3,287 Cullen/Frost Bankers 26,492 1,490 Fairfield Communities* 565,607 8,979 First Tennessee National 58,712 2,418 Nova* 272,816 6,070 Profit Recovery Group International* 146,974 5,410 Texas Regional Bancshares, Cl A 42,200 1,145 Triad Guaranty* 129,583 1,976 ------------ 34,810 ------------ HEALTH CARE (3.1%) Cryolife* 274,510 3,397 Orthodontic Centers of America* 66,962 808 Rexall Sundown* 145,521 2,483 ------------ 6,688 ------------ TECHNOLOGY (17.7%) Acxiom* 155,822 4,207 Benchmark Electronics* 214,785 6,444 Cybex Computer Products* 127,104 2,884 Datastream Systems* 188,213 2,282 Dell Computer* 65,224 2,246 National Data 48,242 2,270 National Instruments* 29,351 1,117 SCB Computer Technology* 795,788 5,123 Scientific-Atlanta 65,225 2,303 Sterling Commerce* 33,867 1,317 Sterling Software* 53,374 1,298 Sykes Enterprises* 160,921 5,009 Texas Instruments 20,939 2,290 ------------ 38,790 ------------ TRANSPORTATION (3.4%) Covenant Transportation, Cl A* 114,180 1,370 Hunt J B Transportation Services 93,873 1,584 Union Pacific 48,129 2,746 USA Truck* 186,915 1,706 ------------ 7,406 ------------ Total Common Stocks (Cost $166,276) 214,267 ------------
61 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 SUNBELT EQUITY FUND--CONCLUDED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (0.1%) Deutsche Bank 4.78%, dated 05/28/99, matures 06/01/99, repurchase price $319,543 (collateralized by various U.S. Treasury obligations: total market value $326,219) (D) $319 $ 319 ------------ Total Repurchase Agreement (Cost $319) 319 ------------ Total Investments (98.1% ) (Cost $166,595) 214,586 ------------ OTHER ASSETS AND LIABILITIES, NET (1.9%) 3,973 ------------ NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 17,784,188 outstanding shares of beneficial interest 166,929 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 1,574,615 outstanding shares of beneficial interest 14,344 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 416,394 outstanding shares of beneficial interest 5,998 Accumulated net realized loss on investments (16,703) Net unrealized appreciation on investments 47,991 ------------ Total Net Assets 100.0% $218,559 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 11.09 ------------ ------------ Net Asset Value and Redemption Price Per Share-- Investor Shares $ 10.76 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($10.76 / 96.25%) $ 11.18 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 10.55 ----------- -----------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 62
- -------------------------------------------------------------------------------- TAX SENSITIVE GROWTH STOCK FUND - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (93.7%) BASIC MATERIALS (2.5%) Alcoa 57,773 $ 3,178 E. I. DuPont de Nemours 64,744 4,237 ------------ 7,415 ------------ CAPITAL GOODS (8.6%) Applied Materials* 88,967 4,893 Caterpillar 88,957 4,882 Delphi Automotive Systems 15,267 300 General Electric 80,766 8,213 Minnesota Mining & Manufacturing 42,062 3,607 United Technologies 63,618 3,948 ------------ 25,843 ------------ COMMUNICATION SERVICES (6.2%) AT&T 103,622 5,751 Bell Atlantic 25,476 1,395 BellSouth 31,319 1,478 GTE 43,773 2,760 MCI WorldCom* 27,295 2,358 SBC Communications 39,059 1,997 Sprint 23,376 2,636 ------------ 18,375 ------------ CONSUMER CYCLICALS (8.6%) Dollar General 137,467 3,651 Ford Motor 35,064 2,001 Gap 72,295 4,523 General Motors 21,844 1,507 Home Depot 58,474 3,326 Office Depot* 98,208 2,050 Service International 109,167 2,095 Wal-Mart Stores 131,383 5,600 Walt Disney 35,447 1,032 ------------ 25,785 ------------ CONSUMER STAPLES (7.9%) Coca-Cola 75,979 5,190 Gillette 52,774 2,692 McDonald's 42,707 1,644 Paychex 74,346 2,203 PepsiCo 69,874 2,502 Philip Morris 110,504 4,261 Procter & Gamble 53,764 5,020 ------------ 23,512 ------------ ENERGY (6.6%) Chevron 32,177 2,982 Exxon 71,855 5,739 Halliburton 83,077 3,437 Mobil 24,985 2,530 - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- ENERGY--CONTINUED Royal Dutch Petroleum 37,010 $ 2,093 Schlumberger 50,696 3,051 ------------ 19,832 ------------ FINANCIALS (15.8%) American Express 30,914 3,746 American International Group 32,334 3,696 Bank of America 46,356 2,999 Bank One 68,298 3,863 Charles Schwab 52,251 5,529 Chase Manhattan Bank 41,776 3,029 Citigroup 66,640 4,415 FNMA 77,975 5,302 Household International 137,625 5,970 JP Morgan 40,206 5,601 Wells Fargo 82,150 3,286 ------------ 47,436 ------------ HEALTH CARE (11.5%) Abbott Laboratories 38,921 1,759 American Home Products 39,026 2,249 Bristol-Myers Squibb 52,745 3,620 Eli Lilly 28,030 2,002 Healthsouth* 164,032 2,194 Johnson & Johnson 38,481 3,564 Medtronic 56,690 4,025 Merck 83,958 5,667 Pfizer 44,537 4,765 Schering Plough 37,119 1,673 Warner Lambert 48,834 3,028 ------------ 34,546 ------------ TECHNOLOGY (26.0%) Allied Signal 102,274 5,938 Cisco Systems* 78,243 8,529 Computer Associates 97,902 4,632 Compuware* 221,437 6,878 Dell Computer* 136,541 4,702 EMC* 52,150 5,195 Hewlett Packard 31,302 2,952 IBM 62,790 7,303 Intel 133,336 7,209 Linear Technology 49,326 2,614 Lucent Technologies 71,226 4,051 Microsoft* 129,623 10,459 Monsanto 58,511 2,428 Oracle* 40,000 993 Texas Instruments 36,414 3,983 ------------ 77,866 ------------ Total Common Stocks (Cost $220,279) 280,610 ------------
63 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 TAX SENSITIVE GROWTH STOCK FUND--CONCLUDED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (8.6%) Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $25,723,692 (collateralized by FNMA and FHLMC obligations: total market value $ 26,240,236) (D) $25,710 $ 25,710 ------------ Total Repurchase Agreement (Cost $25,710) 25,710 ------------ Total Investments (102.3%) (Cost $245,989) $306,320 ------------ OTHER ASSETS AND LIABILITIES, NET (-2.3%) (6,902) ------------ NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 7,462,354 outstanding shares of beneficial interest 158,983 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 2,541,837 outstanding shares of beneficial interest 75,210 Accumulated net realized gain on investments 4,894 Net unrealized appreciation on investments 60,331 ------------ Total Net Assets 100.0% $299,418 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 29.96 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 29.85 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 64
- -------------------------------------------------------------------------------- VALUE INCOME STOCK FUND - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- COMMON STOCKS (92.0%) BASIC MATERIALS (10.7%) Allegheny Teledyne 1,143,400 $ 23,368 B.F. Goodrich 663,400 26,868 Boise Cascade 708,000 28,054 Consolidated Papers 477,500 13,251 DuPont (EI) de Nemours 297,800 19,487 Engelhard 737,300 14,930 Hercules 532,800 18,615 Nalco Chemical 403,400 13,514 Reynolds Metals 307,000 16,329 Sonoco Products 751,030 18,776 Witco Chemical 277,800 4,861 Worthington Industries 776,800 9,953 ------------ 208,006 ------------ CAPITAL GOODS (14.7%) Cooper Industries 646,100 32,022 Corning 157,600 8,609 Crown Cork & Seal 616,300 19,336 Dana 385,000 19,876 Emerson Electric 430,700 27,511 Harris 427,000 16,146 Hubbell, Cl B 394,300 16,511 Minnesota Mining & Manufacturing 258,800 22,192 National Service Industries 575,700 21,193 Northrop Grumman 491,000 33,142 Pall 855,400 17,161 Raytheon, Cl B 201,500 13,715 Tenneco 686,900 16,013 Thomas & Betts 557,900 23,885 ------------ 287,312 ------------ COMMUNICATION SERVICES (3.3%) Alltel 206,700 14,818 GTE 781,600 49,290 ------------ 64,108 ------------ CONSUMER CYCLICALS (11.1%) Albertson's 399,200 21,357 American Greetings, Cl A 516,200 14,776 Genuine Parts 607,600 20,468 H & R Block 648,900 31,269 J.C. Penney 757,300 39,143 Masco 1,070,700 30,582 Ryder 580,000 13,920 Stanley Works 656,300 21,371 TRW 459,000 22,979 ------------ 215,865 ------------ - -------------------------------------------------------------------------------- SHARES VALUE (000) - -------------------------------------------------------------------------------- CONSUMER STAPLES (14.0%) Bestfoods 610,800 $ 30,540 ConAgra 1,526,300 39,779 Dean Foods 508,400 19,065 Flowers Industries 230,900 5,137 Food Lion, Cl A 894,000 9,890 Fort James Corp. 388,300 14,221 Fortune Brands 526,400 21,517 H.J. Heinz 407,000 19,663 International Flavors & Fragrances 697,700 28,693 Kimberly Clark 632,200 37,102 McCormick 467,800 14,209 Newell Rubbermaid 479,400 19,416 Wallace Computer Services 578,400 13,267 ------------ 272,499 ------------ ENERGY (6.5%) Atlantic Richfield 281,300 23,541 Baker Hughes 488,700 15,211 Kerr-McGee 566,700 26,352 Murphy Oil 481,400 23,619 Texaco 234,800 15,379 Unocal 563,000 22,379 ------------ 126,481 ------------ FINANCIALS (17.1%) American Financial Group 402,300 13,578 American General 275,700 19,919 Bank of America 626,200 40,507 Bank One 669,700 37,880 BankBoston 560,600 26,558 Cigna 306,700 28,600 First American of Tennessee 369,700 15,088 Hibernia, Cl A 838,800 11,953 KeyCorp 721,900 25,086 Paine Webber Group 281,800 13,245 PNC Bank 489,600 28,030 Safeco 428,600 18,832 Summit Bancorp 553,000 22,638 Transamerica 252,900 18,557 Union Planters 330,664 13,661 ------------ 334,132 ------------ HEALTH CARE (8.1%) Abbott Laboratories 863,600 39,024 American Home Products 684,700 39,456 Baxter International 749,100 48,364 Bristol-Myers Squibb 286,100 19,634 Pharmacia Upjohn ADR 212,800 11,797 ------------ 158,275 ------------
65 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 VALUE INCOME STOCK FUND--CONCLUDED
- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- TECHNOLOGY (3.1%) EG&G 693,500 $ 20,588 Xerox 731,000 41,073 ------------ 61,661 ------------ UTILITIES (3.4%) Consolidated Natural Gas 213,100 12,666 GPU 429,900 18,728 Questar 843,700 16,083 Scana 733,100 19,565 ------------ 67,042 ------------ Total Common Stocks (Cost $1,667,740) 1,795,381 ------------ REPURCHASE AGREEMENTS (7.5%) Deutsche Bank 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $76,618,190 (collateralized by FHLMC obligation: total market value $78,108,636) (D) $ 76,577 76,577 Greenwich 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $70,371,544 (collateralized by various FNMA obligations: total market value $71,740,804) (D) 70,334 70,334 ------------ Total Repurchase Agreements (Cost $146,911) 146,911 ------------ Total Investments (99.5%) (Cost $1,814,651) 1,942,292 ------------ OTHER ASSETS AND LIABILITIES, NET (0.5%) 8,971 ------------ VALUE (000) NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 123,726,029 outstanding shares of beneficial interest $1,337,495 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 15,170,194 outstanding shares of beneficial interest 171,095 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 13,167,127 outstanding shares of beneficial interest 173,568 Undistributed net investment income 4,654 Accumulated net realized gain on investments 136,810 Net unrealized appreciation on investments 127,641 ------------ Total Net Assets 100.0% $1,951,263 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 12.85 ------------ ------------ Net Asset Value and Redemption Price Per Share-- Investor Shares $ 12.81 ------------ ------------ Maximum Offering Price Per Share -- Investor Shares ($12.81/ 96.25%) $ 13.31 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 12.68 ------------ ------------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 67. 66 - -------------------------------------------------------------------------------- KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS ADR American Depository Receipt Cl Class CV Convertible Security F Foreign Registry Shares FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GDR Global Depository Receipt GNMA Government National Mortgage Association MTN Medium Term Note PLC Public Limited Corporation * Non-income producing security (A) Zero Coupon Bond (B) Private Placement Security (C) Variable rate security. The rate reported on the Statement of Net Assets is the rate in effect on November 30, 1998. (D) Tri-Party Repurchase Agreement 67 This page left intentionally blank 68 STATEMENT OF ASSETS AND LIABILITIES (000) - -------------------------------------------------------------------------------- STI CLASSIC INTERNATIONAL EQUITY INDEX FUND FOR THE YEAR ENDED MAY 31, 1999
------------ INTERNATIONAL EQUITY INDEX FUND ------------ Assets: Investments at Market Value (Cost $65,567) $ 79,964 Cash and Foreign Currency 15,055 Receivable for Investment Securities Sold 11 Receivable for Portfolio Shares Purchased 42 Other Assets 396 -------- Total Assets 95,468 -------- Liabilities: Payable for Investment Securities Purchased 14,299 Payable for Portfolio Shares Redeemed 21 Accrued Expenses 71 Other Liabilities 87 -------- Total Liabilities 14,478 -------- Net Assets: Fund Shares of the Trust Class (unlimited authorization -- no par value) based on 6,315,153 outstanding shares of beneficial interest 61,695 Fund Shares of the Investor Class (unlimited authorization -- no par value) based on 419,449 outstanding shares of beneficial interest 3,827 Fund Shares of the Flex Class (unlimited authorization -- no par value) based on 124,930 outstanding shares of beneficial interest 1,410 Distributions in excess of net investment income (365) Accumulated net realized gain on investments 119 Net unrealized appreciation on investments 14,397 Net unrealized depreciation foreign currency and translation of other assets and liabilities in foreign currency investments (93) -------- Total Net Assets $ 80,990 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 11.82 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $ 11.70 -------- -------- Maximum Offering Price Per Share -- Investor Shares ($11.70 / 96.25%) $ 12.16 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 11.73 -------- --------
(1) The Flex Shares have a contingent sales charge. For a description of a possible sales charge, see notes to the financial statements. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 69 STATEMENT OF OPERATIONS (000) - --------------------------------------- STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30,
CAPITAL EMERGING GROWTH AND INTERNATIONAL BALANCED APPRECIATION MARKETS INCOME EQUITY FUND FUND EQUITY FUND FUND FUND --------- ------------ ----------- ---------------------- ------------ 06/01/98- 06/01/98- 06/01/98- 12/01/98- 12/01/97- 06/01/98- 05/31/99 05/31/99 05/31/99 05/31/99 11/30/98 05/31/99 -------- -------- -------- -------- -------- -------- Income: Interest Income $ 6,819 $ 21,689 $ 120 $ 899 $ 1,915 $ 1,783 Dividend Income 1,651 8,356 875 4,590 8,628 12,210 Less: Foreign Taxes Withheld -- -- (81) -- -- (822) --------- --------- --------- --------- --------- --------- Total Investment Income 8,470 30,045 914 5,489 10,543 13,171 --------- --------- --------- --------- --------- --------- Expenses: Investment Advisory Fees 2,546 23,291 354 2,558 4,749 7,655 Less: Investment Advisory Fees Waived/Reimbursed (248) (1,878) (11) -- -- (308) Administrator Fees 208 1,575 21 493 950 476 Administrator Fees Waived -- -- -- -- -- -- Transfer Agent Fees -- Trust Shares 14 16 16 165 317 14 Transfer Agent Fees -- Investor Shares 11 46 -- 2 3 15 Transfer Agent Fees -- Flex Shares 42 153 -- -- -- 65 Transfer Agent Out of Pocket Fees 26 208 2 2 2 82 Printing Expenses 15 103 -- 23 39 75 Custody Fees 6 53 42 122 233 856 Professional Fees 13 111 -- 95 70 44 Trustee Fees 3 25 -- 5 10 10 Registration Fees 7 131 -- 19 42 43 Distribution Fees -- Trust Shares -- -- -- 1,170 1,116 -- Less: Distribution Fees Waived -- Trust Shares -- -- -- (872) (1,029) -- Distribution Fees -- Investor Shares 32 1,916 -- 26 50 52 Less: Distribution Fees Waived -- Investor Shares (7) (127) -- (16) (50) (8) Distribution Fees -- Flex Shares 441 1,276 -- 136 203 194 Less: Distribution Fees Waived -- Flex Shares (14) -- -- (21) (51) (51) Insurance and Other Fees 6 59 11 38 30 29 Amortization of Deferred Organization Costs -- -- (8) -- -- 5 --------- --------- --------- --------- --------- --------- Total Expenses 3,101 26,958 427 3,942 6,684 9,248 --------- --------- --------- --------- --------- --------- Net Investment Income 5,369 3,087 487 1,547 3,859 3,923 --------- --------- --------- --------- --------- --------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments -- -- -- -- -- -- Net Realized Gain (Loss) on Securities Sold 9,690 166,426 (6,188) 48,404 42,161 21,269 Net Realized Loss on Foreign Currency Transactions -- -- (45) -- -- (811) Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency -- -- (12) -- -- (10) Net Change in Unrealized Appreciation (Depreciation) on Investments 11,063 151,117 3,231 39,898 33,416 (78,440) --------- --------- --------- --------- -------- --------- Total Net Realized and Unrealized Gain (Loss) on Investments 20,753 317,543 (3,014) 88,302 75,577 (57,992) --------- --------- --------- --------- -------- --------- Net Increase (Decrease) in Net Assets from Operations $ 26,122 $ 320,630 $ (2,527) $ 89,849 $ 79,436 $ (54,069) --------- --------- --------- --------- -------- --------- --------- --------- --------- --------- -------- --------- INTERNATIONAL LIFE VISION EQUITY BALANCED INDEX FUND PORTFOLIO ------------ --------- ------------ 06/01/98- 12/01/98- 12/01/97- 05/31/99 05/31/99 11/30/98 -------- -------- -------- Income: Interest Income $ 52 $-- $ -- Dividend Income 1,132 991 2,295 Less: Foreign Taxes Withheld (85) -- -- --------- --------- --------- Total Investment Income 1,099 991 2,295 --------- --------- --------- Expenses: Investment Advisory Fees 563 114 233 Less: Investment Advisory Fees Waived/Reimbursed (70) (54) (120) Administrator Fees 49 20 40 Administrator Fees Waived -- (13) (40) Transfer Agent Fees -- Trust Shares 16 22 47 Transfer Agent Fees -- Investor Shares 10 -- -- Transfer Agent Fees -- Flex Shares 10 -- -- Transfer Agent Out of Pocket Fees 7 -- -- Printing Expenses 6 4 5 Custody Fees 66 13 28 Professional Fees 4 13 10 Trustee Fees -- 1 1 Registration Fees -- 1 19 Distribution Fees -- Trust Shares -- -- -- Less: Distribution Fees Waived -- Trust Shares -- -- -- Distribution Fees -- Investor Shares 22 -- -- Less: Distribution Fees Waived -- Investor Shares (5) -- -- Distribution Fees -- Flex Shares 12 -- -- Less: Distribution Fees Waived -- Flex Shares (4) -- -- Insurance and Other Fees 18 -- 10 Amortization of Deferred Organization Costs 3 3 -- --------- --------- --------- Total Expenses 707 124 233 --------- --------- --------- Net Investment Income 392 867 2,062 --------- --------- --------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments -- 2,204 6,921 Net Realized Gain (Loss) on Securities Sold 7,583 317 (1,004) Net Realized Loss on Foreign Currency Transactions (40) -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency (88) -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments (3,971) 2,338 (1,024) --------- --------- --------- Total Net Realized and Unrealized Gain (Loss) on Investments 3,484 4,859 4,893 --------- --------- --------- Net Increase (Decrease) in Net Assets from Operations $ 3,876 $ 5,726 $ 6,955 --------- --------- --------- --------- --------- ---------
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 70 & 71 STATEMENT OF OPERATIONS (000) - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS FOR THE YEAR ENDED MAY 31, AND NOVEMBER 30,
LIFE VISION LIFE VISION MID-CAP GROWTH AND INCOME MAXIMUM GROWTH EQUITY PORTFOLIO PORTFOLIO FUND ---------------------- ---------------------- ------------ 12/01/98- 12/01/97- 12/01/98- 12/01/97- 06/01/98- 05/31/99 11/30/98 05/31/99 11/30/98 05/31/99 --------- ---------- -------------------- ------------- Income: Interest Income $ -- $ -- $ -- $ -- $ 823 Dividend Income 166 410 49 76 1,454 Less: Foreign Taxes Withheld -- -- -- -- -- --------- --------- --------- --------- --------- Total Investment Income 166 410 49 76 2,277 --------- --------- --------- --------- --------- Expenses: Investment Advisory Fees 25 53 22 40 3,717 Less: Investment Advisory Fees Waived/Reimbursed (15) (32) (13) (26) (355) Administrator Fees 20 40 20 40 253 Administrator Fees Waived (18) (40) (19) (40) -- Transfer Agent Fees-- Trust Shares 5 11 5 8 14 Transfer Agent Fees-- Investor Shares -- -- -- -- 12 Transfer Agent Fees-- Flex Shares -- -- -- -- 35 Transfer Agent Out of Pocket Fees -- -- -- -- 39 Printing Expenses 1 1 1 1 39 Custody Fees 3 6 2 5 21 Professional Fees 4 2 3 -- 21 Trustee Fees -- -- -- 2 8 Registration Fees -- 5 -- -- 13 Distribution Fees-- Investor Shares -- -- -- 4 90 Less: Distribution Fees Waived-- Investor Shares -- -- -- -- (7) Distribution Fees-- Flex Shares -- -- -- -- 172 Less: Distribution Fees Waived-- Flex Shares -- -- -- -- (25) Insurance and Other Fees -- 7 -- 6 9 Amortization of Deferred Organization Costs 3 -- 3 -- -- --------- --------- --------- --------- --------- Total Expenses 28 53 24 40 4,056 --------- --------- --------- --------- --------- Net Investment Income (Loss) 138 357 25 36 (1,779) --------- --------- --------- --------- --------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments 490 2,121 499 1,739 -- Net Realized Gain (Loss) on Securities Sold (82) (45) (42) (463) 12,419 Net Change in Unrealized Appreciation (Depreciation) on Investments 922 (580) 1,329 (226) (10,771) --------- --------- --------- --------- --------- Total Net Realized and Unrealized Gain (Loss) on Investments 1,330 1,496 1,786 1,050 1,648 --------- --------- --------- --------- --------- Net Increase (Decrease) in Net Assets from Operations $ 1,468 $ 1,853 $ 1,811 $ 1,086 $ (131) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- SMALL CAP SMALL CAP SUNBELT TAX SENSITIVE VALUE EQUITY GROWTH STOCK EQUITY GROWTH STOCK INCOME STOCK FUND FUND FUND FUND FUND ---------- ---------- --------- ---------- --------- 06/01/98- 10/08/98*- 06/01/98- 12/11/98- 06/01/98- 05/31/99 05/31/99 05/31/99 05/31/99 05/31/99 ---------- ---------- --------- ---------- --------- Income: Interest Income $ 380 $ 119 $ 187 $ 363 $ 5,715 Dividend Income 7,631 77 1,415 877 48,342 Less: Foreign Taxes Withheld -- -- -- -- -- --------- --------- --------- --------- --------- Total Investment Income 8,011 196 1,602 1,240 54,057 --------- --------- --------- --------- --------- Expenses: Investment Advisory Fees 3,701 314 3,788 1,008 15,302 Less: Investment Advisory Fees Waived/Reimbursed (161) (79) (417) (124) -- Administrator Fees 251 21 258 67 1,498 Administrator Fees Waived -- -- -- -- -- Transfer Agent Fees-- Trust Shares 17 11 12 8 18 Transfer Agent Fees-- Investor Shares -- -- 12 -- 56 Transfer Agent Fees-- Flex Shares 79 9 23 14 179 Transfer Agent Out of Pocket Fees 38 15 61 10 235 Printing Expenses 13 10 61 7 131 Custody Fees 17 7 19 3 67 Professional Fees 23 8 37 8 143 Trustee Fees 4 -- 12 1 42 Registration Fees 17 16 14 62 50 Distribution Fees-- Investor Shares -- -- 97 -- 638 Less: Distribution Fees Waived-- Investor Shares -- -- (7) -- -- Distribution Fees-- Flex Shares 275 12 63 144 1,671 Less: Distribution Fees Waived-- Flex Shares (64) (8) (20) (9) (9) Insurance and Other Fees -- 1 -- 3 94 Amortization of Deferred Organization Costs 4 -- 10 -- -- --------- --------- --------- --------- --------- Total Expenses 4,214 337 4,023 1,202 20,115 --------- --------- --------- --------- --------- Net Investment Income (Loss) 3,797 (141) (2,421) 38 33,942 --------- --------- --------- --------- --------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments -- -- -- -- -- Net Realized Gain (Loss) on Securities Sold (48,614) 2,335 (16,055) 4,943 219,408 Net Change in Unrealized Appreciation (Depreciation) on Investments (39,458) 4,550 (79,885) 14,808 (71,294) --------- --------- --------- --------- --------- Total Net Realized and Unrealized Gain (Loss) on Investments (88,072) 6,885 (95,940) 19,751 148,114 --------- --------- --------- --------- --------- Net Increase (Decrease) in Net Assets from Operations $ (84,275) $ 6,744 $ (98,361) $ 19,789 $ 182,056 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
* Commenced operations Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 72 & 73 STATEMENT OF CHANGES IN NET ASSETS (000) STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30,
EQUITY BALANCED FUND CAPITAL APPRECIATION FUND ------------------------------------------------------------ 06/01/98- 06/01/97- 06/01/98- 06/01/97- 05/31/99 05/31/98 05/31/99 05/31/98 -------------- --------- --------- ---------- Operations: Net Investment Income (Loss) $ 5,369 $ 4,558 $ 3,087 $ 7,983 Capital Gain Received from Investments -- -- -- -- Net Realized Gain (Loss) on Investments 9,690 17,885 166,426 261,636 Net Realized Loss on Foreign Currency Transactions -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments 11,063 14,594 151,117 157,396 ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets from Operations 26,122 37,037 320,630 427,015 ----------- ----------- ----------- ----------- Distributions to Shareholders: Net Investment Income: Trust Shares (4,438) (4,197) (5,572) (7,798) Investor Shares (200) (154) (36) (28) Flex Shares (506) (204) -- -- Capital Gains: Trust Shares (13,593) (12,908) (240,608) (200,074) Investor Shares (771) (536) (41,767) (36,216) Flex Shares (2,745) (972) (19,498) (9,643) ----------- ----------- ----------- ----------- Total Distributions (22,253) (18,971) (307,481) (253,759) ----------- ----------- ----------- ----------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 146,574 53,532 673,116 466,511 Shares Issued in Connection with Crestar Merger -- -- 139,648 -- Reinvestment of Cash Distributions 17,886 16,935 234,593 197,282 Cost of Shares Repurchased (104,280) (49,610) (623,912) (358,832) ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Trust Share Transactions 60,180 20,857 423,445 304,961 ----------- ----------- ----------- ----------- Investor Shares: Proceeds from Shares Issued 7,551 2,150 32,561 29,116 Shares Issued in Connection with Crestar Merger -- -- 12,499 -- Reinvestment of Cash Distributions 966 680 41,544 35,990 Cost of Shares Repurchased (2,023) (1,166) (49,083) (37,738) ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Investor Share Transactions 6,494 1,664 37,521 27,368 ----------- ----------- ----------- ----------- Flex Shares: Proceeds from Shares Issued 54,572 21,409 68,098 67,377 Shares Issued in Connection with Crestar Merger -- 7,867 -- -- Reinvestment of Cash Distributions 3,206 1,164 19,257 9,528 Cost of Shares Repurchased (12,484) (2,194) (39,576) (12,730) ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Flex Share Transactions 45,294 20,379 55,646 64,175 ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Share Transactions 111,968 42,900 516,612 396,504 ----------- ----------- ----------- ----------- Total Increase (Decrease) in Net Assets 115,837 60,966 529,761 569,760 ----------- ----------- ----------- ----------- Net Assets: Beginning of Period 224,403 163,437 1,910,301 1,340,541 ----------- ----------- ----------- ----------- End of Period $ 340,240 $ 224,403 $ 2,440,062 $ 1,910,301 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 11,211 4,245 40,224 29,548 Shares Issued in Connection with Crestar Merger -- 8,202 -- -- Shares Issued in Lieu of Cash Distributions 1,393 1,402 14,645 13,725 Shares Redeemed (8,020) (3,922) (37,763) (22,177) ----------- ----------- ----------- ----------- Net Trust Share Transactions 4,584 1,725 25,308 21,096 ----------- ----------- ----------- ----------- Investor Shares: Shares Issued 570 167 1,967 1,812 Shares Issued in Connection with Crestar Merger -- -- 738 -- Shares Issued in Lieu of Cash Distributions 75 56 2,607 2,518 Shares Redeemed (154) (92) (2,983) (2,349) ----------- ----------- ----------- ----------- Net Investor Share Transactions 491 131 2,329 1,981 ----------- ----------- ----------- ----------- Flex Shares: Shares Issued 4,165 1,688 4,176 4,242 Shares Issued in Connection with Crestar Merger -- -- 474 -- Shares Issued in Lieu of Cash Distributions 252 97 1,228 674 Shares Redeemed (956) (173) (2,440) (795) ----------- ----------- ----------- ----------- Net Flex Share Transactions 3,461 1,612 3,438 4,121 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net Change in Capital Shares 8,536 3,468 31,075 27,198 ----------- ----------- ----------- -----------
EMERGING GROWTH AND MARKETS EQUITY FUND INCOME FUND ------------------------------------------------------------- 06/01/98- 06/01/97- 12/01/98- 12/01/97- 05/31/99 05/31/98 05/31/99 11/30/98 --------- --------- ---------- --------- Operations: Net Investment Income (Loss) $487 $468 $1,547 $3,859 Capital Gain Received from Investments -- -- -- -- Net Realized Gain (Loss) on Investments (6,188) (875) 48,404 42,161 Net Realized Loss on Foreign Currency Transactions (45) (61) -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency (12) (1) -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments 3,231 (7,440) 39,898 33,416 ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets from Operations (2,527) (7,909) 89,849 79,436 ----------- ----------- ----------- ----------- Distributions to Shareholders: Net Investment Income: Trust Shares (622) (314) (935) (3,768) Investor Shares -- -- (66) (212) Flex Shares -- -- (7) -- Capital Gains: Trust Shares -- (544) (38,443) (110,281) Investor Shares -- -- (2,259) (5,275) Flex Shares -- -- (1,704) (2,562) ----------- ----------- ----------- ----------- Total Distributions (622) (858) (43,414) (122,098) ----------- ----------- ----------- ----------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 14,574 23,819 77,854 92,390 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions 544 805 11,972 88,294 Cost of Shares Repurchased (19,772) (20,798) (74,302) (153,783) ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Trust Share Transactions (4,654) 3,826 15,524 26,901 ----------- ----------- ----------- ----------- Investor Shares: Proceeds from Shares Issued -- -- 2,099 11,222 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions -- -- 2,157 5,277 Cost of Shares Repurchased -- -- (4,209) (8,617) ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Investor Share Transactions -- -- 47 7,882 ----------- ----------- ----------- ----------- Flex Shares: Proceeds from Shares Issued -- -- 8,350 12,797 Shares Issued in Connection with Crestar Merger -- -- -- -- Reinvestment of Cash Distributions -- -- 1,675 2,504 Cost of Shares Repurchased -- -- (2,763) (2,494) ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Flex Share Transactions -- -- 7,262 12,807 ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Share Transactions (4,654) 3,826 22,833 47,590 ----------- ----------- ----------- ----------- Total Increase (Decrease) in Net Assets (7,803) (4,941) 69,268 4,928 ----------- ----------- ----------- ----------- Net Assets: Beginning of Period 34,554 39,495 637,132 632,204 ----------- ----------- ----------- ----------- End of Period $ 26,751 $ 34,554 $ 706,400 $ 637,132 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 1,963 2,344 5,206 10,513 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions 78 92 840 6,789 Shares Redeemed (2,644) (2,199) (4,849) (14,789) ----------- ----------- ----------- ----------- Net Trust Share Transactions (603) 237 1,197 2,513 ----------- ----------- ----------- ----------- Investor Shares: Shares Issued -- -- 137 764 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions -- -- 150 402 Shares Redeemed -- -- (272) (591) ----------- ----------- ----------- ----------- Net Investor Share Transactions -- -- 15 575 ----------- ----------- ----------- ----------- Flex Shares: Shares Issued -- -- 550 874 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions -- -- 117 192 Shares Redeemed -- -- (178) (171) ----------- ----------- ----------- ----------- Net Flex Share Transactions -- -- 489 895 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net Change in Capital Shares (603) 237 1,701 3,983 ----------- ----------- ----------- -----------
INTERNATIONAL INTERNATIONAL EQUITY EQUITY FUND INDEX FUND --------------------------------------------------------------------------- 12/01/96- 06/01/98- 06/01/97- 06/01/98- 06/01/97- 11/30/97 05/31/99 05/31/98 05/31/99 05/31/98 ----------- ----------- ----------- ----------- ----------- Operations: Net Investment Income (Loss) $5,276 $3,923 $3,320 $392 $498 Capital Gain Received from Investments -- -- -- -- -- Net Realized Gain (Loss) on Investments 118,138 21,269 61,173 7,583 3,349 Net Realized Loss on Foreign Currency Transactions -- (811) (1,410) (40) (46) Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency -- (10) (93) (88) 19 Net Change in Unrealized Appreciation (Depreciation) on Investments 7,024 (78,440) 50,891 (3,971) 9,866 ----------- ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets from Operations 130,438 (54,069) 113,881 3,876 13,686 ----------- ----------- ----------- ----------- ----------- Distributions to Shareholders: Net Investment Income: Trust Shares (5,360) (2,385) (1,649) (1,136) (489) Investor Shares (214) (6) (5) (83) (34) Flex Shares (24) -- -- (4) -- Capital Gains: Trust Shares (2,857) (33,895) (49,334) (8,431) (2,914) Investor Shares (96) (965) (1,347) (877) (343) Flex Shares (27) (1,189) (1,526) (172) (54) ----------- ----------- ----------- ----------- ----------- Total Distributions (8,578) (38,440) (53,861) (10,703) (3,834) ----------- ----------- ----------- ----------- ----------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 86,500 172,988 292,707 34,363 8,458 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Reinvestment of Cash Distributions 2,679 33,324 47,572 8,985 3,057 Cost of Shares Repurchased (167,444) (175,047) (258,050) (18,882) (17,470) ----------- ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Trust Share Transactions (78,265) 31,265 82,229 24,466 (5,955) ----------- ----------- ----------- ----------- ----------- Investor Shares: Proceeds from Shares Issued 9,602 2,728 7,487 1,083 2,516 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Reinvestment of Cash Distributions 303 965 1,351 959 375 Cost of Shares Repurchased (4,558) (4,566) (3,549) (3,668) (2,400) ----------- ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Investor Share Transactions 5,347 (873) 5,289 (1,626) 491 ----------- ----------- ----------- ----------- ----------- Flex Shares: Proceeds from Shares Issued 7,216 6,324 14,405 980 788 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Reinvestment of Cash Distributions 51 1,174 1,507 174 53 Cost of Shares Repurchased (782) (8,295) (4,407) (987) (427) ----------- ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Flex Share Transactions 6,485 (797) 11,505 167 414 ----------- ----------- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Share Transactions (66,433) 29,595 99,023 23,007 (5,050) ----------- ----------- ----------- ----------- ----------- Total Increase (Decrease) in Net Assets 55,427 (62,914) 159,043 16,180 4,802 ----------- ----------- ----------- ----------- ----------- Net Assets: Beginning of Period 576,777 667,417 508,374 64,810 60,008 ----------- ----------- ----------- ----------- ----------- End of Period $ 632,204 $ 604,503 $ 667,417 $ 80,990 $ 64,810 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 6,467 12,883 20,687 2,851 700 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 193 2,626 3,744 779 277 Shares Redeemed (12,286) (13,225) (18,402) (1,537) (1,473) ----------- ----------- ----------- ----------- ----------- Net Trust Share Transactions (5,626) 2,284 6,029 2,093 (496) ----------- ----------- ----------- ----------- ----------- Investor Shares: Shares Issued 636 203 526 88 210 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 21 77 107 84 34 Shares Redeemed (304) (350) (254) (294) (201) ----------- ----------- ----------- ----------- ----------- Net Investor Share Transactions 353 (70) 379 (122) 43 ----------- ----------- ----------- ----------- ----------- Flex Shares: Shares Issued 467 468 1,021 80 63 Shares Issued in Connection with Crestar Merger -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 4 95 121 15 5 Shares Redeemed (53) (648) (322) (82) (36) ----------- ----------- ----------- ----------- ----------- Net Flex Share Transactions 418 (85) 820 13 32 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net Change in Capital Shares (4,855) 2,129 7,228 1,984 (421) ----------- ----------- ----------- ----------- -----------
LIFE VISION BALANCED PORTFOLIO ------------------------------------------ 12/01/98- 12/01/97- 06/30/97* 05/31/99 11/30/98 11/30/97 ------------ ------------- ------------ Operations: Net Investment Income (Loss) $867 $2,062 $933 Capital Gain Received from Investments 2,204 6,921 -- Net Realized Gain (Loss) on Investments 317 (1,004) 235 Net Realized Loss on Foreign Currency Transactions -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments 2,338 (1,024) 3,730 ----------- ----------- ----------- Increase (Decrease) in Net Assets from Operations 5,726 6,955 4,958 ----------- ----------- ----------- Distributions to Shareholders: Net Investment Income: Trust Shares (735) (2,072) (941) Investor Shares -- -- -- Flex Shares -- -- -- Capital Gains: Trust Shares (6,686) (238) -- Investor Shares -- -- -- Flex Shares -- -- -- ----------- ----------- ----------- Total Distributions (7,421) (2,310) (941) ----------- ----------- ----------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 5,124 15,849 94,371 Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions 7,421 2,310 941 Cost of Shares Repurchased (15,873) (19,035) (9,887) ----------- ----------- ----------- Increase (Decrease) in Net Assets From Trust Share Transactions (3,328) (876) 85,425 ----------- ----------- ----------- Investor Shares: Proceeds from Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions -- -- -- Cost of Shares Repurchased -- -- -- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Investor Share Transactions -- -- -- ----------- ----------- ----------- Flex Shares: Proceeds from Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Reinvestment of Cash Distributions -- -- -- Cost of Shares Repurchased -- -- -- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Flex Share Transactions -- -- -- ----------- ----------- ----------- Increase (Decrease) in Net Assets From Share Transactions (3,328) (876) 85,425 ----------- ----------- ----------- Total Increase (Decrease) in Net Assets (5,023) 3,769 89,442 ----------- ----------- ----------- Net Assets: Beginning of Period 93,211 89,442 -- ----------- ----------- ----------- End of Period $ 88,188 $ 93,211 $ 89,442 ----------- ----------- ----------- ----------- ----------- ----------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued 476 1,449 9,446 Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions 712 214 90 Shares Redeemed (1,486) (1,743) (990) ----------- ----------- ----------- Net Trust Share Transactions (298) (80) 8,546 ----------- ----------- ----------- Investor Shares: Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions -- -- -- Shares Redeemed -- -- -- ----------- ----------- --------- Net Investor Share Transactions -- -- -- ----------- ----------- ----------- Flex Shares: Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- Shares Issued in Lieu of Cash Distributions -- -- -- Shares Redeemed -- -- -- ----------- ----------- ----------- Net Flex Share Transactions -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Net Change in Capital Shares (298) (80) 8,546 ----------- ----------- -----------
*Commenced operations. Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 74 & 75 STATEMENT OF CHANGES IN NET ASSETS (000) - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30,
LIFE VISION LIFE VISION MAXIMUM GROWTH GROWTH AND INCOME PORTFOLIO PORTFOLIO ..................................................................................................................... 12/01/98- 12/01/97- 06/30/97* 12/01/98- 12/01/97- 06/30/97* 05/31/99 11/30/98 11/30/97 05/31/99 11/30/98 11/30/97 ------------ ----------- ---------- ----------- ---------- ----------- Operations: Net Investment Income (Loss) ....................... $ 138 $ 357 $ 190 $ 25 $ 36 $ 39 Capital Gain Received from Investments ............. 490 2,121 -- 499 1,739 -- Net Realized Gain (Loss) on Investments ............ (82) (45) 20 (42) (463) (1) Net Change in Unrealized Appreciation (Depreciation) on Investments ................................... 922 (580) 1,003 1,329 (226) 740 -------- -------- -------- -------- -------- -------- Increase (Decrease) in Net Assets from Operations .. 1,468 1,853 1,213 1,811 1,086 778 -------- -------- -------- -------- -------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... (114) (360) (180) (24) (35) (38) Investor Shares .................................. -- -- -- -- -- -- Flex Shares ...................................... -- -- -- -- -- -- Capital Gains: Trust Shares ..................................... (2,475) (22) -- (1,670) -- -- Investor Shares .................................. -- -- -- -- -- -- Flex Shares ...................................... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total Distributions ................................ (2,589) (382) (180) (1,694) (35) (38) -------- -------- -------- -------- -------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 2,679 2,591 21,846 2,114 5,852 13,614 Shares Issued in Connection with Common Trust Fund Conversion ..................................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- Reinvestment of Cash Distributions ............... 2,589 382 180 1,694 36 38 Cost of Shares Repurchased ....................... (1,239) (7,923) (538) (1,456) (4,421) (680) -------- -------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions ..................................... 4,029 (4,950) 21,488 2,352 1,467 12,972 -------- -------- -------- -------- -------- -------- Investor Shares: Proceeds from Shares Issued ...................... -- -- -- -- -- -- Reinvestment of Cash Distributions ............... -- -- -- -- -- Cost of Shares Repurchased ....................... -- -- -- -- -- -------- -------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions ............................... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Flex Shares: Proceeds from Shares Issued ...................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- Reinvestment of Cash Distributions ............... -- -- -- -- -- -- Cost of Shares Repurchased ....................... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Flex Share Transactions .......................... -- -- -- -- -- -- -------- Increase (Decrease) in Net Assets From Share Transactions ................................... 4,029 (4,950) 21,488 2,352 1,467 12,972 -------- -------- -------- -------- -------- -------- Total Increase (Decrease) in Net Assets ........ 2,908 (3,479) 22,521 2,469 2,518 13,712 -------- -------- -------- -------- -------- -------- Net Assets: Beginning of Period ................................ 19,042 22,521 -- 16,230 13,712 -- -------- -------- -------- -------- -------- -------- End of Period ...................................... $ 21,950 $ 19,042 $ 22,521 $ 18,699 $ 16,230 $ 13,712 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued .................................... 259 239 2,177 192 599 1,350 Shares Issued in Connection with Common Trust Fund Conversion ..................................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ...... 264 35 17 161 3 4 Shares Redeemed .................................. (120) (695) (52) (133) (456) (66) -------- -------- -------- -------- -------- -------- Net Trust Share Transactions ....................... 403 (421) 2,142 220 146 1,288 -------- -------- -------- -------- -------- -------- Investor Shares: Shares Issued .................................... -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ...... -- -- -- -- -- -- Shares Redeemed .................................. -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net Investor Share Transactions .................... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Flex Shares: Shares Issued .................................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ...... -- -- -- -- -- -- Shares Redeemed .................................. -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net Flex Share Transactions ........................ -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net Change in Capital Shares ....................... 403 (421) 2,142 220 146 1,288 -------- -------- -------- -------- -------- --------
MID-CAP EQUITY SMALL CAP GROWTH FUND EQUITY FUND STOCK FUND - ------------------------------------------------------------------------------------------------------------------------ 06/01/98- 06/01/97- 06/01/98- 06/01/97- 10/08/98*- 05/31/99 05/31/98 05/31/99 05/31/98 05/31/99 ---------- ---------- ----------- --------- ---------- Operations: Net Investment Income (Loss) ....................... $ (1,779) $ (1,352) $ 3,797 $ 3,127 $ (141) Capital Gain Received from Investments ............. -- -- -- -- -- Net Realized Gain (Loss) on Investments ............ 12,419 54,941 (48,614) 32,653 2,335 Net Change in Unrealized Appreciation (Depreciation) on Investments ................................... (10,771) 14,034 (39,458) 16,045 4,550 ------- ------ ------- ------ ----- Increase (Decrease) in Net Assets from Operations .. (131) 67,623 (84,275) 51,825 6,744 ------- ------ ------- ------ ----- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... -- -- (3,830) (2,704) (4) Investor Shares .................................. (3) -- -- -- -- Flex Shares ...................................... -- -- (46) (70) -- Capital Gains: Trust Shares ..................................... (26,541) (44,446) (17,401) (14,480) (24) Investor Shares .................................. (1,970) (3,025) -- -- -- Flex Shares ...................................... (1,677) (1,899) (1,638) (897) (1) ------- ------ ------- ------ ----- Total Distributions ................................ (30,191) (49,370) (22,915) (18,151) (29) ------- ------ ------- ------ ----- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 197,227 146,386 159,166 272,776 69,418 Shares Issued in Connection with Common Trust Fund Conversion ..................................... -- -- -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- Reinvestment of Cash Distributions ............... 25,335 41,347 19,237 15,603 28 Cost of Shares Repurchased ....................... (280,036) (170,356) (61,475) (12,528) ------- ------ ------- ------ ----- Increase (Decrease) in Net Assets From Trust Share Transactions ..................................... (57,474) 33,761 8,047 226,904 145,858 ------- ------ ------- ------ ----- Investor Shares: Proceeds from Shares Issued ...................... 3,015 6,110 -- -- -- Reinvestment of Cash Distributions ............... 1,967 3,019 -- -- -- Cost of Shares Repurchased ....................... (8,523) (5,606) -- -- -- ------- ------ ------- ------ ----- Increase (Decrease) in Net Assets From Investor Share Transactions ............................... (3,541) 3,523 -- -- -- ------- ------ ------- ------ ----- Flex Shares: Proceeds from Shares Issued ...................... 4,866 10,574 2,579 42,359 3,553 Shares Issued in Connection with Crestar Merger .. -- -- -- -- 2,699 Reinvestment of Cash Distributions ............... 1,671 1,885 1,669 958 1 Cost of Shares Repurchased ....................... (7,908) (3,934) (15,110) (3,490) (378) ------- ------ ------- ------ ----- Increase (Decrease) in Net Assets From Flex Share Transactions .......................... (1,371) 8,525 (10,862) 39,827 5,875 --------- Increase (Decrease) in Net Assets From Share Transactions ................................... (62,386) 45,809 (2,815) 266,731 151,733 ------- ------ ------- ------ ----- Total Increase (Decrease) in Net Assets ........ (92,708) 64,062 (110,005) 300,405 158,448 ------- ------ ------- ------ ----- Net Assets: Beginning of Period ................................ 381,797 317,735 431,454 131,049 -- ------- ------ ------- ------ ----- End of Period ...................................... $ 289,089 $ 381,797 $ 321,449 $ 431,454 $ 158,448 ------- ------ ------- ------ ----- ------- ------ ------- ------ ----- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued .................................... 16,168 10,517 16,078 22,065 5,174 Shares Issued in Connection with Common Trust Fund Conversion ..................................... -- -- -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- 6,174 Shares Issued in Lieu of Cash Distributions ...... 2,230 3,378 2,040 1,294 2 Shares Redeemed .................................. (22,862) (11,149) (17,349) (4,840) (886) ------- ------ ------- ------ ----- Net Trust Share Transactions ....................... (4,464) 2,746 769 18,519 10,464 ------- ------ ------- ------ ----- Investor Shares: Shares Issued .................................... 247 445 -- -- -- Shares Issued in Lieu of Cash Distributions ...... 175 248 -- -- -- Shares Redeemed .................................. (707) (407) -- -- -- ------- ------ ------- ------ ----- Net Investor Share Transactions .................... (285) 286 -- -- -- ------- ------ ------- ------ ----- Flex Shares: Shares Issued .................................... 403 777 245 3,366 266 Shares Issued in Connection with Crestar Merger .. -- -- -- -- 188 Shares Issued in Lieu of Cash Distributions ...... 152 158 179 80 -- Shares Redeemed .................................. (676) (292) (1,580) (273) (28) ------- ------ ------- ------ ----- Net Flex Share Transactions ........................ (121) 643 (1,156) 3,173 426 ------- ------ ------- ------ ----- ------- ------ ------- ------ ----- Net Change in Capital Shares ....................... (4,870) 3,675 (387) 21,692 10,890 ------- ------ ------- ------ -----
SUNBELT GROWTH VALUE INCOME EQUITY FUND STOCK FUND STOCK FUND ----------------------------------------------------- 06/01/98- 06/01/97 05/31/99 05/31/98 ----------------------------------------------------- Operations: Net Investment Income (Loss) ....................... (2,421) $ (4,364) $ 38 $ 33,942 $ 34,555 Capital Gain Received from Investments ............. -- -- -- -- -- Net Realized Gain (Loss) on Investments ............ (16,055) 49,778 4,943 219,408 319,982 Net Change in Unrealized Appreciation (Depreciation) on Investments ................................... (79,885) 46,313 14,808 (71,294) 44,518 ------- ------ ------ ------- ------- Increase (Decrease) in Net Assets from Operations .. (98,361) 91,727 19,789 182,056 399,055 ------- ------ ------ ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... -- -- (87) (30,625) (30,991) Investor Shares .................................. -- -- -- (3,178) (2,838) Flex Shares ...................................... -- -- -- (1,535) (1,104) Capital Gains: Trust Shares ..................................... (22,775) (32,274) -- (229,623) (262,191) Investor Shares .................................. (1,729) (2,333) -- (29,331) (29,671) Flex Shares ...................................... (508) (516) -- (25,364) (19,217) ------- ------ ------ ------- ------- Total Distributions ................................ (25,012) (35,123) (87) (319,656) (346,012) ------- ------ ------ ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 228,638 207,154 121,119 354,278 381,039 Shares Issued in Connection with Common Trust Fund Conversion ..................................... -- -- 99,222 -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- Reinvestment of Cash Distributions ............... 21,508 30,202 87 241,723 269,446 Cost of Shares Repurchased ....................... (372,294) (238,878) (15,922) (621,009) (459,701) ------- ------ ------ ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ..................................... (122,148) (1,522) 204,506 (25,008) 190,784 ------- ------ ------ ------- ------- Investor Shares: Proceeds from Shares Issued ...................... 2,830 5,150 -- 17,566 35,483 Reinvestment of Cash Distributions ............... 1,727 2,323 -- 32,240 32,233 Cost of Shares Repurchased ....................... (10,109) (8,619) -- (51,945) (28,503) ------- ------ ------ ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions ............................... (5,552) (1,146) -- (2,139) 39,213 ------- ------ ------ ------- ------- Flex Shares: Proceeds from Shares Issued ...................... 1,881 3,848 77,327 38,150 106,762 Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- Reinvestment of Cash Distributions ............... 504 515 -- 26,492 20,054 Cost of Shares Repurchased ....................... (3,604) (2,603) (2,117) (65,171) ------- ------ ------ ------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions .......................... (1,219) 1,760 75,210 (529) 105,972 ------- ------ ------ ------- ------- Increase (Decrease) in Net Assets From Share Transactions ................................... (128,919) (908) 279,716 (27,676) 335,969 ------- ------ ------ ------- ------- Total Increase (Decrease) in Net Assets ........ (252,292) 55,696 299,418 (165,276) 389,012 ------- ------ ------ ------- ------- Net Assets: Beginning of Period ................................ 470,851 415,155 -- 2,116,539 1,727,527 ------- ------ ------ ------- ------- End of Period ...................................... $ 218,559 $ 470,851 $ 299,418 $ 1,951,263 $ 2,116,539 ------- ------ ------ ------- ------- ------- ------ ------ ------- ------- (1)Shares Issued and Redeemed: Trust Shares: Shares Issued .................................... 19,064 13,707 4,133 28,099 26,871 Shares Issued in Connection with Common Trust Fund Conversion ..................................... -- -- 3,875 -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ...... 1,997 2,213 3 20,747 21,156 Shares Redeemed .................................. (31,845) (16,065) (549) (49,236) (32,467) ------- ------- ---- ------- ------- Net Trust Share Transactions ....................... (10,784) (145) 7,462 (390) 15,560 ------- ------- ---- ------- ------- Investor Shares: Shares Issued .................................... 229 353 -- 1,391 2,518 Shares Issued in Lieu of Cash Distributions ...... 165 174 -- 2,775 2,538 Shares Redeemed .................................. (909) (590) -- (4,182) (2,003) ------- ------- ---- ------- ------- Net Investor Share Transactions .................... (515) (63) -- (16) 3,053 ------- ------- ---- ------- ------- Flex Shares: Shares Issued .................................... 148 260 2,612 3,029 7,617 Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ...... 49 39 -- 2,310 1,597 Shares Redeemed .................................. (333) (184) (70) (5,298) (1,488) ------- ------- ---- ------- ------- Net Flex Share Transactions ........................ (136) 115 2,542 41 7,726 ------- ------- ---- ------- ------- ------- ------- ---- ------- ------- Net Change in Capital Shares ....................... (11,435) (93) 10,005 (365) 26,339 ------- ------- ---- ------- -------
*Commenced Operations. Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 76 & 77 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------
STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED DISTRIBUTIONS VALUE NET AND UNREALIZED FROM NET DISTRIBUTIONS NET ASSET NET ASSET RATIO OF BEGINNING INVESTMENT GAINs (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL END OF OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN+ PERIOD (000) ----------- ------------- -------------- ------------ ------------- --------- --------- ------------ BALANCED FUND Trust Shares 1999 $13.09 $ 0.28 $ 1.09 $(0.28) $ (0.92) $13.26 10.98% $ 251,752 1998 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 188,465 1997 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 151,358 1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26 111,638 1995 9.76 0.33 0.49 (0.32) -- 10.26 8.72 89,051 Investor Shares 1999 $13.14 $ 0.24 $ 1.10 $(0.24) $ (0.92) $13.32 10.70% $ 14,962 1998 11.99 0.28 2.19 (0.29) (1.03) 13.14 21.72 8,313 1997 11.60 0.29 1.48 (0.29) (1.09) 11.99 16.27 6,012 1996 10.30 0.30 1.41 (0.30) (0.11) 11.60 16.88 4,896 1995 9.79 0.28 0.51 (0.28) -- 10.30 8.29 3,765 Flex Shares 1999 $13.02 $ 0.16 $ 1.07 $(0.16) $ (0.92) $13.17 9.84% $ 73,526 1998 11.90 0.20 2.16 (0.21) (1.03) 13.02 20.85 27,625 1997 11.53 0.22 1.45 (0.21) (1.09) 11.90 15.40 6,067 1996(1) 10.36 0.24 1.29 (0.25) (0.11) 11.53 15.58 3,131 CAPITAL APPRECIATION FUND Trust Shares 1999 $16.48 $ 0.05 $ 2.70 $(0.06) $ (2.55) $16.62 17.83% $1,966,842 1998 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1,532,587 1997 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1,085,128 1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 981,498 1995 11.99 0.16 0.57 (0.14) (0.40) 12.18 6.63 984,205 Investor Shares 1999 $16.43 $(0.05) $ 2.70 $ -- $ (2.55) $16.53 17.20% $ 311,120 1998 15.06 (0.01) 3.95 -- (2.57) 16.43 28.71 271,044 1997 14.89 0.03 3.10 (0.02) (2.94) 15.06 23.74 218,660 1996 12.17 0.03 3.32 (0.04) (0.59) 14.89 28.18 191,078 1995 11.98 0.09 0.57 (0.07) (0.40) 12.17 5.93 160,875 Flex Shares 1999 $16.22 $(0.09) $ 2.60 $ -- $ (2.55) $16.18 16.50% $ 162,100 1998 14.96 (0.04) 3.87 -- (2.57) 16.22 28.12 106,670 1997 14.84 (0.01) 3.07 -- (2.94) 14.96 23.24 36,753 1996(2) 12.20 0.02 3.26 (0.05) (0.59) 14.84 27.48 10,969 EMERGING MARKETS EQUITY FUND Trust Shares 1999 $ 8.87 $ 0.14 $(0.72) $(0.17) $ -- $ 8.12 (6.22%) $ 26,751 1998 10.79 0.16 (1.86) (0.08) (0.14) 8.87 (15.74) 34,554 1997(3) 10.00 0.04 0.75 -- -- 10.79 7.90 39,495 GROWTH AND INCOME FUND (A) Trust Shares 1999(4) $15.10 $ 0.04 $ 1.97 $(0.02) $ (1.00) $16.09 14.24% $ 634,279 For the years ended November 30: 1998 16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64% 577,042 1997 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 590,824 1996 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68 553,648 1995 10.73 0.24 2.62 (0.26) (1.73) 11.60 28.76 220,386 1994 11.38 0.20 (0.24) (0.19) (0.42) 10.73 (0.49) 166,713 Investor Shares 1999(4) $15.21 $ 0.04 $ 1.99 $(0.03) $ (1.00) $16.21 14.31% $ 36,958 For the years ended November 30: 1998 16.64 0.10 1.66 (0.10) (3.09) 15.21 13.69% 34,434 1997 13.47 0.13 3.25 (0.14) (0.07) 16.64 25.42 28,112 1996 11.66 0.17 2.39 (0.16) (0.59) 11.66 28.71 12,633 1994 11.42 0.18 (0.22) (0.18) (0.42) 10.78 (0.45) 8,115 Flex Shares 1999(4) $15.14 $(0.01) $ 1.97 $ -- $ (1.00) $16.10 13.85% $ 35,163 For the years ended November 30: 1998 16.59 (0.01) 1.64 -- (3.08) 15.14 12.78% 25,656 1997 13.44 0.04 3.23 (0.05) (0.07) 16.59 24.63 13,269 1996 11.64 0.09 2.38 (0.08) (0.59) 13.44 21.81 5,131 1995 (5) 11.11 0.12 1.62 (0.14) (1.07) 11.64 15.78 2,086
RATIO OF EXPENSES TO INCOME NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (LOSS) TO EXPENSES TO INCOME (LOSS) TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------ ------------------ ------------------- ------------------- --------- Trust Shares 1999 0.97% 2.19% 1.06% 2.10% 179% 1998 0.96 2.51 1.08 2.39 154 1997 0.95 2.89 1.08 2.76 197 1996 0.95 3.00 1.09 2.86 155 1995 0.95 3.44 1.11 3.28 157 Investor Shares 1999 1.27% 1.89% 1.43% 1.73% 179% 1998 1.26 2.21 1.59 1.88 154 1997 1.25 2.58 1.64 2.19 197 1996 1.25 2.70 1.89 2.06 155 1995 1.25 3.17 1.80 2.62 157 Flex Shares 1999 2.03% 1.13% 2.15% 1.01% 179% 1998 2.02 1.41 2.23 1.20 154 1997 2.01 1.84 2.45 1.40 197 1996(1) 2.00 1.85 2.97 0.88 155 CAPITAL APPRECIATION FUND Trust Shares 1999 1.17% 0.29% 1.26% 0.20% 147% 1998 1.16 0.61 1.27 0.50 194 1997 1.15 0.83 1.25 0.73 141 1996 1.15 0.90 1.27 0.78 156 1995 1.15 1.38 1.28 1.25 128 Investor Shares 1999 1.82% (0.30%) 1.96% (0.44%) 147% 1998 1.81 (0.03) 2.01 (0.23) 194 1997 1.80 0.19 2.02 (0.03) 141 1996 1.80 0.24 2.08 (0.04) 156 1995 1.80 0.73 2.10 0.43 128 Flex Shares 1999 2.29% (0.86%) 2.38% (0.95%) 147% 1998 2.26 (0.46) 2.37 (0.57) 194 1997 2.27 (0.29) 2.43 (0.45) 141 1996(2) 2.27 (0.29) 2.68 (0.70) 156 EMERGING MARKETS EQUITY FUND Trust Shares 1999 1.57% 1.79% 1.61% 1.75% 67% 1998 1.56 1.14 1.78 0.92 74 1997(3) 1.55 1.37 2.04 0.88 24 GROWTH AND INCOME FUND (A) Trust Shares 1999(4) 1.14% 0.49% 1.43% 0.20% 31% For the years ended November 30: 1998 1.03% 0.63% 1.21 0.45% 71% 1997 1.02 0.92 1.17 0.77 100 1996 1.02 1.38 1.17 1.23 82 1995 1.02 2.16 1.17 2.01 175 1994 1.01 1.82 1.01 1.82 116 Investor Shares 1999(4) 1.08% 0.54% 1.17% 0.45% 31% For the years ended November 30: 1998 1.03% 0.63% 1.18 0.48 71% 1997 1.03 0.89 1.18 0.74 100 1996 1.03 2.14 1.18 1.99 175 1994 1.02 1.81 1.04 1.79 116 Flex Shares 1999(4) 1.83% (0.21%) 1.97% (0.35%) 31% For the years ended November 30: 1998 1.78 (0.13%) 2.03 (0.38%) 71 1997 1.73 0.15 2.09 (0.20) 100 1996 1.68 0.71 2.03 0.36 82 1995 (5) 1.68 1.13 2.03 0.78 175
+ Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operationson June 14, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (3)Commenced operations on January 31, 1997. All ratios for the period have been annualized. (4) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (5) Commenced operations on April 19, 1995. All ratios for the period ended November 30, 1995 have been annualized. (A) On May 24, 1999, the Crestar Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The Crestar Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 78 & 79 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------
STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS -------------- ---------------- ------------------ -------------- ---------------- INTERNATIONAL EQUITY FUND Trust Shares 1999 $15.00 $ -- $(1.14) $(0.05) $(0.84) 1998 13.63 0.04 2.69 (0.04) (1.32) 1997 11.40 0.03 2.57 (0.02) (0.35) 1996(1) 10.00 0.05 1.35 -- -- Investor Shares 1999 $14.92 $ 0.04 $(1.23) $ -- $(0.84) 1998 13.58 0.02 2.64 -- (1.32) 1997 11.38 (0.01) 2.56 -- (0.35) 1996(2) 10.44 0.04 0.90 -- -- Flex Shares 1999 $14.68 $(0.29) $(0.97) $ -- $(0.84) 1998 13.47 0.07 2.46 -- (1.32) 1997 11.37 (0.04) 2.49 -- (0.35) 1996(2) 10.44 0.02 0.91 -- -- INTERNATIONAL EQUITY INDEX FUND Trust Shares 1999 $13.31 $ 0.09 $ 0.85 $(0.24) $(2.19) 1998 11.34 0.11 2.65 (0.11) (0.68) 1997 10.96 0.10 0.69 (0.11) (0.30) 1996 10.24 0.10 0.84 (0.13) (0.09) 1995(3) 10.00 0.08 0.19 (0.02) (0.01) Investor Shares 1999 $13.20 $(0.11) $ 0.98 $(0.18) $(2.19) 1998 11.26 0.16 2.53 (0.07) (0.68) 1997 10.88 0.03 0.72 (0.07) (0.30) 1996 10.20 0.05 0.85 (0.13) (0.09) 1995(3) 10.00 0.05 0.17 (0.01) (0.01) Flex Shares 1999 $13.17 $(0.15) $ 0.94 $(0.04) $(2.19) 1998 11.24 0.17 2.44 -- (0.68) 1997 10.87 (0.05) 0.72 -- (0.30) 1996(4) 10.24 -- 0.82 (0.10) (0.09) LIFE VISION BALANCED PORTFOLIO (A) Trust Shares 1999(5) $11.01 $ 0.11 $ 0.56 $(0.09) $(0.79) For the years ended November 30: 1998 10.46 0.24 0.58 (0.24) (0.03) 1997(6) 10.00 0.12 0.45 (0.11) -- LIFE VISION GROWTH AND INCOME PORTFOLIO (A) Trust Shares 1999(5) $11.06 $ 0.08 $0.69 $(0.06) $ (1.44) For the years ended November 30: 1998 10.51 0.18 0.56 (0.18) (0.01) 1997(6) 10.00 0.09 0.51 (0.09) -- LIFE VISION MAXIMUM GROWTH PORTFOLIO (A ) Trust Shares 1999(5) $11.32 $ 0.02 $1.13 $(0.01) $ (1.15) For the years ended November 30: 1998 10.65 0.03 0.67 (0.03) -- 1997(6) 10.00 0.03 0.65 (0.03) -- MID-CAP EQUITY FUND Trust Shares 1999 $13.79 $ 0.01 $ 0.07 $ -- $ (1.19) 1998 13.21 -- 2.54 -- (1.96) 1997 12.76 0.03 1.69 (0.05) (1.22) 1996 11.00 0.08 2.63 (0.08) (0.87) 1995 9.85 0.08 1.15 (0.08) -- Investor Shares 1999 $13.67 $(0.06) $ 0.08 $ -- $ (1.19) 1998 13.17 (0.03) 2.49 -- (1.96) 1997 12.74 (0.03) 1.69 (0.01) (1.22) 1996 10.99 0.03 2.62 (0.03) (0.87) 1995 9.84 0.03 1.15 (0.03) -- Flex Shares 1999 $13.42 $(0.14) $ 0.08 $ -- $ (1.19) 1998 13.04 (0.04) 2.38 -- (1.96) 1997 12.69 (0.07) 1.64 -- (1.22) 1996(7) 11.13 -- 2.45 (0.02) (0.87)
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO OF PERIOD RETURN+ PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS -------------- --------- -------------- ------------------ ------------------ INTERNATIONAL EQUITY FUND Trust Shares 1999 $12.97 (7.43%) $573,255 1.47% 0.68% 1998 15.00 21.87 628,870 1.47 0.61 1997 13.63 23.29 489,325 1.46 0.51 1996(1) 11.40 14.00 213,306 1.46 1.36 Investor Shares 1999 $12.89 (7.82%) $ 14,145 1.83% 0.30% 1998 14.92 21.39 17,383 1.82 0.24 1997 13.58 22.85 10,674 1.81 0.18 1996(2) 11.38 9.00 3,448 1.81 1.73 Flex Shares 1999 $12.58 (8.48%) $ 17,103 2.53% (0.40%) 1998 14.68 20.54 21,164 2.52 (0.46) 1997 13.47 21.98 8,375 2.51 (0.27) 1996(2) 11.37 8.91 953 2.51 1.08 INTERNATIONAL EQUITY INDEX FUND Trust Shares 1999 $11.82 7.87% $ 74,616 1.07% 0.69% 1998 13.31 25.82 56,200 1.06 0.88 1997 11.34 7.48 53,516 1.05 0.71 1996 10.96 9.29 90,980 1.05 0.84 1995(3) 10.24 2.69 89,446 1.05 1.13 Investor Shares 1999 $11.70 7.33% $ 4,909 1.47% 0.25% 1998 13.20 25.25 7,141 1.46 0.50 1997 11.26 7.12 5,592 1.45 0.28 1996 10.88 8.90 5,597 1.45 0.48 1995(3) 10.20 2.18 3,960 1.45 0.67 Flex Shares 1999 $11.73 6.68% $ 1,465 2.12% (0.30%) 1998 13.17 24.50 1,469 2.11 (0.03) 1997 11.24 6.41 900 2.10 (0.39) 1996(4) 10.87 8.32 917 2.10 (0.24) LIFE VISION BALANCED PORTFOLIO (A) Trust Shares 1999(5) $10.80 6.35% $ 88,188 0.27% 1.90% For the years ended November 30: 1998 11.01 7.90 93,211 0.25 2.21 1997(6) 10.46 5.70 89,442 0.25 2.66 LIFE VISION GROWTH AND INCOME PORTFOLIO (A) Trust Shares 1999(5) $10.33 7.75% $ 21,950 0.27% 1.38% For the years ended November 30: 1998 11.06 7.12 19,042 0.25 1.68 1997(6) 10.51 5.97 22,521 0.25 2.11 LIFE VISION MAXIMUM GROWTH PORTFOLIO (A ) Trust Shares 1999(5) $11.31 10.99% $ 18,699 0.27% 0.28% For the years ended November 30: 1998 11.32 6.53 16,230 0.25 0.23 1997(6) 10.65 6.82 13,712 0.25 0.72 MID-CAP EQUITY FUND Trust Shares 1999 $12.68 1.61% $254,055 1.17% (0.47%) 1998 13.79 21.14 337,825 1.16 (0.29) 1997 13.21 14.23 287,370 1.15 0.23 1996 12.76 25.54 253,905 1.15 0.70 1995 11.00 12.56 125,562 1.15 0.88 Investor Shares 1999 $12.50 1.17% $ 19,230 1.62% (0.90%) 1998 13.67 20.56 24,930 1.61 (0.75) 1997 13.17 13.76 20,245 1.60 (0.21) 1996 12.74 24.93 17,971 1.60 0.25 1995 10.99 11.96 7,345 1.60 0.43 Flex Shares 1999 $12.17 0.56% $ 15,804 2.22% (1.52%) 1998 13.42 19.80 19,042 2.21 (1.37) 1997 13.04 13.06 10,120 2.20 (0.85) 1996(7) 12.69 23.00 5,029 2.20 (0.37)
RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO RATIO OF AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE -------------------- -------------------- --------- INTERNATIONAL EQUITY FUND Trust Shares 1999 1.51% 0.64% 161% 1998 1.48 0.60 108 1997 1.51 0.46 139 1996(1) 1.65 1.17 113 Investor Shares 1999 1.93% 0.20% 161% 1998 1.91 0.15 108 1997 2.05 (0.06) 139 1996(2) 3.14 0.40 113 Flex Shares 1999 2.82% (0.69%) 161% 1998 2.58 (0.52) 108 1997 3.03 (0.79) 139 1996(2) 5.86 (2.27) 113 INTERNATIONAL EQUITY INDEX FUND Trust Shares 1999 1.17% 0.59% 32% 1998 1.18 0.76 1 1997 1.15 0.61 2 1996 1.19 0.70 30 1995(3) 1.31 0.87 10 Investor Shares 1999 1.71% 0.01% 32% 1998 1.84 0.12 1 1997 1.88 (0.15) 2 1996 2.06 (0.13) 30 1995(3) 2.44 (0.32) 10 Flex Shares 1999 2.92% (1.10%) 32% 1998 3.52 (1.44) 1 1997 3.69 (1.98) 2 1996(4) 4.14 (2.28) 30 LIFE VISION BALANCED PORTFOLIO (A) Trust Shares 1999(5) 0.42% 1.75% 48% For the years ended November 30: 1998 0.42 2.04 52 1997(6) 0.42 2.49 43 LIFE VISION GROWTH AND INCOME PORTFOLIO (A) Trust Shares 1999(5) 0.60% 1.05% 40% For the years ended November 30: 1998 0.59 1.34 57 1997(6) 0.59 1.77 25 LIFE VISION MAXIMUM GROWTH PORTFOLIO (A ) Trust Shares 1999(5) 0.63% (0.08%) 33% For the years ended November 30: 1998 0.66 (0.18) 75 1997(6) 0.73 0.24 34 MID-CAP EQUITY FUND Trust Shares 1999 1.28% (0.58%) 76% 1998 1.27 (0.40) 129 1997 1.26 0.12 152 1996 1.29 0.56 116 1995 1.32 0.71 66 Investor Shares 1999 1.76% (1.04%) 76% 1998 1.84 (0.98) 129 1997 1.85 (0.46) 152 1996 1.96 (0.11) 116 1995 2.27 (0.24) 66 Flex Shares 1999 2.48% (1.78%) 76% 1998 2.47 (1.63) 129 1997 2.58 (1.23) 152 1996(7) 3.04 (1.21) 116
Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on December 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on January 2, 1996. All ratios for the period have bee annualized. (3) Commenced operations on June 6, 1994. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Life Vision Balanced, Crestar Life Vision Growth and Income, and Crestar Life Vision Maximum Growth Portfolios exchanged all of their assets and certain liabilities for shares of the Life Vision Balanced, Life Vi sion Growth and Income, and Life Vision Maximum Growth Portfolios, respectively. The Crestar Life Vision Balanced, Crestar Life Vision Growth and Income, and Crestar Life Vision Maximum Growth Portfolios are the accounting survivors in these transactions, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. (4) Commenced operations on June 8, 1995. All ratios for the period have been annualized. (5) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (6) Commenced operations on June 30, 1997. All ratios for the period have been annualized. (7) Commenced operations on June 5, 1995. All ratios for the period have been annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 80 & 81 FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD --------- ------------- ----------------- ------------- ------------- --------- SMALL CAP EQUITY FUND Trust Shares 1999 $12.88 $ 0.13 $ (2.57) $(0.13) $(0.61) $ 9.70 1998 11.07 0.14 2.41 (0.12) (0.62) 12.88 1997(1) 10.00 0.05 1.04 (0.02) -- 11.07 Flex Shares 1999 $12.80 $ 0.01 $ (2.53) $(0.02) $(0.61) $ 9.65 1998(2) 11.28 0.03 2.17 (0.06) (0.62) 12.80 SMALL CAP GROWTH STOCK FUND Trust Shares 1999(3) $10.00 $(0.05) $ 4.62 $ -- $(0.02) $14.55 Flex Shares 1999(3) $10.00 $(0.19) $ 4.67 $ -- $(0.02) $14.46 SUNBELT EQUITY FUND Trust Shares 1999 $15.12 $(0.28) $ (2.84) $ -- $(0.91) $11.09 1998 13.28 0.01 3.03 -- (1.20) 15.12 1997 14.11 (0.09) 0.25 -- (0.99) 13.28 1996 10.03 (0.04) 4.32 -- (0.20) 14.11 1995 9.70 (0.01) 0.38 -- (0.04) 10.03 Investor Shares 1999 $14.77 $(0.33) $ (2.77) $ -- $(0.91) $10.76 1998 13.06 (0.07) 2.98 -- (1.20) 14.77 1997 13.95 (0.14) 0.24 -- (0.99) 13.06 1996 9.96 (0.11) 4.30 -- (0.20) 13.95 1995 9.69 (0.05) 0.36 -- (0.04) 9.96 Flex Shares 1999 $14.60 $(0.40) $ (2.74) $ -- $(0.91) $10.55 1998 13.00 (0.09) 2.89 -- (1.20) 14.60 1997 13.97 (0.14) 0.16 -- (0.99) 13.00 1996(4) 10.20 (0.07) 4.04 -- (0.20) 13.97 TAX SENSITIVE GROWTH STOCK FUND Trust Shares 1999(5) $25.61 $ 0.02 $ 4.34 $(0.01) $ -- $29.96 Flex Shares 1999(6) $25.52 $(0.05) $ 4.38 $ -- $ -- $29.85 VALUE INCOME STOCK FUND Trust Shares 1999 $13.90 $ 0.24 $ 1.02 $(0.24) $(2.07) $12.85 1998 13.71 0.26 2.62 (0.27) (2.42) 13.90 1997 13.15 0.30 2.32 (0.30) (1.76) 13.71 1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 1995 10.54 0.32 1. 1999 $13.87 $ 0.19 $ 1.02 $(0.20) $(2.07) $12.81 1998 13.68 0.20 2.62 (0.21) (2.42) 13.87 1997 13.13 0.25 2.32 (0.26) (1.76) 13.68 1996 11.58 0.30 2.71 (0.30) (1.16) 13.13 1995 10.52 0.28 1.56 (0.27) (0.51) 11.58 Flex Shares 1999 $13.75 $ 0.10 $ 1.01 $(0.11) $(2.07) $12.68 1998 13.61 0.12 2.57 (0.13) (2.42) 13.75 1997 13.08 0.18 2.29 (0.18) (1.76) 13.61 1996(7) 11.59 0.26 2.65 (0.26) (1.16) 13.08
RATIO OF RATIO OF RATIO OF EXPENSES TO NET NET AVERAGE AVERAGE INVESTMENT INVESTMENT NET ASSETS NET ASSETS INCOME (LOSS) NET ASSETS RATIO OF INCOME (LOSS) (EXCLUDING (EXCLUDING TO END OF EXPENSES TO TO WAIVERS WAIVERS PORTFOLIO TOTAL PERIOD AVERAGE AVERAGE AND AND TURNOVER RETURN+ (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------- ---------- ------------ ------------- --------------- --------------- ------------ SMALL CAP EQUITY FUND Trust Shares 1999 (18.72%) $ 301,984 1.22% 1.27% 1.27% 1.22% 63% 1998 23.59 390,841 1.21 1.07 1.31 0.97 55 1997(1) 10.97 131,049 1.20 1.86 1.37 1.69 27 Flex Shares 1999 (19.52%) $ 19,465 2.27% 0.21% 2.55% (0.07%) 63% 1998(2) 22.29 40,613 2.06 0.01 2.35 (0.28) 55 SMALL CAP GROWTH STOCK FUND Trust Shares 1999(3) 45.70% $ 152,290 1.15% (0.47%) 1.48% (0.80%) 75% Flex Shares 1999(3) 44.78% $ 6,158 2.25% (1.50%) 3.19% (2.44%) 75% SUNBELT EQUITY FUND Trust Shares 1999 (20.46%) $ 197,215 1.17% (0.68%) 1.30% (0.82%) 84% 1998 23.86 431,921 1.16 (0.90) 1.27 (1.01) 70 1997 1.48 381,371 1.15 (0.65) 1.26 (0.76) 72 1996 43.19 412,430 1.15 (0.34) 1.28 (0.47) 106 1995 3.81 258,908 1.15 (0.12) 1.30 (0.27) 80 Investor Shares 1999 (20.75%) $ 16,949 1.62% (1.12%) 1.78% (1.12%) 84% 1998 23.25 30,860 1.61 (1.35) 1.86 (1.60) 70 1997 1.05 28,095 1.60 (1.10) 1.84 (1.34) 72 1996 42.58 29,002 1.60 (0.79) 1.93 (1.12) 106 1995 3.20 22,180 1.60 (0.57) 1.98 (0.95) 80 Flex Shares 1999 (21.28%) $ 4,395 2.22% (1.74%) 2.66% (2.17%) 84% 1998 22.48 8,070 2.21 (1.96) 2.58 (2.33) 70 1997 0.46 5,689 2.20 (1.72) 2.69 (2.21) 72 1996(4) 39.86 2,705 2.20 (1.43) 3.62 (2.85) 106 TAX SENSITIVE GROWTH STOCK FUND Trust Shares
1999(5) 17.04% $ 223,543 1.15% 0.21% 1.32% 0.04% 18% Flex Shares 1999(6) 16.97% $ 75,875 2.25% (0.80%) 2.48% (1.03%) 18% VALUE INCOME STOCK FUND Trust Shares 1999 11.13% $1,589,951 0.92% 1.91% 0.92% 1.91% 69% 1998 23.10 1,725,418 0.92 1.85 0.92 1.85 99 1997 22.18 1,488,062 0.91 2.40 0.91 2.40 105 1996 27.91 1,244,399 0.92 2.86 0.92 2.86 134 1995 1999 10.71% $ 194,312 1.28% 1.55% 1.28% 1.55% 69% 1998 22.71 210,591 1.27 1.47 1.27 1.47 99 1997 21.69 165,999 1.30 2.01 1.31 2.00 105 1996 27.39 130,597 1.30 2.47 1.37 2.40 134 1995 18.71 92,256 1.30 2.80 1.41 2.69 126 Flex Shares 1999 9.91% $ 167,000 2.02% 0.81% 2.03% 0.80% 69% 1998 21.76 180,530 2.01 0.78 2.01 0.78 99 1997 20.91 73,466 2.00 1.33 2.03 1.30 105 1996(7) 26.52 26,298 2.00 1.72 2.15 1.57 134
Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on January 31, 1997. All ratios for the period have been annualized. (2) Commenced operations on June 5, 1997. All ratios for the period have been annualized. (3) Commenced operations on October 8, 1998. All ratios for the period have been annualized. (4) Commenced operations on June 5, 1995. All ratios for the period have been annualized. (5) Commenced operations on December 11, 1998. All ratios for the period have been annualized. (6) Commenced operations on December 15, 1998. All ratios for the period have been annualized. (7) Commenced operations on June 1, 1995. All ratios for the period have been annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 82 & 83 NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-four portfolios as of May 31, 1999: the Balanced Fund, the Capital Appreciation Fund (formerly Capital Growth Fund), the Emerging Markets Equity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Balanced Portfolio, the Life Vision Growth and Income Portfolio, the Life Vision Maximum Growth Portfolio, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Small Cap Growth Stock Fund, the Sunbelt Equity Fund, the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each fund's prospectus provides a description of the fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Equity Funds. The financial statements of the Fixed Income Funds, Institutional Money Market Funds and Retail Money Market Funds are not presented herein, but presented separately. On February 17, 1999 and February 19, 1999, respectively, the Board of Trustees of the STI Classic Funds and Board of Directors of the CrestFunds, Inc. ("CrestFunds") approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and liabilities of the CrestFunds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 8). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust. BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 8, the STI Classic Funds acquired certain Crestar Funds in a tax-free business combination. While each Fund now exists as an STI Classic Fund, a number of the surviving funds for accounting purposes are Crestar Funds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Operations, Statements of Changes in Net Assets and Financial Highlights presented reflect periods beginning on the first day of the accounting survivor's fiscal year. SECURITY VALUATION -- Investment securities held by the Equity Funds that are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price each business day. If there is no such reported sale, these securities and unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Foreign securities in the Emerging Markets Equity Fund, the International Equity Fund and the International Equity Index Fund are valued based upon quotations from the primary market in which they are traded. Debt obligations with sixty days or less remaining until maturity may be valued at their amortized cost. FEDERAL INCOME TAXES -- It is each fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest method. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreementsmature. Provisions of the repurchase agreements ensure that the market value of the collateral, 84 - ------------------------------------------------------------------------------- including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each fund is calculated each business day, by dividing the total value of each fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for Investor shares of the Balanced, the Capital Appreciation, the Growth and Income, the International Equity, the International Equity Index, the Mid-Cap Equity, the Sunbelt Equity, and the Value Income Stock Funds is equal to the net asset value per share plus a sales load of 3.75%. Flex Shares of the Funds may be purchased at their net asset value. Shares redeemed within the first year after purchase will be subject to a contingent deferred sales charge ("CDSC") equal to 2.00% of the net asset value of the shares at the time of redemption. The CDSC will not apply to shares redeemed after such time. FOREIGN CURRENCY TRANSLATION -- The books and records of the Emerging Markets Equity, the International Equity and the International Equity Index Funds are maintained in U.S. dollars on the following basis: (I) market value of investment securities, assets and liabilities at the current rate of exchange; and (II) purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. The Emerging Markets Equity, the International Equity and the International Equity Index Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. The Emerging Markets Equity, the International Equity and the International Equity Index Funds report certain foreign currency related transactions as components of realized and unrealized gains and losses for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. TBA PURCHASE COMMITMENTS -- The Balanced Fund may enter into "TBA" (To Be Announced) purchase commitments to purchase securities for a fixed price at a future date beyond customary settlement time. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which risk is in addition to the risk of decline in the value of the funds' other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Security Valuation." OTHER -- Expenses that are directly related to a specific fund are charged to that fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income are declared and paid each calendar quarter by the Equity Funds, except for the Emerging Markets Equity, the International Equity, and the International Equity Index Funds. These funds distribute income annually. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent differences, primarily attributable to net operating losses and the classification of short-term capital gains and ordinary income for tax purposes, have been reclassified to/from the following accounts:
UNDISTRIBUTED ACCUMULATEDNET INVESTMENT PAID-IN-CAPITAL REALIZED GAIN/ INCOME/(LOSS) (000) (LOSS) (000) (000) ------------------------------------------------ Capital Appreciation Fund............. $ (175) $ -- $ 175 Emerging Markets Equity Fund...... -- (11) 11 Growth and Income Fund (74) -- 74 Life Vision Balanced Portfolio........ (11) -- 11 International Equity Fund............. -- 4 (4) International Equity Index Fund...... -- (240) 240 Life Vision Growth and Income Portfolio (2) 31 (29) Life Vision Maximum Growth Portfolio. (2) -- 2 Mid-Cap Equity Fund (1,783) (3) 1,786 Small Cap Equity Fund............. -- 4 (4) Small Cap Growth Stock Fund............. (120) (146) 266 Sunbelt Equity Fund (2,424) 43 2,381 Tax Sensitive Growth Stock Fund....... -- (48) 48
85 NOTES TO FINANCIAL STATEMENTS (continued) - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 These reclassifications have no effect on net assets or net asset values per share. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Organization Costs and Transactions with Affiliates In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." This SOP provides guidance on the financial reporting of start-up costs and organization costs and requires costs of start-up activities and organization costs to be expensed as incurred. Investment companies that began operations prior to June 30, 1998 can adopt the SOP prospectively. Therefore, previously capitalized organization costs will continue to be amortized over a period of sixty months. Any future start-up or organization costs will be expensed as incurred. Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration, Transfer Agency Servicing and Distribution Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999 under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 24, 1999, administrative and accounting services were provided to the CrestFunds by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the CrestFunds. Additionally, SEI Investments Mutual Funds Services was entitled to receive a minimum annual fee of $40,000 for each of the Life Vision Portfolios. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. The Trust and the Distributor are parties to a Distribution Agreement dated May 29, 1995 regarding the Flex Shares and a Distribution Agreement dated November 21, 1995 with respect to the Trust and Investor shares. The Distributor will receive no fees for its distribution services under this agreement for the Trust Shares of any fund. With respect to the Investor Shares and Flex Shares, the Distributor receives amounts, pursuant to a Distribution Plan and (in the case of Flex Shares) a Distribution and Service Plan, as outlined in the table in footnote 5 under the column titled "Distribution Fee". Prior to May 24, 1999, the Distributor, a wholly owned subsidiary of SEI Investments Co., served as distributor of each of the CrestFunds shares pursuant to an agreement with the Company. The Trust Class and Investors Class A shares of the CrestFunds had a separate distribution plan (the 12b-1 Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the 12b-1 Plan, the Trust Class and Investors Class A shares of the CrestFunds paid the Distributor as compensation for its services .15% of the aggregate average daily net assets of such classes of the CrestFunds. The Distributor had voluntarily agreed to waive any fees payable pursuant to the 12b-1 Plan. Additionally, the Investors Class B Shares of the CrestFunds had a distribution plan (the B Shares Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the B Shares Plan, the Investors Class B Shares of the CrestFunds paid the Distributor as compensation for its services .75% of the aggregate average daily net assets of such class of the Funds. In addition, pursuant to the B Shares Plan, the Distributor was compensated at an annual rate of .25% of the B shares' average net assets for providing ongoing Shareholder support services to investors in B shares. The Distributor had agreed to waive a portion of its fees pursuant to the B Shares Plan in order to limit Distribution Fees to .95% for each Fund, except for the Value Fund for which the limit was .90%. Prior to April 15, 1999, the limit was .75% for the Value Fund. Prior to May 24, 1999, the CrestFunds had adopted a shareholder service plan (the "Plan") for Trust Class Shares of the Value Fund, Capital Appreciation Fund and Special Equity Fund. Under the Plan, these Fund's paid the Distributor a negotiated fee at a rate of up to .25% annually of the average daily net assets of such Fund attributable to the shares that are subject to the arrangement in return for provision of a broad range of shareholder and administrative services. The Distributor had agreed to waive a portion of its shareholder service plan for trust class shares in order to limit shareholder service fees to .10%. 86 - ------------------------------------------------------------------------------- 5. Investment Advisory and Custodian Agreements: The Trust and STI Capital Management, N.A., ("STI Capital Management, N.A."), Trusco Capital Management ("Trusco") and the SunTrust Bank, Atlanta have entered into advisory agreements dated May 29, 1992, June 15, 1993, and December 20, 1993, respectively. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets:
MAXIMUM FLEX SHARE MAXIMUM DISTRI- MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX ANNUAL SHARE SHARE SHARE AND SHARE ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE --------- --------- ----------- --------- --------- ---------- TRUSCO: Growth and Income Fund .90% 1.01% .25% 1.18% 1.00% 1.93% Life Vision Balanced Portfolio .25% .25% -- -- -- -- Life Vision Growth and Income Portfolio .25% .25% -- -- -- -- Life Vision Maximum Growth Portfolio .25% .25% -- -- -- -- International Equity Index Fund .90% 1.07% .38% 1.47% 1.00% 2.12% Small Cap Growth Stock Fund 1.15% 1.20% -- -- 1.00% 2.25% Sunbelt Equity Fund 1.15% 1.17% .43% 1.62% 1.00% 2.22% Tax Sensitive Growth Stock Fund 1.15% 1.20% -- -- 1.00% 2.25% STI CAPITAL MANAGEMENT, N.A.: Balanced Fund .95% .97% .28% 1.27% 1.00% 2.03% Capital Appreciation Fund 1.15% 1.17% .68% 1.82% 1.00% 2.29% Emerging Markets Equity Fund 1.30% 1.57% -- -- -- -- International Equity Fund 1.25% 1.48% .33% 1.83% 1.00% 2.53% Mid-Cap Equity Fund 1.15% 1.17% .43% 1.62% 1.00% 2.22% Small Cap Equity Fund 1.15% 1.22% -- -- 1.00% 2.27% Value Income Stock Fund .80% .97% .33% 1.32% 1.00% 2.02%
The Investment Advisors, the Administrator and the Distributor have voluntarily agreed to waive all or a portion of their fees (and to reimburse funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 24, 1999 Crestar Asset Management Company ("CAMCO") provided investment advisory services to the CrestFunds. CAMCO was paid for advisory services at an annual rate of .75% of average daily net assets for the Capital Appreciation Fund, Value Fund and Special Equity Fund, and .25% of average daily net assets for the Life Vision Balanced Fund, Life Vision Growth and Income Fund, and Life Vision Maximum Growth Fund. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for all the funds except the Emerging Markets Equity, the International Equity and the International Equity Index Funds who utilize the Bank of New York as custodian. Fees of the Custodians are paid on the basis of the net assets of the funds. The Custodians play no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the funds. 6. Investment Transactions: The cost of purchases and the proceeds from sales of securities, excluding short-term investments and U.S. Government Securities, for the period ended May 31, 1999, were as follows:
PURCHASES SALES (000) (000) ---------------------- Balanced Fund $ 66,419 $ 56,352 Capital Appreciation Fund 83,708 115,513 Emerging Markets Equity Fund 16,762 21,044 Growth and Income Fund 196,661 202,372 International Equity Fund 931,039 926,353 International Equity Index Fund 34,263 19,833 Life Vision Balanced Portfolio 43,858 91,385 Life Vision Growth and Income Portfolio 10,263 8,165 Life Vision Maximum Growth Portfolio 7,041 5,883 Mid-Cap Equity Fund 232,823 332,718 Small Cap Equity Fund 200,349 231,019 Small Cap Growth Stock Fund 192,444 41,977 Sunbelt Equity Fund 18,876 42,696 Tax Sensitive Growth Stock Fund 195,255 33,468
The cost of U.S. Government security purchases and the proceeds from the sale of U.S. Government Securities for the Balanced Fund during the period ended May 31, 1999, were $189,416 and $165,912, respectively. At May 31, 1999, the Emerging Markets Equity Fund, Small Cap Equity Fund and Sunbelt Equity Fund had capital loss carryforwards for federal tax purposes of $4,447,790, $16,347,746 and $3,453,741, respectively, resulting from security sales. For tax purposes, the losses in the funds can be carried forward for a maximum of eight years to offset any net realized capital gains. The carryforward for each of the funds expires in May 2007. 87 NOTES TO FINANCIAL STATEMENTS (concluded) - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 The following Funds had cumulative wash sales for the fiscal year ended May 31, 1999:
FUND AMOUNT Balanced Fund $ 907,255 Capital Appreciation Fund 1,727,191 Growth and Income Fund 254,155 International Equity Fund 1,799,430 Life Vision Balanced Portfolio 256,794 Life Vision Growth and Income Portfolio 230,291 Mid-Cap EquityFund 303,398 Small Cap Equity Fund 849,386 Small Cap Growth Stock Fund 382,100 Sunbelt Equity Fund 3,289,602
The wash sale losses cannot be used for Federal income tax purposes and are deferred. At May 31, 1999, the total cost of securities and the net realized gains or losses on securities sold for Federal income tax purposes were not materially different from amounts reported for financial reporting purposes. The aggregate gross unrealized appreciation and depreciation for securities held by the funds at May 31, 1999, were as follows:
AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION DEPRECIATION -------------- ------------ --------------- Balanced Fund $ 43,946 $ (6,383) $ 37,563 Capital Appreciation Fund 599,156 (53,463) 545,693 Emerging Markets Equity Fund 3,887 (5,989) (2,102) Growth and Income Fund 16,417 (9,020) 177,397 International Equity Fund 62,199 (24,918) 37,281 International Equity Index Fund 19,507 (5,110) 14,397 Life Vision Balanced Portfolio 6,479 (1,435) 5,044 Life Vision Growth and Income Portfolio 1,601 (256) 1,345 Life Vision Maximum Growth Portfolio 2,052 (209) 1,843 Mid-Cap Equity Fund 46,226 (17,128) 29,098 Small Cap Equity Fund 18,487 (34,256) (15,769) Small Cap Growth Stock Fund 19,516 (6,020) 13,496 Sunbelt Equity Fund 57,241 (9,250) 47,991 Tax Sensitive Growth Stock Fund 61,975 (1,644) 60,331 Value Income Stock Fund 204,487 (76,846) 127,641
7. Common Trust Fund Conversion On December 11, 1998, the SunTrust Quality Growth Stock Fund of SunTrust was converted into the STI Classic Tax Sensitive Growth Stock Fund. The assets, which consisted of securities and related receivables, were converted on a tax free basis. At the time of conversion 3,874,558 of Trust Class shares were issued. The net assets of the Sun Trust Quality Growth Stock Fund immediately before the conversion were $99,222,180, which included unrealized appreciation of $45,523,361. 88 - ------------------------------------------------------------------------------- 8. CrestFunds Merger The Board of Directors and shareholders of the CrestFunds approved a reorganization of the CrestFunds into STI Classic Funds which took place at the close of business on May 17, 1999 (May 24, 1999 for Growth and Income Fund, Life Vision Balanced Portfolio, Life Vision Growth and Income Portfolio, Life Vision Maximum Growth Portfolio). The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations on May 17, 1999 and May 24, 1999 and is unaudited:
SHARES OUTSTANDING UNREALIZED ON MERGE RAPPRECIATION CRESTFUNDS DATE (DEPRECIATION) - ------------------------------------------------------------------------------- Capital Appreciation Trust Shares 7,017,951 $50,852,434 Investor Class A 634,910 4,570,273 Investor Class B 405,693 945,904 Special Equity Trust Shares 6,434,126 8,484,235 Investor Class A 335,109 461,214 Investor Class B 439,353 (115,351) Value Fund (1) Trust Shares 39,426,216 185,105,926 Investor Class A 2,284,756 7,740,403 Investor Class B 2,164,932 4,552,822 Life Vision Balanced (1) Trust Shares 8,168,631 6,271,120 Life Vision Growth and Income (1) Trust Shares 2,130,709 1,682,009 Life Vision Maximum Growth (1) Trust Shares 1,650,909 2,180,220
* Investor Class A shares of CrestFund Special Equity were exchanged for Trust Shares of STI Small Cap Growth Stock. (1) Represents the accounting survivor in this business combination.
SHARES ISSUEDNET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUND COMBINATION COMBINATION SHARE - ------------------------------------------------------------------------------- Capital Appreciation (1) Trust Shares 8,202,045 $2,043,356,370 $17.02 Investor Shares 738,260 321,669,847 16.93 Flex Shares 474,357 165,340,901 16.58 Small Cap Growth Stock (1) Trust Shares 6,174,359 153,356,352 14.40 Investor Shares -- -- -- Flex Shares 188,473 5,980,718 14.32 Growth and Income Trust Shares 39,426,21 6 649,230,675 16.47 Investor Shares 2,284,756 37,909,335 16.59 Flex Shares 2,164,932 35,677,567 16.47 Life Vision Balanced Trust Shares 8,168,631 89,406,305 10.95 Life Vision Growth and Income Trust Shares 2,130,709 22,352,880 10.49 Life Vision Maximum Growth Trust Shares 1,650,909 19,002,404 11.51
89 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1998 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Balanced, Capital Appreciation, Emerging Markets Equity, Growth & Income, International Equity, Mid-Cap Equity, Small Cap Equity, Small Cap Growth, Sunbelt Equity, Tax Sensitive Growth, Value Income Stock Funds, Life Vision Balanced, Life Vision Growth & Income, and Life Vision Maximum Growth Portfolios, and the statements of assets and liabilities, including the schedule of investments, of the International Equity Index Funds of STI Classic Funds (the "Trust") as of May 31, 1999, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of operations for the year ended November 30, 1998, statements of changes for the years ended November 30, 1998 and November 30, 1997, and financial highlights for the periods prior to May 31, 1999, for the Growth & Income Fund, Life Vision Balanced, Life Vision Growth & Income, and Life Vision Maximum Growth Portfolios were audited by other auditors whose report dated January 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 1999, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Balanced, Capital Appreciation, Emerging Markets Equity, Growth & Income, International Equity, International Equity Index, Mid-Cap Equity, Small Cap Equity, Small Cap Growth, Sunbelt Equity, Tax Sensitive Growth, and Value Income Stock Funds, the Life Vision Balanced Life Vision Growth & Income, and Life Vision Maximum Growth Portfolios, of STI Classic Funds as of May 31, 1999, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 23, 1999 90 NOTICE TO SHAREHOLDERS - ------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 1999 UNAUDITED
For shareholders that do not have a May 31, 1999 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 1999 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended May 31, 1999, each portfolio is designating the following items with regard to distributions paid during the year: LONG TERM FOREIGN (20% RATE) ORDINARY TAX CAPITAL GAINS INCOME TAX-EXEMPT TOTAL QUALIFYING WITHHOLDING FUND DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS(1) PASS THROUGH(2) ----------------------------------------------------------------------------------- ------------- ---------- --------------- Balanced Fund 35.30% 64.70% 0.00% 100.00% 11.74% --% Capital Appreciation Fund 54.78% 45.22% 0.00% 100.00% 14.67% --% Emerging Markets Equity Fund 0.00% 100.00% 0.00% 100.00% 0.00% 11.35% Growth and Income Fund 80.44% 19.56% 0.00% 100.00% 90.34% --% International Equity Fund 53.89% 46.11% 0.00% 100.00% 0.00% 4.52% International Equity Index Fund 86.80% 13.20% 0.00% 100.00% 0.00% 6.19% Life Vision Balanced Portfolio 41.73% 58.27% 0.00% 100.00% 36.19% --% Life Vision Growth and Income Portfolio 46.39% 53.61% 0.00% 100.00% 46.82% --% Life Vision Maximum Growth Portfolio 50.94% 49.06% 0.00% 100.00% 76.43% --% Mid-Cap Equity Fund 46.90% 53.10% 0.00% 100.00% 10.81% --% Small Cap Equity Fund 16.78% 83.22% 0.00% 100.00% 38.00% --% Small Cap Growth Stock Fund 0.00% 100.00% 0.00% 100.00% 11.73% --% Sunbelt Equity Fund 71.61% 28.39% 0.00% 100.00% 0.00% --% Tax Sensitive Growth Stock Fund 0.00% 100.00% 0.00% 100.00% 89.31% --% Value Income Stock Fund 48.03% 51.97% 0.00% 100.00% 59.02% --%
- ------------------------------------------------------------------------------- (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of "Ordinary Income Distribution". (2) Foreign tax credit pass through represents the amount eligible for the foreign tax credit and is reflected as a percentage of "Ordinary Income Distribution". 91 NOTES INVESTMENT ADVISORS STI Capital Management, N.A. Trusco Capital Management, Inc. SunTrust Bank, Atlanta STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 PRIME QUALITY MONEY MARKET FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- COMMERCIAL PAPER (44.7%) FINANCE (19.3%) ABN-AMRO 4.880%, 10/18/99 $147,000 $144,230 AI Credit 4.900%, 06/01/99 50,000 50,000 Allstate 4.930%, 06/01/99 1,435 1,435 Associates 4.800%, 06/14/99 35,000 34,939 Bank of Montreal 4.810%, 07/19/99 75,000 74,519 BankAmerica 4.830%, 10/27/99 50,000 49,007 Credit Suisse First Boston 4.860%, 07/12/99 1,000 994 Den Norske Bank 4.900%, 07/07/99 800 796 4.860%, 08/10/99 20,000 19,811 Ford Motor Credit 4.750%, 11/03/99 25,000 24,489 General Electric Capital 4.800%, 06/11/99 80,000 79,889 4.800%, 06/14/99 2,000 1,997 4.820%, 07/16/99 3,600 3,578 4.730%, 08/19/99 20,000 19,792 4.740%, 12/01/99 25,000 24,398 General Motors Acceptance 4.670%, 10/20/99 55,000 53,994 Goldman Sachs 4.770%, 09/17/99 25,000 24,642 4.910%, 10/21/99 99,000 97,083 GTE Funding 4.830%, 06/02/99 21,560 21,557 4.800%, 06/03/99 3,200 3,199 J.P. Morgan 4.820%, 07/15/99 2,425 2,411
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Marsh & McClennan 4.900%, 06/03/99 $ 50,000 $ 49,986 Merrill Lynch 4.820%, 06/17/99 40,000 39,914 Paccar 4.850%, 06/23/99 325 324 Progress Capital 4.930%, 06/01/99 5,691 5,691 4.810%, 06/02/99 4,812 4,811 Sigma Finance 4.850%, 06/01/99 1,070 1,070 4.900%, 08/10/99 7,273 7,204 Sony Capital 4.930%, 06/03/99 41,025 41,014 Ubs Finance 4.980%, 10/05/99 17,130 16,831 4.890%, 12/13/99 8,815 8,582 4.780%, 12/20/99 25,000 24,329 -------- 932,516 -------- INDUSTRIAL (24.4%) Albertson's 4.800%, 06/07/99 18,200 18,185 Allied Signal 4.890%, 06/08/99 23,432 23,410 Allstate 4.830%, 07/22/99 25,000 24,829 Arco 4.840%, 06/11/99 20,000 19,973 4.820%, 06/29/99 8,200 8,169 4.810%, 07/21/99 25,000 24,833 AT&T 4.810%, 07/28/99 120,000 119,086 Becton Dickinson 4.870%, 07/19/99 504 501 Bp America 4.920%, 06/01/99 53,845 53,845
5 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 PRIME QUALITY MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Caterpillar 4.810%, 07/13/99 $ 20,000 $ 19,888 4.900%, 09/09/99 28,100 27,718 Daimler Chrysler 4.720%, 07/15/99 35,000 34,798 Dupont (EI) de Nemour 4.800%, 11/16/99 25,000 24,440 Eastman Kodak 4.810%, 08/23/99 4,871 4,817 4.840%, 09/13/99 27,600 27,214 4.840%, 09/23/99 53,300 52,483 Edison International 4.820%, 08/02/99 50,000 49,585 4.850%, 08/16/99 85,000 84,130 Exxon Asset 4.910%, 06/02/99 80,000 79,989 Exxon Imperial 4.890%, 06/03/99 20,000 19,995 4.890%, 06/04/99 50,000 49,980 4.880%, 06/11/99 6,500 6,491 Ford Motor 4.950%, 06/03/99 3,400 3,399 4.850%, 07/26/99 1,525 1,514 4.850%, 07/27/99 2,800 2,779 General Electric 4.820%, 06/04/99 2,800 2,799 4.820%, 06/07/99 2,000 1,998 4.820%, 06/10/99 6,300 6,292 4.820%, 06/11/99 1,500 1,498 4.810%, 06/18/99 2,715 2,709 4.850%, 07/06/99 4,500 4,479 4.830%, 07/16/99 3,600 3,578 4.830%, 07/28/99 17,900 17,762 4.890%, 08/13/99 1,000 990 Golden Peanut 4.860%, 09/01/99 5,000 4,938 --------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- International Lease 4.900%, 06/01/99 $ 8,474 $ 8,474 J.C. Penney 4.930%, 06/11/99 3,200 3,196 5.040%, 07/29/99 20,000 19,841 New York Times 4.850%, 06/11/99 4,550 4,544 4.850%, 06/25/99 1,000 997 PPG Industries 4.850%, 06/11/99 400 399 Rio Tinto 4.840%, 06/14/99 23,400 23,359 4.850%, 06/16/99 5,919 5,907 4.850%, 06/17/99 11,700 11,675 4.810%, 07/06/99 20,000 19,906 4.810%, 07/16/99 5,700 5,666 4.850%, 08/17/99 38,085 37,690 Sara Lee 4.900%, 06/03/99 2,190 2,189 SmithKline Beecham 4.930%, 06/01/99 2,470 2,470 South Carolina 4.810%, 06/03/99 16,925 16,920 4.830%, 06/11/99 9,642 9,629 4.820%, 06/18/99 5,400 5,388 4.850%, 06/29/99 1,565 1,559 Southern California Edison 4.850%, 07/06/99 10,000 9,953 4.840%, 08/17/99 9,570 9,471 St. Paul 4.900%, 06/01/99 29,640 29,640 4.800%, 06/11/99 10,000 9,987 4.800%, 06/17/99 20,000 19,957 Toys "R" Us 4.820%, 06/01/99 14,273 14,273
6
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- Unilever 4.910%, 06/01/99 $ 9,575 $ 9,575 Walt Disney 4.460%, 07/13/99 60,000 59,688 Xerox 4.920%, 06/01/99 3,158 3,158 4.850%, 06/24/99 494 492 --------- 1,175,097 --------- UTILITIES (1.0%) BellSouth 4.930%, 06/04/99 1,130 1,130 Consolidated Natural Gas 4.870%, 06/08/99 3,107 3,104 Georgia Power 4.810%, 07/19/99 39,300 39,048 GTE 4.910%, 06/02/99 3,032 3,032 Southwestern Pub 4.870%, 06/25/99 900 897 -------- 47,211 -------- Total Commercial Paper (Cost $2,154,824) 2,154,824 -------- CORPORATE OBLIGATIONS (24.7%) FINANCE (21.5%) American Express Centurion Bank Note (C) 4.990%, 06/01/99 50,000 50,000 5.060%, 06/01/99 35,000 35,000 American Express Credit 8.500%, 06/15/99 1,500 1,502 American General 8.000%, 02/15/00 5,993 6,112 American General, MTN 6.350%, 10/29/99 5,000 5,026 6.190%, 11/08/99 5,000 5,024
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- American International Group, MTN 6.050%, 11/01/99 $ 10,000 $ 10,040 Associates 6.625%, 07/15/99 7,350 7,364 7.250%, 09/01/99 350 352 8.250%, 12/01/99 3,000 3,045 Associates (C) 4.890%, 06/01/99 50,000 49,994 Associates, MTN 6.750%, 06/28/99 5,500 5,505 7.550%, 07/15/99 4,000 4,012 6.125%, 11/12/99 4,000 4,017 Bear Stearns, MTN 5.715%, 07/30/99 20,000 20,000 Bear Stearns, Ser B, MTN 5.300%, 03/09/00 20,000 20,000 Beneficial, MTN 6.650%, 10/11/99 3,300 3,318 8.100%, 11/09/99 1,600 1,621 7.180%, 12/20/99 2,500 2,528 Beneficial, MTN (C) 5.117%, 08/27/99 3,000 3,001 5.100%, 09/01/99 40,000 40,045 Beta Finance (A) 5.200%, 03/01/00 50,000 49,944 Beta Finance, MTN 6.250%, 02/18/00 631 634 Chrysler Financial 12.750%, 11/01/99 5,000 5,155 9.500%, 12/15/99 22,000 22,506 Chrysler Financial, MTN 6.280%, 06/21/99 8,280 8,286 6.280%, 06/23/99 5,000 5,004 6.160%, 07/28/99 1,000 1,001 6.375%, 01/28/00 17,000 17,137
7 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 PRIME QUALITY MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Credit Suisse First Boston International (C) 5.425%, 06/02/99 $ 25,000 $ 25,000 Credit Suisse First Boston International Gue, MTN (A) 5.400%, 03/20/00 50,000 50,000 CS First Boston (A) 5.290%, 03/20/00 15,000 15,000 CS First Boston (C) 4.860%, 06/01/99 25,000 25,000 Export Development, MTN 8.625%, 03/24/00 3,000 3,075 First Union National Bank (C) 5.020%, 08/19/99 30,000 30,000 Ford Motor Credit 6.375%, 09/15/99 1,500 1,505 Ford Motor Credit, MTN 5.730%, 02/23/00 4,750 4,771 Ford Motor Credit, MTN (C) 5.220%, 08/01/99 6,000 6,007 General Motors Acceptance 7.125%, 06/01/99 5,000 5,000 8.625%, 06/15/99 480 481 8.400%, 10/15/99 5,000 5,058 7.000%, 03/01/00 1,500 1,520 General Motors Acceptance (A) 6.500%, 01/17/00 1,750 1,764 General Motors Acceptance, MTN 6.150%, 09/20/99 6,060 6,080 8.625%, 01/10/00 10,000 10,209 6.250%, 01/11/00 2,100 2,115 7.500%, 06/09/00 1,650 1,683 General Motors Acceptance, MTN (C) 4.960%, 06/01/99 7,500 7,495 Goldman Sachs Group, MTN (A) 5.280%, 02/24/00 25,000 25,000
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- Household Finance 7.625%, 06/15/99 $ 5,800 $ 5,805 Household Finance, MTN 7.280%, 07/22/99 2,500 2,507 Household International, MTN (C) 5.080%, 07/22/99 15,000 15,004 IBM Credit 5.680%, 07/07/99 1,000 1,001 IBM Credit, MTN (C) 4.950%, 06/15/99 40,000 40,000 International Lease Finance 6.375%, 01/18/00 5,000 5,039 John Deere Capital, MTN 6.430%, 08/09/99 2,000 2,005 J.P. Morgan 5.700%, 02/15/00 2,000 2,004 J.P. Morgan (C) 4.990%, 06/24/99 60,000 59,997 J.p. Morgan, MTN (C) 5.060%, 06/01/99 80,000 80,000 Merrill Lynch (C) 5.090%, 06/01/99 60,000 60,000 Merrill Lynch, MTN (C) 4.990%, 08/05/99 5,000 4,999 5.450%, 08/16/99 10,000 10,019 National City Capital 6.750%, 06/01/99 30,050 30,050 Nationsbank, MTN (C) 5.030%, 06/02/99 28,000 28,006 5.060%, 06/03/99 13,000 13,004 5.066%, 06/03/99 10,000 10,000 NYNEX Capital Funding, MTN 7.640%, 07/19/99 2,000 2,006 Paccar Financial, MTN 6.110%, 12/15/99 5,000 5,027 6.570%, 12/15/99 5,000 5,039
8
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Pitney Bowes, MTN 6.540%, 07/15/99 $ 2,025 $ 2,028 PNC Bank, (C) 4.790%, 06/01/99 20,000 20,000 Teco Finance, MTN (A) 7.140%, 11/19/99 12,000 12,111 Texaco Capital 6.875%, 07/15/99 1,000 1,002 9.450%, 03/01/00 1,600 1,651 Transamerica Finance, MTN 8.750%, 10/01/99 1,000 1,012 5.970%, 12/06/99 1,500 1,506 7.570%, 12/09/99 1,000 1,012 Transamerica Finance, MTN (C) 5.250%, 07/22/99 750 750 --------- 1,036,520 --------- INDUSTRIAL (2.6%) American Home Products 7.700%, 02/15/00 10,520 10,707 Anheuser Busch 8.750%, 12/01/99 12,150 12,366 AT&T, MTN 8.250%, 01/11/00 5,000 5,090 Ford 9.250%, 03/01/00 7,000 7,203 General Mills 6.820%, 10/29/99 5,250 5,286 May Department Stores, MTN 9.560%, 12/01/99 1,000 1,022 Mobil Oil 9.170%, 02/29/00 3,833 3,907 Philip Morris 6.000%, 11/15/99 2,300 2,305 Philip Morris (C) 6.150%, 09/16/99 52,460 52,776 Shell Oil 6.625%, 07/01/99 630 631
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- United Technologies, MTN 8.300%, 12/15/99 $ 2,000 $ 2,034 Wal-Mart 6.125%, 10/01/99 660 662 5.650%, 02/01/00 22,000 22,073 -------- 126,062 -------- UTILITIES (0.6%) Duke Energy 8.000%, 11/01/99 5,330 5,392 GTE Southwest 5.820%, 12/01/99 5,900 5,922 Province of Quebec 9.125%, 03/01/00 12,500 12,859 Southern California Edison 6.750%, 01/15/00 2,000 2,019 8.250%, 02/01/00 3,500 3,571 -------- 29,763 -------- Total Corporate Obligations (Cost $1,192,345) 1,192,345 -------- ASSET BACKED SECURITIES (5.2%) Americredit Auto Receivables Trust, Ser 1998-B, Cl A1 5.199%, 11/12/99 8,644 8,645 Americredit Auto Receivables Trust, Ser 1999-A Cl A1 4.980%, 03/12/00 11,259 11,259 Americredit Auto Receivables Trust, Ser 1999-B, Cl A1 4.917%, 06/12/00 23,000 23,000
9 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 PRIME QUALITY MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Arcadia Auto Receivables Trust, Ser 1998-D, Cl A1 5.482%, 12/15/99 $ 383 $ 384 Arcadia Auto Receivables Trust, Ser 1999-A, Cl A1 4.960%, 03/15/00 18,662 18,663 Case Equipment Loan Trust, Ser 1998-C, Cl A1 5.420%, 12/15/99 4,017 4,018 First Security Auto Owner Trust, Ser 1999-2, Cl A1 5.015%, 06/15/00 90,000 90,000 Honda Auto Receivables Owner Trust, Ser 1999-1, Cl A1 4.974%, 02/15/00 14,188 14,188 Household Automobile Revolving Trust, Ser 1998-1, Cl A1 5.330%, 12/17/99 9,073 9,073 Key Auto Finance Trust, Ser 1999-1, Cl A1 4.960%, 04/15/00 12,040 12,041 Mmca Automobile Trust, Ser 1999-1, Cl A1 5.066%, 01/15/00 12,065 12,065 Onyx Acceptance Auto Trust, Ser 1999-B, Cl A1 4.930%, 05/15/00 17,000 17,000 Union Acceptance, Ser 1999-A, Cl A1 4.980%, 03/08/00 8,659 8,659 Union Acceptance, Ser 1999-B, Cl A1 4.960%, 06/08/00 22,000 22,000 -------- Total Asset Backed Securities (Cost $250,995) 250,995 --------
- --------------------------------------------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- BANK NOTES (2.5%) American Express Centurion (A) (C) 4.841%, 06/09/99 $ 5,000 $ 5,000 First Union Bank Note (C) 5.040%, 06/01/99 75,000 74,986 First USA 6.500%, 12/23/99 2,200 2,217 Inter-American Development 9.500%, 04/11/00 760 785 Nationsbank 4.880%, 10/18/99 35,000 35,000 -------- Total Bank Notes (Cost $117,988) 117,988 -------- CERTIFICATES OF DEPOSIT (6.9%) Bayerische Hypo 5.270%, 03/03/00 50,000 49,962 Bayerische Landesbank 4.830%, 06/21/99 100,000 100,000 Bear Stearns, MTN (C) 5.029%, 06/18/99 15,000 15,000 Branch Banking and Trust (C) 5.060%, 06/01/99 50,000 49,990 Canadian Imperial Bank 5.120%, 02/23/00 50,000 49,982 Commerzbank AG 5.160%, 02/25/00 22,000 21,991 PNC Bank N.A. (C) 4.779%, 06/03/99 15,000 14,998 Toronto Dominion Bank 5.270%, 03/03/00 30,000 29,977 -------- Total Certificates of Deposit (Cost $331,900) 331,900 --------
10
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- INSURANCE FUNDING AGREEMENTS (5.6%) General American Life Insurance, GIC (C) (F) 5.130% $160,000 $160,000 Integrity Life Insurance, GIC (C) (F) 5.130% 110,000 110,000 -------- Total Insurance Funding Agreements (Cost $270,000) 270,000 -------- U.S. GOVERNMENT AGENCY OBLIGATIONS (1.7%) FHLMC 4.935%, 06/04/99 15,000 14,994 FNMA 4.680%, 06/10/99 65,000 64,924 SLMA, Ser 1996-3, Cl A1 (C) 5.115%, 06/02/99 2,525 2,510 SLMA, Ser 1996-4, Cl A1 (C) 5.105%, 06/02/99 909 909 -------- Total U.S. Government Agency Obligations (Cost $83,337) 83,337 -------- REPURCHASE AGREEMENTS (9.7%) Barclays 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $20,023,992 (collateralized by FHLB, FHLMC and FNMA obligations: total market value $20,418,104) (B) 20,013 20,013 Deutsche Bank 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $75,060,980 (collateralized by FHLMC obligation: total market value $76,521,219) (B) 75,021 75,021
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Merrill Lynch 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $139,825,303 (collateralized by various GNMA obligations: total market value $142,547,920) (B) $139,750 $139,750 J.P. Morgan 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $121,360,378 (collateralized by various FNMA obligaions: total market value $123,721,327) (B) 121,295 121,295 Salomon Brothers 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $90,056,124 (collateralized by various FHLMC and FNMA obligations: total market value $91,908,156) (B) 90,008 90,008 Swiss 4.82%, dated 05/28/99, matures 06/01/99, repurchase price $20,040,207 (collateralized by FNMA obligation: total market value $20,430,541) (B) 20,030 20,030 -------- Total Repurchase Agreements (Cost $466,117) 466,117 -------- Total Investments (101.0%) (Cost $4,867,506) 4,867,506 --------- OTHER ASSETS AND LIABILITIES, NET (-1.0%) (46,174) --------
11 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 PRIME QUALITY MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 3,903,658,704 outstanding shares of beneficial interest $3,903,579 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 918,111,878 outstanding shares of beneficial interest 918,144 Overdistributed net investment income (43) Accumulated net realized loss on investments (348) ------------ Total Net Assets 100.0% 4,821,332 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ------------ ------------ Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $1.00 ------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 31. 12 TAX-EXEMPT MONEY MARKET FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- MUNICIPAL BONDS (99.4%) ALABAMA (1.9%) Special Care Facilities, Montgomery Hospital, RB, VRDN (FGIC) (C) (D) 3.350%, 06/03/99 $ 1,120 $ 1,120 University of Alabama, Birmingham Hospital, Ser A, RB, VRDN (C) 3.300%, 06/02/99 13,220 13,220 -------- 14,340 -------- ALASKA (1.0%) Alaska State Housing Finance Authority, Ser C, GO (C) 3.350%, 06/02/99 7,870 7,870 -------- ARIZONA (1.0%) City of Mesa, TECP 3.300%, 10/06/99 5,000 5,000 State, Educational Loan Marketing, Ser A, RB, VRDN, AMT (C) 3.300%, 06/02/99 2,500 2,500 -------- 7,500 -------- ARKANSAS (0.1%) State, Development Financial Authority, Potlatch Projects, Ser A, RB, VRDN, AMT (C) (D) (E) 3.450%, 06/02/99 1,000 1,000 -------- CALIFORNIA (0.7%) State, Higher Educational Loan Authority, Student Loan Revenue, Ser D-2, RB 3.650%, 04/01/00 5,000 5,000 -------- COLORADO (1.1%) Cherry Creek, South Metropolitan District Number 1, GO, VRDN (C) 3.250%, 06/03/99 1,350 1,350
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Lowry Economic, Redevelopment Authority, Ser B, RB, VRDN (C) 3.250%, 06/02/99 $ 2,000 $ 2,000 Smith Creek, Metropolitan District, RB, VRDN (C) 3.300%, 06/03/99 5,300 5,300 -------- 8,650 -------- DELAWARE (0.2%) State, Educational Development Authority, RB, VRDN (C) (D) (E) 3.625%, 06/03/99 1,875 1,875 -------- DISTRICT OF COLUMBIA (0.1%) Metropolitan Airports Authority, Ser B, RB, AMT 4.000%, 10/01/99 1,000 1,002 -------- FLORIDA (7.6%) Citrus Park, Community Development, RB, VRDN (C) (D) (E) 3.350%, 06/02/99 1,500 1,500 Dade County, Aviation Revenue, Ser B, RB (AMBAC) 5.600%, 10/01/99 750 756 Dade County, Aviation Revenue, Ser C, RB (MBIA) 5.000%, 10/01/99 5,160 5,194 Dade County, Water & Sewer System, Ser 1994, RB, VRDN (FGIC) (C) (D) 3.150%, 06/02/99 8,000 8,000 Hillsborough County, Industrial Development Authority, Pollution Control Revenue, Tampa Electric Project, RB, VRDN, AMT (C) 3.500%, 06/01/99 1,100 1,100
13 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Jacksonville, TECP 2.950%, 06/10/99 $ 4,100 $ 4,100 Palm Beach County, Jewish Community Campus Corporation, VRDN, RB (AMBAC) (C) (E) 3.200%, 06/02/99 4,000 4,000 Palm Beach County, RB, VRDN (C) 3.300%, 06/03/99 1,000 1,000 State, Housing Financial Agency, Heron Park Project, Ser U, RB, VRDN, AMT (C) (E) 3.450%, 06/02/99 1,190 1,190 State, Local Government Pooled Loan Program, TECP 3.050%, 06/08/99 4,810 4,810 3.000%, 06/10/99 4,000 4,000 State, RB, VRDN (C) 3.320%, 06/03/99 5,295 5,295 St. Lucie County, Pollution Control, TECP 3.000%, 06/09/99 6,500 6,500 2.950%, 06/10/99 5,000 5,000 University of North Florida Foundation, Parking System, RB, VRDN (C) 3.300%, 06/03/99 6,000 6,000 -------- 58,445 -------- GEORGIA (6.4%) Conyers-Rockdale-Big Haynes, Impoundment Authority Revenue, RB, VRDN (C) 3.250%, 06/02/99 3,000 3,000 Fulton County, Industrial Development Authority, American Red Cross Project, RB, VRDN (C) (D) (E) 3.300%, 06/03/99 1,200 1,200
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Gordon County, Development Authority, Sara Lee Corporation, RB, VRDN (C) (D) 3.300%, 06/03/99 $ 1,400 $ 1,400 Lafayette, Industrial Development Authority, Blue-Bird Project, Ser 1991, RB, VRDN (C) (D) (E) 3.300%, 06/03/99 1,000 1,000 Metropolitan Atlanta, Rapid Transit Authority, Georgia Sales Tax Revenue, RB, VRDN (C) 3.320%, 06/03/99 10,000 10,000 Monroe County, Industrial Development Authority, Forsyth Inns Project, RB, VRDN (C) (D) (E) 3.350%, 06/02/99 2,425 2,425 Putnam County, Development Authority, Pollution Control, RB, VRDN (C) 3.350%, 06/01/99 1,700 1,700 State, RB, VRDN (C) 3.320%, 06/03/99 10,545 10,545 State, Ser E, GO 4.000%, 02/01/00 5,600 5,637 State, Municipal Electric Authority, RB, VRDN (C) (D) (E) 3.300%, 06/02/99 4,000 4,000 State, Municipal Gas Authority, Portfolio II Project, Ser A, RB, VRDN (C) 3.150%, 06/02/99 6,625 6,625 Summerville, Development Authority, Ser 1997, RB, VRDN, AMT (C) (E) 3.350%, 06/10/99 2,000 2,000 -------- 49,532 --------
14
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- HAWAII (3.1%) Hawaii State Highway, RB, VRDN (C) (E) 3.320%, 06/03/99 $ 19,790 $ 19,790 State, GO, VRDN (MBIA) (C) 3.320%, 06/02/99 4,260 4,260 -------- 24,050 -------- IDAHO (0.9%) Nez Pierce County, Pollution Control, Potlatch Project, RB, VRDN (C) (D) (E) 3.350%, 06/02/99 2,000 2,000 3.350%, 06/03/99 1,000 1,000 State, TRAN 4.500%, 06/30/99 4,000 4,003 -------- 7,003 -------- ILLINOIS (8.3%) Bloomington, Airport Authority, GO, VRDN (C) (D) (E) 3.300%, 06/02/99 1,300 1,300 Chicago, Airport Facilities, Centerpoint O'Hare, International Airport Project, RB, VRDN, (C) (E) 3.400%, 06/02/99 3,500 3,500 Chicago, Industrial Development Midwest Project, RB, VRDN, (C) (E) 3.420%, 06/03/99 2,055 2,055 Chicago, O'Hare International Airport, RB, VRDN (C) (D) (E) 3.350%, 07/01/99 1,840 1,840 Chicago, Single-Family Mortage, RB, VRDN, AMT (B) (C) 3.100%, 09/01/99 5,595 5,595 Lockport, Industrial Development Panduit Project, RB, VRDN (C) (E) 3.350%, 06/02/99 2,000 2,000
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Savannah, Industrial Development Authority, Metform Project, Ser A, RB, VRDN (C) (D) (E) 3.400%, 06/02/99 $ 1,900 $ 1,900 State, Chicago Illinois Sales Tax, RB (FGIC) 4.000%, 01/01/00 1,875 1,885 State, Development Financial Authority, Derby Project, RB, VRDN, AMT (C) (D) (E) 3.500%, 06/02/99 900 900 State, Development Financial Authority, Pollution Control, Illinois Power, Ser A, RB, VRDN (C) (E) 3.400%, 06/02/99 5,000 5,000 State, Educational Facilities Authority, Chicago Children's Museum, RB, VRDN (C) (D) (E) 3.250%, 06/02/99 1,600 1,600 State, Educational Facilities Authority, Museum of Science and Industry, RB, VRDN (C) (E) 3.250%, 06/03/99 5,600 5,600 State, Educational Facilities Authority, RB, VRDN, (C) (E) 3.370%, 06/03/99 9,900 9,903 State, Health Facilities Authority, Advocate Healthcare, Ser B, RB, VRDN (C) (D) 3.300%, 06/02/99 2,900 2,900 State, Health Facilities Authority, Proctor Hospital Project, RB, VRDN (C) 3.250%, 06/02/99 5,400 5,400
15 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- State, Health Facilities Authority, Streeterville Corporation, RB, VRDN (C) (D) (E) 3.250%, 06/02/99 $ 2,000 $ 2,000 State, Health Facilities Authority, Streeterville Corporation, Ser A, RB, VRDN (C) (E) 3.250%, 06/02/99 3,500 3,500 State, Health Facilities Authority, University of Chicago Hospital Project, Ser C, RB, VRDN (MBIA) (C) (D) 3.200%, 06/02/99 4,000 4,000 Wheeling, Industrial Development Circuit Service Project, RB, VRDN (C) (E) 3.420%, 06/03/99 2,800 2,800 -------- 63,678 -------- INDIANA (4.0%) Elkhart County, Economic Development, Godfrey Conveyor, RB, VRDN, AMT (C) 3.500%, 06/02/99 1,900 1,900 Elkhart County, Economic Development, Holly Park, RB, AMT, VRDN (C) (D) (E) 3.500%, 06/02/99 2,100 2,100 Fort Wayne, Economic Development Authority, ND Tech Project, RB, VRDN, AMT (C) (D) (E) 3.400%, 06/02/99 1,000 1,000 Indiana State, Educational Facilities Authority, Indiana Wesleyan Project, Ser B, RB, VRDN (C) 3.300%, 06/01/99 2,500 2,500 Indianapolis, Industrial Economic Development Authority, Allied Signal, RB, VRDN (C) (D) 3.400%, 06/02/99 3,500 3,500
- --------------------------------------------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- Indianapolis, Local Public Improvements, Ser G, RB 3.500%, 08/15/99 $ 5,000 $ 5,005 Indianapolis, Local Public Improvements, Ser B, RB (MBIA) 3.350%, 06/01/00 1,550 1,550 Indianapolis, Multi-Family Housing, RB, VRDN, AMT (C) (D) (E) 3.500%, 06/02/99 2,700 2,700 Jasper, Economic Development, Wabash Valley Produce Project, RB, AMT, VRDN (C) (E) 3.420%, 06/03/99 2,000 2,000 La Porte County, Economic Development Revenue, Pedcor Investments-Woodland, RB, VRDN, AMT (C) 3.350%, 06/03/99 2,000 2,000 Michigan City, Industrial Economic Development, Performance Packaging, RB, VRDN, AMT (C) (D) (E) 3.550%, 06/02/99 800 800 State, Development Financial Authority, Culver Educational Facilities, RB, VRDN (C) (E) 3.250%, 06/02/99 2,000 2,000 State, Development Financial Authority, Dekko International Project, RB, VRDN (C) (D) (E) 3.420%, 06/02/99 430 430 State, Development Financial Authority, Educational Facility, Indiana Historical Society, RB, VRDN (C) (E) 3.250%, 06/02/99 1,200 1,200
16
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- State, Health Facility Financing Authority, Clarian Health Partners, Ser B, RB, VRDN (C) (D) 3.200%, 06/02/99 $ 2,000 $ 2,000 -------- 30,685 -------- IOWA (0.4%) Davenport, Ser C, GO 4.375%, 06/01/99 465 465 West Des Moines, Commercial Development, Greyhound Lines Project, RB, VRDN (C) (D) (E) 3.300%, 06/02/99 2,500 2,500 -------- 2,965 -------- KANSAS (0.1%) Johnson County, School District Number 229, Ser B, GO 4.250%, 09/01/99 1,000 1,003 -------- KENTUCKY (1.7%) Clark County, Pollution Control, RB, VRDN (C) (D) (E) 3.100%, 10/15/99 2,500 2,500 Jefferson County, Industrial Building, Fisher-Klosterman Project, RB, VRDN, AMT (C) (D) (E) 3.420%, 06/03/99 2,170 2,170 State, Asset/Liability Commission, General Fund Revenue, TRAN 3.500%, 11/01/99 4,000 4,009 State, Higher Education Student Loan, Ser B, RB, AMT 6.400%, 12/01/99 4,125 4,191 -------- 12,870 -------- LOUISIANA (3.0%) Calcasieu Parish, Industrial Development Board, Hydroserve Westlake, RB, AMT, VRDN (C) (E) 3.450%, 06/02/99 5,000 5,000
- --------------------------------------------------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- Plaquemines, TECP 3.100%, 06/09/99 $ 5,500 $ 5,500 State, Eagle Trust 3.340%, 06/03/99 8,000 8,000 State, Offshore Terminal Authority, Deepwater Port, First Stage A-Loop Project, Ser A, RB, VRDN (C) (D) (E) 3.200%,06/02/99 2,000 2,000 State, Public Facilites Authority, Pollution Control, Ciba-Geigy Project, RB, VRDN (C) 3.200%, 06/02/99 2,400 2,400 -------- 22,900 -------- MARYLAND (2.1%) Baltimore County, Allied Signal Project, VRDN (C) (D) (E) 3.350%, 06/02/99 1,000 1,000 State, Community Development, Department Housing & Community, RB, AMT (FHA) 3.100%, 01/13/00 4,655 4,655 State, Department of Transportation, RB, Prerefunded at 100.75 6.600%, 11/01/99 1,885 1,927 State, Department of Transportation, RB, Prerefunded at 101 6.700%, 11/01/99 3,250 3,332 University of Maryland, Revolving Equipment Loan Program, Ser B, RB, VRDN (C) (E) 3.300%, 06/02/99 4,100 4,100 Washington Suburban, General Construction, GO Prerefunded at 102 6.750%, 12/01/99 1,400 1,453 -------- 16,467 --------
17 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- MICHIGAN (1.9%) Oakland County, Economic Development Authority, Moody Family Limited Project, RB, VRDN, AMT (C) (E) 3.500%, 06/02/99 $ 900 $ 900 State, Building Authority Revenue, Facilities Program Ser I, RB 4.500%, 10/01/99 2,200 2,211 State, Housing Development Authority, RB, VRDN, AMT (C) (D) (E) 3.350%, 06/02/99 1,000 1,000 State, Industrial Development Authority, RB, VRDN (C) (D) (E) 3.300%, 06/01/99 3,000 3,000 State, Municipal Bond Authority, School Loan, RB 3.500%, 12/01/99 2,000 2,006 State, Municipal Bond Authority, Ser B-1, RB 4.500%, 07/02/99 1,000 1,001 State Recreation Program, GO 5.500%, 11/01/99 2,000 2,021 State, Strategic Fund, Consolidated Industrial Project, RB, AMT, VRDN (C) (E) 3.500%, 06/02/99 2,500 2,500 -------- 14,639 -------- MISSISSIPPI (2.3%) State, Business Finance, Solid Waste Disposal Revenue, Choctaw Generation, RB, VRDN (C) 3.350%, 06/02/99 3,000 3,000 State, Government Bond, Ser B, GO 4.250%, 08/01/99 4,515 4,519 State, Hospital Equipment & Facilities, TECP 2.800%, 06/15/99 10,000 10,000 -------- 17,519 --------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- MISSOURI (0.9%) Carthage, Industrial Development Authority, Schrieber Project, RB, VRDN, AMT (C) (D) (E) 3.400%, 06/02/99 $ 3,100 $ 3,100 Saint Charles County, Industrial Development Authority, Casalon Apartment Project, Ser 95, RB, VRDN (C) (D) (E) 3.200%, 06/03/99 3,100 3,100 State, Environmental Improvement & Energy Resource Authority, Utilicorp United Project, RB, VRDN, AMT (C) (D) (E) 3.400%, 06/02/99 700 700 -------- 6,900 -------- NEBRASKA (0.3%) American Public Energy Agency, Gas Supply Revenue, Public Gas Agency, Ser C, RB 3.350%, 09/01/99 655 655 Investment Finance Authority, Single-Family Mortgage, Ser B, RB, VRDN (FGIC) (C) (D) 3.000%, 07/15/99 1,825 1,825 -------- 2,480 -------- NEVADA (3.1%) Clark County, Airport Improvement Authority, Ser A-1, RB, VRDN (C) (D) (E) 3.150%, 06/02/99 4,200 4,200 Clark County, Industrial Development, RB, VRDN, (C) 3.470%, 06/03/99 6,495 6,495 Clark County, Nevada Airport Improvement Ser A-1, RB, VRDN, AMT, (C) (E) 3.450%, 06/02/99 5,090 5,090
18
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Clark County, School District, RB, VRDN (C) 3.340%, 06/03/99 $ 8,345 $ 8,345 -------- 24,130 -------- NEW HAMPSHIRE (0.6%) State, Housing Finance Authority, Multi-Family Housing, Fairways Project, RB, VRDN, AMT (C) (D) (E) 3.450%, 06/02/99 5,000 5,000 -------- NEW JERSEY (0.4%) Parsippany, Troy Hills Township, GO 4.500%, 12/01/99 1,055 1,063 State, Ser D, GO (D) 5.100%, 08/15/99 2,000 2,029 -------- 3,092 -------- NEW MEXICO (0.8%) Farmington, Pollution Control, RB, VRDN (C) 3.250%, 11/04/99 4,785 4,785 State, Mortgage Financial Authority, Ser B, RB, VRDN (C) 3.000%, 07/01/99 1,700 1,700 -------- 6,485 -------- NEW YORK (4.5%) Long Island Power, TECP 2.800%, 08/12/99 3,000 3,000 New York, GO, VRDN, (C) (E) 3.400%, 06/01/99 7,000 7,000 New York, Industrial Development Special Facility, Korean Airlines Co. Project, Ser A , RB, VRDN, (C) (E) 3.200%, 06/02/99 3,000 3,000 New York, Ser J, RB, GO 5.500%, 07/01/99 1,000 1,002
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Southeast Industrial Development, Unilock Project, RB, VRDN, AMT (C) (D) (E) 3.400%, 06/02/99 $ 2,200 $ 2,200 State, Urban Development Corporation, Senior Lien, RB, VRDN (C) 3.300%, 06/03/99 12,155 12,155 Suffolk County, Tax Anticipation Notes, Ser I, RB 3.500%, 08/12/99 6,000 6,006 -------- 34,363 -------- NORTH CAROLINA (2.5%) Cleveland County, Family YMCA, Recreational Facilities Revenue, RB, VRDN (B) (C) 3.350%, 06/02/99 3,000 3,000 Mecklenburg County, Industrial Facilities & Pollution Control, Sterigenics International Project, RB, VRDN, AMT (C) (D) (E) 3.400%, 06/02/99 1,800 1,800 Mecklenburg County, Ser C, GO, VRDN (C) 3.200%, 06/02/99 5,000 5,000 State, Educational Facilities Catawba College, RB, VRDN (C) (E) 3.250%, 06/02/99 2,000 2,000 State, Educational Facilities, Guilford College, RB, VRDN (C) (D) (E) 3.300%, 06/02/99 2,200 2,200 State, GO, VRDN (C) 3.320%, 06/03/99 5,340 5,340 -------- 19,340 -------- OHIO (3.6%) Lorain County, Catholic Healthcare, TECP 3.000%, 06/08/99 7,000 7,000
19 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- State, Air Quality Development Authority, JMG Limited Partnership, Ser A, RB, VRDN, AMT (D) (E) 3.400%, 06/02/99 $ 3,000 $ 3,000 State, Air Quality Development Authority, Edison Project, Ser A, RB, VRDN (C) (D) (E) 2.950%, 06/07/99 8,000 8,000 State, GO 5.400%, 08/01/99 1,000 1,004 State, Pollution Control Authority, Duquesne Project, RB, VRDN, AMT (C) (D) (E) 3.350%, 06/02/99 3,000 3,000 Warrren County, Health Care Facilities Revenue, RB, VRDN (C) 3.250%, 06/02/99 5,700 5,700 -------- 27,704 -------- OREGON (0.8%) State, Ser 73, GO, VRDN (C) (E) 3.200%, 06/02/99 6,000 6,000 -------- PENNSYLVANIA (4.5%) Beaver County, Industrial Development Authority, Duquesne Light Company Project, Ser B, RB, VRDN (C) (D) 3.250%, 06/02/99 1,000 1,000 Cambria County, Industrial Development Authority, Cambria Cogeneration, Ser A-1, RB, AMT, VRDN (C) (D) (E) 3.250%, 06/02/99 10,000 10,000 Geisinger Authority, Health System, Penn State, RB 4.500%, 06/03/99 1,000 1,002 Philadelphia, School District, Tax & Anticipation Notes, Ser A, RB 4.250%, 06/30/99 1,500 1,501
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Philadelphia, Tax & Anticipation Notes, Ser A, GO 4.250%, 06/30/99 $ 5,000 $ 5,002 State, Intergovernmental Cooperation Authority, Special Tax Revenue, RB, VRDN (C) 2.900%, 06/15/99 9,630 9,630 State, Ser A, RB, VRDN (C) (D) 3.340%, 06/03/99 6,830 6,830 -------- 34,965 -------- RHODE ISLAND (0.9%) State, GO, VRDN (C) 3.320%, 06/03/99 6,635 6,635 -------- SOUTH CAROLINA (1.5%) Piedmont, Municipal Power Agency, Electrical Revenue, Ser D, RB, VRDN (C) 3.200%, 06/02/99 3,100 3,100 State, Economic Development Authority, Kiswire Project, RB, AMT, VRDN (C) (D) (E) 3.500%, 06/03/99 3,000 3,000 State, Public Service Authority, TECP 3.150%, 06/17/99 4,000 4,000 State, Public Service Authority, Ser A, RB 4.500%, 01/01/00 1,500 1,513 -------- 11,613 -------- TENNESSEE (5.7%) Covington, Industrial Development Board, Charms Project, RB, VRDN, AMT (C) (D) (E) 3.400%, 06/02/99 3,000 3,000 Hamilton County, Industrial Development Board, Tennessee Aquarium Project, RB, VRDN (C) (D) (E) 3.250%, 06/03/99 3,000 3,000 Jackson County, TECP 2.900%, 06/10/99 10,000 10,000
20
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Jackson, Water & Sewer, RB, Prerefunded @ 102 (AMBAC) (D) (E) 10.375%, 07/01/99 $ 1,500 $ 1,539 Lower County, River Authority, TECP 2.850%, 06/08/99 5,000 5,000 Memphis-Shelby County, Industrial Development Board, Ponderosa Fibres American Project, RB, AMT, VRDN (C) (D) (E) 3.350%, 06/03/99 1,200 1,200 Nashville & Davidson County, Industrial Development Authority, Multi-Family Mortgage, Chimneytop II Project, RB, VRDN (C) (D) (E) 3.400%, 06/02/99 1,325 1,325 Nashville & Davidson County, Vanderbilt University, RB, VRDN (C) (D) 3.100%, 07/15/99 7,000 7,000 State, Ser A, Anticipation Notes, VRDN (C) (E) 3.150%, 06/02/99 8,000 8,000 State, Ser 108, GO 3.370%, 06/03/99 2,500 2,500 State, School Bond Authority, TECP 3.000%, 06/16/99 1,400 1,400 -------- 43,964 -------- TEXAS (9.9%) Austin, Convention Center Revenue, Ser B, RB, Prerefunded @ 102 (D) (E) 8.250%, 11/15/99 4,100 4,277 Brazos, River Authority, TECP 2.800%, 06/10/99 6,000 6,000 Dallas, GO 5.500%, 02/15/00 2,105 2,140 Dallas, Rapid Transit, TECP 2.950%, 06/10/99 3,600 3,600
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Fort Worth, Water & Sewer, Ser B, RB 5.875%, 02/15/00 $ 1,325 $ 1,351 Georgetown, Higher Education Financing Authority, Southwestern University Project, Ser 1984, RB, VRDN (C) (D) (E) 3.250%, 06/02/99 2,000 2,000 Gulf Coast, Waste Disposal, Texwater Pollution Control, RB, VRDN (C) (D) 3.000%, 07/15/99 8,280 8,280 Harris County, Health Facilities Authority, Memorial Hospital Project, Ser B, RB, VRDN (C) (D) 3.150%, 06/02/99 2,600 2,600 Harris County, Industrial Development Authority, Lubrizol Project, RB, VRDN (C) (D) 3.150%, 06/02/99 1,600 1,600 Houston, Water & Sewer, RB, VRDN (FGIC) (C) (E) (D) 3.050%, 06/01/99 8,835 8,835 Lone Star, Airport Improvement Authority, RB, VRDN (C) (D) (E) 3.250%, 06/01/99 1,700 1,700 San Antonio, Electric & Gas, RB (MBIA) 6.375%, 02/01/00 1,350 1,380 Southwest Higher Education Authority, Southern Methodist University Project B, RB, VRDN (C) (E) 3.200%, 06/02/99 5,000 5,000 State, College Student Loan, GO, AMT 5.100%, 08/01/99 1,000 1,003
21 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-EXEMPT MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- State, Public Facilities, RB, VRDN (C) 3.340%, 06/03/99 $ 7,180 $ 7,180 State, RB, VRDN (C) (D) 3.450%, 06/03/99 4,935 4,935 State, Public Finance Authority, State Preservation Board, Ser A, RB (AMBAC) 4.250%, 02/01/00 1,200 1,209 State, TRAN 4.500%, 08/31/99 10,000 10,039 University of Houston, RB 5.500%, 02/15/00 2,850 2,898 -------- 76,027 -------- UTAH (2.8%) State, Housing Finance Agency, RB, VRDN, AMT (C) 3.100%, 07/01/99 8,600 8,600 State, Housing Finance Agency, RB, VRDN (C) (D) (E) 3.100%, 07/01/99 11,135 11,135 Utah County, Utah Environmental Impact, USX Corporate Project, RB, VRDN (C) 3.000%, 06/01/99 2,000 2,000 -------- 21,735 -------- VIRGINIA (3.3%) Braxton County, Solid Waste Disposal, Weyerhaeuser Co. Project, RB, VRDN, AMT (C) (E) 3.300%, 06/02/99 7,650 7,650 Chesterfield County, Industrial Development Authority, Allied Signal Project, RB, VRDN (C) 3.400%, 06/02/99 3,000 3,000 Front Royal & Warren County, Industrial Development Authority, Pen Tab Industries Project, RB, VRDN, AMT (C) (D) (E) 3.300%, 06/03/99 2,700 2,700
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Prince George County, Industrial Development Authority, Industrial Development Revenue, RB, VRDN, AMT (C) 3.470%, 06/03/99 $ 5,000 $ 5,000 State, College Building Authority, Educational Facilities, Leasing program, RB 4.250%, 02/01/00 6,610 6,664 -------- 25,014 -------- WASHINGTON (3.4%) Pierce County, Washington Economic Development, Weyerhaeuser Real Estate Project, RB, VRDN (C) (D) (E) 3.250%, 06/02/99 3,000 3,000 Port of Seattle, VRDN (C) (D) 3.350%, 06/02/99 1,200 1,200 Seattle, Water Systems Revenue, RB, VRDN (C) 3.350%, 06/02/99 4,200 4,200 South Columbia Basin, RB 5.700%, 12/01/99 1,000 1,013 State, Public Power Supply System, Nuclear Project No. 1, Ser 1A-3, RB, VRDN (C) (D) (E) 3.200%, 06/02/99 3,300 3,300 State, Public Power Supply System, Nuclear Project No. 1, Ser 1A-1, RB, VRDN (C) (D) (E) 3.300%, 06/02/99 4,725 4,725 State, Public Power Supply System, Nuclear Project No. 3, Ser 3A, RB, VRDN (MBIA) (C) (D) 3.000%, 06/01/99 5,000 5,000 State, GO, VRDN (C) (D) (E) 3.200%, 12/09/99 3,335 3,335 -------- 25,773 --------
22
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- WEST VIRGINIA (0.5%) Marshall County, Pollution Control Authority, Allied Signal Project, RB, VRDN (C) (D) 3.400%, 06/02/99 $ 2,000 $ 2,000 Marshall County, Pollution Control Authority, PPG Industries Project, RB, VRDN (C) (D) 3.550%, 06/03/99 2,000 2,000 -------- 4,000 -------- WISCONSIN (0.9%) Appleton, Industrial Development Revenue, Pro Lable Project, RB, VRDN, AMT (C) 3.520%, 06/02/99 950 950 Germantown, Industrial Revenue, Speaker Project, RB, VRDN, AMT (C) 3.520%, 06/03/99 905 905 Holland, Industrial Development Revenue, White Clover Dairy Project, RB, VRDN, AMT (C) 3.420%, 06/02/99 1,500 1,500 Oconomowoc, Industrial Development Revenue, Quest Technologies Project, RB, VRDN, AMT (C) 3.420%, 06/02/99 1,550 1,550 Wisconsin, Health Facilities, Saint Lukes Medical Center, RB, VRDN (C) (D) (E) 3.250%, 06/02/99 1,840 1,840 -------- 6,745 --------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- WYOMING (0.6%) Sweetwater, RB, VRDN (C) 3.200%, 06/01/99 $ 4,600 $ 4,600 -------- Total Municipal Bonds (Cost $765,558) 765,558 -------- CASH EQUIVALENT (0.3%) SEI Tax-Exempt Trust Institutional Tax-Free Portfolio 2,227 2,227 -------- Total Cash Equivalent (Cost $2,227) 2,227 -------- Total Investments (99.7%) (Cost $767,785) 767,785 -------- OTHER ASSETS AND LIABILITIES, NET (0.3%) 2,709 -------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 641,639,113 outstanding shares of beneficial interest 641,639 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 128,859,463 outstanding shares of beneficial interest 128,860 Accumulated net realized loss on investments (5) -------- Total Net Assets 100.0% $770,494 -------- -------- Net Asset Value, Offering and Redemption Price Per Share --Trust Shares $ 1.00 -------- -------- Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $ 1.00 --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 31. 23 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-FREE MONEY MARKET FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- MUNICIPAL BONDS (96.9%) COLORADO (1.3%) Denver, Public Facility Improvements, Major League Baseball Stadium Project, Ser A, RB (FGIC) 5.900%, 10/01/99 $ 3,500 $ 3,529 -------- DISTRICT OF COLUMBIA (2.7%) District of Columbia, Healthcare Facility, St. John's Child Development Center, RB (C) 3.800%, 06/01/99 1,100 1,100 District of Columbia, RB (C) (E) 3.250%, 06/01/99 6,260 6,260 -------- 7,360 -------- GEORGIA (2.9%) State, COP (MBIA) (C) 3.320%, 06/03/99 8,000 8,000 -------- HAWAII (0.8%) State, Housing Finance & Development Authority, Single- Family Housing, RB, AMT (C) 3.420%, 07/01/99 2,250 2,250 -------- ILLINOIS (6.2%) Chicago, O'Hare International Airport, RB, AMT (C) 3.390%, 06/03/99 5,000 5,000 Chicago, Public Improvements, Ser C, GO (E) 3.050%, 10/31/99 5,000 5,000 State, Health Facility Authority, Swedish Covenant Hospital Project, RB (AMBAC) (C) 3.400%, 06/02/99 2,200 2,200 State, Toll Highway Authority, RB (FSA) (C) 3.250%, 06/03/99 5,000 5,000 -------- 17,200 --------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- KANSAS (0.9%) Johnson County, School Improvements, GO (AMBAC) 8.000%, 09/01/99 $ 2,525 $ 2,555 -------- LOUISIANA (2.8%) Jefferson Parish, Home Mortgage, RB (C) 3.390%, 06/03/99 7,720 7,720 -------- MARYLAND (4.2%) Montgomery County, Housing Opportunity Commission, Issue 1, RB, AMT (C) (E) 3.500%, 06/03/99 10,000 10,000 State, Health & Higher Educational Facilities Authority, Pooled Loan Project, Ser D, RB (C) (E) 3.200%, 06/03/99 1,675 1,675 -------- 11,675 -------- MICHIGAN (3.6%) Detroit, Sewer Disposal, Ser B, RB (MBIA) (C) 3.400%, 06/02/99 10,000 10,000 -------- NEW YORK (9.0%) Long Island, Power Authority, Electric System Project, RB (C) 3.430%, 06/03/99 4,000 4,000 New York City, GO (C) 3.340%, 06/03/99 11,960 11,960 New York City, Municipal Water Financing Authority, RB (FSA) (C) 3.320%, 06/03/99 9,000 9,000 -------- 24,960 -------- PENNSYLVANIA (11.1%) Emmaus, General Authority, RB (FSA) (C) 3.250%, 06/02/99 12,000 12,000 24 - -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - --------------------------------------------------------------------------------------------------------------------------- Philadelphia, Gas Works, RB (FSA) (C) 3.320%, 06/03/99 $ 3,635 $ 3,635 Philadelphia, Water & Wastewater, RB (AMBAC) (C) 3.320%, 06/03/99 7,000 7,000 Pittsburgh, GO (C) 3.320%, 06/03/99 8,000 8,000 -------- 30,635 -------- SOUTH CAROLINA (3.0%) Florence County, McLeod Regional Medical Center Project, Ser A, RB (FGIC) (C) (E) 3.250%, 06/03/99 8,200 8,200 -------- TENNESSEE (1.8%) Shelby County, Health, Educational & Housing Facilities, Multi-Family Housing, Ser A, RB, AMT (C) (E) 3.450%, 06/02/99 5,000 5,000 -------- TEXAS (7.6%) Houston, Water & Sewer System, RB (FGIC) (C) 3.320%, 06/03/99 5,000 5,000 Plano, TECP 2.950%, 06/16/99 7,000 7,000 San Antonio, Electric & Gas, RB, Partially Prerefunded 02/01/07 @ 101 (C) (E) 3.320%, 06/03/99 9,000 9,000 -------- 21,000 -------- VIRGINIA (35.4%) Alexandria, Industrial Development, Pooled Loan Project, Ser A, RB (C) (E) 3.250%, 06/02/99 2,875 2,875
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Alexandria, Industrial Development, Ser A, RB (C) 3.800%, 06/02/99 $ 3,500 $ 3,500 Almermarle County, Industrial Development, Health Services, RB (C) 3.250%, 06/02/99 4,400 4,400 Chesterfield, TECP 2.850%, 06/25/99 10,000 10,000 Fairfax County, Economic Development, Flint Hill School Project, RB (C) (E) 3.250%, 06/02/99 4,340 4,340 Fairfax County, Public Improvements, GO (C) 3.320%, 06/03/99 6,300 6,300 Hampton Roads, Regional Jail Authority, Ser B, RB (C) (E) 3.300%, 06/02/99 2,000 2,000 King George County, Industrial Development, Birchwood Power Partners, Ser B, RB (C) (E) 3.500%, 06/01/99 4,000 4,000 Louisa County, Industrial Development, RB (C) (E) 3.250%, 06/03/99 1,900 1,900 Norfolk, Industrial Development, Childrens Hospital Project, RB (C) (E) 3.250%, 06/01/99 4,000 4,000 Pulaski County, Industrial Development Authority, Pulaski Furniture Project, Ser A, RB (C) 3.800%, 06/02/99 4,219 4,219 Pulaski County, Industrial Development Authority, Pulaski Furniture Project, Ser B, RB (C) 3.800%, 06/02/99 500 500
25 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 TAX-FREE MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Richmond, BAN (C) 3.250%, 06/03/99 $ 570 $ 570 Richmond, Redevelopment & Housing Authority, Multi-Family Housing, RB (C) 3.420%, 06/03/99 13,000 13,000 Roanoke County, Industrial Development, Roanoke Memorial Hospital Project, Ser C, RB (C) (E) 3.200%, 06/02/99 2,000 2,000 State, College Building Authority, Public Higher Education Financing, Ser A, RB 3.150%, 09/01/99 1,850 1,850 State, Port Authority, RB, AMT (MBIA) (C) 3.390%, 06/03/99 10,100 10,100 State, Public Building Authority, RB 5.100%, 08/01/99 7,115 7,139 State, University & Hospital & Public Improvements, GO 5.000%, 06/02/99 2,000 2,035 Suffolk, Redevelopment & Housing Authority, Multi-Family Housing, Windsor Fieldstone Project, RB (C) 3.800%, 6/03/99 4,218 4,218 York County, TECP 2.800%, 06/25/99 8,800 8,800 -------- 97,746 -------- WASHINGTON (3.6%) Washington State, Public Power Supply System, Nuclear Project Number 1, RB, Prerefunded @ 100 6.000%, 07/01/99 10,000 10,019 -------- Total Municipal Bonds (Cost $267,849) 267,849 --------
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- CASH EQUIVALENTS (2.4%) Financial Square Tax Free Portfolio $ 6,003 $ 6,003 SEI Institutional Tax Free Portfolio 644 644 -------- Total Cash Equivalents (Cost $6,647) 6,647 -------- Total Investments (99.3% ) (Cost $274,496) 274,496 -------- OTHER ASSETS AND LIABILITIES, NET (0.7%) 1,890 -------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 270,461,831 outstanding shares of beneficial interest 270,439 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 5,955,089 outstanding shares of beneficial interest 5,955 Overdistributed net investment income (1) Accumulated net realized loss on investments (7) -------- Total Net Assets 100.0% $276,386 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $1.00 -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 31. 26 - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATION (10 8%) U.S. Treasury Note 5.500%, 02/29/00 $ 50,000 $ 50,256 -------- Total U.S. Treasury Obligation (Cost $50,256) 50,256 -------- GOVERNMENT AGENCY OBLIGATIONS (14.1%) Agency for International Development, Ser 5A 7.750%, 11/15/99 50,000 50,637 Agency for International Development (C) 4.756%, 11/15/99 15,000 14,976 -------- Total Government Agency Obligations (Cost $65,613) 65,613 -------- REPURCHASE AGREEMENTS (75.3%) Abn-Amro 4.80%, dated 05/28/99, matures 06/01/99, repurchse price $14,007,466 (collateralized by U.S. Treasury Note: total market value $14,280,482) (B) 14,000 14,000 Barclays 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $19,044,181 (collateralized by U.S. Treasury Note: total market value $19,414,792) (B) 19,034 19,034 Deutsche Bank 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $19,968,414 (collateralized by U.S. Treasury Note: total market value $20,356,970) (B) 19,958 19,958 Greenwich 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $20,020,513 (collateralized by U.S. Treasury Note: total market value $20,412,490) (B) 20,010 20,010
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- J.P. Morgan 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $110,917,235 (collateralized by a GNMA obligation: total market value $113,075,273) (B) $110,858 $110,858 Merrill Lynch 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $20,031,391 (collateralized by various GNMA obligations: total market value $20,424,265) (B) 20,021 20,021 Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $109,997,946 (collateralized by various GNMA obligations: total market value $113,740,112) (B) 109,939 109,939 Salomon Brothers 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $17,099,617 (collateralized by U.S. Treasury Note: total market value $17,446,918) (B) 17,091 17,091 SBC Warburg 4.80%, dated 05/28/99, matures 06/01/99, repurchase price $19,914,879 (collateralized by U.S. Treasury Note: total market value $20,306,494) (B) 19,904 19,904 -------- Total Repurchase Agreements (Cost $350,815) 350,815 -------- Total Investments (100.2%) (Cost $466,684) 466,684 -------- OTHER ASSETS AND LIABILITIES, NET (-0.2%) (753) --------
27 STATEMENTS OFNETASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 404,208,908 outstanding shares of beneficial interest $404,209 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 61,445,158 outstanding shares of beneficial interest 61,445 Undistributed net investment income 86 Accumulated net realized gain on investments 191 ------------ Total Net Assets 100.0% $465,931 ------------ ------------ Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ------------ ------------ Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $1.00 ------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 31. 28 - -------------------------------------------------------------------------------- U.S. TREASURY MONEY MARKET FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (28.3%) U.S. Treasury Bills 4.190%, 06/03/99 $ 50,000 $ 49,989 4.250%, 06/17/99 50,000 49,912 U.S. Treasury Notes 6.750%, 06/30/99 15,000 15,014 5.625%, 11/30/99 15,000 15,067 5.625%, 12/31/99 15,000 15,080 5.875%, 02/15/00 15,000 15,100 5.500%, 03/31/00 25,000 25,102 6.375%, 05/15/00 30,000 30,372 -------- Total U.S. Treasury Obligations (Cost $215,636) 215,636 -------- REPURCHASE AGREEMENTS (70.5%) ABN-AMRO 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $34,046,305 (collateralized by U.S. Treasury STRIPS: total market value $34,709,165) (B) 34,028 34,028 Barclays 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $29,219,675 (collateralized by U.S. Treasury Note: total market value $29,788,780) (B) 29,204 29,204 Deutsche Bank 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $179,292,640 (collateralized by various U.S. Treasury Bonds and Notes: total market value $182,782,325) (B) 179,198 179,198
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- Greenwich Bank 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $179,851,869 (collateralized by U.S. Treasury Note: total market value $183,353,384) (B) $179,757 $179,757 Merrill Lynch 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $20,014,602 (collateralized by U.S. Treasury STRIPS: total market value $20,404,674) (B) 20,004 20,004 Morgan Stanley 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $22,425,774 (collateralized by U.S. Treasury Note: total market value $22,870,506) (B) 22,414 22,414 J.P. Morgan 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $20,789,780 (collateralized by U.S. Treasury Note: total market value $21,195,355) (B) 20,779 20,779 Salomon 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $23,408,760 (collateralized by various U.S. Treasury Notes: total market value $23,869,853) (B) 23,396 23,396 SBC Warburg 4.77%, dated 05/28/99, matures 06/01/99, repurchase price $27,014,310 (collateralized by U.S. Treasury Bond: total market value $27,545,730) (B) 27,000 27,000 -------- Total Repurchase Agreements (Cost $535,780) 535,780 --------
29 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 U.S. TREASURY MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------------------------- VALUE (000) - -------------------------------------------------------------------------------- Total Investments (98.8%) (Cost $751,416) $751,416 -------- OTHER ASSETS AND LIABILITIES, NET (1.2%) 9,417 -------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 760,916,765 outstanding shares of beneficial interest 760,833 -------- Total Net Assets 100.0% $760,833 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 31. 30 KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS
AMBAC Security insured by the American Municipal Bond Assurance Corporation AMT Alternative Minimum Tax BAN Bond Anticipation Note Cl Class COP Certificate of Participation FGIC Security insured by the Financial Guaranty Insurance Company FFCB Federal Farm Credit Bank FHA Federal Housing Authority FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association FSA Security insured by Financial Securities Assurance GIC Guaranteed Investment Contract GNMA Government National Mortgage Association GO General Obligation MBIA Security insured by the Municipal Bond Insurance Association MTN Medium Term Note RB Revenue Bond Ser Series SLMA Student Loan Marketing Association STRIPS Separately Traded Registered Interest and Principal Security TECP Tax Exempt Commercial Paper TRAN Tax & Revenue Anticipation Note VRDN Variable Rate Demand Note
(A) Private Placement Security (B) Tri-Party Repurchase Agreement (C) Adjustable Rate Security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 1999. The date shown is the next scheduled reset date. (D) Put and demand features exist requiring the issuer to repurchase the instrument prior to maturity. (E) Securities are held in connection with a letter of credit issued by a major bank. (F) The contract has no stated maturity date, but may be terminated unconditionally by the Fund at anytime upon at least 7 days notice to the issuer. 31 STATEMENT OF OPERATIONS (000) - -------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1999 AND NOVEMBER 30, 1998
TAX-EXEMPT TAX-FREE U.S. GOVERNMENT PRIME QUALITY MONEY MONEY SECURITIES U.S. TREASURY MONEY MARKET MARKET MARKET MONEY MARKET MONEY FUND FUND FUND FUND MARKET FUND --------- --------------------------------------------------- --------------------- 06/01/98- 06/01/98- 12/01/98 12/01/97 06/01/98- 12/01/98 12/01/97 05/31/99 05/31/99 05/31/99 11/30/98 05/31/99 05/31/99 11/30/98 --------- --------- --------- --------- --------- --------- --------- Interest Income $ 142,719 $ 24,519 $ 4,823 $ 8,624 $ 23,472 $ 18,000 $ 33,565 --------- --------- --------- --------- --------- --------- --------- Expenses: Investment Advisory Fees 17,531 4,122 607 963 2,992 1,486 2,412 Less: Investment Advisory Fees Waived (4,356) (1,057) (3) -- (607) (21) -- Administrator Fees 2,093 584 222 361 359 550 927 Less: Administrator Fees Waived (250) -- -- -- (3) -- -- Transfer Agent Fees-- Trust Shares 18 14 73 121 13 183 309 Transfer Agent Fees-- Investor Shares 19 17 -- -- 33 -- -- Transfer Agent Out of Pocket Fees 291 77 1 -- 55 1 -- Printing Expenses 142 32 12 9 46 27 24 Custody Fees 73 15 56 95 11 143 230 Professional Fees 164 41 35 24 23 103 65 Trustee Fees 29 11 2 3 2 5 9 Registration Fees 414 49 7 21 6 27 68 Distribution Fees-- Trust Shares -- -- 213 349 -- 539 927 Less: Distribution Fees Waived -- Trust Shares -- -- (213) (349) -- (539) (927) Distribution Fees-- Investor Shares 1,157 214 14 33 104 -- -- Less: Distribution Fees Waived -- Investor Shares (188) (58) (14) (33) (49) -- -- Insurance and Other Fees 39 4 5 3 -- 59 40 --------- --------- --------- --------- --------- --------- --------- Total Expenses 17,176 4,065 1,017 1,600 2,985 2,563 4,084 --------- --------- --------- --------- --------- --------- --------- Net Investment Income 125,543 20,454 3,806 7,024 20,487 15,437 29,481 --------- --------- --------- --------- --------- --------- --------- Net Realized Gain (Loss) on Securities Sold (19) (1) 2 (9) 191 -- -- --------- --------- --------- --------- --------- --------- --------- Net Increase in Net Assets from Operations $ 125,524 $ 20,453 $ 3,808 $ 7,015 $ 20,678 $ 15,437 $ 29,481 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 32 STATEMENT OF CHANGES IN NET ASSETS (000) - -------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIOD ENDED NOVEMBER 30, AND THE YEAR ENDED MAY 31,
PRIME QUALITY TAX-EXEMPT TAX-FREE MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND --------------------------------------------------------------------------------------- 06/01/98- 06/01/97- 06/01/98- 06/01/97- 12/01/98- 12/01/97- 12/01/96- 05/31/99 05/31/98 05/31/99 05/31/98 05/31/99 11/30/98 11/30/97 --------------------------------------------------------------------------------------- Operations: Net Investment Income ................... $ 125,543 $ 95,132 $ 20,454 $ 17,568 $ 3,806 $ 7,024 $ 6,505 Net Realized Gain (Loss) on Investments (19) 50 (1) -- 2 (9) 3 ----------- ----------- --------- ---------- --------- --------- --------- Increase in Net Assets from Operations ................. 125,524 95,182 20,453 17,568 3,808 7,015 6,508 ----------- ----------- --------- ---------- --------- --------- --------- Distributions to Shareholders: Net Investment Income: Trust Shares ........................ (99,427) (77,500 (16,665) (13,717) (3,739) (6,778) (6,352) Investor Shares ..................... (26,132) (17,632) (3,788) (3,852) (91) (239) (161) ----------- ----------- --------- ---------- --------- --------- --------- Total Distributions ............... (125,559) (95,132) (20,453) (17,569) (3,830) (7,017) (6,513) ----------- ----------- --------- ---------- --------- --------- --------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ......... 4,698,805 3,915,486 984,432 1,039,352 246,896 369,536 393,449 Shares Issued in Connection with Crestar Merger .................... 1,179,761 -- -- -- -- -- -- Reinvestment of Cash Distributions .. 4,306 3,699 -- -- -- -- -- Cost of Shares Redeemed ............. (3,859,828) (3,125,552) (790,815) (924,334) (247,343) (325,471) (348,927) ----------- ----------- --------- ---------- --------- --------- --------- Increase (Decrease) in Net Assets From Trust Share Transactions .......... 2,023,044 793,633 193,617 115,018 (447) 44,065 44,522 ----------- ----------- --------- ---------- --------- --------- --------- Investor Shares: Proceeds from Shares Issued ......... 1,199,739 806,517 356,214 346,323 5,749 22,060 16,177 Shares Issued in Connection with Crestar Merger .................... 187,089 -- -- -- -- -- -- Reinvestment of Cash Distributions .. 24,846 15,979 3,497 3,314 110 237 144 Cost of Shares Redeemed ............. (905,401) (694,228) (365,395) (317,112) (8,754) (21,081) (11,681) ----------- ----------- --------- ---------- --------- --------- --------- Increase (Decrease) in Net Assets From Investor Share Transactions ......... 506,273 128,268 (5,684) 32,525 (2,895) 1,216 4,640 ----------- ----------- --------- ---------- --------- --------- --------- Increase (Decrease) in Net Assets From Share Transactions ........... 2,529,317 921,901 187,933 147,543 (3,342) 45,281 49,162 ----------- ----------- --------- ---------- --------- --------- --------- Total Increase (Decrease) in Net Assets ...................... 2,529,282 921,951 187,933 147,542 (3,364) 45,279 49,157 ----------- ----------- --------- ---------- --------- --------- --------- Net Assets: Beginning of Period ................... 2,292,050 1,370,099 582,561 435,019 279,750 234,471 185,314 ----------- ----------- --------- ---------- --------- --------- --------- End of Period ......................... $ 4,821,332 $ 2,292,050 $ 770,494 $ 582,561 $ 276,386 $ 279,750 $ 234,471 ----------- ----------- --------- ---------- --------- --------- --------- ----------- ----------- --------- ---------- --------- --------- --------- (1) Shares Issued and Redeemed: Trust Shares: Shares Issued ....................... 4,698,805 3,915,486 984,432 1,039,352 246,896 369,536 393,449 Shares Issued in Connection with Crestar Merger .................... 1,179,840 -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ................ 4,306 3,699 -- -- -- -- -- Shares Redeemed ..................... (3,859,828) (3,125,552) (790,815) (924,334) (247,343) (325,471) (348,927) ----------- ----------- --------- ---------- --------- --------- --------- ----------- ----------- --------- ---------- --------- --------- --------- Net Trust Share Transactions ...... 2,023,123 793,633 193,617 115,018 (447) 44,065 44,522 ----------- ----------- --------- ---------- --------- --------- --------- Investor Shares: Shares Issued ....................... 1,199,740 806,517 356,214 346,323 5,749 22,060 16,177 Shares Issued in Connection with Crestar Merger .................... 187,089 -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ............. 24,846 15,979 3,497 3,314 110 237 144 Shares Redeemed ..................... (905,433) (694,228) (365,395) (317,112) (8,754) (21,081) (11,681) ----------- ----------- --------- ---------- --------- --------- --------- Net Investor Share Transactions ... 506,242 128,268 (5,684) 32,525 (2,895) 1,216 4,640 ----------- ----------- --------- ---------- --------- --------- --------- Net Change in Capital Shares ...... 2,529,365 921,901 187,933 32,525 (3,342) 45,281 49,162 ----------- ----------- --------- ---------- --------- --------- ---------
U.S. GOVERNMENT U.S. TREASURY SECURITIES SECURITIES MONEY MARKET FUND MONEY MARKET FUND ------------------------------------------------------------ 06/01/98- 06/01/97- 12/01/98- 12/01/97- 12/01/96- 05/31/99 05/31/98 05/31/99 11/30/98 11/30/97 ------------------------------------------------------------ Operations: Net Investment Income ................... $ 20,487 $ 19,342 $ 15,437 $ 29,481 $ 24,451 Net Realized Gain (Loss) on Investments 191 146 -- -- -- --------- --------- --------- ----------- ----------- Increase in Net Assets from Operations ................. 20,678 19,488 15,437 29,481 24,451 --------- --------- --------- ----------- ----------- Distributions to Shareholders: Net Investment Income: Trust Shares ........................ (17,844) (16,621) (15,522) (29,476) (24,456) Investor Shares ..................... (2,641) (2,723) -- -- -- --------- --------- --------- ----------- ----------- Total Distributions ............... (20,485) (19,344) (15,522) (29,476) (24,456) --------- --------- --------- ----------- ----------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ......... 739,766 776,773 681,589 1,131,937 1,251,595 Shares Issued in Connection with Crestar Merger .................... -- -- -- -- -- Reinvestment of Cash Distributions .. 1,170 380 1 4 146 Cost of Shares Redeemed ............. (714,135) (744,136) (620,595) (1,064,404) (1,008,406) --------- --------- --------- ----------- ----------- Increase (Decrease) in Net Assets From Trust Share Transactions .......... 26,801 33,017 60,995 67,537 243,335 --------- --------- --------- ----------- ----------- Investor Shares: Proceeds from Shares Issued ......... 294,871 178,312 -- -- -- Shares Issued in Connection with Crestar Merger .................... -- -- -- -- -- Reinvestment of Cash Distributions .. 2,578 2,600 -- -- -- Cost of Shares Redeemed ............. (294,755) (185,358) -- -- -- --------- --------- --------- ----------- ----------- Increase (Decrease) in Net Assets From Investor Share Transactions ........ 2,694 (4,446) -- -- -- --------- --------- --------- ----------- ----------- Increase (Decrease) in Net Assets From Share Transactions ........... 29,495 28,571 60,995 67,537 243,335 --------- --------- --------- ----------- ----------- Total Increase (Decrease) in Net Assets ...................... 29,688 28,715 60,910 67,542 243,330 --------- --------- --------- ----------- ----------- Net Assets: Beginning of Period ................... 436,243 407,528 699,923 632,381 389,051 --------- --------- --------- ----------- ----------- End of Period ......................... $ 465,931 $ 436,243 $ 760,833 $ 699,923 $ 632,381 --------- --------- --------- ----------- ----------- --------- --------- --------- ----------- ----------- (1) Shares Issued and Redeemed: Trust Shares: Shares Issued ....................... 739,766 776,773 681,589 1,131,937 1,251,595 Shares Issued in Connection with Crestar Merger .................... -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ................ 1,170 380 1 4 146 Shares Redeemed ..................... (714,135) (744,136) (620,595) (1,064,404) (1,008,406) --------- --------- --------- ----------- ----------- Net Trust Share Transactions ...... 26,801 33,017 60,995 67,537 243,335 --------- --------- --------- ----------- ----------- Investor Shares: Shares Issued ....................... 294,871 178,312 -- -- -- Shares Issued in Connection with Crestar Merger .................... -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ............. 2,578 2,600 -- -- -- Shares Redeemed ..................... (294,755) (185,358) -- -- -- --------- --------- --------- ----------- ----------- Net Investor Share Transactions ... 2,694 (4,446) 60,995 67,537 243,335 --------- --------- --------- ----------- ----------- Net Change in Capital Shares ...... 29,495 28,571 60,995 67,537 243,335 --------- --------- --------- ----------- -----------
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 33 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET NET ASSET NET ASSET VALUE INVESTMENT DISTRIBUTIONS FROM VALUE END TOTAL BEGINNING OF PERIOD INCOME NET INVESTMENT INCOME OF PERIOD RETURN+ ------------------ ---------- --------------------- ---------- ------- PRIME QUALITY MONEY MARKET FUND Trust Shares 1999 $ 1.00 $ 0.05 $ (0.05) $ 1.00 4.83% 1998 1.00 0.05 (0.05) 1.00 5.22% 1997 1.00 0.05 (0.05) 1.00 5.01% 1996 1.00 0.05 (0.05) 1.00 5.25% 1995 1.00 0.05 (0.05) 1.00 4.79% Investor Shares 1999 $ 1.00 $ 0.05 $ (0.05) $ 1.00 4.66% 1998 1.00 0.05 (0.05) 1.00 5.04% 1997 1.00 0.05 (0.05) 1.00 4.84% 1996 1.00 0.05 (0.05) 1.00 5.08% 1995 1.00 0.05 (0.05) 1.00 4.62% TAX EXEMPT MONEY MARKET FUND Trust Shares 1999 $ 1.00 $ 0.03 $ (0.03) $ 1.00 2.81% 1998 1.00 0.03 (0.03) 1.00 3.21% 1997 1.00 0.03 (0.03) 1.00 3.09% 1996 1.00 0.03 (0.03) 1.00 3.28% 1995 1.00 0.03 (0.03) 1.00 3.10% Investor Shares 1999 $ 1.00 $ 0.03 $ (0.03) $ 1.00 2.69% 1998 1.00 0.03 (0.03) 1.00 3.09% 1997 1.00 0.03 (0.03) 1.00 2.97% 1996 1.00 0.03 (0.03) 1.00 3.16% 1995 1.00 0.03 (0.03) 1.00 3.00% TAX-FREE MONEY MARKET FUND (A) Trust Shares 1999* $ 1.00 $ 0.01 $ (0.01) $ 1.00 1.27% For the Year Ended November 30: 1998 1.00 0.03 (0.03) 1.00 2.97% 1997 1.00 0.03 (0.03) 1.00 3.06% 1996 1.00 0.03 (0.03) 1.00 3.14% 1995 1.00 0.03 (0.03) 1.00 3.26% 1994 1.00 0.02 (0.02) 1.00 2.07% Investor Shares 1999* $ 1.00 $ 0.01 $ (0.01) $ 1.00 1.27% For the Year Ended November 30: 1998 1.00 0.03 $ (0.03) 1.00 2.96% 1997 1.00 0.03 (0.03) 1.00 3.05% 1996 1.00 0.03 (0.03) 1.00 3.13% 1995 1.00 0.03 (0.03) 1.00 3.25% 1994 1.00 0.02 (0.02) 1.00 1.98%
NET ASSETS RATIO OF END OF EXPENSES TO PERIOD (000) AVERAGE NET ASSETS ---------- ------------------ PRIME QUALITY MONEY MARKET FUND Trust Shares 1999 $3,903,232 0.60% 1998 1,880,229 0.59% 1997 1,086,555 0.58% 1996 1,050,800 0.58% 1995 799,189 0.58% Investor Shares 1999 $ 918,100 0.77% 1998 411,821 0.76% 1997 283,544 0.75% 1996 215,696 0.75% 1995 157,616 0.75% TAX EXEMPT MONEY MARKET FUND Trust Shares 1999 $ 641,640 0.52% 1998 448,023 0.51% 1997 333,006 0.50% 1996 273,613 0.50% 1995 215,413 0.45% Investor Shares 1999 $ 128,854 0.64% 1998 134,538 0.62% 1997 102,013 0.62% 1996 95,223 0.62% 1995 87,647 0.55% TAX-FREE MONEY MARKET FUND (A) Trust Shares 1999* $ 270,431 0.67% For the Year Ended November 30: 1998 270,899 0.66% 1997 226,837 0.66% 1996 182,320 0.66% 1995 202,333 0.66% 1994 157,602 0.67% Investor Shares 1999* $ 5,955 0.67% For the Year Ended November 30: 1998 8,851 0.67% 1997 7,634 0.68% 1996 2,994 0.67% 1995 1,627 0.67% 1994 757 0.76%
RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) ------------------ ------------------- ------------------- PRIME QUALITY MONEY MARKET FUND Trust Shares 1999 4.69% 0.77% 4.52% 1998 5.10% 0.77% 4.92% 1997 4.90% 0.76% 4.72% 1996 5.11% 0.78% 4.91% 1995 4.77% 0.79% 4.56% Investor Shares 1999 4.52% 0.97% 4.32% 1998 4.93% 0.98% 4.71% 1997 4.74% 0.97% 4.52% 1996 4.94% 1.00% 4.69% 1995 4.55% 1.01% 4.29% TAX-EXEMPT MONEY MARKET FUND Trust Shares 1999 2.75% 0.66% 2.61% 1998 3.14% 0.67% 2.98% 1997 3.04% 0.66% 2.88% 1996 3.23% 0.68% 3.05% 1995 3.12% 0.70% 2.87% Investor Shares 1999 2.66% 0.82% 2.48% 1998 3.04% 0.83% 2.83% 1997 2.92% 0.83% 2.71% 1996 3.10% 0.85% 2.87% 1995 3.00% 0.87% 2.68% TAX-FREE MONEY MARKET FUND (A) Trust Shares 1999* 2.51% 0.82% 2.36% For the Year Ended November 30: 1998 2.92% 0.81% 2.77% 1997 3.02% 0.81% 2.87% 1996 2.88% 0.81% 2.73% 1995 3.19% 0.81% 3.04% 1994 2.06% 0.67% 2.06% Investor Shares 1999* 2.52% 1.06% 2.13% For the Year Ended November 30: 1998 2.92% 1.07% 2.52% 1997 3.42% 1.08% 3.02% 1996 2.86% 1.07% 2.46% 1995 3.16% 1.07% 2.76% 1994 1.97% 1.44% 1.29%
+ Total return is for the period indicated and has not been annualized. * For the period December 1, 1998 to May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the Crestar Tax-Free Money Fund exchanged all of its assets and certain liabilities for shares of the Tax-Free Money Market Fund. The Crestar Tax-Free Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 34 & 35 FINANCIAL HIGHLIGHTS (concluded) - -------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET NET ASSET NET ASSET VALUE INVESTMENT DISTRIBUTIONS FROM VALUE END BEGINNING OF PERIOD INCOME NET INVESTMENT INCOME OF PERIOD ------------------- ---------- --------------------- ---------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 1999 $1.00 $ 0.04 $(0.04) $1.00 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 1995 1.00 0.05 (0.05) 1.00 Investor Shares 1999 $1.00 $ 0.04 $(0.04) $1.00 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 1995 1.00 0.04 (0.04) 1.00 U.S. TREASURY MONEY MARKET FUND (A) Trust Shares 1999** $1.00 $0.02 $(0.02) $1.00 For the Year Ended November 30: 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 1995 1.00 0.05 (0.05) 1.00 Investor Shares (1) For the Year Ended November 30: 1994 $1.00 $0.01 $(0.01) $1.00
RATIO OF RATIO OF EXPENSES TO NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS RETURN+ PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) -------- ---------- ------------------ ------------------ ------------------ U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 1999 4.57% $ 404,459 0.63% 4.47% 0.76% 1998 5.04% 377,490 0.62% 4.92% 0.78% 1997 4.83% 344,350 0.61% 4.73% 0.76% 1996 5.14% 325,493 0.61% 5.02% 0.78% 1995 4.67% 434,111 0.61% 4.64% 0.80% Investor Shares 1999 4.41% $ 61,472 0.77% 4.32% 0.98% 1998 4.90% 58,753 0.76% 4.79% 0.96% 1997 4.69% 63,178 0.75% 4.59% 0.96% 1996 4.99% 58,608 0.75% 4.88% 0.99% 1995 4.51% 46,639 0.75% 4.51% 1.02% U.S. TREASURY MONEY MARKET FUND (A) Trust Shares 1999** 2.08% $ 760,833 0.68% 4.10% 0.83% For the Year Ended November 30: 1998 4.89% 699,923 0.66% 4.77% 0.81% 1997 4.91% 632,381 0.65% 4.82% 0.80% 1996 4.80% 389,051 0.66% 4.69% 0.81% 1995 5.29% 370,454 0.66% 5.16% 0.81% Investor Shares (1) For the Year Ended November 30: 1994 0.79% $ -- 0.92%* 2.31%* 29.16%*
RATIO OF EXPENSES TO INCOME TO AVERAGE NET ASSETS (EXCLUDING WAIVERS AND REIMBURSEMENTS) ------------------ U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 1999 4.34% 1998 4.76% 1997 4.58% 1996 4.85% 1995 4.45% Investor Shares 1999 4.11% 1998 4.59% 1997 4.38% 1996 4.64% 1995 4.24% U.S. TREASURY MONEY MARKET FUND (A) Trust Shares 1999** 3.95% For the Year Ended November 30: 1998 4.62% 1997 4.67% 1996 4.54% 1995 5.01% Investor Shares (1) For the Year Ended November 30: 1994 (25.93%)*
(1) Ceased operations March 31, 1994. * Annualized. ** For the period December 1, 1998 to May 31, 1999. All ratios for the period have been annualized. + Total return is for the period indicated and has not been annualized. (A) On May 24, 1999, the Crestar U.S. Treasury Money Fund exchanged all of its assets and certain liabilities for shares of the U.S. Treasury Money Market Fund. The Crestar U.S. Treasury Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 36 & 37 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-four portfolios as of May 31, 1999: the Balanced Fund, the Capital Appreciation Fund (formerly Capital Growth Fund), the Emerging Markets Equity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Balanced Portfolio, the Life Vision Growth and Income Portfolio, the Life Vision Maximum Growth Portfolio, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Small Cap Growth Stock Fund, the Sunbelt Equity Fund, the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds" or the "Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each fund's prospectus provides a description of the fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Retail Money Market Funds. The financial statements of the Equity Funds, the Fixed Income Funds and the Institutional Money Market Funds are not presented herein, but are presented separately. On February 17, 1999 and February 19, 1999, respectively, the Board of Trustees of the STI Classic Funds and Board of Directors of the CrestFunds Inc. ("CrestFunds") approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and liabilities of the CrestFunds in exchange for the issuance of shares in the Trust in a tax-free reorganization (see Note 7). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 7, the STI Classic Funds acquired certain Crestar Funds in a tax-free business combination. While each Fund now exists as a STI Classic Fund, a number of the surviving funds for accounting purposes are Crestar Funds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Operations, Statements of Changes in Net Assets and Financial Highlights presented reflect periods beginning on the first day of the accounting survivor's fiscal year. SECURITY VALUATION -- Investment securities held by the Funds are stated at amortized cost, which approximates market value. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. 38 - -------------------------------------------------------------------------------- Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized ratably to maturity and are included in interest income. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income of each of the Funds are declared on each business day and paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Transactions with Affiliates: Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration, Transfer Agency Servicing and Distribution Agreements: The Trust and SEI Investments Mutual Funds Services ("the Administrator") are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999, 39 NOTES TO FINANCIAL STATEMENTS (concluded) - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 24, 1999, administrative and accounting services were provided to the CrestFunds by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the CrestFunds. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. 5. Investment Advisory and Custodian Agreements: The Trust and Trusco Capital Management, Inc. (the "Investment Advisor") have entered into an advisory agreement dated July 15, 1993. Under terms of the agreements, the Funds are charged the following annual fees based upon average daily net assets:
MAXIMUM MAXIMUM TRUST INVESTOR INVESTOR ANNUAL SHARE SHARE SHARE ADVISORY MAXIMUM DISTRIBUTION MAXIMUM FEE EXPENSE FEE EXPENSE --------- ------- ------------ --------- Prime Quality Money Market Fund .65% .60% .20% .77% Tax-Exempt Money Market Fund .55 .62 .15 .74 Tax-Free Money Market Fund .40 .51 .40 .67 U.S. Government Securities Money Market Fund .65 .63 .17 .77 U.S. Treasury Money Market Fund .65 .63 -- --
The Investment Advisor and the Administrator have voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 24, 1999 Crestar Asset Management Company ("CAMCO") provided investment advisory services to the CrestFunds. CAMCO was paid for advisory services to each CrestFund money market fund at an annual rate of .40% of each CrestFund money market fund's average daily net assets for the first $500 million of net assets, .35% of each Fund's average daily net assets on the next $500 million of net assets, .30% of each money market fund's average daily net assets on all remaining net assets. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the Funds. Fees of the Custodian are paid on the basis of the net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Investment Transactions: At May 31, 1999, the Prime Quality Money Market Fund and the Tax-Exempt Money Market Fund had capital loss carryforwards for Federal tax purposes of $314,064 and $3,830, respectively, resulting from security sales. For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. The carryforward for the Prime Quality Money Market Fund expires between May 2003 and May 2005 and the carryforward for the Tax-Exempt Money Market Fund expires between May 2004 and May 2007. 40 - -------------------------------------------------------------------------------- 7. CrestFunds Merger: The Board of Directors and shareholders of the CrestFunds approved a reorganization of the CrestFunds into the STI Classic Funds which was effective on May 17, 1999 for the Prime Quality Money Market Fund and May 24, 1999 for the Tax-Free Money Market Fund and U.S. Treasury Money Market Fund. The following table summarizes certain relevant information of the Funds prior to and immediately after business combinations on May 17, 1999 and May 24, 1999 and is unaudited:
SHARES OUTSTANDING SHARES ISSUED NET ASSETS NAV ON MERGER IN BUSINESS AFTER PER CREST FUND DATE STICLASSIC FUND COMBINATION COMBINATION SHARE ------------ -------------- -------------------- ------------ -------------- -------- Cash Reserve Prime Quality Money Market (2) Trust Shares 1,179,840,320 Trust Shares 1,179,992,513 3,898,000,842 $1.00 Investor Class A 187,019,982 Investor Shares 187,134,402 897,327,829 1.00 Investors Class B (1) 68,609 Flex Shares n/a n/a n/a U.S. Treasury Money Fund (2) U.S. Treasury Money Market Trust Shares 278,919,943 Trust Shares 278,919,943 278,898,164 1.00 Investor Class A 5,967,857 Investor Shares 5,967,857 5,968,442 1.00 Tax Free Money Fund (2) Tax-Free Money Market Trust Shares 732,825,211 Trust Shares 732,825,211 732,779,926 1.00
(1) Investors Class B Shares of the CrestFunds Cash Reserve Fund were exchanged for Investors Shares of the STI Classic Prime Quality Money Market Fund. (2) Represents the accounting survivor in this business combination. 8. Concentration of Credit Risk: The Prime Quality Money Market Fund invests primarily in high quality money market instruments rated in the highest short-term rating category by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Services, Inc. (Moody's) or, if not rated, are determined by the Investment Advisor to be of comparable quality. The Tax-Exempt Money Market and Tax-Free Money Market Funds invest in high quality, U.S. dollar denominated municipal securities rated in one of the two highest short-term rating categories or, if not rated, are determined by the Investment Advisor to be of comparable quality. The U.S. Government Securities Money Market and U.S. Treasury Money Market Funds invest exclusively in U.S. Treasury obligations, U.S. Government subsidiary corporation securities which are backed by the full faith and credit of the U.S. Government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities and U.S. Government subsidiary corporation securities. 41 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Prime Quality Money Market, Tax-Exempt Money Market, Tax-Free Money Market, U.S. Government Securities Money Market, and U.S. Treasury Money Market Funds of STI Classic Funds (the "Trust") as of May 31, 1999, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of operations for the year ended November 30, 1998, statements of changes for the years ended November 30, 1998 and November 30, 1997, and financial highlights for the periods presented prior to May 31, 1999, for the Tax-Free Money Market and U.S. Treasury Money Market Funds were audited by other auditors whose report dated January 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 1999, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Prime Quality Money Market, Tax-Exempt Money Market, Tax-Free Money Market, U.S. Government Securities Money Market, and U.S. Treasury Money Market Funds, of STI Classic Funds as of May 31, 1999, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 23, 1999 42 NOTICE TO SHAREHOLDERS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 For shareholders that do not have a May 31, 1999 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 1999 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended May 31, 1999, each portfolio is designating the following items with regard to distributions paid during the year:
LONG TERM (20% RATE) ORDINARY CAPITAL GAINS INCOME TAX-EXEMPT TOTAL QUALIFYING FUND DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1) ------------------------ ------------- ------------- ---------- ------------- ------------- Prime Quality Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% Tax-Exempt Money Market Fund 0.00% 0.02% 99.98% 100.00% 0.00% Tax Free-Money Market Fund 0.00% 0.00% 100.00% 100.00% 0.00% U.S. Government Securities Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% U.S. Treasury Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00%
- -------------------------------------------------------------------------------- (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of "Ordinary Income Distribution". 43 NOTES INVESTMENT ADVISOR Trusco Capital Management, Inc. STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STI CLASSIC FUNDS CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND INSTITUTIONAL SHARES INVESTMENT ADVISER: TRUSCO CAPITAL MANAGEMENT, INC. This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of the Classic Institutional Money Market Funds of the STI Classic Funds (the "Trust") and should be read in conjunction with the prospectus dated October 1, 1999 for the Institutional Shares of the Trust's Classic Institutional Cash Management, Classic Institutional U.S. Government Securities, and Classic Institutional U.S. Treasury Securities Money Market Funds and the Corporate Trust Shares of the Classic Institutional U.S. Treasury Securities Money Market Funds. The prospectus may be obtained through the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
TABLE OF CONTENTS PAGE THE TRUST.................................................................................B-2 ADDITIONAL INFORMATION ABOUT EACH FUND....................................................B-2 DESCRIPTION OF PERMITTED INVESTMENTS......................................................B-3 INVESTMENT LIMITATIONS...................................................................B-10 INVESTMENT ADVISER.......................................................................B-11 THE ADMINISTRATOR........................................................................B-13 THE DISTRIBUTOR..........................................................................B-14 THE TRANSFER AGENT.......................................................................B-14 INDEPENDENT PUBLIC ACCOUNTANTS...........................................................B-14 TRUSTEES AND OFFICERS OF THE TRUST.......................................................B-14 PERFORMANCE INFORMATION..................................................................B-17 COMPUTATION OF YIELD.....................................................................B-17 CALCULATION OF TOTAL RETURN..............................................................B-18 PURCHASING SHARES........................................................................B-18 REDEEMING SHARES.........................................................................B-19 DETERMINATION OF NET ASSET VALUE.........................................................B-19 TAXES....................................................................................B-20 FUND TRANSACTIONS........................................................................B-21 TRADING PRACTICES AND BROKERAGE..........................................................B-21 DESCRIPTION OF SHARES....................................................................B-24 SHAREHOLDER LIABILITY....................................................................B-24 LIMITATION OF TRUSTEES' LIABILITY........................................................B-24 YEAR 2000................................................................................B-25 5% AND 25% SHAREHOLDERS..................................................................B-25 EXPERTS..................................................................................B-25 APPENDIX A: FINANCIAL STATEMENTS..........................................................F-1
October 1, 1999 THE TRUST STI Classic Funds (the "Trust") is a diversified, open-end management investment company established under Massachusetts law as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Declaration of Trust permits the Trust to offer separate series ("Funds") of units of beneficial interest ("shares") and different classes of shares of each Fund. Each Share of each Fund represents an equal proportionate interest in that portfolio. See "Description of Shares." This Statement of Additional Information relates to shares of the Classic Institutional U.S. Treasury Money Market Fund which are offered through two separate classes (Institutional Shares and Corporate Trust Shares) and Shares of the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Government Securities Money Market Fund which are offered through a single class (Institutional Shares), (collectively, the "Funds"). ADDITIONAL INFORMATION ABOUT EACH FUND Each Classic Institutional Money Market Fund intends to comply with federal regulations applicable to money market funds using the amortized cost method for calculating net asset value, which require each Fund to invest only in U.S. dollar denominated obligations, to maintain an average maturity on a dollar-weighted basis of 90 days or less and to acquire eligible securities that present minimal credit risk and have a maturity of 397 days or less. The Classic Institutional U.S. Treasury Securities Money Market Fund seeks to manage its investments in a manner consistent with the criteria for obtaining an Aaa rating by Moody's Investors Service ("Moody's") and/or an AAA rating by Standard & Poor's Corporation ("S&P"). These requirements will also limit the Classic Institutional U.S. Treasury Securities Money Market Fund's ability to generate high current income. For a further discussion of these rules, see "Description of Permitted Investments." CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND The Classic Institutional Cash Management Money Market Fund will invest in money Market instruments denominated in U.S. dollars consisting of: (i) U.S. Treasury obligations; (ii) receipts; (iii) obligations issued or guaranteed as to principal and interest by agencies and instrumentalities of the U.S. Government; (iv) commercial paper issued by domestic and foreign issuers rated in the highest short-term rating category by one or more nationally recognized statistical rating organizations (an "NRSRO") as described in the "Appendix" or, if not rated, determined by the Adviser to be of comparable quality; (v) high quality obligations (including certificates of deposit, time deposits, bankers' acceptances, Eurodollar and Yankee bank obligations) of U.S. commercial banks (including foreign branches of such banks), and U.S. and London branches of foreign banks or savings and loan and thrift institutions that are members of the Federal Reserve System, the Federal Deposit Insurance Corporation, or savings and loan associations; (vi) high quality short-term corporate obligations issued by companies with commercial paper meeting the ratings indicated in (iv) above, or, if not rated, determined by the Adviser to be of comparable quality; (vii) repurchase agreements involving such obligations; (viii) high quality obligations of supranational entities satisfying the credit ratings described in (iv) above, or, if not rated, determined by the Adviser to be of comparable quality; (ix) high quality medium term notes; (x) municipal securities; (xi) mortgage-backed securities; and (xii) asset-backed securities. The Fund may not invest more than 25% of its total assets in obligations issued by foreign branches of U.S. banks and London branches of foreign banks. The Fund may purchase securities subject to standby commitments. The Fund may also purchase restricted securities. As a money market fund, the Fund is subject to limitations on the percentage of its assets that may be investment in any one issuer and on the percentage that may be invested in securities carrying the second highest rating assigned by the requisite NRSROs. CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND The Classic Institutional U.S. Government Securities Money Market Fund will invest solely in (i) U.S. Treasury Obligations; (ii) obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government; (iii) repurchase agreements involving and of the foregoing obligations; and (iv) shares of registered money market funds that invest in the foregoing. B-2 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND The Classic U.S. Treasury Securities Money Market Fund will invest exclusively in U.S. Treasury obligations and any repurchase agreements with dealers will be selected pursuant to guidelines adopted by the Trust's Board of Trustees and collateralized by U.S. Treasury obligations. The Fund, however, seeks to invest exclusively in securities that would qualify to be rated in the highest ratings category of an NRSRO, such as S&P or Moody's. As a result, the Fund's ability to maintain an average dollar-weighted portfolio maturity to the maximum extent permitted by Rule 2a-7 will be limited, and the Fund's performance may be affected adversely. DESCRIPTION OF PERMITTED INVESTMENTS BANK INVESTMENT CONTRACTS ("BICS") BICs are contracts issued by U.S. banks and savings and loans institutions. Pursuant to such contracts, the Institutional Cash Management Money Market Fund makes cash contributions to a deposit fund of the general account of the bank or savings and loan institution. The bank or savings and loan institution then credits to the Fund on a monthly basis guaranteed interest at either a fixed, variable or floating rate. A BIC provides that this guaranteed interest will not be less than a certain minimum rate. A BIC is a general obligation of the issuing bank or savings and loan institution and not a separate account. The purchase price paid for a BIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. BICs are generally not assignable or transferable without the permission of the issuing bank or savings and loan institution. For this reason, an active secondary market in BICs currently does not exist. Therefore, BICs are considered to be illiquid investments. The Fund may invest up to an aggregate amount of 5% of its total assets in BICs. BANKERS' ACCEPTANCES Bankers' acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used by corporations to finance the shipment and storage of goods. Maturities are generally six months or less. CERTIFICATES OF DEPOSIT Certificates of deposit are interest bearing instruments with a specific maturity. They are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market prior the maturity. Certificates of deposit with penalties for early withdrawal will be considered liquid. COMMERCIAL PAPER Commercial paper is a term used to describe unsecured short-term promissory notes issued by banks, municipalities, corporations and other entities. Maturities on these issues vary from a few to 270 days. FOREIGN SECURITIES Foreign securities may include U.S. dollar denominated obligations or securities of foreign issuers. Possible investments include equity securities of foreign entities, obligations of foreign branches of U.S. banks and of foreign banks, including, without limitation, European Certificates of Deposit, European Time Deposits, European Bankers' Acceptances, Canadian Time Deposits and Yankee Certificates of Deposit, and investments in Canadian Commercial Paper, Europaper and foreign B-3 securities. These instruments may subject the Fund to investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. In making investment decisions for the Fund, the Adviser evaluates the risks associated with investing Fund assets in a particular country, including risks stemming from a country's financial infrastructure and settlement practices; the likelihood of expropriation, nationalization or confiscation of invested assets; prevailing or developing custodial practices in the country; the country's laws and regulations regarding the safekeeping, maintenance and recovery of invested assets, the likelihood of government-imposed exchange control restrictions which could impair the liquidity of Fund assets maintained with custodians in that country, as well as risks from political acts of foreign governments ("country risks"). Of course, the Adviser cannot assure that the Fund will not suffer losses resulting from investing in foreign countries. Holding Fund assets in foreign countries through specific foreign custodians presents additional risks, including but not limited to the risks that a particular foreign custodian or depository will not exercise proper care with respect to Fund assets or will not have the financial strength or adequate practices and procedures to properly safeguard Fund assets. GUARANTEED INVESTMENT CONTRACTS ("GICS") GICs are contracts issued by U.S. insurance companies. Pursuant to such contracts, the Institutional Cash Management Money Market Fund makes cash contributions to a deposit fund of the insurance company's general account. The insurance company then credits to the Fund on a monthly basis guaranteed interest at either a fixed, variable or floating rate. A GIC provides that this guaranteed interest will not be less than a certain minimum rate. A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. Generally, GICs are not assignable or transferable without the permission of the issuing insurance company. For this reason, an active secondary market in GICs does not currently exist and GICs are generally considered to be illiquid investments. However, the Fund will treat GICs with seven-day unconditional demand features as liquid investments. ILLIQUID SECURITIES Illiquid securities are securities that cannot be disposed of within seven days at approximately the price at which they are being carried on a Fund's books. Rule 144A securities and Section 4(2) commercial paper that meet the criteria established by the Board of Trustees of the Trust may be considered liquid. See "Restricted Securities". INVESTMENT COMPANY SHARES Investment companies typically incur fees that are separate from those fees incurred directly by the Funds. A Fund's purchase of such investment company securities results in the layering of expenses, such that Shareholders would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees. MEDIUM NOTES B-4 Medium term notes are periodically or continuously offered corporate or agency debt that differs from traditionally underwritten corporate bonds only in the process by which they are issued. MUNICIPAL SECURITIES The Institutional Cash Management Money Market Fund may invest in municipal securities. The two principal classifications of municipal securities are "general obligation" and "revenue" issues. General obligation issues are issues involving the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues, although the characteristics and method of enforcement of general obligation issues may vary according to the law applicable to the particular issue. Revenue issues are payable only from the revenues derived from a particular facility or class of facilities or other specific revenue source. A Fund may also invest in "moral obligation" issues, which are normally issued by special purpose authorities. Moral obligation issues are not backed by the full faith and credit of the state and are generally backed by the agreement of the issuing authority to request appropriations from the state legislative body. Municipal securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to other public institutions and facilities. Certain private activity bonds that are issued by or on behalf of public authorities to finance various privately-owned or operated facilities are included within the term "Municipal Securities." Private activity bonds are industrial development bonds are generally revenue bonds, the credit and quality of which are directly related to the credit of the private user of the facilities. Municipal securities may also include general obligation notes, tax anticipation notes, bond anticipation notes, revenue anticipation notes, project notes, certificates of indebtedness, demand notes, tax-exempt commercial paper, construction loan notes and other forms of short-term, tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of fax funds, the proceeds of bond placements or other revenues. Project notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its project notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide that, if required, the federal government will end the issuer an amount equal to the principal of and interest on the project notes. The quality of municipal securities, both within a particular classification and between classifications, will vary, and the yields on municipal securities depend upon a variety of factors, including general money market conditions, the financial condition of the issuer (or other entity whose financial resources are supporting the securities), general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating(s) of the issue. In this regard, it should be emphasized that the ratings of any NRSRO are general and are not absolute standards of quality. Municipal securities with the same maturity, interest rate and rating(s) may have different yields, while municipal securities of the same maturity and interest rate with different rating(s) may have the same yield. An issuer's obligations under its municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its municipal securities may be materially adversely affected by litigation or other conditions. MUNICIPAL NOTE RATINGS: Moody's highest rating for state and municipal and other short-term notes is MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are of high quality. Margins of protection are ample although not so large as in the preceding group. B-5 An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a long-term debt rating. The following criteria will be used in making that assessment. - Amortization schedule (the larger the final maturity relative to other maturities the more likely it will be treated as a note). - Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note). Note rate symbols are as follows: SP-1. Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2. Satisfactory capacity to pay principal and interest. OTHER INVESTMENTS The Trust is not prohibited from investing in obligations of banks which are clients of SEI Investments Company ("SEI Investments"), the parent company of the Administrator and the Distributor. The purchase of shares of the Trust by such banks or by their customers will not be a consideration in determining which bank obligations the Trust will purchase. However, the Trust will not purchase obligations issued by the Adviser. RECEIPTS Receipts are interests in separately traded interest and principal component parts of U.S. Treasury obligations that are issued by banks and brokerage firms and are created by depositing U.S. Treasury obligations into a special account at a custodian bank. The custodian holds the interest and principal payments for the benefit of the registered owners of the certificates or receipts. The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. Receipts are sold as zero coupon securities which means that they are sold at a substantial discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. This discount is amortized over the life of the security and such amortization will constitute the income earned on the security for both accounting and tax purposes. Because of these features, receipts may be subject to greater price volatility than interest paying U.S. Treasury obligations. See also "Taxes." RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS Investments by a money market fund are subject to limitations imposed under regulations adopted by the Securities and Exchange Commission. Under these regulations, money market funds may only acquire obligations that present minimal credit risk and that are "eligible securities," which means they are (i) rated, at the time of investment, by at least two NRSROs organizations (one if it is the only organization rating such obligation) in the highest rating category or, if unrated, determined to be of comparable quality (a "first tier security"), or (ii) rated according to the foregoing criteria in the second highest rating category or, if unrated, determined to be of comparable quality ("second tier security"). A security is not considered to be unrated if its issuer has outstanding obligations of comparable priority and securities that have a short-term rating. In the case of taxable money market funds, investments in second tier securities are subject to the further constrains in the (i) no more than 5% of a Fund's assets may be invested in second tier securities and (ii) any investment in securities of any one such issuer is limited to the greater of 1% of the Fund's total assets or $1 million. A taxable money market fund may also hold more than 5% of its assets in first tier secretes of a single issuer for three "business days" (that is, any day other than a Saturday, Sunday or customary business holiday). In the event that the security owned by a Fund is downgraded below the stated rating categories, the Adviser will review and take appropriate action with regard to the security. B-6 REPURCHASE AGREEMENTS Each Fund may enter into repurchase agreements. Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a security and simultaneously commits to return the security to the seller (a primary securities dealer as recognized by the Federal Reserve Bank of New York or a national member bank as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed-upon price (including principal and interest) on an agreed-upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is, in effect, secured by the value of the underlying security. Repurchase agreements are considered to be loans by a Fund for purposes of its investment limitations. The repurchase agreements entered into by a Fund will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement (the Adviser monitors compliance with this requirement). Under all repurchase agreements entered into by a Fund, the Custodian or its agent must take possession of the underlying collateral. However, if the seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if a Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. RESTRICTED SECURITIES Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") absent an exemption from registration. Permitted investments for the Funds include restricted securities, and each Fund may invest up to 10% of its net assets in illiquid securities, subject to each Fund's investment limitations on the purchase of illiquid securities. Restricted securities, including securities eligible for re-sale under 1933 Act Rule 144A, that are determined to be liquid are not subject to this limitation. This determination is to be made by the Fund's Adviser pursuant to guidelines adopted by the Board of Trustees. Under these guidelines, the Adviser will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such Restricted Securities, the Adviser intends to purchase securities that are exempt from registration under Rule 144A under the 1933 Act. SECURITIES LENDING The Funds may lend securities pursuant to agreements which require that the loans be continuously secured by collateral at all times equal to 100% of the market value of the loaned securities which consists of cash, securities of the U.S. Government or its agencies, or any combination of cash and such securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of the Fund's total assets taken at fair market value. A Fund will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. Government securities. However, a Fund will normally pay lending fees to such broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the Adviser to be of good standing and when, in the judgment of the Adviser, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. The Funds may use the Distributor or a broker-dealer affiliate of the Adviser as a broker in these transactions. B-7 STANDBY COMMITMENTS AND PUTS The Institutional Cash Management Money Market Fund may purchase securities at a price which would result in a yield-to-maturity lower than that generally offered by the seller at the time of purchase when it can simultaneously acquire the right to sell the securities back to the seller, the issuer, or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Fund to meet redemptions and remain as fully invested as possible in municipal securities. The Fund reserves the right to engage in put transactions. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. The Institutional Cash Management Money Market Fund would limit its put transactions to institutions which the Adviser believes present minimal credit risks, and the Adviser would use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, the Fund would be a general creditor (I.E., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Fund and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Fund could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Fund. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Fund may purchase subject to a standby commitment or put, but the amount paid directly or indirectly for all standby commitments or puts which are not integral parts of the security as originally issued held in the Fund will not exceed 1/2 of 1% of the value of its total assets of such Fund calculated immediately after any such put is acquired. STRIPS Each Fund may invest in Separately Traded Interest and Principal Securities ("STRIPS"), which are component parts of U.S. Treasury Securities traded through the Federal Book-Entry System. The Adviser will only purchase STRIPS that it determines are liquid or, if illiquid, do not violate each Fund's investment policy concerning investments in illiquid securities. Consistent with Rule 2a-7 under the Investment Company Act of 1940, as amended, (the "1940 Act"), the Adviser will only purchase STRIPS for the Funds that have a remaining maturity of 397 days or less; therefore, the Funds currently may only purchase interest component parts of U.S. Treasury Securities. While there is no limitation on the percentage of a Fund's assets that may be comprised of STRIPS, the Adviser will monitor the level of such holdings to avoid the risk of impairing Shareholders' redemption rights and of deviations in the value of shares of the Funds. SUPRANATIONAL AGENCY OBLIGATIONS The Institutional Cash Management Money Market Fund may purchase obligations of supranational agencies. Currently the Fund intends to invest only in obligations issued or guaranteed by the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (World Bank), African Development Bank, European Coal and Steel Community, European Economic Community, European Investment Bank and the Nordic Investment Bank. B-8 TAXABLE MUNICIPAL SECURITIES The Institutional Cash Management Money Market Fund may invest in taxable municipal securities. Taxable municipal securities are municipal securities the interest on which is not exempt from federal income tax. Taxable municipal securities include "private activity bond" that are issued by or on behalf of states or political subdivisions thereof to finance privately-owned or operated facilities for business and manufacturing, housing, sports, and pollution control and to finance activities of and facilities for charitable institutions. Private activity bonds are also used to finance public facilities such as airports, mass transit systems, ports, parking lots, and low income housing. The payment of the principal and interest on private activity bonds is not backed by a pledge of tax revenues, and is dependent solely on the ability of the facility's user to meet its financial obligations, and may be secured by a pledge of real and personal property so financed. Interest on these bonds may not be exempt from federal income tax. U.S. GOVERNMENT AGENCY SECURITIES Certain investments of the Institutional Cash Management Money Market Fund and the U.S. Government Securities Money Market Fund may include U.S. Government Agency Securities. Agencies of the United States Government which issue obligations consist of, among others, the Export Import Bank of the United States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing Administration, Government National Mortgage Association ("GNMA"), Maritime Administration, Small Business Administration, and The Tennessee Valley Authority. Obligations of instrumentalities of the United States Government include securities issued by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae, and the United States Postal Service as well as government trust certificates. Some of these securities are supported by the full faith and credit of the United States Treasury, others are supported by the right of the issuer to borrow from the Treasury and still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. Government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing the value of the obligation prior to maturity. U.S. TREASURY OBLIGATIONS U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts of such obligations that are transferable through the Federal book-entry system known as Separately Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). VARIABLE AND FLOATING RATE INSTRUMENTS Certain obligations may carry variable or floating rates of interest, and may involve a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices. The interest rates on these securities may be reset daily, weekly, quarterly or some other reset period, and may have a floor or ceiling on interest rate changes. There is a risk that the current interest rate on such obligations may not accurately reflect existing market interest rates. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security. VARIABLE RATE MASTER DEMAND NOTES The Institutional Cash Management Money Market Fund may invest in variable rate master demand notes which may or may not be backed by bank letters of credit. These notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between the Fund, as lender, and the borrower. Such notes provide that the interest rate on the amount outstanding varies on a daily, weekly or monthly basis depending upon a stated short-term interest rate index. Both the lender and the borrower have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes and it is not generally contemplated that such instruments will be traded. The quality of B-9 the note or the underlying credit must, in the opinion of the Adviser, be equivalent to the ratings applicable to permitted investments for the Fund. The Adviser will monitor on an ongoing basis the earning power, cash flow and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. ZERO COUPON OBLIGATIONS Zero coupon obligations are debt securities that do not bear any interest, but instead are issued at a deep discount from par. The value of a zero coupon obligations increases over time to reflect the interest accreted. Such obligations will not result in the payment of interest until maturity, and will have greater price volatility than similar securities that are issued at par and pay interest periodically. INVESTMENT LIMITATIONS The following are fundamental policies of each Fund and cannot be changed with respect to a Fund without the consent of the holders of a majority of a Fund's outstanding shares. The term "a majority of the outstanding shares" of a Fund means the vote of the lesser of (i) 67% or more of the shares of such Fund present at a meeting, if the holders of more than 50% of the outstanding shares of such Fund are present or represented by proxy or (ii) more than 50% of the outstanding shares of such Fund. A Fund may not: 1. Acquire more than 10% of the voting securities of any one issuer. 2. Invest in companies for the purpose of exercising control. 3. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. Any borrowing will be done from a bank and, to the extent that such borrowing exceeds 5% of the value of the Fund's assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter or such longer period as the Securities and Exchange Commission may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. This borrowing provision is included solely to facilitate the orderly sale of portfolio securities to accommodate heavy redemption requests if they should occur and is not for investment purposes. All borrowings in excess of 5% of the value of a Fund's total assets will be repaid before making additional investments and any interest paid on such borrowings will reduce income. 4. Make loans, except that (a) a Fund may purchase or hold debt instruments in accordance with its investment objective and policies; (b) a Fund may enter into repurchase agreements, and (c) a Fund may engage in securities lending as described in the Prospectus and in this Statement of Additional Information. 5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings permitted by (3) above in aggregate amounts not to exceed 10% of the Fund's total assets, taken at current value at the time of the incurrence of such loan, except as permitted with respect to securities lending. 6. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts and interests in a pool of securities that are secured by interests in real estate. However, subject to their permitted investment spectrum, any Fund may invest in companies which invest in real estate commodities or commodities contracts. B-10 7. Make short sales of securities, maintain a short position or purchase securities on margin, except that the Trust may obtain short-term credits as necessary for the clearance of security transactions. 8. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a security. 9. Purchase securities of other investment companies except for money market funds and CMOs and REMICs deemed to be investment companies and then only as permitted by the 1940 Act and the rules and regulations thereunder. Under these rules and regulations, a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund owns more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the total assets of a Fund; or securities (other than treasury stock) issued by all investment companies represent more than 10% of the total assets of the Fund. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. 11. Purchase securities of any issuer (except securities issued or guaranteed by the United States, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result more than 5% of the total assets of a Fund would be invested in the securities of such issuer; provided, however, that a Fund may invest up to 25% of its total assets without regard to this restriction as permitted by applicable law. 12. Purchase any securities which would cause more than 25% of the total assets of a Fund to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to investments in obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities, repurchase agreements involving such securities or tax-exempt securities issued by governments or political subdivisions of governments and, with respect to only the Classic Institutional Cash Management Money Market Fund, obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. 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 10% of its net assets would be invested in illiquid securities. The foregoing percentages, except with respect to holding illiquid securities, will apply at the time of the purchase of a security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. INVESTMENT ADVISER The Trust and Trusco Capital Management, Inc. (the "Adviser") have entered into an advisory agreement (the "Advisory Agreement"). The Adviser is an indirect wholly-owned subsidiary of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a bank holding company with assets of $90.7 billion as of July 1, 1999. The Advisory Agreement provides that the Adviser shall not be protected against any liability to the Trust or its Shareholders by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. B-11 The Advisory Agreement provides that if, for any fiscal year, the ratio of expenses of a Fund (including amounts payable to the Adviser but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by certain states, the Adviser and/or the Administrator will bear the amount of such excess. The Adviser will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of the Advisory Agreement, after the first two years, must be specifically approved at least annually (i) by the vote of the Trustees, and (ii) by the vote of a majority of the Trustees who are not parties to each Agreement or "interested persons" of any party thereto, cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement will terminate automatically in the event of its assignment, and is terminable at any time without penalty by the Trustees of the Trust or, with respect to the Funds, by a majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Adviser, or by the Adviser on 90 days' written notice to the Trust. Prior to May 17, 1999, Crestar Asset Management Company served as the investment adviser to the predecessor of the Classic Institutional Cash Management Money Market Fund. Prior to May 24, 1999, Crestar Asset Management Company served as the investment adviser to the predecessor of the Classic Institutional U.S. Government Money Market Fund. For the fiscal years ended May 31, 1998 and May 31, 1997, the Funds paid the following advisory fees:
================================================================================================================================= FEES PAID FEES WAIVED OR REIMBURSED FUND ---------------------------------------------------------------------------------------- ---- 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- Classic Institutional Cash $1,377,839 $444,000 $209,000 $799,660 $704,000 $629,000 Management Money Market Fund (formerly Arbor Prime Obligations Fund)* - --------------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. $265,960 $476,000 $324,000 $166,261 $906,000 $629,000 Government Securities Money Market Fund (formerly Arbor U.S. Government Money Fund)* - --------------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. Treasury $0 $11,328 $ 0 $560,506 $197,908 $ 18,255 Securities Money Market Fund =================================================================================================================================
* Prior to May 17, 1999, advisory fees were paid by the predecessor to this fund pursuant to an agreement between The Arbor Fund and the Adviser for the fiscal years ended January 31, 1999, January 31, and January 31, 1997, respectively. BANKING LAWS Current interpretations of federal banking laws and regulations: - - prohibit SunTrust and the Adviser from sponsoring, organizing, controlling, or distributing the Funds' shares; but - - do not prohibit SunTrust or the Adviser generally from acting as an investment adviser, transfer agent, or custodian to the Funds or from purchasing Fund shares as agent for and upon the order of a customer. The Adviser believes that it may perform advisory and related services for the Trust without violating applicable banking laws or regulations. However, the legal requirements and interpretations about the permissible activities of banks and their affiliates may change in the future. These changes could prevent the Adviser from continuing to perform services for the B-12 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 Adviser, or its affiliates, would consider performing additional services for the Trust. The Fund cannot predict whether these changes will be enacted. The Fund also cannot predict the terms that the Adviser, or its affiliates, might offer to provide additional services. THE ADMINISTRATOR The Trust and SEI Investments Mutual Funds Services (the "Administrator"), are parties to an administration agreement (the "Administration Agreement") dated May 29, 1992. The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments, 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, Alpha Select Funds, Amerinds Funds Inc., The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Advantage Fund, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional International Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds and UAM Funds, Inc. II. For its administrative services, the Administrator is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of: .12% of the first $1 billion of average aggregate net assets, .09% on the next $4 billion of average aggregate net assets, .07% of the next $3 billion of average aggregate net assets, .065% of the next $2 billion of average aggregate net assets, and .06% thereafter. For the fiscal years ended May 31, 1999, May 31, 1998 and May 31, 1997, the Funds paid the following administration fees:
================================================================================================================================ FEES WAIVED FUND FEES PAID ------------------------------------------------------------------------------------------ 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- Classic Institutional Cash $ 530,802 $ 251,000 $ 209,000 $ 138,021 $ 210,000 $ 126,000 Management Money Market Fund* - -------------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. $ $ 310,000 $ 212,000 $ 268,476 $ 243,000 $ 168,000 Government Securities Money Market Fund* - --------------------------------------------------------------------------------------------------------------------------------
B-13
================================================================================================================================ FEES WAIVED FUND FEES PAID ------------------------------------------------------------------------------------------ 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. $ 175,125 $ 61,988 $ 6,047 $ 45,029 $ 13,823 $ 0 Treasury Securities Money Market Fund ================================================================================================================================
* Prior to May 17, 1999, administration fees were paid by the predecessor to this fund pursuant to an agreement between The Arbor Fund and the Administrator for the fiscal years ended January 31, 1999, January 31, 1998, and January 31, 1997, respectively. THE DISTRIBUTOR SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary of SEI Investments, and the Trust have entered into a distribution agreement (the "Distribution Agreement") dated May 29, 1992. The Distributor will receive no compensation for distribution of Shares. The Distribution Agreement is renewable annually and may be terminated by the Distributor, the Qualified Trustees (as defined in the Distribution Agreement), or by a majority vote of the outstanding securities of the Trust upon not more than 60 days' written notice by either party. 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. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP serves as independent public accountants for the Trust. LEGAL COUNSEL Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust. TRUSTEES AND OFFICERS OF THE TRUST The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. The business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers of some or all of the following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The Parkstone Advantage Fund, The Pillar Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid B-14 Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, and TIP Funds, each of which is an open-end management investment company managed by SEI Investments Mutual Funds Services or its affiliates and 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. 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, Controller, Treasurer and Chief Financial Officer - President of the Administrator and Senior Vice President of SEI Investments Mutual Funds Services Operations Group since 1998. Vice President of the Administrator and Vice President of Fund Accounting and Administration of SEI Investments Mutual Funds Services, 1996- 1998. Vice President of the Distributor since December 1997. Senior Vice President, Fund Administration, BISYS Fund Services, September 1995-November 1996. Senior Vice President and Site Manager, Fidelity Investments 1981- September 1995. JAMES R. FOGGO (DOB 02/14/66) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of SEI Investments since 1998. Vice President and Assistant Secretary of the Administrator and the Distributor since May 1999. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker & McKenzie (law firm), 1995- B-15 1998. Associate, Battle Fowler L.L.P. (law firm), 1993-1995. LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange, 1989-1998. 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. 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. RICHARD W. GRANT (10/25/45) - Secretary - 1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1989. JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary -1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), Associate, Morgan, Lewis & Bockius since 1993. Counsel to the Trust, Administrator and Distributor, since 1995. - ------------------------ * Messrs. Looney, Goodrum, McNair, 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, 1999, 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 $16,000 N/A N/A $18,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- Wilton Looney, Trustee $18,000 N/A N/A $20,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- Champney A. McNair, $16,000 N/A N/A $18,000 for service on Trustee two boards - ---------------------------------------------------------------------------------------------------------------------------- F. Wendell Gooch, Trustee $16,000 N/A N/A $18,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- T. Gordy Germany, $16,000 N/A N/A $18,000 for service on Trustee two boards - ----------------------------------------------------------------------------------------------------------------------------
B-16
============================================================================================================================ 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 - ---------------------------------------------------------------------------------------------------------------------------- Dr. Bernard F. Sliger, Trustee $16,000 N/A N/A $18,000 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- Jonathan T. Walton, Trustee $11,500 N/A N/A $12,500 for service on two boards - ---------------------------------------------------------------------------------------------------------------------------- William H. Cammack, N/A N/A N/A $ 0 for service on Trustee* two boards =================================================================================================================================
* Messr. Cammack is an "interested person" of the Trust as defined in the Investment Company Act of 1940. PERFORMANCE INFORMATION From time to time a Fund may advertise its performance. Performance figures are based on historical earnings and are not intended to indicate future performance. PERFORMANCE COMPARISONS Each Fund may periodically compare its performance to other mutual funds tracked by mutual fund rating services, to broad groups of comparable mutual funds, or to unmanaged indices. These comparisons may assume reinvestment of dividends but generally do not reflect deductions for administrative and management costs. COMPUTATION OF YIELD The current yield of the Funds will be calculated daily based upon the seven days ending on the date of calculation (the "base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Funds is determined by computing the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = [Base Period Return + 1)^365/7] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets.
=========================================================================================================================== FUND 7-DAY YIELD 7-DAY EFFECTIVE YIELD - --------------------------------------------------------------------------------------------------------------------------- Classic Institutional Cash Management Money Market Fund 4.72% 4.83% - --------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. Government Securities Fund 4.73% 4.84% - ---------------------------------------------------------------------------------------------------------------------------
B-17
=========================================================================================================================== FUND 7-DAY YIELD 7-DAY EFFECTIVE YIELD - --------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Fund 4.45% 4.55% ===========================================================================================================================
The yield of these Funds fluctuates, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Fund will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments the Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. Yields are one basis upon which investors may compare the Funds with other money market funds; however, yields of other money market funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. CALCULATION OF TOTAL RETURN Total return will be calculated according to the following formula: P (1 + T)TO THE POWER OF n= ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. From time to time, the Trust may include the names of clients of the Adviser in advertisements and/or sales literature for the Trust. The SEI Funds Evaluation database tracks the total return of numerous tax-exempt pension accounts. The range of returns in these accounts determines the percentile rankings. SunTrust Bank's investment advisory affiliate, Trusco Capital Management, has been in the top 1% of the SEI Funds Evaluation database for equity managers over the past ten years. SEI Investment's database includes research data on over 1,000 investment managers responsible for over $_____ billion in assets. Based on the foregoing, the average annual total returns for the Funds from inception through May 31, 1999 and for one-year periods ended May 31, 1999 were as follows:
======================================================================================================= FUND AVERAGE ANNUAL TOTAL RETURN --------------------------------------- ONE-YEAR SINCE INCEPTION* - ------------------------------------------------------------------------------------------------------- Classic Institutional Cash Management Money Market 5.21% 5.49% Fund - Institutional Shares - ------------------------------------------------------------------------------------------------------- Classic Institutional U.S. Government Securities Money 5.06% 5.41% Market Fund - Institutional Shares - ------------------------------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Money 4.97% 5.25% Market Fund - Institutional Shares - ------------------------------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Money Market Fund - Corporate Trust Shares =======================================================================================================
ADVERTISING From time to time, the Trust may include the names of clients of the Adviser in advertisements and/or sales literature for the B-18 Trust. PURCHASING SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. REDEEMING SHARES A Shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the NYSE is restricted, or during the existence of an emergency (as determined by the Securities and Exchange Commission by rule or regulation) as a result of disposal or valuation of a Fund's securities is not reasonably practicable, or for such other periods as the Securities and Exchange Commission has by order permitted. The Trust also reserves the right to suspend sales of shares of a Fund for any period during which the NYSE, an Adviser, the Administrator and/or, the Custodian are not open for business. A number of Fund shareholders are institutions with significant share holdings that may be redeemed at any time. If a substantial number or amount of redemptions should occur within a relatively short period of time, a Fund may have to sell portfolio securities it would otherwise hold and incur the additional transaction costs. The sale of portfolio securities may result in the recognition of capital gains, which will be distributed annually and generally will be taxable to shareholders as ordinary income or capital gains. Shareholders are notified annually regarding the federal tax status of distributions they receive (see "Taxes"). Certain state securities laws may require those financial institutions providing certain distribution services to the Trust to register as dealers pursuant to state law. DETERMINATION OF NET ASSET VALUE The net asset value per share of the Funds is calculated daily by the Administrator by adding the value of securities and other assets, subtracting liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which a security's value, as determined by this method, is higher or lower than the price a Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield of a Fund may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a lower aggregate portfolio value on a particular day, a prospective investor in a Fund would be able to obtain a somewhat higher yield than would result from investment in a company utilizing solely market values, and existing investors in a Fund would experience a lower yield. The converse would apply in a period of rising interest rates. A Fund's use of amortized cost and the maintenance of a Fund's net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions are met. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds current net asset value per share calculated using available market quotations from the Funds amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation B-19 and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Funds in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Fund must annually distribute at least 90% of its investment company taxable income. TAXES The following is a summary of certain Federal income tax considerations generally affecting the Funds and their shareholders that are not described in the Funds' prospectus. No attempt is made to present a detailed explanation of the Federal tax treatment of the Funds or their Shareholders, and the discussion here and in the Funds' prospectus is not intended as a substitute for careful tax planning. This discussion of Federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder, in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein. FEDERAL INCOME TAX In order to qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must distribute annually to its Shareholders at least the sum of 90% of its net interest income excludable from gross income plus 90% of its investment company taxable income (generally, net investment income plus net short-term capital gain) ("Distribution Requirement") and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of a Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or certain other income; (ii) at the close of each quarter of a Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RIC's and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a Fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. Government securities or the securities of other RIC's) of any one issuer, or of two or more issuers engaged in same or similar businesses if the Fund owns at least 20% of the voting power of such issuers. In addition, each Fund will distribute by the end of any calendar year 98% of its ordinary income for that year and 98% of its capital gain net income for the one-year period ending on October 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. Any gain or loss recognized on a sale or redemption of Shares of a Fund by a Shareholder who is not a dealer in securities will generally be treated as a long-term capital gain or loss if the shares have been held for more than twelve months, and short-term if for a year or less. If shares held for six months or less are sold or redeemed for a loss, two special rules apply: B-20 First, if shares on which a net capital gain distribution has been received are subsequently sold or redeemed, and such shares have been held for six months or less, any loss recognized will be treated as long-term capital loss to the extent of the long-term capital gain distributions. Second, any loss recognized by a Shareholder upon the sale or redemption of shares of a tax-exempt fund held for six months or less will be disallowed to the extent of any exempt-interest dividends received by the Shareholder with respect to such shares. The Funds will make annual reports to Shareholders of the Federal income tax status of all distributions. FOREIGN TAXES Dividends and interests received by the Classic Institutional Cash Management Money Market Fund may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield on the Fund's stock or securities. Tax conventions between certain countries and the United States may reduce or eliminate these taxes. The Fund will not be able to treat shareholders as having paid their proportionate share of such taxes for foreign tax credit purposes. Foreign countries generally do not impose taxes on capital gains with respect to investments by foreign investors. FUND TRANSACTIONS The Trust has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Subject to policies established by the Trustees, the Adviser is responsible for placing the orders to execute transactions for a Fund. In placing orders, it is the policy of the Trust to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Adviser generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, the Adviser will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. TRADING PRACTICES AND BROKERAGE The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the funds and accounts under management by an Adviser, brokerage business to brokers or dealers who provide brokerage and research services. These research services B-21 include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by an Adviser in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the funds receiving the pricing service. An Adviser may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of each Adviser and the Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. It is expected that the Trust may execute brokerage or other agency transactions through the Distributor or an affiliate of an Adviser, both of which are registered broker-dealers, for a commission in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor or an affiliate of an Adviser is permitted to receive and retain compensation for effecting portfolio transactions for the Trust on an exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor or an affiliate of an Adviser to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other renumeration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Trust may direct commission business to one or more designated broker-dealers in connection with such broker/dealer's provision of services to the Trust or payment of certain Trust expenses (e.g., custody, pricing and professional fees). The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor, and will review these procedures periodically. For the fiscal year ended May 31, 1999, the Funds paid the following brokerage commissions with respect to portfolio transactions: B-22
================================================================================================================================ Portfolio Total $ Total $ % of Total % of Total Total Brokerage Amount of Amount of Brokerage Brokered Commissions Paid Brokered Brokered Commissions Transactions to SFS in Commissions Commissions Paid to Effected Connection with Paid in FYE Paid to Affiliated Through Repurchase 5/31/99(1) Affiliates for Brokers in Affiliated Agreement FYE 5/31/99(1) FYE 5/31/99(1) Brokers in Transactions for FYE 5/31/991 FYE 5/31/99 - -------------------------------------------------------------------------------------------------------------------------------- Classic Institutional Cash $ 77,975 $ 77,975 100 % 100 % Management Money Market Fund - -------------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. $ 67 $ 67 100 % 100 % Government Securities Money Market Fund - -------------------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. $ 25,484 $ 25,484 100 % 100 % Treasury Securities Money Market Fund ================================================================================================================================
(1) Prior to May 17, 1999, brokerage fees were paid by the predecessor to this fund pursuant to an agreement between The Arbor Fund and the Adviser for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. For the fiscal year ended May 31, 1998, the Funds paid the following brokerage commissions with respect to portfolio transactions:
======================================================================================================================= Portfolio Total $ Total $ % of Total Total Brokerage Amount of Amount of Brokerage Commissions Paid Brokerage Brokerage Commissions to SFS in Commissions Commissions Paid to Connection with Paid in FYE Paid to Affiliated Repurchase 5/31/98(1) Affiliates in Brokers in Agreement FYE 5/31/98(1) FYE 5/31/98(1) Transactions for FYE 5/31/99 ----------------------------------------------------------------------------------------------------------------------- Classic Institutional Cash N/A N/A N/A $ 142,350 Management Money Market Fund ----------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. N/A N/A N/A $ 60,314 Government Securities Money Market Fund ----------------------------------------------------------------------------------------------------------------------- Classic Institutional U.S. $ 51,533 $ 51,533 100 % Treasury Securities Money Market Fund ========================================================================================================================
(1) Prior to May 17, 1999, brokerage fees were paid by the predecessor to this fund pursuant to an agreement between The Arbor Fund and the Adviser for the fiscal years ended January 31, 1999, January 31, 1998, and January 31, 1997, respectively. B-23 For the fiscal year ended May 31, 1997, the Funds paid the following brokerage fees:
============================================================================================================================== Portfolio Total $ Total $ Total Brokerage Amount of Amount of Commissions Paid to Brokerage Brokerage SFS in Connection Commissions Commissions with Repurchase Paid in FYE Paid to Agreement 5/31/97(1) Affiliates in Transactions for FYE 5/31/97(1) FYE 5/31/99(1) - ------------------------------------------------------------------------------------------------------------------------------ Classic Institutional Cash Management Money Market N/A N/A $ 37,949.24 Fund - ------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Government Securities Money N/A N/A $ 34,718.03 Market Fund - ------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Treasury Securities Money N/A N/A Market Fund ==============================================================================================================================
(1) These amounts refer to brokerage commissions paid to, or brokered transactions effected through, SEI Investments Distribution Co., the Trust's principal underwriter. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. Shares are entitled upon liquidation to a PRO RATA share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any Shareholder held personally liable for the obligations of the Trust. LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. B-24 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 mission critical 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 has sought and received assurances from each from each that its system is expected to accommodate the year 2000 without material adverse consequences to the Trust. While it is likely that such assurances have been received, the Trust and its shareholders may experience losses if these assurances prove to be incorrect or as a result of year 2000 computer difficulties experienced by issuers of portfolio securities or third parties, such as custodians, banks, broker-dealers or others with which the Trust does business. 5% AND 25% SHAREHOLDERS As of September 1, 1999, the following persons were the only persons who were record owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or more of the shares of the Funds. Persons who owned of record or beneficially more than 25% of a Fund's outstanding shares may be deemed to control the Fund within the meaning of the Act. The Trust believes that most of the shares of the Institutional Class of the Funds were held for the record owner's fiduciary, agency or custodial customers.
FUND NAME AND ADDRESS NMBER OF SHARES % OF SHARES - ---- ---------------- --------------- ----------- Classic Institutional Cash SunTrust Capital Markets ACH ACCT 1,217,084,865.0400 62.46% Management Money Market Attn: Anita Woods Ctr 3910 Fund 303 Peachtree St. 24th Floor Atlanta, GA 30308-3201 SunTrust Banks 668,884,844.9700 34.33% Attn: Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 Classic Institutional U.S. SunTrust Capital Markets ACH ACCT 214,711,533.6500 95.45% Treasury Securities Money Attn: Anita Woods Ctr 3910 Market Fund 303 Peachtree St. 24th Floor Atlanta, GA 30308-3201
EXPERTS The financial statements as of May 31, 1999 have been audited by Arthur Andersen LLP, Independent Public Accountants, as indicated in their report dated July 23, 1999 with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. B-25 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- COMMERCIAL PAPER (32.2%) FINANCE (23.1%) Allstate 4.830%, 07/22/99 $10,000 $ 9,932 Associates Corporation NA 4.800%, 06/14/99 25,000 24,957 Bank of Montreal 4.810%, 07/19/99 25,000 24,840 BankAmerica 4.830%, 10/27/99 15,000 14,702 Den Norske Bank 4.860%, 08/10/99 15,000 14,858 4.950%, 11/16/99 35,000 34,191 Deutsche Bank Financial 4.800%, 06/28/99 50,000 49,820 Ford Motor Credit 4.800%, 06/01/99 2,000 2,000 4.730%, 08/31/99 20,000 19,761 General Electric Capital 4.800%, 06/10/99 1,750 1,748 4.800%, 06/11/99 2,055 2,052 4.820%, 07/16/99 6,500 6,461 4.830%, 07/30/99 835 828 4.730%, 08/19/99 30,000 29,689 General Motors Acceptance 4.670%, 10/20/99 45,000 44,177 Goldman Sachs Group 4.770%, 09/17/99 25,000 24,642 IBM Credit 4.820%, 06/03/99 1,580 1,580 John Hancock 4.810%, 07/15/99 770 765 JP Morgan 4.850%, 07/07/99 304 303 4.812%, 10/06/99 800 786 FACE AMOUNT (000) VALUE (000) FINANCE--CONTINUED KFW International Finance 4.830%, 06/21/99 $ 700 $ 698 4.790%, 06/24/99 1,200 1,196 4.810%, 06/24/99 1,300 1,296 4.810%, 07/06/99 330 328 4.820%, 10/04/99 500 492 Merrill Lynch 4.820%, 06/17/99 30,000 29,936 Progress Capital 4.820%, 06/11/99 1,205 1,203 Sigma Finance 4.850%, 11/17/99 25,000 24,431 St Paul 4.800%, 06/17/99 20,000 19,957 UBS Finance 4.930%, 12/21/99 35,000 34,027 4.780%, 12/23/99 15,000 14,592 ------------ 436,248 ------------ INDUSTRIAL (8.9%) AES Shady Point 4.790%, 06/01/99 18,000 18,000 American Home Product 4.790%, 06/02/99 900 900 AT&T 4.810%, 07/28/99 20,000 19,848 Allied Signal 4.820%, 06/16/99 2,200 2,196 Dupont (EI) de Nemours 4.830%, 06/07/99 400 400 Eastman Kodak 4.820%, 07/22/99 500 497 4.840%, 09/20/99 15,000 14,776 Edison International 4.820%, 08/02/99 25,000 24,792 4.850%, 08/16/99 10,000 9,898
1 STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - -------------------------------------------------------------------------------- INDUSTRIAL--CONTINUED Fortune Brand 4.866%, 07/22/99 $ 948 $ 942 Gannett 4.820%, 06/14/99 500 499 General Electric 4.810%, 06/18/99 300 299 4.830%, 07/28/99 2,400 2,382 J.C. Penney 5.040%, 07/29/99 8,000 7,936 Motorola Credit 4.830%, 06/11/99 500 499 South Carolina Fuel 4.800%, 06/07/99 23,644 23,625 Walt Disney 4.460%, 07/13/99 40,000 39,792 --------- 167,281 --------- UTILITIES (0.2%) GTE 4.820%, 06/07/99 3,800 3,797 --------- Total Commercial Paper (Cost $607,326) 607,326 --------- CORPORATE OBLIGATIONS (35.7%) FINANCE (33.8%) American Express Centurion (B) 4.968%, 06/07/99 9,300 9,300 5.060%, 06/01/99 15,000 15,000 4.980%, 06/02/99 35,000 35,000 American Express Credit 8.500%, 06/15/99 400 401 American General Finance 6.875%, 07/01/99 100 100 American General Finance, MTN 6.370%, 10/29/99 5,000 5,026 Associates Corporation NA 7.250%, 09/01/99 2,500 2,513 6.000%, 03/15/00 150 151 - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- FINANCE--CONTINUED Associates Corporation NA (B) 4.890%, 06/01/99 $20,000 $ 19,997 Associates Corporation NA , MTN 6.750%, 06/28/99 5,000 5,003 Associates Corporation NA, Ser F, MTN 6.125%, 11/01/99 500 502 Bayerische Hypotheken Bank 6.125%, 12/30/99 227 228 Bayerische Hypotheken Bank, MTN 6.750%, 10/04/99 663 666 6.125%, 11/08/99 825 827 6.250%, 12/30/99 150 151 6.000%, 01/07/00 416 417 Bayerische Hypo-Vereinsbank, MTN 6.625%, 07/02/99 142 142 4.625%, 11/12/99 209 208 6.000%, 12/10/99 206 207 Bear Stearns 4.940%, 06/19/00 35,000 35,000 Bear Stearns, MTN 5.715%, 07/30/99 15,000 15,000 Bear Stearns, MTN (B) 5.029%, 06/18/99 15,000 15,000 Beneficial, MTN (B) 5.100%, 06/01/99 10,000 10,011 Beta Finance (B) 4.850%, 06/01/99 25,000 25,000 Beta Finance, MTN (B) 5.520%, 06/01/99 25,000 25,000 4.940%, 07/15/99 15,000 15,000 Branch Banking and Trust (B) 5.030%, 06/01/99 35,000 34,987 British Telecom Finance, MTN 8.750%, 08/11/99 100 101 Caterpillar Financial, MTN 5.750%, 01/31/00 122 122
2
- ------------------------------------------------------------------------------- FACE AMOUNT (000)VALUE (000) - ------------------------------------------------------------------------------- FINANCE--CONTINUED Caterpillar Financial Services, MTN 6.800%, 07/01/99 $ 250 $ 250 Chrysler Financial 9.500%, 12/15/99 7,086 7,249 Chrysler Financial, MTN 6.375%, 01/28/00 3,750 3,780 Commerzbank, MTN 4.625%, 07/23/99 370 370 5.125%, 03/07/00 148 148 Credit Suisse First Boston (A) (B) 4.800%, 06/01/99 35,000 34,996 Credit Suisse First Boston (B) 4.860%, 06/01/99 15,000 15,000 Credit Suisse First Boston International, MTN 5.400%, 03/20/00 20,000 20,000 Deutsche Bank, MTN 6.125%, 11/08/99 386 387 6.500%, 12/29/99 677 682 Dresdner Finance, MTN 5.500%, 12/21/99 475 475 Exxon Capital 6.500%, 07/15/99 100 100 First Union Bank (B) 4.810%, 06/01/99 25,000 25,000 5.040%, 06/01/99 25,000 24,995 5.020%, 08/19/99 20,000 20,000 Ford Holdings 9.250%, 03/01/00 3,940 4,054 Ford Motor Credit 8.875%, 06/15/99 1,000 1,001 6.375%, 09/15/99 850 853 Ford Motor Credit, MTN 6.125%, 12/03/99 870 873 8.625%, 01/24/00 344 351 FACE AMOUNT (000) VALUE (000) FINANCE--CONTINUED General Electric Capital Canada Financial, MTN 8.750%, 10/25/99 $ 365 $ 370 General Electric Capital, MTN 5.430%, 01/17/00 100 100 5.840%, 03/30/00 150 151 General Motors Acceptance 8.400%, 10/15/99 200 202 7.000%, 03/01/00 195 197 General Motors Acceptance, MTN 6.750%, 09/30/99 215 216 6.250%, 01/06/00 500 503 8.500%, 01/31/00 2,000 2,044 General Motors Acceptance, MTN (B) 4.830%, 07/06/99 2,000 2,000 Goldman Sachs Group, MTN 5.280%, 02/24/00 10,000 10,000 Helaba Finance Bank, MTN 5.750%, 12/21/99 464 465 IBM Credit (B) 4.950%, 06/15/99 10,000 10,000 IBM Credit, MTN 6.750%, 08/09/99 215 216 Inter-America Development Bank, MTN 6.250%, 12/31/99 145 146 International Bank Reconstruction and Development, MTN 6.000%, 07/14/99 318 318 5.150%, 03/23/00 326 325 International Lease Finance 6.500%, 08/15/99 1,000 1,003 International Lease Finance, MTN 5.960%, 07/07/99 500 500 JP Morgan, MTN (B) 5.060%, 06/01/99 20,000 20,000
3 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONTINUED
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- FINANCE--CONTINUED Merrill Lynch (B) 5.090%, 06/01/99 $15,000 $ 15,000 Merrill Lynch, MTN 6.070%, 09/27/99 300 301 Morgan Guaranty Trust, MTN 6.625%, 07/16/99 377 378 Morgan Stanley Dean Witter 6.250%, 03/15/00 1,500 1,512 Morgan Stanley Dean Witter, MTN (B) 5.108%, 08/23/99 10,000 10,008 National City 6.750%, 06/01/99 10,000 10,000 Nationsbank (B) 5.060%, 06/03/99 10,000 10,003 Norwest Financial, MTN 6.050%, 11/19/99 200 201 PNC Bank (B) 4.790%, 06/01/99 10,000 10,000 4.779%, 06/03/99 10,000 9,999 Rabobank, MTN 6.500%, 08/16/99 416 417 6.000%, 12/31/99 122 123 6.375%, 12/31/99 223 224 Sigma Finance (A) 5.305%, 03/13/00 15,000 15,000 Sigma Finance, MTN 5.350%, 05/22/00 25,000 25,000 Tampa Bay Devil Rays (B) 5.000%, 06/03/99 45,000 45,000 Texas State 5.850%, 12/01/99 1,250 1,254 Toronto Dominion Bank, MTN 6.500%, 03/27/00 509 513 Toyota Motor Credit, MTN 6.500%, 09/30/99 170 171 5.750%, 12/20/99 382 383 FACE AMOUNT (000) VALUE (000) FINANCE--CONTINUED Wachovia 7.000%, 12/15/99 $ 2,443 $ 2,468 World Bank 8.375%, 10/01/99 200 202 ------- 638,537 ------- INDUSTRIAL (1.5%) Anheuser Busch, MTN 7.850%, 12/01/99 1,300 1,318 AT&T 8.250%, 01/11/00 2,000 2,036 Dupont (EI) de Nemours, MTN 7.500%, 06/11/99 115 115 HJ Heinz 6.750%, 10/15/99 200 201 JC Penney 6.875%, 06/15/99 500 500 KFW International, MTN 7.000%, 06/15/99 100 100 Philip Morris 6.150%, 09/16/99 11,900 11,973 9.250%, 02/15/00 900 924 Unilever NV, MTN 8.000%, 12/08/99 110 111 Wal-Mart Stores 6.125%, 10/01/99 150 150 5.650%, 02/01/00 8,000 8,027 Walt Disney, MTN 6.250%, 06/21/99 2,734 2,736 ------- 28,191 ------- UTILITIES (0.4%) BellSouth 6.500%, 02/01/00 500 504 Chesapeake and Potomac Telephone 5.875%, 09/15/99 250 251 Duke Power, MTN 5.780%, 07/08/99 2,000 2,002
4 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- UTILITIES--CONTINUED Michigan Bell Telephone 5.875%, 09/15/99 $ 100 $ 100 Province of Quebec 9.125%, 03/01/00 4,000 4,114 Southern California Edison 8.250%, 02/01/00 650 662 Virginia Electric & Power 8.875%, 06/01/99 450 450 ------ 8,083 ------ Total Corporate Obligations (Cost $674,811) 674,811 ------ CERTIFICATES OF DEPOSIT (7.4%) Bayerische Hypo-New York 5.270%, 03/03/00 20,000 19,985 Bayerische Landesbank 4.830%, 06/21/99 30,000 30,000 Branch Banking and Trust (B) 5.060%, 06/01/99 20,000 19,996 Canadian Imperial Bank 5.120%, 02/23/00 15,000 14,995 Commerzbank 5.160%, 02/25/00 13,000 12,995 Nationsbank 4.880%, 10/18/99 30,000 30,000 Toronto Dominion Bank 5.270%, 03/03/00 12,500 12,490 ------ Total Certificates of Deposit (Cost $140,461) 140,461 ------ ASSET-BACKED SECURITIES (2.3%) American Express Master Trust, Ser 1992-2 CI A 6.600%, 05/15/00 500 501 Americredit Auto Receivables Trust, Ser 1998-B Cl A1 5.199%, 11/12/99 2,561 2,561 - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- ASSET-BACKED SECURITIES--CONTINUED Americredit Auto Receivables Trust, Ser 1999-A Cl A1 4.980%, 03/12/00 $ 3,518 $ 3,519 Americredit Auto Receivables Trust, Ser 1999-B Cl A1 4.917%, 06/12/00 7,000 7,000 Arcadia Auto Receivables Trust, Ser 1999-A Cl A1 4.960%, 03/15/00 3,588 3,589 Case Equipment Loan Trust, Ser 1998-C Cl A1 5.420%, 12/15/99 967 967 Honda Auto Receivables Owner Trust, Ser 1999-1 Cl A1 4.974%, 02/15/00 3,547 3,547 Household Auto Revolving Trust, Ser 1998-1 Cl A1 5.330%, 12/17/99 2,634 2,634 Key Auto Finance Trust, Ser 1999-1 Cl A1 4.960%, 04/15/00 3,344 3,345 Mitsubishi Motor Credit of America Auto Trust, Ser 1999-1 Cl A1 5.066%, 01/15/00 3,016 3,016 Onyx Acceptance Auto Trust, Ser 1999-B Cl A1 4.930%, 05/15/00 9,000 9,000 Union Acceptance, Ser 1999-A Cl A1 4.980%, 03/08/00 2,999 3,000 ------ Total Asset-Backed Securities (Cost $42,679) 42,679 ------
5 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONCLUDED
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- TAXABLE MUNICIPAL BOND (1.1%) Missouri State, Higher Education Loan Authority, Student Loan Revenue, Ser F, Cl A1 4.940%, 06/02/99 $20,150 $ 20,150 ------ Total Taxable Municipal Bond (Cost $20,150) 20,150 ------ BANK NOTE (0.3%) American Express Centurion (B) 4.841%, 08/09/99 5,000 5,000 ------ Total Bank Note (Cost $5,000) 5,000 ------ U.S. GOVERNMENT AGENCY OBLIGATIONS (2.3%) FHLB 5.945%, 07/30/99 200 200 FHLMC 4.935%, 06/04/99 10,000 9,996 FNMA 4.680%, 06/10/99 20,000 19,977 8.700%, 06/10/99 370 370 8.450%, 07/12/99 370 371 SLMA (B) 5.271%, 06/01/99 750 750 4.920%, 08/02/99 12,000 11,994 SLMA, MTN 5.630%, 06/02/99 290 290 ------ Total U.S. Government Agency Obligations (Cost $43,948) 43,948 ------ REPURCHASE AGREEMENTS (26.6%) Barclays 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $25,016,418 (collateralized by FHLB and FNMA obligations: total market value $25,503,132) (C) 25,003 25,003 - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Deutsche Bank 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $166,685,056 (collateralized by FHLMC obligation: total market value $169,927,563) (C) $166,596 $ 166,596 Greenwich 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $81,567,767 (collateralized by various GNMA and FHLMC obligations: total market value $83,155,519) (C) 81,524 81,524 Merrill Lynch 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $125,275,405 (collateralized by FHLB, FHLMC, and FNMA obligations: total market value $127,715,110) (C) 125,208 125,208 Morgan Stanley 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $20,010,733 (collateralized by various FNMA obligations: total market value $20,421,366) (C) 20,000 20,000 Salomon Brothers 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $84,894,852 (collateralized by various FHLMC and FNMA obligations: total market value $86,683,968) (C) 84,849 84,849 ------ Total Repurchase Agreements (Cost $503,180) 503,180 ------ Total Investments (107.9% ) (Cost $2,037,555) $2,037,555 ------
6
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-7.9%) Securities Purchased Payable $ (154,997) Other Assets and Liabilities, Net 5,925 ----------- Total Other Assets and Liabilities (149,072) ----------- NET ASSETS: Fund shares of the Institutional Class (unlimited authorization -- no par value) based on 1,888,474,236 outstanding shares of beneficial interest $1,888,474 Overdistributed net investment income (2) Accumulated net realized gain on investments 11 ----------- Total Net Assets 100.0% $1,888,483 ----------- ----------- Net Asset Value, Offering and Redemption Price Per Share-- Institutional Shares $ 1.00 ----------- -----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 11. 7 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE BACKED OBLIGATIONS (75.2%) FHLB 5.630%, 06/15/99 $20,000 $ 20,000 5.980%, 06/15/99 10,000 9,981 4.966%, 02/25/00 30,000 29,982 5.160%, 03/08/00 30,000 29,989 5.125%, 05/19/00 20,000 19,985 FHLB (B) 5.026%, 06/02/99 35,000 35,000 5.170%, 06/02/00 30,000 30,000 FHLMCDN 4.935%, 06/04/99 35,000 34,986 4.842%, 08/13/99 25,000 24,762 FMCDN 4.868%, 09/10/99 30,000 29,604 FNMA 5.540%, 07/16/99 20,000 19,998 FNMA (B) 4.774%, 08/05/99 25,000 24,992 FNMA, MTN 4.970%, 04/12/00 20,000 19,991 5.120%, 05/26/00 10,000 9,987 FNMA, MTN (B) 4.991%, 06/01/99 25,500 25,496 FNMADN 4.680%, 06/10/99 15,000 14,982 4.920%, 06/11/99 10,000 9,987 4.920%, 07/02/99 10,000 9,959 4.760%, 07/20/99 30,000 29,807 4.867%, 10/15/99 15,000 14,734 SLMA (B) 4.841%, 06/01/99 20,000 19,999 ------ Total U.S. Agency Mortgage Backed Obligations (Cost $464,221) 464,221 ------ REPURCHASE AGREEMENTS (24.6%) ABN-AMRO 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $50,493,447 (collateralized by various GNMA obligations: total market value $51,475,692) (C) 50,466 50,466 - ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Deutsche Bank 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $13,349,714 (collateralized by FHLMC obligation: total market value $13,609,303) (C) $13,343 $13,343 Greenwich 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $73,986,034 (collateralized by various FNMA obligations: total market value $75,425,724) (C) 73,946 73,946 J.P. Morgan 4.83%, dated 05/28/99, matures 06/01/99, repurchase price $14,106,190 (collateralized by various GNMA obligations: total market value $14,380,596) (C) 14,099 14,099 ------ Total Repurchase Agreements (Cost $151,854) 151,854 ------ Total Investments (99.8% ) (Cost $616,075) 616,075 ------ OTHER ASSETS AND LIABILITIES, NET (0.2%) 1,014 ------ NET ASSETS: Fund Shares of the Institutional Class (unlimited authorization -- no par value) based on 617,114,635 outstanding shares of beneficial interest 617,114 Accumulated net realized loss on investments (25) ------- Total Net Assets 100.0% $617,089 ------- ------- Net Asset Value, Offering and Redemption Price Per Share -- Institutional Shares $ 1.00 ------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 11. 8 - ------------------------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
- ------------------------------------------------------------------------------- FACE AMOUNT (000)VALUE (000) - ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (23.4%) U.S. Treasury Bill 4.700%, 09/16/99 $45,000 $ 44,391 U.S. Treasury Note 5.500%, 02/29/00 22,000 22,103 ------ Total U.S. Treasury Obligations (Cost $66,494) 66,494 ------ REPURCHASE AGREEMENTS (76.8%) ABN-AMRO 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $12,506,611 (collateralized by U.S. Treasury Note: total market value $12,750,347) (C) 12,500 12,500 Barclays 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $11,683,126 (collateralized by U.S. Treasury Note: total market value $11,911,303) (C) 11,677 11,677 Credit Suisse First Boston 4.73%, dated 05/28/99, matures 06/01/99, repurchase price $11,005,781 (collateralized by U.S. Treasury Bill: total market value $11,786,000) (C) 11,000 11,000 Duetsche Bank 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $63,908,474 (collateralized by various U.S. Treasury Notes and U.S. Treasury Bonds: total market value $65,152,408) (C) 63,875 63,875 FACE AMOUNT (000) VALUE (000) REPURCHASE AGREEMENTS--CONTINUED Greenwich 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $11,871,391 (collateralized by U.S. Treasury Bond: total market value $12,105,827) (C) $11,865 $ 11,865 J.P. Morgan 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $12,006,347 (collateralized by U.S. Treasury Note: total market value $12,240,216) (C) 12,000 12,000 Merrill Lynch 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $10,912,810 (collateralized by U.S. Treasury STRIPS: total market value $11,125,364) (C) 10,907 10,907 Morgan Stanley 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $11,977,273 (collateralized by U.S. Treasury Bond: total market value $12,280,432) (C) 11,971 11,971 SBC Warburg 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $60,074,906 (collateralized by U.S. Treasury Bond: total market value $61,245,063) (C) 60,043 60,043 Salomon Brothers 4.76%, dated 05/28/99, matures 06/01/99, repurchase price $11,831,033 (collateralized by U.S. Treasury Bond: total market value $12,069,022) (C) 11,825 11,825 ------ Total Repurchase Agreements (Cost $217,663) 217,663 ------
9 STATEMENT OF NET ASSETS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND--CONCLUDED
- ------------------------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------------------------- Total Investments (100.2% ) (Cost $284,157) $284,157 ----- OTHER ASSETS AND LIABILITIES, NET (-0.2%) (632) ----- NET ASSETS: Fund shares of the Institutional Class (unlimited authorization -- no par value) based on 283,494,939 outstanding shares of beneficial interest 283,495 Undistributed net investment income 4 Accumulated net realized gain on investments 26 ------ Total Net Assets 100.0% $283,525 ------ ------ Net Asset Value, Offering and Redemption Price Per Share--- Institutional Shares $ 1.00 ------ ------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 11. 10 - ------------------------------------------------------------------------------- KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS Cl Class FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation FHLMCDN Federal Home Loan Mortgage Corporation Discount Note FMCDN Federal Mortgage Corporation Discount Note FNMA Federal National Mortgage Association FNMADN Federal National Mortgage Association Discount Note MTN Medium Term Note NA North America Ser Series SLMA Student Loan Marketing Association STRIPS Separately Traded Registered Interest and Principal Security (A) Private Placement Security (B) Adjustable Rate Security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 1999. The date shown is the next scheduled reset date. (C) Tri-Party Repurchase Agreement THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THEFINANCIAL STATEMENTS. 11 STATEMENT OF OPERATIONS (000) - ------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND JANUARY 31, 1999
CLASSIC CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. GOVERNMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY SECURITIES MONEY FUND MARKET FUND MARKET FUND ------------------------------------------------------------ 02/01/99- 02/01/98- 02/01/99- 02/01/98- 06/01/98- 05/31/99 01/31/99 05/31/99 01/31/99 05/31/99 -------- -------- -------- -------- ---------- Income: Interest Income $15,955 $44,755 $10,807 $35,773 $11,296 ----------------------------------------------------------- Expenses: Investment Advisory Fees 635 646 432 1,323 449 Investment Advisory Fees Waived (238) (268) (166) (629) (449) Contribution From Advisor -- -- -- -- (112) Administrator Fees 246 1,616 168 529 175 Administrator Fees Waived (96) (689) (69) (220) (45) Transfer Agent Fees 75 240 62 198 134 Printing Fees 10 27 12 32 66 Custody Fees 43 290 81 265 54 Professional Fees 19 22 15 27 52 Trustee Fees -- 1 2 1 11 Registration Fees 79 1 1 1 74 Insurance and Other Fees 5 5 4 7 43 Amortization of Deferred Organizational Costs -- 3 1 4 -- ---------------------------------------------------------- Total Expenses 778 1,894 543 1,538 452 ---------------------------------------------------------- Net Investment Income 15,177 42,861 10,264 34,235 10,844 ---------------------------------------------------------- Net Realized Gain on Securities Sold 1 -- -- -- 25 ---------------------------------------------------------- Increase in Net Assets Resulting from Operations $15,178 $42,861 $10,264 $34,235 $10,869 ---------------------------------------------------------- ---------------------------------------------------------- Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 12 STATEMENT OF CHANGES IN NET ASSETS (000) - ------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND JANUARY 31,
CLASSIC CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. GOVERNMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY SECURITIES MONEY FUND MARKET FUND MARKET FUND ------------------------------------------------------------------------------------- 02/01/99- 02/01/98- 02/01/97- 02/01/99- 02/01/98- 02/01/97- 06/01/98- 06/01/97- 05/31/99 01/31/99 01/31/98 05/31/99 01/31/99 01/31/98 05/31/99 05/31/98 Operations: Net Investment Income $ 15,177 $ 42,861 $ 31,705 $ 10,264 $ 34,235 $ 37,262 $ 10,844 $ 5,596 Net Realized Gain (Loss) on Investments 1 -- (3) -- -- 3 25 4 --------------------------------------------------------------------------------------- Increase in Net Assets Resulting from Operations 15,178 42,861 31,702 10,264 34,235 37,265 10,869 5,600 --------------------------------------------------------------------------------------- Distributions to Shareholders: Net Investment Income (15,172) (42,874) (31,704) (10,249) (34,250) (37,262) (10,842) (5,596) ---------------------------------------------------------------------------------------- Total Distributions (15,172) (42,874) (31,704) (10,249) (34,250) (37,262) (10,842) (5,596) ---------------------------------------------------------------------------------------- Share Transactions: Proceeds from Shares Issued 2,243,802 7,764,540 6,369,124 1,958,641 6,897,369 7,090,197 1,267,762 991,131 Shares Issued in Connection with Crestar Arbor Merger 1,072,229 -- -- -- -- -- -- -- Reinvestments of Cash Distributions 7,086 10,074 5,066 3,113 13,467 9,939 7,876 4,231 Cost of Shares Redeemed (2,319,130) (7,630,948) (6,110,786) (2,032,711)(7,012,200) (6,897,460) (1,132,474) (875,270) --------------------------------------------------------------------------------------------- Increase (Decrease) in Net Assets from Share Transactions 1,003,987 143,666 263,404 (70,957) (101,364) 202,676 143,164 120,092 -------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets 1,003,993 143,653 263,402 (70,942) (101,379) 202,679 143,191 120,096 --------------------------------------------------------------------------------------------- Net Assets: Beginning of Period 884,490 740,837 477,435 688,031 789,410 586,731 140,334 20,238 --------------------------------------------------------------------------------------------- End of Period $1,888,483 $ 884,490 $ 740,837 $ 617,089 $ 688,031 $789,410 $ 283,525 $ 140,334 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- Shares Issued and Redeemed: Shares Issued 2,243,802 7,764,540 6,369,124 1,958,641 6,897,369 7,090,197 1,267,762 991,131 Shares Issued in Connection with Crestar Arbor Merger 1,072,211 -- -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 7,086 10,074 5,066 3,113 13,467 9,939 7,876 4,231 Shares Redeemed (2,319,131) (7,630,948) (6,110,786) (2,032,711)(7,012,200) (6,897,460)(1,132,474) (875,270) --------------------------------------------------- ------------------------------------------ Net Share Transactions 1,003,968 143,666 263,404 (70,957) (101,364) 202,676 143,164 120,092 ---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THEFINANCIAL STATEMENTS. 13 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND JANUARY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET DISTRIBUTIONS NET ASSET NET ASSETS NET ASSET VALUE INVESTMENT FROM NET VALUE END TOTAL END OF BEGINNING OF PERIOD INCOME INVESTMENT INCOME OF PERIOD RETURN+ PERIOD (000) CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND (A) Institutional Shares 1999* $1.00 0.02 (0.02) $1.00 1.58% $1,888,483 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.46 884,490 1998 1.00 0.06 (0.06) 1.00 5.66 740,837 1997 1.00 0.05 (0.05) 1.00 5.45 477,435 1996(B) 1.00 0.02 (0.02) 1.00 1.42 382,632 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (C) Institutional Shares 1999* $1.00 0.02 (0.02) $1.00 1.56% $ 617,089 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.30 688,031 1998 1.00 0.05 (0.05) 1.00 5.52 789,410 1997 1.00 0.05 (0.05) 1.00 5.29 586,731 1996 1.00 0.06 (0.06) 1.00 5.88 514,870 1995(D) 1.00 0.03 (0.03) 1.00 4.98 579,422 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 1999 $1.00 0.05 (0.05) $1.00 4.97% $ 283,525 1998 1.00 0.05 (0.05) 1.00 5.50 140,334 1997(E) 1.00 0.02 (0.02) 1.00 2.46 20,238 RATIO OF EXPENSES TO RATIO OF NET INVESTMENT AVERAGE NET ASSETS EXPENSES TO INCOME TO (EXCLUDING WAIVERS AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) 0.25% 4.79% 0.35% 0.23 5.31 0.35 0.20 5.52 0.36 0.20 5.33 0.38 0.20 5.61 0.40 0.25% 4.73% 0.36% 0.23 5.18 0.36 0.20 5.39 0.37 0.20 5.17 0.37 0.20 5.72 0.37 0.20 4.98 0.38 0.20% 4.83% 0.47% 0.18 5.34 0.38 0.09 5.27 0.51
(A) On May 17, 1999, the Arbor Prime Obligations Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional Cash Management Money Market Fund. The Arbor Prime Obligations Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 17, 1999 have been carried forward in these financial highlights. (B) Commencedoperations on October 25, 1995. All ratios for the period have been annualized. (C) On May 24, 1999, the Arbor U.S. Government Securities Money Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional U.S. Government Securities Money Market Fund. The Arbor U.S. Government Securities Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. (D) Commenced operations on August 1,1994. All ratios for the period have been annualized. (E) Commenced operationson December 12, 1996. All ratios for the period have been annualized. Returns are for the period indicated and have not been annualized. * For the period February 1, 1999 to May 31, 1999. All ratios for the period have beenannualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 14 & 15 NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-four portfolios as of May 31, 1999: the Balanced Fund, the Capital Appreciation Fund (formerly the Capital Growth Fund), the Emerging Markets Equity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Balanced Portfolio, the Life Vision Growth and Income Portfolio, the Life Vision Maximum Growth Portfolio, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Small Cap Growth Stock Fund, the Sunbelt Equity Fund, the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds" or the "Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each fund's prospectus provides a description of the fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Institutional Money Market Funds. The financial statements of the Equity Funds, the Fixed Income Funds and the Retail Money Market Funds are not presented herein, but are presented separately. On February 17, 1999 and February 22, 1999, respectively, the Board of Trustees of the STI Classic Funds and Board of Trustees of the Arbor Funds approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and liabilities of certain of the Arbor Funds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 7). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 7, the STI Classic Funds acquired certain Arbor Funds in a tax-free business combination. While each Fund now exists as a STI Classic Fund, one of the surviving funds for accounting purposes is an Arbor Fund. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Operations, Statements of Changes in Net Assets and Financial Highlights presented reflect periods beginning on the first day of the accounting survivor's fiscal year. SECURITY VALUATION -- Investment securities held by the Funds are stated at amortized cost, which approximates market value. 16 - ------------------------------------------------------------------------------- FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized ratably to maturity and are included in interest income. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income of each of the Funds are declared on each business day and paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the Institutional U.S. Treasury Securities Money Market Fund has reclassified $2,000 from Undistributed Net Investment Income to Accumulated Net Realized Gain. This reclassification is attributable to the classification of short-term capital gains and ordinary income treatment for tax purposes. This reclassification has no effect on net assets or net asset value per share. 17 NOTES TO FINANCIAL STATEMENTS (concluded) - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Organization Costs and Transactions with Affiliates: In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." This SOP provides guidance on the financial reporting of start-up costs and organization costs and requires costs of start-up activities and organization costs to be expensed as incurred. Investment companies that began operations prior to June 30, 1998 can adopt the SOP prospectively. Therefore, previously capitalized organization costs will continue to be amortized over a period of sixty months. Any future start-up or organization costs will be expensed as incurred. Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor") Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration and Transfer Agency Servicing Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 24, 1999, and May 17, 1999, administrative and accounting services were provided to the Arbor U.S. Government Securities Money Fund and Prime Obligations Fund, respectively, by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .08% of the average daily net assets of these funds. A portion of these fees were voluntarily waived. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. 5. Investment Advisory and Custodian Agreements: The Trust and Trusco Capital Management, Inc. (the "Investment Advisor") have entered into an advisory agreement dated July 15, 1993. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets:
MAXIMUM INSTITUTIONAL ANNUAL SHARE ADVISORY MAXIMUM FEE EXPENSE ------------ ------------ Classic Institutional Cash Management Money Market Fund .20% .25% Classic Institutional U.S. Government Securities Money Market Fund .20% .25% Classic Institutional U.S. Treasury Money Market Fund .20% .25%
18 - ------------------------------------------------------------------------------- The Investment Advisor and the Administrator have voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 24, 1999, and May 17, 1999, Crestar Asset Management Company ("CAMCO") provided Investment Advisory services to certain Arbor Funds. CAMCO was paid for advisory services to each Fund at an annual rate of .10% and .11% of the average daily net assets for U.S. Government Securities Money and Prime Obligations Funds, respectively. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the Funds. Fees of the Custodian are paid on the basis of the net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Concentration of Credit Risk: The Classic Institutional Cash Management Money Market Fund invests in high quality money market instruments issued by corporations and the U.S. Government and rated by one or more nationally recognized statistical rating organizations, or, if not rated determined by the Advisor to be of comparable quality. The Classic Institutional U.S. Government Securities Fund invests in U.S. Treasury obligations, U.S. Government subsidiary corporation securities which are backed by the full faith and credit of the U.S. government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities and U.S. Government subsidiary corporation securities. The Classic Institutional U.S. Treasury Securities Money Market Fund invests in U.S. Treasury Obligations, which are backed by the full faith and credit of the U.S. Government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities. 7. Arbor Funds Merger: The Board of Directors and shareholders of certain of the Arbor Funds approved a reorganization of certain of the Arbor Funds into the STI Classic Funds which took place at the close of business on May 17, 1999 for the Prime Obligations Fund and May 24, 1999 for the U.S. Government Securities Money Fund. The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations on May 17, 1999 and May 24, 1999 and is unaudited:
SHARES OUTSTANDING SHARES ISSUED NET ASSETS NAV ON MERGER IN BUSINESS AFTER PER ARBOR FUND DATE STI CLASSIC FUND COMBINATION COMBINATION SHARE ------------------------- -------------- -------------------- ------------ ----------------------- U.S. Government Securities 684,672,707 Classic Institutional U.S. Government 684,672,707 684,647,218 $1.00 Money Fund (1) Securities Money Market Fund Prime Obligation Fund (1) 711,747,295 Classic Institutional Cash Management 711,747,295 1,783,974,148 1.00 Money Market Fund
(1) Represents the accounting survivor in this business combination. 19 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Classic Institutional Cash Management Money Market, Classic Institutional U.S. Government Securities Money Market, and Classic Institutional U.S. Treasury Securities Money Market Funds of STI Classic Funds (the "Trust") as of May 31, 1999, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of operations for the year ended January 31, 1999, statements of changes for the years ended January 31, 1999 and January 31, 1998, and financial highlights for the periods presented prior to May 31, 1999, for the Classic Institutional Cash Management Money Market and Classic Institutional U.S. Government Securities Money Market Funds were audited by other auditors whose report dated March 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 1999, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Classic Institutional Cash Management Money Market, Classic Institutional U.S. Government Securities Money Market, and Classic Institutional U.S. Treasury Securities Money Market Funds, of STI Classic Funds as of May 31, 1999, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 23, 1999 20 NOTICE TO SHAREHOLDERS - ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1999 (UNAUDITED) For shareholders that do not have a May 31, 1999 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 1999 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended May 31, 1999, each portfolio is designating the following items with regard to distributions paid during the year.
LONG TERM MID TERM (20% RATE) (28% RATE) ORDINARY CAPITAL GAINS CAPITAL GAINS INCOME TAX-EXEMPT TOTAL QUALIFYING FUND DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1) - -------------------------------------- -------------- -------------- ----------- ----------- -------------- ------------- Classic Institutional Cash Management Money Market Fund 0.00% 0.00% 100.00% 0.00% 100.00% 0.00% Classic Institutional U.S. Government Securities Money Market Fund 0.00% 0.00% 100.00% 0.00% 100.00% 0.00% Classic Institutional U.S. Treasury Securities Money Market Fund 0.00% 0.00% 100.00% 0.00% 100.00% 0.00%
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of "OrdinaryIncome Distribution". 21 NOTES NOTES NOTES INVESTMENT ADVISOR Trusco Capital Management, Inc. STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STI CLASSIC FUNDS PART C: OTHER INFORMATION POST-EFFECTIVE AMENDMENT NO. 32 Item 23. Exhibits: (a) Declaration of Trust - originally filed with Registrant's Registration Statement on Form N-1A filed February 12, 1992 and incorporated by reference to Exhibit 1 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (b)(1) By-Laws - originally filed with Registrant's Pre-Effective Amendment No. 1 filed April 23, 1992 and incorporated by reference to Exhibit 2 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (b)(2) Amended By-Laws - incorporated by reference to Exhibit (b)(2) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. (c) Not applicable. (d)(1) Revised Investment Advisory Agreement with Trusco Capital Management, Inc. - as originally filed with Registrant's Post-Effective Amendment No. 5 filed August 2, 1993 and incorporated by reference to Exhibit 5(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(2) Investment Advisory Agreement with American National Bank and Trust Company - as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and as Exhibit 5(d) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(3) Investment Advisory Agreement with Sun Bank Capital Management, National Association (now STI Capital Management, N.A.) - as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit 5(e) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(4) Investment Advisory Agreement with Trust Company Bank (now SunTrust Bank, Atlanta) - as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit D(4) of Post-Effective Amendment No. 24 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-98-028802 on July 30, 1998. (d)(5) Revised Schedule A to theRevised Investment Advisory Agreement with Trusco Capital Management, Inc. is 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 is filed herewith. (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 - is filed herewith. (j) Consent of Arthur Andersen LLP, independent public accountants, is filed herewith. (j)(2) Consent of PricewaterhouseCoopers LLP, independent public accountants, is filed herewith. (j)(3) Consent of Deloitte & Touche LLP, independent public accountants, is filed herewith. (k) Not applicable. (l) Not applicable. (m)(1) Distribution Plan - Investor Class - incorporated by reference to Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. (m)(2) Distribution and Service Agreement relating to Flex Shares dated May 29, 1995 - originally filed with Post- Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 15(a) of Post- Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (n) 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. (o)(1) Certificate of Class Designation - incorporated by reference to Exhibit (o)(1) of Post-Effective Amendment No. 27 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-99-009731 on April 15, 1999. (p) Powers of Attorney - is 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 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: C-2
Name of Connection with Name Other Company Other Company ---- ------------- ------------- STI CAPITAL MANAGEMENT, N.A. E. Jenner Wood III SunTrust Banks, Inc. -- Director Hunting F. Deutsch SunTrust Bank, Orlando -- Director Anthony R. Gray -- -- Chairman & Chief Investment Officer James R. Wood -- -- President Elliott A. Perny -- -- Executive Vice President Stuart F. Van Arsdale -- -- Senior Vice President Jonathan D. Rich -- -- Director Larry M. Cole -- -- Senior Vice President L. Earl Denney -- -- Executive Vice President Ronald Schwartz -- -- Senior Vice President Andre B.Prawato -- -- Senior Vice President Edward J. Dau -- -- Senior Vice President James K. Wood -- -- Senior Vice President Mills A. Riddick -- -- Senior Vice President Christopher A. Jones -- -- Senior Vice President David E. West -- -- Vice President C-3 Name of Connection with Name Other Company Other Company ---- ------------- ------------- Brett L. Barner -- -- Senior Vice President TRUSCO CAPITAL MANAGEMENT, INC. Douglas S. Phillips -- -- President Paul L. Robertson, III -- -- Secretary/Treasurer E. Jenner Wood SunTrust Banks, Inc. Director Director Donald W. Thurmond SunTrust Bank, Atlanta Director Director Bob M. Farmer -- -- Vice President M. Elizabeth (Beth) Wines -- -- Vice President Charles Arnold, Jr. -- -- Senior Vice President James R. Dillon, Jr. -- -- First Vice President James P. Foster -- -- Vice President Mark D. Garfinkel -- -- Vice President Robert (Bob) G. Goggin -- -- Vice President Joe E. Ransom -- -- Vice President George D. Smith, Jr. -- -- Vice President Jonathan Mote -- -- Vice President Charles B. Leonard -- -- First Vice President Mary F. Cernilli -- -- Vice President C-4 Name of Connection with Name Other Company Other Company ---- ------------- ------------- Garrett P. Smith -- -- Vice President Gregory L. Watkins -- -- Vice President David S. Yealy -- -- Vice President Robert J. Rhoades -- -- Senior Vice President Kar Ming Leong -- -- Vice President Stephen M. Yarbrough -- -- Vice President Celia S. Stanley -- -- Vice President Rebekah R. Alley -- -- Vice President SUNTRUST BANK, ATLANTA Robert R. Long SunTrust Banks of Chairman of the Board Chairman of the Board and Georgia, Inc. President Ronald S. Crowding -- Executive Vice President Executive Vice President Charles B. Ginden -- -- Executive Vice President William H. Rogers, Jr. -- -- Executive Vice President Donald Wayne Thurmond -- -- Executive Vice President Dr. William M. Chase Emory University President Director Gaylord O. Coan Gold Kist, Inc. CEO Director A.D. Correll Georgia-Pacific Chairman & CEO Director Corporation C-5 Name of Connection with Name Other Company Other Company ---- ------------- ------------- R.W. Courts, II Atlantic Realty Company President Director A.W. Dahlberg The Southern Company President, Chairman & Director CEO L. Phillip Humann SunTrust Banks, Inc. President, Chairman & CEO Director Services Corporation William B. Johnson The Ritz Carlton Hotel Chairman of the Board Director J. Hicks Lanier Oxford Industries, Inc. Chairman of the Board Director & President Director Pinehill Development Co. 30% owner Joseph L. Lanier, Jr. Dan River, Inc. Chairman of the Board Director Chairman Larry L. Prince Genuine Parts Company Chairman of the Board Director R. Randall Rollins Rollins, Inc. Chairman of the Board Director Lor, Inc. Director Maran, Inc. Director Gutterworld, Inc. Director Dabora, Inc. Director & Secretary Simpson, Nance & Graham Director Auto Parts Wholesale, Director Inc. Global Expanded Metal, Director Inc. Rollins Holding Co. Director Rol, Ltd. Partner Rollins Investment Fund Partner Energy Partners Partner Petro Partnership Partner The Piedmont Investment Director Group WRG, Ltd. Partner Rollins, Inc. Chairman RPC Energy Services, Inc. Chairman The Mul Company Partner Bugvac, Inc. Director Omnitron Int'l, Inc. Director MRG, Ltd. Partner Gerald T. Adams -- -- Senior Vice President C-6 Name of Connection with Name Other Company Other Company ---- ------------- ------------- James R. Albach -- -- Group Vice President Gay Cash -- -- Vice President Joseph B. Foley, Jr. -- -- Group Vice President Thomas R. Frisbie -- -- Group Vice President Mark Stancil -- -- Group Vice President David E. Thompson -- -- Vice President Charles C. Watson -- -- Group Vice President Dr. Mary B. Bullock Agnes Scott College President Director Larry L. Gellerstedt, III Beers Construction Co. Chairman Director John T. Glover Post Properties, Inc. President Director M. Douglas Ivester The Coca-Cola Company Chairman of the Board & CEO Director Dennis M. Love Printpack, Inc. President & CEO Director Charles H. McTier Robert Woodruff Foundation President Director
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 C-7 SEI Institutional International Trust August 30, 1988 The Advisors' Inner Circle Fund November 14, 1991 The Pillar Funds February 28, 1992 CUFUND May 1, 1992 STI Classic Funds May 29, 1992 First American Funds, Inc. November 1, 1992 First American Investment Funds, Inc. November 1, 1992 The Arbor Fund January 28, 1993 Boston 1784 Funds7 June 1, 1993 The PBHG Funds, Inc. July 16, 1993 Morgan Grenfell Investment Trust January 3, 1994 The Achievement Funds Trust December 27, 1994 Bishop Street Funds January 27, 1995 CrestFunds, Inc. March 1, 1995 STI Classic Variable Trust August 18, 1995 ARK Funds November 1, 1995 Huntington Funds January 11, 1996 SEI Asset Allocation Trust April 1, 1996 TIP Funds April 28, 1996 SEI Institutional Investments Trust June 14, 1996 First American Strategy Funds, Inc. October 1, 1996 HighMark Funds February 15, 1997 Armada Funds March 8, 1997 PBHG Insurance Series Fund, Inc. April 1, 1997 The Expedition Funds June 9, 1997 Alpha Select Funds January 1, 1998 Oak Associates Funds February 27, 1998 The Nevis Fund, Inc. June 29, 1998 The Parkstone Group of Funds September 14, 1998 CNI Charter Funds April 1, 1999 The Parkstone Advantage Fund May 1, 1999 Amerindo Funds, Inc. July 13, 1999 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 -- C-8 Larry Hutchison Senior Vice President -- Jack May Senior Vice President -- Hartland J. McKeown Senior Vice President -- Barbara J. Moore Senior Vice President Vice President and Assistant Secretary Kevin P. Robins Senior Vice President & General Counsel -- Patrick K. Walsh Senior Vice President -- Robert Aller Vice President -- Gordon W. Carpenter Vice President -- Todd Cipperman Vice President & 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 Secretary Vice President & Assistant Secretary Greg Gettinger Vice President & Assistant Secretary -- 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, Controller, Treasurer & Chief Financial Officer Joanne Nelson Vice President -- 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 Secretary -- Lynda J. Striegel Vice President & Assistant Secretary Vice President & 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: C-9 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) (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-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 (the "Securities Act") and the Investment Company Act of 1940, as amended the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 32 to Registration Statement No. 33-91476 to be signed on its behalf by the undersigned, duly authorized, in the City of Oaks, Commonwealth of Pennsylvania on the 28th day of September, 1999. By: /s/ Mark Nagle ---------------------------------------------------- Mark Nagle, President, Chief Financial Officer, and Chief Executive Officer Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacity on the dates indicated. * Trustee September 28, 1999 - ----------------------------- F. Wendell Gooch * Trustee September 28, 1999 - ----------------------------- Daniel S. Goodrum * Trustee September 28, 1999 - ----------------------------- Wilton Looney * Trustee September 28, 1999 - ----------------------------- Champney A. McNair * Trustee September 28, 1999 - ----------------------------- T. Gordy Germany * Trustee September 28, 1999 - ----------------------------- Bernard F. Sliger * Trustee September 28, 1999 - ----------------------------- Jonathan T. Walton * Trustee September 28, 1999 - ----------------------------- William H. Cammack /s/ Mark Nagle President, September 28, 1999 - ----------------------------- Chief Financial Officer Mark Nagle & Chief Executive Officer * By: /s/ Kevin Robins --------------------------------------- Kevin P. Robins, With Power of Attorney
C-11 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.D5 Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. is 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-12 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 - is filed herewith. 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 - filed herewith. EX-99.J Consent of Arthur Andersen LLP, independent public accountants, is filed herewith. EX-99.J2 Consent of PricewaterhouseCoopers LLP, is filed herewith. EX-99.J3 Consent of Deloitte & Touche LLP, independent public accountants is filed herewith. EX-99.K Not applicable. EX-99.L Not applicable. EX-99.M1 Distribution Plan - Investor Class - incorporated by reference to Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. EX-99.M2 Distribution and Service Agreement relating to Flex Shares dated May 29, 1995 - originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 15(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96- 015938 on July 31, 1996. EX-99.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.O1 Certificate of Class Designation - incorporated by reference to Exhibit (o)(1) of Post- Effective Amendment No. 27 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-99-009731 on April 15, 1999. EX-99.P Powers of Attorney - filed herewith. C-13 EX-99.B(D)(5) 2 EXHIBIT 99.B(D)(5) REVISED SCHEDULE A DATED MAY 24, 1999 TO THE INVESTMENT ADVISORY AGREEMENT BETWEEN STI CLASSIC FUNDS AND TRUSCO CAPITAL MANAGEMENT Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual rate as follows:
Portfolio Fee --------- --- Prime Quality Money Market Fund .65% Government Securities Money Market Fund .65% Tax -Exempt Money Market Fund .55% Short-Term Bond Fund .65% Short-Term U.S. Treasury Fund .65% Sunbelt Equity Fund 1.15% U.S. Government Securities Fund .74% International Equity Index Fund .90% Classic Institutional Cash Management Money Market Fund .20% Classic Institutional U.S. Treasury Securities Money Market Fund .20% Small Cap Growth Stock Fund 1.15% Tax Sensitive Growth Stock Fund 1.15% Maryland Municipal Bond Fund .65% Virginia Intermediate Municipal Bond Fund .65% Virginia Municipal Bond Fund .65% Tax-Free Money Market Fund .40% U.S. Treasury Money Market Fund .65% Growth and Income Fund .90% Life Vision Maximum Growth Portfolio .25% Life Vision Growth and Income Portfolio .25% Life Vision Balanced Portfolio .25% Classic Institutional U.S. Government Securities Money Market Fund .20%
EX-99.B(H)(2) 3 EXHIBIT 99.B(H)(2) ADMINISTRATION AGREEMENT ----------------- THIS AGREEMENT is made as of this 29th day of May 1995, by and between the STI Classic Funds (the "Trust"), a Massachusetts business trust, and SEI Financial Management Corporation (the "Administrator"), a Delaware corporation. WHEREAS, the Trust is an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), consisting of several series of shares; and WHEREAS, the Trust desires the Administrator to provide, and the Administrator is willing to provide, management, shareholder services and administrative services to such portfolios of the Trust as the Trust and the Administrator may agree on (the "Portfolios") and as listed on Schedule B attached hereto and made a part of this Agreement, on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the Trust and the Administrator hereby agree as follows: ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Trust hereby retains the Administrator to act as the administrator of the Portfolios and to furnish the Portfolios with the management and administrative services as set forth below. The Administrator hereby accepts such employment to perform the duties set forth below. The Administrator shall, for all purposes herein, be deemed to be an independent contractor and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Trust in any way and shall not be deemed an agent of the Trust. ARTICLE 2. OTHER ADMINISTRATIVE SERVICES. The Administrator shall perform or supervise the performance by others of other administrative services in connection with the operations of the Portfolios, and, on behalf of the Trust, will investigate, assist in the selection of and conduct relations with custodians, depositories, accountants, legal counsel, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and persons in any other capacity deemed to be necessary or desirable for the Portfolios' operations. The Administrator shall provide the Trustees of the Trust with such reports regarding investment performance as they may reasonably request but shall have no responsibility for supervising the performance by any investment adviser or sub-adviser of its responsibilities. The Administrator shall provide the Trust with regulatory reporting, fund accounting and related portfolio accounting services, all necessary office space, equipment, personnel compensation and facilities (including facilities for Shareholders' and Trustees' meetings) for 1 handling the affairs of the Portfolios and such other services as the Administrator shall, from time to time, determine to be necessary to perform its obligations under this Agreement. The Administrator shall make reports to the Trust's Trustees concerning the performance of its obligations hereunder; furnish advice and recommendations with respect to other aspects of the business and affairs of the Portfolios as the Trust and the Administrator shall determine desirable; and shall provide the Portfolios' Shareholders with the reports described in the Portfolios' then current prospectuses. The Administrator shall calculate the daily net asset value of the Portfolios in accordance with the procedures prescribed in the Trust's Registration Statement and such other procedures as may be established by the Trustees of the Trust. The Administrator will answer such correspondence and inquiries from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence and inquiries as may from time to time on such terms as may be mutually agreed upon between the Administrator and the Fund. Also, the Administrator may perform other services for the Trust as agreed from time to time, including, but not limited to, preparation and mailing of appropriate Federal income tax forms and returns to the Internal Revenue Service and other appropriate taxing authorities; mailing the annual reports of the Portfolios; and mailing notices of Shareholders' meetings, proxies and proxy statements, for all of which the Trust will pay the Administrator's out-of-pocket expenses. ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES. (A) THE ADMINISTRATOR. The Administrator shall furnish at its own expense the executive, supervisory and clerical personnel necessary to perform its obligations under this Agreement. The Administrator shall also provide the items which it is obligated to provide under this Agreement, and shall pay all compensation, if any, of officers of the Trust as well as all Trustees of the Trust who are affiliated persons of the Administrator or any affiliated corporation of the Administrator; provided, however, that unless otherwise specifically provided, the Administrator shall not be obligated to pay the compensation of any employee of the Trust retained by the Trustees of the Trust to perform services on behalf of the Trust. (B) THE TRUST. The Trust assumes and shall pay or cause to be paid all other expenses of the Trust not otherwise allocated herein, including, without limitation, organizational costs, taxes, expenses for legal and auditing services, the expenses of preparing (including typesetting), printing and mailing reports, prospectuses, statements of additional information, proxy solicitation material and notices to existing Shareholders, all expenses incurred in connection with issuing and redeeming Shares, the cost of custodial services, the cost of pricing services, the cost of initial and ongoing registration of the Shares under Federal and state securities laws, fees and out-of-pocket expenses of Trustees who are not affiliated persons of the Administrator or the investment adviser 2 to the Trust or any affiliated corporation of the Administrator or the investment adviser, insurance, interest, brokerage costs, litigation and other extraordinary or nonrecurring expenses, and all fees and charges of investment advisers to the Trust. ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR. (A) ADMINISTRATION FEE. For the services to be rendered, the facilities furnished and the expenses assumed by the Administrator pursuant to this Agreement, the Trust shall pay to the Administrator compensation at an annual rate specified in Schedule A attached hereto and made a part of this Agreement. Such compensation shall be calculated and accrued daily, and paid to the Administrator monthly. The Trust shall also reimburse the Administrator for its reasonable out of pocket expenses, including the travel and lodging expenses incurred by officers and employees of the Administrator in connection with attendance at meetings of the Board of Trustees. If this Agreement becomes effective subsequent to the first day of a month or terminates before the last day of a month, the Administrator's compensation for that part of the month in which this Agreement is in effect shall be prorated in a manner consistent with the calculation of the fees as set forth above. Payment of the Administrator's compensation for the preceding month shall be made promptly. (B) COMPENSATION FROM TRANSACTIONS. The Trust hereby authorizes any entity or person associated with the Administrator which is a member of a national securities exchange to effect any transaction on the exchange for the account of the Trust which is permitted by Section 11 (a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the retention of compensation for such transactions in accordance with Rule 11a2-2(T) (a) (2) (iv). (C) SURVIVAL OF COMPENSATION RATES. All rights of compensation under this Agreement for services performed as of the termination date shall survive the termination of this Agreement. ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of the Administrator shall be confined to those expressly set forth herein, and no implied duties are assumed by or may be asserted against the Administrator hereunder. The Administrator 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 law which cannot be waived or modified hereby. (As used in this Article 5, the term "Administrator" shall include directors, officers, employees and other corporate agents of the Administrator as well as that corporation itself.) So long as the Administrator acts in good faith and with due diligence and without gross negligence, the Trust assumes full responsibility and shall indemnify the Administrator and hold 3 it harmless from and against any and all actions, suits and claims, whether groundless or otherwise, and from and against any and all losses, damages, costs, charges, reasonable counsel fees and disbursements, payments, expenses and liabilities (including reasonable investigation expenses) arising directly or indirectly out of said administration, transfer agency, and dividend disbursing relationships to the Trust or any other service rendered to the Trust hereunder. The indemnity and defense provisions set forth herein shall indefinitely survive the termination of this Agreement. The rights hereunder shall include the right to reasonable advances of defense expenses in the event of any pending or threatened litigation with respect to which indemnification hereunder may ultimately be merited. In order that the indemnification provision contained herein shall apply, however, it is understood that if in any case the Trust may be asked to indemnify or hold the Administrator harmless, the Trust shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the Administrator will use all reasonable care to identify and notify the Trust promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the Trust, but failure to do so in good faith shall not affect the rights hereunder. The Administrator may apply to the Trust at any time for instructions and may consult counsel for the Trust or its own counsel and with accountants and other experts with respect to any matter arising in connection with the Administrator's duties, and the Administrator shall not be liable or accountable for any action taken or omitted by it in good faith in accordance with such instruction or with the opinion of such counsel, accountants or other experts. Also, the Administrator shall be protected in acting upon any document which it reasonably believes to be genuine and to have been signed or presented by the proper person or persons. Nor shall the Administrator be held to have notice of any change of authority of any officers, employee or agent of the Trust until receipt of written notice thereof from the Trust. ARTICLE 6. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator rendered to the Trust are not to be deemed to be exclusive. The Administrator is free to render such services to others and to have other businesses and interests. It is understood that Trustees, officers, employees and Shareholders of the Trust are or may be or become interested in the Administrator, as directors, officers, employees and shareholders or otherwise and that directors, officers, employees and shareholders of the Administrator and its counsel are or may be or become similarly interested in the Trust, and that the Administrator may be or become interested in the Trust as a Shareholder or otherwise. ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall be as specified in Schedule A attached hereto and made a part of this Agreement. This Agreement shall not be assignable by either party without the written consent of the other party. 4 ARTICLE 8. AMENDMENTS. This Agreement may be amended by the parties hereto only if such amendment is specifically approved (i) by the vote of a majority of the Trustees of the Trust, and (ii) by the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a Board of Trustees meeting called for the purpose of voting on such approval. For special cases, the parties hereto may amend such procedures set forth herein as may be appropriate or practical under the circumstances, and the Administrator may conclusively assume that any special procedure which has been approved by the Trust does not conflict with or violate any requirements of its Declaration of Trust, By-Laws or then current prospectuses, or any rule, regulation or requirement of any regulatory body. ARTICLE 9. TRUSTEES' LIABILITY. A copy of the Declaration of Trust of the Trust is on file with the Secretary of State 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 not individually and that the obligations of this instrument are 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. ARTICLE 10. CERTAIN RECORDS. The Administrator shall maintain customary records in connection with its duties as specified in this Agreement. Any records required to be maintained and preserved pursuant to Rules 31a-1 and 31a-2 under the 1940 Act which are prepared or maintained by the Administrator on behalf of the Trust shall be prepared and maintained at the expense of the Administrator, but shall be the property of the Trust and will be made available to or surrendered promptly to the Trust on request. In case of any request or demand for the inspection of such records by another party, the Administrator shall notify the Trust and follow the Trust's instructions as to permitting or refusing such inspection; provided that the Administrator may exhibit such records to any person in any case where it is advised by its counsel that it may be held liable for failure to do so, unless (in cases involving potential exposure only to civil liability) the Trust has agreed to indemnify the Administrator against such liability. ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person" and "affiliated person," when used in this Agreement, shall have the respective meanings specified in the 1940 Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission. ARTICLE 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 5 party to the party giving notice: if to the Trust, at 680 East Swedesford Road, Wayne, PA 19087- 1658, and if to the Administrator at 680 East Swedesford Road, Wayne, PA 19087-1658. ARTICLE 13. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the Commonwealth of Massachusetts and the applicable provisions of the 1940 Act. To the extent that the applicable laws of the Commonwealth of Massachusetts, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control. ARTICLE 14. MULTIPLE ORIGINALS. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. STI CLASSIC FUNDS By: -------------------------- Attest: ---------------------- SEI FINANCIAL MANAGEMENT CORPORATION By: -------------------------- Attest: ---------------------- 6 --------------------- AMENDED SCHEDULE A DATED MARCH 1, 1999 TO THE ADMINISTRATION AGREEMENT DATED MAY 29, 1995 BETWEEN STI CLASSIC FUNDS AND SEI FINANCIAL MANAGEMENT CORPORATION Fees: Pursuant to Article 4, Section A, the Trust shall pay the Administrator compensation for services rendered to the Portfolios listed in Schedule B hereto (the "Portfolios") at an annual rate of the average daily net assets of each such Portfolio and each Portfolio of the STI Classic Variable Trust, which is calculated daily and paid monthly, as set forth below: .12% on first $1 billion .09% on the next $4 billion .07% on the next $3 billion .065% on the next $2 billion .06 % thereafter Term: Pursuant to Article 7, this Agreement shall remain in effect until February 28, 2004. In the event of a material breach of this Agreement by either party, the non- breaching party shall notify the breaching party in writing of such breach and upon receipt of such notice, the breaching party shall have 45 days to remedy the breach or the nonbreaching party may immediately terminate this Agreement. 7 SCHEDULE B TO THE ADMINISTRATION AGREEMENT DATED MAY 29, 1995 BETWEEN STI CLASSIC FUNDS AND SEI FINANCIAL MANAGEMENT CORPORATION The Administrator shall perform services under the Administration Agreement for the following Portfolios: *Prime Quality MM Fund *U.S. Government Securities MM Fund *Investment Grade Bond Fund *Investment Grade Tax Exempt Bond Fund *Capital Growth Fund *Tax Exempt MM Fund *Value Income Stock Fund *Short-Term Bond Fund *Short-Term U.S. Treasury Securities Fund *Sunbelt Equity Fund *Aggressive Growth Fund *Balanced Fund *Florida Tax-Exempt Bond Fund *Georgia Tax-Exempt Bond Fund *Tennessee Tax-Exempt Bond Fund *U.S. Government Securities Fund *Limited-Term Federal Mortgage Securities Fund *International Equity Index Fund 8 EX-99.B(I) 4 EXHIBIT 99.B(I) [MORGAN, LEWIS & BOCKIUS LLP LOGO APPEARS HERE] September 23, 1999 STI Classic Funds 2 Oliver Street Boston, MA 02109 Re: Opinion of Counsel regarding Post-Effective Amendment No. 32 to the Registration Statement filed on Form N-1A under the Securities Act of 1933 (File No. 33-45671). -------------------------------------------------------------------------- Ladies and Gentlemen: We have acted as counsel to STI Classic Funds, a Massachusetts business trust (the "Trust"), in connection with the above-referenced Registration Statement on Form N-1A (as amended, the "Registration Statement") which relates to the Trust's shares of beneficial interest,without par value (collectively, the "Shares"). This opinion is being delivered to you in connection with the Trust's filing of Post-Effective Amendment No. 32 to the Registration Statement (the "Amendment") to be filed with the Securities and Exchange Commission pursuant to Rule 485(b) of the Securities Act of 1933 (the "1933 Act"). With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have reviewed, among other things, executed copies of the following documents: (a) a certificate of the Commonwealth of Massachusetts as to the existence and good standing of the Trust; (b) copies of the Fund's Agreement and Declaration of Trust and of all amendments and all supplements thereto (the "Declaration of Trust"); (c) a certificate executed by James R. Foggo, the Assistant Secretary of the Trust, certifying as to, and attaching copies of, the Trust's Declaration of Trust and Amended and Restated By-Laws (the "By-Laws"), and certain resolutions adopted by the Board of Trustees of the Trust authorizing the issuance of the Shares; and (d) a printer's proof of the Amendment. In our capacity as counsel to the Trust, we have examined the originals, or certified, conformed or reproduced copies, of all records, agreements, instruments and documents as we have deemed relevant or necessary as the basis for the opinion hereinafter expressed. In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of all original or certified copies, and the conformity to original or certified copies of all copies submitted to us as conformed or reproduced copies. As to various questions of fact relevant to such opinion, we have relied upon, and assume the accuracy of, certificates and oral or written statements of public officials and officers or representatives of the Fund. We have assumed that the Registration Statement, as filed with the Securities and Exchange Commission, will be in substantially the form of the printer's proof referred to in paragraph (d) above. Based upon, and subject to, the limitations set forth herein, we are of the opinion that the Shares, when issued and sold in accordance with the Trust's Declaration of Trust and By-Laws, and for the consideration described in the Registration Statement, will be legally issued, fully paid and nonassessable under the laws of the Commonwealth of Massachusetts. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not concede that we are in the category of persons whose consent is required under Section 7 of the 1933 Act. Very truly yours, Morgan, Lewis and Bockius LLP EX-99.J(1) 5 EXHIBIT 99.J(1) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use in this Registration Statement of our report dated July 23, 1999, on the May 31, 1999 financial statements of STI Classic Funds, included in Post-Effective Amendment No. 32 to the Registration Statement on Form N1-A, and to all references to our Firm included in or made part of this Registration Statement File No. 33-45671. /s/Arthur Andersen LLP Philadelphia, PA September 24, 1999 EX-99.B(J)(2) 6 EXHIBIT 99.B(J)(2) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the reference in this Post-Effective Amendment No. 32 to the Registration Statement (File No. 33-45671) and Amendment No. 34 to the Registration Statement (File No. 811-6557) of the STI Classic Funds (including the Classic Institutional Cash Management Money Market Fund and Classic Institutional U.S. Government Securities Money Market Fund) on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 respectively, to our Firm under the caption "Financial Highlights" in the Prospectus. /s/ PricewaterhouseCoopers LLP 2400 Eleven Penn Center Philadelphia, Pennsylvania September 24, 1999 EX-99.B(J)(3) 7 EXHIBIT 99.B(J)(3) CONSENT OF INDEPENDENT AUDITORS CrestFunds, Inc.: We consent to the reference to Deloitte & Touche LLP in Post-Effective Amendment No. 32 to Registration Statement No. 811-6557 of STI Classic Funds under the caption "Financial Highlights" in the September 24, 1999 Prospectus and Statement of Additional Information, under the caption "Financial Statements" both of which are part of such Registration Statement. /s/DELOITTE & TOUCHE LLP New York, New York September 24, 1999 EX-99.B(P) 8 EXHIBIT 99.B(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 resubstitution, 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 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 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 resubstitution, 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 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 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 Daniel S. Goodrum - --------------------------------- 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 resubstitution, 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 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 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 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 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 resubstitution, 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 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 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 resubstitution, 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 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 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 resubstitution, to sign for and in the name, 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 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 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 resubstitution, 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 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 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 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 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 resubstitution, 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 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 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 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 Joseph M. O'Donnell and Kevin Robins, and each of them singly, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, to sign for him and in his name, 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 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 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 hand and seal as of the date set forth below. /S/ Mark Nagle Date: July 3, 1998 - ------------------------------------------------- ----------------- Mark Nagle, President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----