<PAGE>
PROSPECTUS
HOW TO READ
THIS PROSPECTUS
The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important information
about the Trust Shares of the Bond and Money Market Funds that you should know
before investing. Please read this prospectus and keep it for future reference.
We arranged the prospectus into different sections so that you can easily review
this important information. On the next page, we discuss general information you
should know about investing in the Funds.
<TABLE>
<C> <S>
IF YOU WOULD LIKE MORE DETAILED INFORMATION
ABOUT EACH FUND, PLEASE SEE:
2 FLORIDA TAX-EXEMPT BOND FUND
4 GEORGIA TAX-EXEMPT BOND FUND
6 INVESTMENT GRADE BOND FUND
8 INVESTMENT GRADE TAX-EXEMPT BOND FUND
10 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
12 PRIME QUALITY MONEY MARKET FUND
14 SHORT-TERM BOND FUND
16 SHORT-TERM U.S. TREASURY SECURITIES FUND
18 TAX-EXEMPT MONEY MARKET FUND
20 U.S. GOVERNMENT SECURITIES FUND
22 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FOLLOWING TOPICS, PLEASE SEE:
24 EACH FUND'S PRINCIPAL INVESTMENTS
25 THE ADVISORS AND THEIR PORTFOLIO MANAGERS
26 PURCHASING, SELLING AND EXCHANGING FUND SHARES
28 HISTORICAL FINANCIAL INFORMATION
ABOUT EACH FUND
30 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS
30 TAXES
TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC
FUNDS PLEASE REFER TO THE BACK COVER OF THE
PROSPECTUS
</TABLE>
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING"
EXPLANATIONS.
- --------------------------------------------------------------------------------
FUND SUMMARY
INVESTMENT STRATEGY
WHAT ARE THE RISKS OF INVESTING?
PERFORMANCE INFORMATION
WHAT IS AN INDEX?
FUND EXPENSES
FUND INVESTMENTS
INVESTMENT ADVISORS
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
OCTOBER 1, 1998
<PAGE>
PROSPECTUS 1
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in mutual
funds.
The value of your investment in a Fund (except a Money Market Fund) is based on
the market prices of the securities the Fund holds. These prices change daily
due to economic and other events that affect securities markets generally, as
well as those that affect particular companies or governments. These price
movements, sometimes called volatility, will vary depending on the types of
securities a Fund owns and the markets where these securities trade.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
Each Money Market Fund tries to maintain a constant price per share of $1.00,
but we cannot guarantee this.
Each Fund has its own investment goal and strategies for reaching that goal. But
we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be
changed without shareholder approval. Before investing, make sure that the
Fund's goal matches your own.
The Advisors invest each Fund's assets in a way that the Advisor believes will
help the Fund achieve its goal. An Advisor's judgments about the stock markets,
economy and companies, or selecting investments may not reflect actual market
movements, economic conditions or company performance.
SUNTRUST BANK, ATLANTA SERVES AS CUSTODIAN OF THE ASSETS OF THE FUNDS. SUNTRUST
BANK, ATLANTA AND THE ADVISORS ARE OWNED BY SUNTRUST BANKS, INC. THE FEES PAID
FOR CUSTODIAN SERVICES ARE INCLUDED IN THE "OTHER EXPENSES" FIGURE OF THE "FUND
EXPENSES" TABLE ON THE FOLLOWING PAGES. LAST FISCAL YEAR, THE FUNDS PAID
SUNTRUST BANK, ATLANTA $1.3 MILLION FOR SERVING AS CUSTODIAN.
<PAGE>
2 PROSPECTUS
FLORIDA TAX-EXEMPT BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS Current income exempt from federal income taxes
for Florida residents without undue risk
INVESTMENT FOCUS Florida municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued
STRATEGY sectors and less in overvalued ones
INVESTOR PROFILE Florida residents who want income exempt
from federal income taxes
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Jacksonville, Sales Tax
Revenue..................... 3.4%
Orlando, Florida.............. 3.2%
Florida State Div. Bd. Fin.... 3.1%
Brevard County, Florida....... 2.9%
Palm Beech Solid Waste........ 2.6%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Florida Tax-Exempt Bond Fund invests substantially all of its
assets in municipal securities with income exempt from federal income taxes.
Issuers of these securities can be located in Florida, the District of Columbia,
Puerto Rico and other U.S. territories and possessions. In selecting investments
for the Fund, we try to limit risk as much as possible. Based on our analysis of
municipalities, credit risk, market trends and investment cycles, we attempt to
invest more of the Fund's assets in undervalued market sectors and less in
overvalued sectors. We also try to identify and invest in municipal issuers with
improving credit and avoid those with deteriorating credit. We anticipate that
the Fund's average weighted maturity will range from 6 to 25 years.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in Florida debt securities. As a result, the Fund is
subject to the risk that the prices of debt securities will decline due to
rising interest rates. This risk is greater for long-term debt securities than
for short-term debt securities. The Fund's concentration of investments in
securities of issuers located in Florida subjects the Fund to economic
conditions and government policies of Florida. Debt securities may decline in
credit quality due to economic or governmental events. In addition, an issuer
may be unable to make timely payments of principal or interest to the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 15.85
1996 3.94
1997 7.82
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
6.18% -1.41%
(3/31/95) (3/31/96)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.31%.
<PAGE>
PROSPECTUS 3
FLORIDA TAX-EXEMPT BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 3 YEARS (1/25/94)
<S> <C> <C> <C>
FLORIDA TAX-EXEMPT BOND FUND 7.82% 9.09% 6.51%
LEHMAN BROTHERS 10-YEAR MUNICIPAL
BOND INDEX 9.23% 10.19% 6.38%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers 10-Year
Municipal Bond Index is a widely recognized index of long-term investment
grade tax-exempt bonds with maturities between 8 and 12 years. The index
represents various market sectors and geographic locations.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .16%
---------
Total Annual Fund Operating Expenses .81%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$83 $259 $450 $1002
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .51%
AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
4 PROSPECTUS
GEORGIA TAX-EXEMPT BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Current income exempt from federal and Georgia
income taxes for Georgia residents without undue
risk
INVESTMENT FOCUS Georgia municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued
STRATEGY sectors and less in overvalued ones
INVESTOR PROFILE Georgia residents who want income exempt from
federal and state income taxes
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Henry County, Georgia......... 3.4%
Dalton Georgia Utilities,
RB.......................... 2.9%
Georgia State................. 2.9%
Henry County, Georgia......... 2.6%
Burke County, Georgia......... 2.6%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Georgia Tax-Exempt Bond Fund invests substantially all of its
assets in municipal securities with income exempt from federal and Georgia
income taxes. Issuers of these securities can be located in Georgia, the
District of Columbia, Puerto Rico and other U.S. territories and possessions. In
selecting investments for the Fund, we try to limit risk as much as possible.
Based on our analysis of municipalities, credit risk, market trends and
investment cycles, we attempt to invest more of the Fund's assets in undervalued
market sectors and less in overvalued sectors. We try to diversify the Fund's
holdings within Georgia. We also try to identify and invest in municipal issuers
with improving credit and avoid those with deteriorating credit. We anticipate
that the Fund's average weighted maturity will range from 6 to 25 years.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in Georgia debt securities. As a result, the Fund is
subject to the risk that the prices of debt securities will decline due to
rising interest rates. This risk is greater for long-term debt securities than
for short-term debt securities. The Fund's concentration of investments in
securities of issuers located in Georgia subjects the Fund to economic
conditions and government policies of Georgia. Debt securities may decline in
credit quality due to economic or governmental events. In addition, an issuer
may be unable to make timely payments of principal or interest to the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 13.51
1996 3.53
1997 8.17
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
5.02% -.79%
(3/31/95) (3/31/96)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.02%.
<PAGE>
PROSPECTUS 5
GEORGIA TAX-EXEMPT BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (1/18/94)
<S> <C> <C> <C>
GEORGIA TAX-EXEMPT
BOND FUND 8.17% 8.33% 4.88%
LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers 10-Year
Municipal Bond Index is a widely recognized index of long-term investment
grade tax-exempt bonds with maturities between 8 and 12 years. The index
represents various market sectors and geographic locations.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .17%
---------
Total Annual Fund Operating Expenses .82%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$84 $262 $455 $1014
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .50%
AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
6 PROSPECTUS
INVESTMENT GRADE BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High total return through current income and
capital appreciation, while preserving the
principal amount invested
INVESTMENT FOCUS Investment grade U.S. government and corporate
debt securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify relatively inexpensive
STRATEGY securities in a selected market index
INVESTOR PROFILE Investors who want to receive income from their
investment, as well as an increase in the value of
the investment
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
United States Treasury Bond... 11.6%
United States Treasury Bond... 8.6%
United States Treasury Bond... 7.0%
Merrill Lynch................. 4.9%
FNMA.......................... 4.9%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Investment Grade Bond Fund invests primarily in investment grade
corporate debt securities, U.S. Treasury obligations and mortgage-backed
securities. In selecting investments for the Fund, we try to minimize risk while
attempting to outperform selected market indices. Currently, our selected index
is the Lehman Brothers Government/Corporate Bond Index, a widely recognized,
unmanaged index of investment grade government and corporate debt securities. We
seek to invest more in portions of the Index that seem relatively inexpensive,
and less in those that seem expensive. We allocate the Fund's investments among
various market sectors based on our analysis of historical data, yield
information and credit ratings. We anticipate that the Fund's average weighted
maturity will range from 4 to 10 years. Due to the Fund's investment strategy,
the Fund may buy and sell securities frequently. This may result in higher
transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in investment grade debt securities. As a result, the
Fund is subject to the risk that the prices of debt securities will decline due
to rising interest rates. This risk is greater for long-term debt securities
than for short-term debt securities. In addition, an issuer may be unable to
make timely payments of principal or interest to the Fund. Some investment grade
debt securities have speculative characteristics. In addition, the Fund is
subject to the risk of investing in mortgage-backed securities. See
"Mortgage-Backed Securities" to the right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. The mortgages
underlying mortgage-backed securities may mature or be paid off before the
stated maturity date. This has four drawbacks. First, the Fund may lose money
on its investment. Second, the monthly income payments to the Fund may
fluctuate. Third, we cannot predict the maturity of the Fund's investment with
certainty. Fourth, we would invest any resulting proceeds elsewhere, generally
at lower interest rates.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 10.84
1994 -3.32
1995 17.80
1996 2.34
1997 9.08
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
6.11% -2.67%
(6/30/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 4.31%.
<PAGE>
PROSPECTUS 7
INVESTMENT GRADE BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (7/16/92)
<S> <C> <C> <C>
INVESTMENT GRADE
BOND FUND 9.08% 7.10% 6.96%
LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX 9.75% 7.61% 7.97%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers Government/
Corporate Bond Index is a widely recognized index of government and
corporate debt securities rated investment grade or better, with maturities
of at least 1 year.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .74%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses .87%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$89 $278 $482 $1073
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .64%
AND .77%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
8 PROSPECTUS
INVESTMENT GRADE TAX-EXEMPT BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High total return through (i) current income that
is exempt from federal income taxes and (ii)
capital appreciation, while preserving the
principal amount invested
INVESTMENT FOCUS Investment grade municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued
STRATEGY sectors and less in overvalued ones
INVESTOR PROFILE Investors who want to receive tax-free current
income and an increase in the value of their
investment
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
New York Ser J, GO............ 4.7%
Washington State.............. 3.1%
Illinois State................ 3.0%
King County................... 2.7%
Allegheny Cnty, PA Airport
Rev......................... 2.3%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Investment Grade Tax-Exempt Bond Fund invests primarily in
investment grade tax-exempt obligations, like municipal securities. The issuers
of these securities may be located in any U.S. state, territory or possession.
In selecting investments for the Fund, we try to limit risk as much as possible.
Based on our analysis of municipalities, credit risk, market trends and
investment cycles, we attempt to invest more of the Fund's assets in undervalued
market sectors and less in overvalued sectors. We also try to identify and
invest in municipal issuers with improving credit and avoid those with
deteriorating credit. We anticipate that the Fund's average weighted maturity
will range from 4 to 10 years. Due to the Fund's investment strategy, the Fund
may buy and sell securities frequently. This may result in higher transaction
costs and capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in investment grade debt securities. As a result, the
Fund is subject to the risk that the prices of debt securities will decline due
to rising interest rates. This risk is greater for long-term debt securities
than for short-term debt securities. Debt securities may decline in credit
quality due to economic or governmental events. In addition, an issuer may be
unable to make timely payments of principal or interest to the Fund. Some
investment grade bonds may have speculative characteristics.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1994 -0.32
1995 14.98
1996 5.52
1997 7.80
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
6.07% -3.14%
(3/31/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.70%.
<PAGE>
PROSPECTUS 9
INVESTMENT GRADE TAX-EXEMPT BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR G.O. INDEX.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 3 YEARS (10/21/93)
<S> <C> <C> <C>
INVESTMENT GRADE TAX-EXEMPT BOND FUND 7.80% 9.36% 6.64%
LEHMAN BROTHERS 5-YEAR
G.O. INDEX 6.48% 7.54% 5.33%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers 5-Year G.O.
Index is a widely recognized index of municipal bonds with maturities
ranging from 4 to 6 years. The index represents various market sectors and
geographic locations.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .74%
Other Expenses .15%
---------
Total Annual Fund Operating Expenses .89%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$91 $284 $493 $1096
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .62%
AND .77%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
10 PROSPECTUS
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital
INVESTMENT FOCUS Mortgage-backed securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify securities that are less prone
STRATEGY to pre-payment risk
INVESTOR PROFILE Conservative investors who want to receive income
from their investment
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
United States Treasury Note... 15.5%
FHLMC-GNMA Remic.............. 11.1%
FNMA.......................... 8.8%
FHLMC......................... 8.1%
FNMA.......................... 8.1%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Limited-Term Federal Mortgage Securities Fund invests primarily
in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA
and collateralized mortgage obligations. These securities typically have an
average maturity from 1 to 5 years. In selecting investments for the Fund, we
try to identify securities that we expect to perform well in rising and falling
markets. We also attempt to reduce the risk that the underlying mortgages are
pre-paid by focusing on securities that we believe are less prone to this risk.
For example, Fannie Mae or GNMA securities that were issued years ago may be
less prone to pre-payment risk because there have been many opportunities for
pre-payment, but none have occurred. Due to the Fund's investment strategy, the
Fund may buy or sell securities frequently. This may result in higher
transaction costs and capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in debt securities. As a result, the Fund is subject
to the risk that the prices of debt securities will decline due to rising
interest rates. This risk is greater for long-term debt securities than for
short-term debt securities. In addition, the Fund is subject to the risk of
investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the
right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. Collateralized
mortgage obligations (CMOs) are a type of mortgage-backed security that are
divided into separate maturity classes. Mortgage income is applied first to
the CMO with the shortest maturity, second to the CMO with the next shortest,
and so on. The mortgages underlying mortgage-backed securities may mature or
be paid off before the stated maturity date. This has four drawbacks. First,
the Fund may lose money on its investment. Second, the monthly income
payments to the Fund may fluctuate. Third, we cannot predict the maturity of
the Fund's investment with certainty. Fourth, we would invest any resulting
proceeds elsewhere, generally at lower interest rates.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 12.14
1996 4.53
1997 6.74
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.05% .32%
(3/31/95) (3/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.84%.
<PAGE>
PROSPECTUS 11
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MERRILL LYNCH 1-5 YEAR
SHORT/INTERMEDIATE U.S. TREASURY INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (6/7/94)
<S> <C> <C> <C>
LIMITED-TERM FEDERAL MORTGAGE
SECURITIES FUND 6.74% 7.76% 6.57%
MERRILL LYNCH 1-5 YEAR SHORT/
INTERMEDIATE U.S. TREASURY INDEX 7.11% 8.08% 7.16%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Merrill Lynch 1-5 Year Short/
Intermediate U.S. Treasury Index is a widely recognized index of U.S.
Treasury securities with maturities 1 year or greater and no more than 5
years.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses .78%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$80 $249 $433 $966
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .54%
AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
12 PROSPECTUS
PRIME QUALITY MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital and liquidity
INVESTMENT FOCUS Money market instruments
PRINCIPAL INVESTMENT Attempts to identify money market instruments with the most attractive risk/return
STRATEGY trade-off
INVESTOR PROFILE Conservative investors who want to receive current income from their investment
</TABLE>
INVESTMENT STRATEGY
The Prime Quality Money Market Fund invests exclusively in high
quality U.S. money market instruments and foreign money market instruments
denominated in U.S. dollars. In selecting investments for the Fund, we try to
increase income without adding undue risk. We analyze maturity, yields, market
sectors and credit risk. Investments are made in money market instruments with
the most attractive risk/return trade-off.
MONEY MARKET FUNDS
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These include CDs, bankers'
acceptances, commercial paper, U.S. Treasury securities, some municipal
securities, and repurchase agreements. A money market fund follows strict rules
about credit risk, maturity and diversification of its investments. An
investment in a money market fund is not a bank deposit. Although a money market
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in a money market fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 2.77
1994 3.77
1995 5.47
1996 4.99
1997 5.15
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.37% .68%
(6/30/95) (6/30/93)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.56%.
<PAGE>
PROSPECTUS 13
PRIME QUALITY MONEY MARKET FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE FIRST TIER AVERAGE.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (6/8/92)
<S> <C> <C> <C>
PRIME QUALITY
MONEY MARKET FUND 5.15% 4.43% 4.28%
IBC/DONOGHUE FIRST
TIER AVERAGE 5.01% 4.32% 4.25%
</TABLE>
TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The IBC/Donoghue First Tier
Average is a widely recognized composite of money market funds that invest
in the highest credit quality short-term money market instruments.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses .78%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$80 $249 $433 $966
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and Administrator are voluntarily
waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, OTHER
EXPENSES AND TOTAL OPERATING EXPENSES ARE .51%, .09% AND .60%, RESPECTIVELY.
The Advisor and Administrator could discontinue these voluntary waivers at any
time. For more information about these fees, see "Investment Advisors."
<PAGE>
14 PROSPECTUS
SHORT-TERM BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital
INVESTMENT FOCUS Investment grade U.S. government and corporate debt
securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT Attempts to identify securities that offer a
STRATEGY comparably better return than similar securities
for a given level of credit risk
INVESTOR PROFILE Income oriented investors who are willing to accept
increased risk for the possibility of returns
greater than money market investing
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
United States Treasury Note... 7.1%
United States Treasury Note... 5.4%
U.S. Treasury Stripped........ 4.5%
United States Treasury Note... 4.0%
United States Treasury Note... 3.8%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Short-Term Bond Fund invests primarily in a diversified
portfolio of short- to medium-term investment grade U.S. Treasury, corporate
debt, mortgage-backed and asset-backed securities. The Fund intends to maintain
an average weighted maturity of 3 years or less. In selecting investments for
the Fund, we attempt to identify securities that offer a comparably better
investment return for a given level of credit risk. For example, short-term
bonds generally have better returns than money market instruments, with a fairly
modest increase in credit risk. We manage the Fund from a total return
perspective. That is, we make day to day investment decisions for the Fund with
a view towards maximizing returns. We analyze yields, market sectors and credit
risk in an effort to identify attractive investments with the best risk/reward
trade-off.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in debt securities. As a result, the Fund is subject
to the risk that the prices of debt securities will decline due to rising
interest rates. In addition, an issuer may be unable to make timely payments of
principal or interest to the Fund. Also, the Fund may invest in bonds rated
"investment grade." Some investment grade bonds may have speculative
characteristics. In addition, the Fund is subject to the risk of investing in
mortgage-backed and asset-backed securities. See "Mortgage-Backed and
Asset-Backed Securities" to the right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. The owner of an
asset-backed security owns a share of the underlying pool of assets, such as
truck and auto loans, leases and credit card receivables. The mortgages,
receivables or other assets underlying these securities may mature or be paid
off before the stated maturity date. This has four drawbacks. First, the Fund
may lose money on its investment. Second, the monthly income payments to the
Fund may fluctuate. Third, we cannot predict the maturing of the Fund's
investment with certainty. Fourth, we would invest any resulting proceeds
elsewhere, generally at lower interest rates.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1994 -.07
1995 11.77
1996 3.90
1997 6.78
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
3.76% -.58%
(6/30/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 3.00%.
<PAGE>
PROSPECTUS 15
SHORT-TERM BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT
SPONSORED/CORPORATE INDEX AND THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN
INDEX.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 3 YEARS (3/15/93)
<S> <C> <C> <C>
SHORT-TERM BOND FUND 6.78% 7.44% 5.45%
SALOMON 1-3 YEAR TREASURY/ GOVERNMENT
SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63%
SALOMON ONE YEAR TREASURY BENCHMARK
ON-THE-RUN INDEX 6.10% 6.61% 5.34%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Salomon 1-3 Year Treasury/
Government Sponsored/ Corporate Index is a widely recognized index of U.S.
Treasury, government agency and investment grade corporate securities with
maturities greater than 1 year and less than 3 years. The Salomon One Year
Treasury Benchmark On-the-Run Index is a widely recognized index of U.S.
Treasury securities.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .15%
---------
Total Annual Fund Operating Expenses .80%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$82 $255 $444 $990
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .52%
AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
16 PROSPECTUS
SHORT-TERM U.S. TREASURY SECURITIES FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS High current income, while preserving capital
INVESTMENT FOCUS Short-term U.S. Treasury securities only
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT Attempts to identify Treasury securities with
STRATEGY maturities that offer a comparably better return
potential and yield than either shorter maturity or
longer maturity securities for a given level of
interest rate risk
INVESTOR PROFILE Income oriented investors who are willing to accept
increased risk for the possibility of returns
greater than money market investing
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
United States Treasury Note... 33.4%
United States Treasury Note... 25.0%
United States Treasury Note... 8.5%
United States Treasury Note... 4.9%
United States Treasury Note... 4.5%
* HOLDINGS MAY VARY
</TABLE>
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. We manage the Fund from a total
return perspective. That is, we make day to day investment decisions for the
Fund with a view toward maximizing returns and yield. We try to select those
U.S. Treasury securities that offer the best risk/reward trade-off.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. Treasury securities. As a result, the Fund is
subject to the risk that the prices of debt securities will decline due to
rising interest rates.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1994 1.41
1995 8.58
1996 4.52
1997 5.86
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
2.61% -.10%
(3/31/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.75%.
<PAGE>
PROSPECTUS 17
SHORT-TERM U.S. TREASURY SECURITIES FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT
SPONSORED/CORPORATE INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (3/15/93)
<S> <C> <C> <C>
SHORT-TERM U.S. TREASURY SECURITIES
FUND 5.86% 6.31% 4.82%
SALOMON 1-3 YEAR TREASURY/ GOVERNMENT
SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63%
SALOMON 6 MONTH TREASURY BILL INDEX 5.41% 5.53% 4.98%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Salomon 1-3 Year Treasury/
Government Sponsored/Corporate Index is a widely recognized index of U.S.
Treasury, government agency and investment grade corporate debt securities
with maturities greater than 1 year and less than 3 years. The Salomon 6
Month Treasury Bill Index is a widely recognized index of U.S. Treasury
bills.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .20%
---------
Total Annual Fund Operating Expenses .85%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$87 $271 $471 $1049
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .47%
AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
18 PROSPECTUS
TAX-EXEMPT MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS High current interest income exempt from federal income taxes, while preserving capital
and liquidity
INVESTMENT FOCUS Municipal money market instruments
PRINCIPAL INVESTMENT Attempts to increase income without added risk by analyzing credit quality
STRATEGY
INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their
investment
</TABLE>
INVESTMENT STRATEGY
The Tax-Exempt Money Market Fund invests substantially all of its
assets in money market instruments issued by municipalities and issuers that pay
income exempt from federal income taxes. In selecting investments for the Fund,
we analyze the credit quality and structure of each security to minimize risk.
We actively manage the Fund's average maturity based on current interest rates
and our outlook of the market.
SIMPLY SPEAKING . . .
MONEY MARKET FUNDS
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These include CDs, bankers'
acceptances, U.S. Treasury securities, some municipal securities, commercial
paper, and repurchase agreements. Money market funds follow strict rules about
credit risk, maturity and diversification of its investments. An investment in
a money market fund is not a bank deposit. Although a money market fund seeks
to keep a constant share price of $1.00, you may lose money by investing in a
money market fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 2.02
1994 2.47
1995 3.48
1996 3.06
1997 3.23
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
.92% .45%
(6/30/95) (3/31/93)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 1.53%.
<PAGE>
PROSPECTUS 19
TAX-EXEMPT MONEY MARKET FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE TAX-FREE STOCKBROKER &
GENERAL PURPOSE AVERAGE.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (6/8/92)
<S> <C> <C> <C>
TAX-EXEMPT MONEY MARKET FUND 3.23% 2.85% 2.79%
IBC/DONOGHUE TAX-FREE STOCKBROKER &
GENERAL PURPOSE AVERAGE 3.14% 2.77% 2.77%
</TABLE>
TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The IBC/Donoghue Tax-Free
Stockbroker & General Purpose Average is a widely recognized composite of
money market funds that invest in short-term municipal securities exempt
from Federal taxation.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .55%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses .68%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$69 $218 $379 $847
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .49%
AND .62%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
20 PROSPECTUS
U.S. GOVERNMENT SECURITIES FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS High current income, while preserving capital
INVESTMENT FOCUS Mortgage-backed securities and U.S. Treasury
obligations
SHARE PRICE VOLATILITY Low to medium
PRINCIPAL INVESTMENT Attempts to increase income without adding undue
STRATEGY risk
INVESTOR PROFILE Conservative investors who want to receive income
from their investment
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
United States Treasury Note... 5.1%
United States Treasury Bond... 5.0%
GNMA.......................... 4.7%
FHLMC......................... 3.8%
FNMA Remic.................... 3.2%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The U.S. Government Securities Fund invests primarily in U.S.
government debt securities, such as mortgage-backed securities and U.S. Treasury
obligations. In an attempt to provide a consistently high dividend without
adding undue risk, the Fund focuses its investments in mortgage-backed
securities. The average maturity of the Fund's portfolio will typically range
from 7 to 14 years.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. government debt securities. As a result, the
Fund is subject to the risk that the prices of debt securities will decline due
to rising interest rates. This risk is greater for long-term debt securities
than for short-term debt securities. In addition, the Fund is subject to the
risk of investing in mortgage-backed securities. See "Mortgage-Backed
Securities" to the right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. The mortgages
underlying mortgage-backed securities may mature or be paid off before the
stated maturity date. This has four drawbacks. First, the Fund may lose money
on its investment. Second, the monthly income payments to the Fund may
fluctuate. Third, we cannot predict the maturity of the Fund's investment with
certainty. Fourth, we would invest any resulting proceeds elsewhere, generally
at lower interest rate.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility
of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 17.33
1996 2.55
1997 8.94
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
5.89% -2.24%
(6/30/95) (3/31/96)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 3.90%.
<PAGE>
PROSPECTUS 21
U.S. GOVERNMENT SECURITIES FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT
BOND INDEX.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 3 YEARS (7/31/94)
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES FUND 8.94% 9.44% 7.73%
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT BOND INDEX 7.72% 8.65% 7.55%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers Intermediate
Government Bond Index is a widely recognized index of U.S. Treasury
securities and government agency securities with maturities ranging from 1
to 10 years.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .74%
Other Expenses .19%
---------
Total Annual Fund Operating Expenses .93%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$95 $296 $515 $1143
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .58%
AND .77%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
22 PROSPECTUS
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS High current income, while preserving capital and liquidity
INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements
PRINCIPAL INVESTMENT Attempts to increase income without adding undue risk by analyzing yields
STRATEGY
INVESTOR PROFILE Conservative investors who want to receive current income
</TABLE>
INVESTMENT STRATEGY
The U.S. Government Securities Money Market Fund invests exclusively
in U.S. Treasury bills, notes, bonds and components of these securities,
government agency securities, and repurchase agreements involving these
securities. In selecting investments for the Fund, we try to increase income
without adding undue risk by analyzing yields. We actively manage the maturity
of the Fund and its portfolio to maximize the Fund's yield based on current
market interest rates and our outlook on the market.
SIMPLY SPEAKING . . .
MONEY MARKET FUNDS
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These include CDs, bankers'
acceptances, U.S. Treasury securities, some municipal securities, commercial
paper, and repurchase agreements. Money market funds follow strict rules about
credit risk, maturity and diversification of its investments. An investment in
a money market fund is not a bank deposit. Although a money market fund seeks
to keep a constant share price of $1.00, you may lose money by investing in a
money market fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 2.67
1994 3.64
1995 5.39
1996 4.81
1997 4.99
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.36% .65%
(6/30/95) (6/30/93)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.45%.
<PAGE>
PROSPECTUS 23
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE U.S. TREASURY & REPO
AVERAGE.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS (6/8/92)
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND 4.99% 4.29% 4.15%
IBC/DONOGHUE U.S. TREASURY & REPO
AVERAGE 4.89% 4.21% 4.13%
</TABLE>
TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The IBC/Donoghue U.S. Treasury &
Repo Average is a widely recognized composite of money market funds that
invest in U.S. Treasury securities and repurchase agreements.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Other Expenses .14%
---------
Total Annual Fund Operating Expenses .79%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$81 $252 $439 $978
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and Administrator are voluntarily
waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, OTHER
EXPENSES AND TOTAL OPERATING EXPENSES ARE .50%, .13% AND .63%, RESPECTIVELY.
The Advisor and Administrator could discontinue these voluntary waivers at any
time. For more information about these fees, see "Investment Advisors."
<PAGE>
24 PROSPECTUS
EACH FUND'S PRINCIPAL INVESTMENTS
FUND INVESTMENTS
The table below shows each Fund's principal investments. In other words,
the table describes the type or types of investments that we believe will
most likely help each Fund achieve its investment goal.
BOND FUNDS
<TABLE>
<CAPTION>
FLORIDA GEORGIA INVESTMENT INVESTMENT LIMITED- SHORT- SHORT-TERM U.S.
TAX- TAX- GRADE BOND GRADE TAX- TERM FEDERAL TERM BOND U.S. GOVERNMENT
EXEMPT EXEMPT FUND EXEMPT MORTGAGE FUND TREASURY SECURITIES
BOND BOND BOND SECURITIES SECURITIES FUND
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Asset-Backed
Securities X
- ----------------------------------------------------------------------------------------------------------------------------
Corporate
Debt Securities X X
- ----------------------------------------------------------------------------------------------------------------------------
Mortgage-
Backed Securities X X X X
- ----------------------------------------------------------------------------------------------------------------------------
Municipal Securities X X X
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Government
Securities X X X
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
PRIME QUALITY MONEY TAX-EXEMPT MONEY U.S. GOVERNMENT SECURITIES
MARKET FUND MARKET FUND MONEY MARKET FUND
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Bank Obligations X
- -----------------------------------------------------------------------------------------------------------
Commercial Paper X X
- -----------------------------------------------------------------------------------------------------------
Corporate Obligations X
- -----------------------------------------------------------------------------------------------------------
Foreign Securities (U.S. Dollar
denominated) X
- -----------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities X
- -----------------------------------------------------------------------------------------------------------
Municipal Securities X
- -----------------------------------------------------------------------------------------------------------
U.S. Government Securities X X
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Each Fund also may invest in other securities, use other strategies and engage
in other investment practices, which are described in detail in our Statement of
Additional Information. Of course, we cannot guarantee that any Fund will
achieve its investment goal.
The investments listed above and the investments and strategies described
throughout this prospectus are those that we use under normal conditions. During
unusual economic or market conditions or for temporary defensive or liquidity
purposes, each Bond Fund may invest up to 100% of its assets in cash, money
market instruments, repurchase agreements and short-term obligations. In
addition, the Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund,
Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term
Federal Mortgage Securities Fund, Short-Term Bond Fund, Short-Term U.S. Treasury
Securities Fund, and the U.S. Government Securities Fund each may shorten its
average weighted maturity to as little as 90 days. When a Fund is investing for
temporary defensive purposes, it is not pursuing its investment goal.
<PAGE>
PROSPECTUS 25
THE ADVISORS AND THEIR PORTFOLIO MANAGERS
INVESTMENT ADVISORS
The Investment Advisors make investment decisions for the Funds and continuously
review, supervise and administer their Funds' respective investment programs.
The Board of Trustees supervises the Advisors and establishes policies that the
Advisors must follow in their management activities.
STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802,
serves as the Advisor to the Investment Grade Bond, Limited-Term Federal
Mortgage Securities, Investment Grade Tax-Exempt Bond and Florida Tax-Exempt
Bond Funds. As of May 31, 1998, STI had approximately $11.7 billion in assets
under management. For the fiscal year ended May 31, 1998, STI received advisory
fees of:
<TABLE>
<S> <C>
FLORIDA TAX-EXEMPT BOND FUND............. .51%
INVESTMENT GRADE BOND FUND............... .64%
INVESTMENT GRADE TAX-EXEMPT BOND FUND.... .62%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES
FUND................................... .54%
</TABLE>
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Advisor to the U.S. Government Securities,
Short-Term Bond, Short-Term U.S. Treasury Securities, Prime Quality Money
Market, U.S. Government Securities Money Market, and Tax-Exempt Money Market
Funds. As of May 31, 1998, Trusco had approximately $22 billion in assets under
management. For the fiscal year ended May 31, 1998, Trusco received advisory
fees of:
<TABLE>
<S> <C>
SHORT-TERM BOND FUND..................... .52%
SHORT-TERM U.S. TREASURY SECURITIES
FUND................................... .47%
U.S. GOVERNMENT SECURITIES MONEY MARKET
FUND................................... .50%
PRIME QUALITY MONEY MARKET FUND.......... .51%
TAX-EXEMPT MONEY MARKET FUND............. .49%
U.S. GOVERNMENT SECURITIES FUND.......... .58%
</TABLE>
SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia 30303, serves as the
Advisor to the Georgia Tax-Exempt Bond Fund. As of June 31, 1998, SunTrust Bank,
Atlanta had approximately $76 billion under management. For the fiscal year
ended May 31, 1998, SunTrust Bank, Atlanta received advisory fees of .50% for
the Georgia Tax-Exempt Bond Fund.
The Advisors may use their affiliates as brokers for Fund transactions.
PORTFOLIO MANAGERS
Mr. L. Earl Denney, CFA, has served as Senior Vice President of STI since 1983.
He has managed the Investment Grade Bond Fund since it began operating in June
1992. He has more than 20 years of experience in fixed income investment
management. Prior to joining STI, he was fixed income portfolio manager with
American National Bank.
The U.S. Government Securities Fund has been co-managed by Mr. Charles B.
Leonard and Mr. Michael L. Ford since it began operating in June 1994. Mr.
Leonard, CFA, has served as First Vice President of Trusco since 1988, and has
more than 25 years of investment experience. Mr. Ford has been an Associate of
Trusco since April 1994, and has more than 11 years of investment experience.
Prior to joining Trusco, Mr. Ford served as a senior securities analyst at
Liberty Capital Advisors from 1992 to 1994 and served as a securities analyst at
Southern Farm Bureau Life Insurance Company from 1990 to 1992.
The Limited-Term Federal Mortgage Securities Fund has been co-managed by Mr. L.
Earl Denney, CFA, and Mr. Dave E. West, CFA, since it began operating in June
1994. Mr. Denney has served as Senior Vice President of STI since 1983. Mr.
Denney has more than 20 years of experience in fixed income investment
management. Prior to joining STI, he was a fixed income portfolio manager with
American National Bank. Mr. West has served as a Vice President of STI since
1994, and has served as a fixed-income portfolio manager with STI since 1989.
Mr. David Yealy has served as a Vice President of Trusco since 1993. He has
managed the Short-
<PAGE>
26 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
Term Bond Fund and Short-Term U.S. Treasury Securities Fund since July 1996. He
has more than 13 years of investment experience.
Mr. Ronald Schwartz, CFA, has served as a Senior Vice President since 1992. He
has managed the Investment Grade Tax-Exempt Bond Fund and Florida Tax-Exempt
Bond Fund since each Fund began operating in June 1992 and January 1994,
respectively. He has more than 18 years of investment experience. Prior to
joining STI, he served as a trader at the Bank of Boston.
Ms. Gay Cash has served as a Vice President of SunTrust Bank, Atlanta since
1987. She has managed Georgia Tax-Exempt Bond Fund since it began operating in
January 1994. She has more than 18 years of investment experience.
PURCHASING FUND SHARES
HOW TO PURCHASE FUND SHARES
Generally you may not purchase Trust Shares directly. Rather, Trust Shares are
sold to financial institutions or intermediaries, including subsidiaries of
SunTrust Banks, Inc. (SunTrust) on behalf of accounts for which they act as
fiduciary, agent, investment advisor, or custodian. As a result, you, as a
customer of a financial institution, may purchase Trust Shares through accounts
maintained with financial institutions and potentially through the Preferred
Portfolio Account (an asset allocation account available through SunTrust
Securities, Inc.). Trust Shares will be held of record by (in the name of) your
financial institution. Depending upon the terms of your account, however, you
may have, or be given, the right to vote your Trust Shares. We may reject any
purchase order if we determine that accepting the order would not be in the best
interests of the STI Classic Funds or its shareholders.
SIMPLY SPEAKING . . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open
for business (a Business Day). But you may not purchase shares of a Money
Market Fund on federal holidays.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order. We calculate each
Fund's NAV once each Business Day at the regularly-scheduled close of normal
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So,
for the Bond Funds, to receive the current Business Day's NAV, generally we must
receive your purchase order from your financial institution before 4:00 p.m.
Eastern time. For the Money Market Funds, your purchase order will be effective
on the Business Day we receive it if:
- - we receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money
Market Fund or before 1:00 p.m. Eastern time for the Prime Quality and U.S.
Government Securities Money Market Funds; and
- - we receive federal funds (readily available) before we calculate NAV (normally
4:00 p.m. Eastern time).
Otherwise, your purchase order will be effective the following Business Day, as
long as we receive federal funds before we calculate NAV on that following day.
SIMPLY SPEAKING . . .
FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS
You may have to transmit your purchase and sale requests to your financial
institution at an earlier time for your transaction to become effective that
day. This allows the financial institution time to process your request and
transmit it to us. For more information about how to purchase or sell Fund
shares through your financial institution, you should contact your financial
institution directly.
<PAGE>
PROSPECTUS 27
PURCHASING, SELLING AND EXCHANGING FUND SHARES
HOW WE CALCULATE NAV
In calculating NAV for the Bond Funds, we generally value a Fund's portfolio at
market price. In calculating NAV for the Money Market Funds, we generally value
a Fund's portfolio using the amortized cost valuation method, which is described
in detail in our Statement of Additional Information. If market prices are
unavailable, or we think that the market prices or the amortized cost valuation
method are unreliable, fair value prices may be determined in good faith using
methods approved by the Board of Trustees. We expect the NAV of each Money
Market Fund to remain constant at $1.00 per share, although we cannot guarantee
this.
SIMPLY SPEAKING . . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the
assets in the Fund.
SELLING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting your financial institution. Your financial institution will give you
information about how to sell your shares. The sale price of each share will be
the next NAV determined after we receive your request from your financial
institution. So, for the Bond Funds, to receive the current Business Day's NAV,
generally we must receive your sale order from your financial institution before
4:00 p.m. Eastern time. For the Money Market Funds, your sale order will be
effective on that same Business Day if we receive your order before:
- - 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund; or
- - 1:00 p.m. Eastern time for the Prime Quality Money Market and U.S. Government
Securities Money Market Funds.
SIMPLY SPEAKING . . .
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although we have certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, we are
not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with us over the telephone, you will generally bear the
risk of any loss.
REDEMPTIONS IN KIND
We generally pay sale (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) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay brokerage costs to sell the
securities distributed to you, as well as taxes on any capital gains from the
sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information.
<PAGE>
28 PROSPECTUS
HISTORICAL FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Trust Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions.
This information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain our annual report, which contains more performance information,
at no charge by calling 1-800-874-4700.
SIMPLY SPEAKING . . .
FINANCIAL HIGHLIGHTS
Study these tables to see how each Fund performed since it began investment
operations.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
----------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -----------------------------
Trust Shares
1998.................................... $ 10.28 $ 0.44 $ 0.45 $ (0.44 ) $ (0.01 ) $ 10.72
1997.................................... 10.06 0.46 0.25 (0.46 ) (0.03 ) 10.28
1996.................................... 10.18 0.46 (0.07 ) (0.46 ) (0.05 ) 10.06
1995.................................... 9.75 0.44 0.43 (0.44 ) -- 10.18
1994(1)................................. 10.00 0.13 (0.25 ) (0.13 ) -- 9.75
- ------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------
Trust Shares
1998.................................... $ 9.73 $ 0.41 $ 0.39 $ (0.41 ) $ (0.01 ) $ 10.11
1997.................................... 9.56 0.42 0.22 (0.42 ) (0.05 ) 9.73
1996.................................... 9.63 0.43 (0.05 ) (0.43 ) (0.02 ) 9.56
1995.................................... 9.42 0.42 0.21 (0.42 ) -- 9.63
1994(2)................................. 10.00 0.14 (0.58 ) (0.14 ) -- 9.42
- ----------------------------
INVESTMENT GRADE BOND FUND
- ----------------------------
Trust Shares
1998.................................... $ 10.16 $ 0.60 $ 0.49 $ (0.60 ) $ -- $ 10.65
1997.................................... 10.07 0.60 0.09 (0.60 ) -- 10.16
1996.................................... 10.26 0.60 (0.19 ) (0.60 ) -- 10.07
1995.................................... 9.89 0.61 0.37 (0.61 ) -- 10.26
1994.................................... 10.45 0.50 (0.36 ) (0.50 ) (0.20 ) 9.89
- ----------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ----------------------------------------
Trust Shares
1998.................................... $ 11.22 $ 0.44 $ 0.50 $ (0.44 ) $ (0.32 ) $ 11.40
1997.................................... 11.10 0.44 0.33 (0.44 ) (0.21 ) 11.22
1996.................................... 11.28 0.45 0.19 (0.45 ) (0.37 ) 11.10
1995.................................... 10.68 0.46 0.60 (0.46 ) -- 11.28
1994(3)................................. 11.37 0.22 (0.34 ) (0.22 ) (0.35 ) 10.68
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT RATIO OF EXPENSES TO
NET ASSETS END EXPENSES TO INCOME TO AVERAGE NET ASSETS
TOTAL OF PERIOD AVERAGE NET AVERAGE NET (EXCLUDING WAIVERS
RETURN (000) ASSETS ASSETS AND REIMBURSEMENTS)
----------- -------------- ------------- -------------- --------------------
<S> <C> <C>
- -----------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -----------------------------
Trust Shares
1998.................................... 8.77 % $ 93,939 0.66 % 4.16 % 0.80 %
1997.................................... 7.22 50,487 0.65 4.48 0.80
1996.................................... 3.87 30,790 0.65 4.49 0.88
1995.................................... 9.26 10,118 0.65 4.63 1.13
1994(1)................................. (1.19)** 3,192 0.65 * 3.86 * 1.12 *
- ------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------
Trust Shares
1998.................................... 8.37 % $ 62,363 0.66 % 4.09 % 0.81 %
1997.................................... 6.79 39,732 0.65 4.31 0.81
1996.................................... 3.89 22,950 0.65 4.36 0.89
1995.................................... 6.94 13,187 0.65 4.56 0.98
1994(2)................................. (4.43)** 4,338 0.65 * 4.12 * 1.06 *
- ----------------------------
INVESTMENT GRADE BOND FUND
- ----------------------------
Trust Shares
1998.................................... 10.92 % $ 793,488 0.76 % 5.67 % 0.86 %
1997.................................... 6.99 633,646 0.75 5.89 0.85
1996.................................... 4.02 599,514 0.75 5.81 0.87
1995.................................... 10.39 543,308 0.75 6.22 0.88
1994.................................... 1.17 460,538 0.75 4.77 0.88
- ----------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ----------------------------------------
Trust Shares
1998.................................... 8.57 % $ 146,606 0.76 % 3.83 % 0.88 %
1997.................................... 7.13 139,144 0.75 3.96 0.86
1996.................................... 5.82 124,507 0.75 4.01 0.89
1995.................................... 10.21 78,208 0.75 4.34 0.91
1994(3)................................. (1.10)** 44,595 0.75 * 3.46 * 0.95 *
<CAPTION>
RATIO OF NET
INVESTMENT INCOME TO
AVERAGE NET ASSETS
(EXCLUDING WAIVERS PORTFOLIO
AND REIMBURSEMENTS) TURNOVER RATE
-------------------- -------------
- -----------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -----------------------------
Trust Shares
1998.................................... 4.02 % 69 %
1997.................................... 4.33 135
1996.................................... 4.26 63
1995.................................... 4.15 105
1994(1)................................. 3.39 * 53
- ------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------
Trust Shares
1998.................................... 3.94 % 7 %
1997.................................... 4.15 15
1996.................................... 4.12 60
1995.................................... 4.23 25
1994(2)................................. 3.71 * 26
- ----------------------------
INVESTMENT GRADE BOND FUND
- ----------------------------
Trust Shares
1998.................................... 5.57 % 109 %
1997.................................... 5.79 298
1996.................................... 5.69 184
1995.................................... 6.09 238
1994.................................... 4.64 259
- ----------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ----------------------------------------
Trust Shares
1998.................................... 3.71 % 378 %
1997.................................... 3.85 489
1996.................................... 3.87 514
1995.................................... 4.18 592
1994(3)................................. 3.26 * 432
</TABLE>
* Annualized
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on January 25, 1994.
(2) Commenced operations on January 18, 1994.
(3) Commenced operations on October 21, 1993.
<PAGE>
PROSPECTUS 29
HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
----------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ---------------------------------------------
Trust Shares
1998.................................... $ 10.02 $ 0.58 $ 0.11 $ (0.58 ) $ (0.01 ) $ 10.12
1997.................................... 9.99 0.58 0.04 (0.58 ) (0.01 ) 10.02
1996.................................... 10.11 0.62 (0.14 ) (0.60 ) -- 9.99
1995(4)................................. 10.00 0.58 0.13 (0.60 ) -- 10.11
- ----------------------
SHORT-TERM BOND FUND
- ----------------------
Trust Shares
1998.................................... $ 9.90 $ 0.55 $ 0.16 $ (0.55 ) $ (0.01 ) $ 10.05
1997.................................... 9.86 0.53 0.07 (0.53 ) (0.03 ) 9.90
1996.................................... 9.98 0.54 (0.10 ) (0.54 ) (0.02 ) 9.86
1995.................................... 9.79 0.53 0.19 (0.53 ) -- 9.98
1994.................................... 10.01 0.42 (0.21 ) (0.42 ) (0.01 ) 9.79
- ---------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ---------------------------------------
Trust Shares
1998.................................... $ 9.88 $ 0.51 $ 0.10 $ (0.52 ) $ -- $ 9.97
1997.................................... 9.84 0.51 0.04 (0.51 ) -- 9.88
1996.................................... 9.93 0.55 (0.09 ) (0.55 ) -- 9.84
1995.................................... 9.82 0.47 0.11 (0.47 ) -- 9.93
1994.................................... 9.98 0.33 (0.11 ) (0.33 ) (0.05 ) 9.82
- -------------------------------
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------
Trust Shares
1998.................................... $ 10.02 $ 0.61 $ 0.44 $ (0.61 ) $ -- $ 10.46
1997.................................... 9.91 0.62 0.11 (0.62 ) -- 10.02
1996.................................... 10.27 0.62 (0.33 ) (0.62 ) (0.03 ) 9.91
1995(5)................................. 9.98 0.53 0.29 (0.53 ) -- 10.27
- ---------------------------------
PRIME QUALITY MONEY MARKET FUND
- ---------------------------------
Trust Shares
1998.................................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00
1997.................................... 1.00 0.05 -- (0.05 ) -- 1.00
1996.................................... 1.00 0.05 -- (0.05 ) -- 1.00
1995.................................... 1.00 0.05 -- (0.05 ) -- 1.00
1994.................................... 1.00 0.03 -- (0.03 ) -- 1.00
- -------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -------------------------------
Trust Shares
1998.................................... $ 1.00 $ 0.03 $ -- $ (0.03 ) $ -- $ 1.00
1997.................................... 1.00 0.03 -- (0.03 ) -- 1.00
1996.................................... 1.00 0.03 -- (0.03 ) -- 1.00
1995.................................... 1.00 0.03 -- (0.03 ) -- 1.00
1994.................................... 1.00 0.02 -- (0.02 ) -- 1.00
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- ----------------------------------------------
Trust Shares
1998.................................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00
1997.................................... 1.00 0.05 -- (0.05 ) -- 1.00
1996.................................... 1.00 0.05 -- (0.05 ) -- 1.00
1995.................................... 1.00 0.05 -- (0.05 ) -- 1.00
1994.................................... 1.00 0.03 -- (0.03 ) -- 1.00
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT RATIO OF EXPENSES TO
NET ASSETS END EXPENSES TO INCOME TO AVERAGE NET ASSETS
TOTAL OF PERIOD AVERAGE NET AVERAGE NET (EXCLUDING WAIVERS
RETURN (000) ASSETS ASSETS AND REIMBURSEMENTS)
----------- -------------- ------------- -------------- --------------------
<S> <C> <C>
- --------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUN
- --------------------------------------------
Trust Shares
1998.................................... 7.12 % $ 137,488 0.66 % 5.75 % 0.77 %
1997.................................... 6.43 123,903 0.65 5.81 0.78
1996.................................... 4.84 73,370 0.65 6.04 0.84
1995(4)................................. 7.50 ** 41,823 0.65 * 6.43 * 0.93 *
- ----------------------
SHORT-TERM BOND FUND
- ----------------------
Trust Shares
1998.................................... 7.31 % $ 120,422 0.66 % 5.47 % 0.79 %
1997.................................... 6.30 89,701 0.65 5.37 0.78
1996.................................... 4.45 91,156 0.65 5.39 0.81
1995.................................... 7.60 60,952 0.65 5.49 0.85
1994.................................... 2.02 34,772 0.65 4.15 0.85
- ---------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ---------------------------------------
Trust Shares
1998.................................... 6.30 % $ 46,920 0.66 % 5.19 % 0.84 %
1997.................................... 5.76 21,988 0.65 5.23 0.92
1996.................................... 4.73 10,149 0.65 5.56 1.00
1995.................................... 6.11 9,599 0.65 4.91 1.08
1994.................................... 2.17 12,723 0.65 3.23 0.81
- -------------------------------
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------
Trust Shares
1998.................................... 10.76 % $ 34,899 0.76 % 5.93 % 0.92 %
1997.................................... 7.54 19,471 0.75 6.19 1.02
1996.................................... 2.77 10,277 0.75 6.05 1.25
1995(5)................................. 8.64 ** 3,291 0.75 * 6.67 * 3.33 *
- ---------------------------------
PRIME QUALITY MONEY MARKET FUND
- ---------------------------------
Trust Shares
1998.................................... 5.22 % $ 1,880,229 0.59 % 5.10 % 0.77 %
1997.................................... 5.01 1,086,555 0.58 4.90 0.76
1996.................................... 5.25 1,050,800 0.58 5.11 0.78
1995.................................... 4.79 799,189 0.58 4.77 0.79
1994.................................... 2.88 583,399 0.58 2.86 0.79
- -------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -------------------------------
Trust Shares
1998.................................... 3.21 % $ 448,023 0.51 % 3.14 % 0.67 %
1997.................................... 3.09 333,006 0.50 3.04 0.66
1996.................................... 3.28 273,613 0.50 3.23 0.68
1995.................................... 3.10 215,413 0.45 3.12 0.70
1994.................................... 2.08 143,982 0.42 2.05 0.71
- --------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------
Trust Shares
1998.................................... 5.04 % $ 377,490 0.62 % 4.92 % 0.78 %
1997.................................... 4.83 344,350 0.61 4.73 0.76
1996.................................... 5.14 325,493 0.61 5.02 0.78
1995.................................... 4.67 434,111 0.61 4.64 0.80
1994.................................... 2.77 309,228 0.61 2.69 0.77
<CAPTION>
RATIO OF NET
INVESTMENT INCOME TO
AVERAGE NET ASSETS
(EXCLUDING WAIVERS PORTFOLIO
AND REIMBURSEMENTS) TURNOVER RATE
-------------------- -------------
- --------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUN
- --------------------------------------------
Trust Shares
1998.................................... 5.64 % 163 %
1997.................................... 5.68 133
1996.................................... 5.85 83
1995(4)................................. 6.15 * 68
- ----------------------
SHORT-TERM BOND FUND
- ----------------------
Trust Shares
1998.................................... 5.34 % 87 %
1997.................................... 5.24 118
1996.................................... 5.23 163
1995.................................... 5.29 200
1994.................................... 3.95 75
- ---------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ---------------------------------------
Trust Shares
1998.................................... 5.01 % 39 %
1997.................................... 4.96 93
1996.................................... 5.21 94
1995.................................... 4.48 88
1994.................................... 3.07 117
- -------------------------------
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------
Trust Shares
1998.................................... 5.77 % 14 %
1997.................................... 5.92 21
1996.................................... 5.55 83
1995(5)................................. 4.09 * 30
- ---------------------------------
PRIME QUALITY MONEY MARKET FUND
- ---------------------------------
Trust Shares
1998.................................... 4.92 %
1997.................................... 4.72
1996.................................... 4.91
1995.................................... 4.56
1994.................................... 2.65
- -------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -------------------------------
Trust Shares
1998.................................... 2.98 %
1997.................................... 2.88
1996.................................... 3.05
1995.................................... 2.87
1994.................................... 1.76
- --------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------
Trust Shares
1998.................................... 4.76 %
1997.................................... 4.58
1996.................................... 4.85
1995.................................... 4.45
1994.................................... 2.53
</TABLE>
* Annualized
** Return is for the period the indicated and has not been annualized.
(4) Commenced operations on June 7, 1994.
(5) Commenced operations on July 31, 1994.
<PAGE>
30 PROSPECTUS
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares income dividends daily and pays these dividends monthly. The
Funds make distributions of capital gains, if any, at least annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.
SIMPLY SPEAKING . . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to
receive the distribution.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OF FUND
SHARES.
The Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond, Georgia
Tax-Exempt Bond, and Tax-Exempt Money Market Funds intend to distribute
federally tax-exempt income. Each Fund may invest a portion of its assets in
securities that generate taxable income for federal or state income taxes.
Income exempt from federal tax may be subject to state and local taxes. Any
capital gains distributed by these Funds may be taxable.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
SIMPLY SPEAKING . . .
FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you
reinvest them.
<PAGE>
HOW TO OBTAIN MORE INFORMATION
INVESTMENT ADVISORS
STI Capital Management, N.A.
Trusco Capital Management, Inc.
SunTrust Bank, Atlanta
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the STI Classic Funds is included in our SAI.
The SAI has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMIANNUAL REPORTS
These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies, and recent market conditions and trends.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE:
Call 1-800-874-4770
BY MAIL:
Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.
FROM THE SEC: You can also obtain these documents, and other information about
the STI Classic Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Fund's Investment Company Act registration number
is 811-06557.
<PAGE>
PROSPECTUS
HOW TO READ
THIS PROSPECTUS
The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important information
about the Trust Shares of the Equity Funds that you should know before
investing. Please read this prospectus and keep it for future reference.
We arranged the prospectus into different sections so that you can easily review
this important information. On the next page, we discuss general information you
should know about investing in the Funds.
<TABLE>
<C> <S>
IF YOU WOULD LIKE MORE DETAILED INFORMATION
ABOUT EACH FUND, PLEASE SEE:
2 BALANCED FUND
4 CAPITAL GROWTH FUND
6 EMERGING MARKETS EQUITY FUND
8 INTERNATIONAL EQUITY FUND
10 INTERNATIONAL EQUITY INDEX FUND
12 MID-CAP EQUITY FUND
14 SMALL CAP EQUITY FUND
16 SMALL CAP GROWTH STOCK FUND
18 SUNBELT EQUITY FUND
20 TAX SENSITIVE GROWTH STOCK FUND
22 VALUE INCOME STOCK FUND
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FOLLOWING TOPICS, PLEASE SEE:
24 EACH FUND'S PRINCIPAL INVESTMENTS
24 THE ADVISORS AND THEIR PORTFOLIO MANAGERS
25 PURCHASING, SELLING AND EXCHANGING FUND SHARES
27 HISTORICAL FINANCIAL INFORMATION
ABOUT EACH FUND
29 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS
29 TAXES
TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC
FUNDS PLEASE REFER TO THE BACK COVER OF THE
PROSPECTUS
</TABLE>
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING"
EXPLANATIONS.
- --------------------------------------------------------------------------------
FUND SUMMARY
INVESTMENT STRATEGY
WHAT ARE THE RISKS OF INVESTING?
PERFORMANCE INFORMATION
WHAT IS AN INDEX?
FUND EXPENSES
FUND INVESTMENTS
INVESTMENT ADVISORS
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
OCTOBER 1, 1998
<PAGE>
PROSPECTUS 1
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in mutual
funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect securities markets generally, as well as those that affect
particular companies or governments. These price movements, sometimes called
volatility, will vary depending on the types of securities a Fund owns and the
markets where these securities trade. The Equity Funds invest primarily in
common stocks and other equity securities. Historically, equity securities have
outperformed other types of investments on a long-term basis, but have been
subject to more price fluctuation in the short run.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
Each Fund has its own investment goal and strategies for reaching that goal. But
we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be
changed without shareholder approval. Before investing, make sure that the
Fund's goal matches your own.
The Advisors invest each Fund's assets in a way that the Advisor believes will
help the Fund achieve its goal. An Advisor's judgments about the stock markets,
economy and companies, or selecting investments may not reflect actual market
movements, economic conditions or company performance.
SUNTRUST BANK, ATLANTA SERVES AS CUSTODIAN OF THE ASSETS OF THE FUNDS. SUNTRUST
BANK, ATLANTA AND THE ADVISORS ARE OWNED BY SUNTRUST BANKS, INC. THE FEES PAID
FOR CUSTODIAN SERVICES ARE INCLUDED IN THE "OTHER EXPENSES" FIGURE OF THE "FUND
EXPENSES" TABLE ON THE FOLLOWING PAGES. LAST FISCAL YEAR, THE FUNDS PAID
SUNTRUST BANK, ATLANTA $1.3 MILLION FOR SERVING AS CUSTODIAN.
<PAGE>
2 PROSPECTUS
BALANCED FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS Capital appreciation and current income
INVESTMENT FOCUS
PRIMARY U.S. common stocks
SECONDARY Bonds
SHARE PRICE VOLATILITY Moderate
PRINCIPAL INVESTMENT Attempts to identify companies with a history of
STRATEGY earnings growth and bonds with minimal risk
INVESTOR PROFILE Investors who want income from their investment, as
well as an increase in its value
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
General Electric Company...... 1.9%
Bristol Myers Squibb
Company..................... 1.3%
Carnival Corporation, Class
A........................... 1.3%
United Technologies
Corporation................. 1.2%
CVS Corporation............... 1.1%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Balanced Fund invests in common and preferred stocks,
convertible securities, U.S. government obligations and investment grade
corporate (bonds). In selecting stocks for the Fund, we attempt to identify
high-quality companies with a history of earnings growth. In selecting bonds, we
try to minimize risk while attempting to outperform selected market indices. Due
to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests in both common stocks and bonds. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, the value of bonds held by the Fund may
decline due to rising interest rates. An issuer may be unable to make timely
payments of principal or interest. The Fund may have more assets than usual
invested in bonds during periods of rising interest rates or less assets than
usual invested in bonds during falling interest rates. Some investment grade
bonds may have speculative characteristics. Fixed income securities, regardless
of credit quality, also experience price volatility, especially in response to
interest rate changes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 25.51%
1996 12.13%
1997 21.14%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
11.21% .80%
(6/30/97) (3/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 12.62%.
<PAGE>
PROSPECTUS 3
BALANCED FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (1/3/94)
<S> <C> <C> <C>
BALANCED FUND 21.14% 19.46% 13.03%
S&P 500 INDEX 33.35% 31.13% 23.48%
LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX 9.75% 10.43% 6.92%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The S&P 500 Index is a widely
recognized index of 500 stocks designed to mimic the overall equity market's
industry weightings. The Lehman Brothers Government/ Corporate Bond Index is
a widely recognized index of government and corporate debt securities rated
investment grade or better, with maturities of at least 1 year.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .95%
Other Expenses .14%
---------
Total Annual Fund Operating Expenses 1.09%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$111 $347 $601 $1329
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .83%
AND .97%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at
any time. For more information about these fees, see "Investment Advisors."
<PAGE>
4 PROSPECTUS
CAPITAL GROWTH FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS U.S. common stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify companies with above average
STRATEGY growth potential
INVESTOR PROFILE Investors who want the value of their investment to
grow, but do not need to receive income on their
investment
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
General Electric Company...... 2.8%
Bristol Myers Squibb
Company..................... 1.9%
Carnival Corporation, Class
A........................... 1.9%
United Technologies
Corporation................. 1.8%
Microsoft Corporation......... 1.7%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Capital Growth Fund invests primarily in U.S. common stocks and
other equity securities that we believe are undervalued by the stock market. In
selecting investments for the Fund, we choose companies that we believe have
above average growth potential. We rotate the Fund's investments among various
market sectors based on our research of business cycles. Our strategy focuses on
large-cap stocks with a strong growth history. Due to its investment strategy,
the Fund may buy and sell securities frequently. This may result in higher
transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 9.89%
1994 -7.41%
1995 31.15%
1996 20.31%
1997 31.13%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
17.09% -4.09%
(6/30/97) (12/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 17.25%.
<PAGE>
PROSPECTUS 5
CAPITAL GROWTH FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (7/1/92)
<S> <C> <C> <C>
CAPITAL GROWTH FUND 31.13% 16.05% 17.02%
S&P 500 INDEX 33.35% 20.25% 20.32%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. Unlike a mutual fund, an index does not
have an investment advisor and does not pay any commissions or expenses. If
an index had expenses, its performance would be lower. The S&P 500 Index is
a widely recognized index of 500 stocks designed to mimic the overall equity
market's industry weightings.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.15%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses 1.28%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$130 $406 $702 $1545
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04%
AND 1.17%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
6 PROSPECTUS
EMERGING MARKETS EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long term capital appreciation
INVESTMENT FOCUS Undervalued foreign common stocks
SHARE PRICE VOLATILITY Very High
PRINCIPAL INVESTMENT Focus on individual stocks and companies in an
STRATEGY attempt to identify attractively priced investments
INVESTOR PROFILE Aggressive long-term investors who are willing to
accept the volatility of of emerging markets for
the possibility of higher returns
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Banco Pinto & Sotto Mayor..... 4.3%
Telefonos De Mexico ADR....... 2.8%
Telebras ADR.................. 2.6%
Greek Telecom................. 2.3%
Telefoncia Del Peru ADR....... 2.2%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Emerging Markets Equity Fund invests primarily in common stocks
and other equity securities of foreign issuers located in emerging market
countries. An emerging market country is a country that the World Bank or the
United Nations considers to be emerging or developing. Our "bottom-up" strategy
focuses on individual stocks and companies. Through research, we attempt to
identify investments that we feel are attractively priced relative to the
current market.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of foreign companies. As a result,
the Fund is subject to the risk that stock prices will fall over short or
extended periods of time. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. Investments in foreign markets may be
more volatile than investments in U.S. markets. Investments in emerging foreign
markets may be more volatile than investments in developed foreign markets.
Diplomatic, political or economic developments in a foreign country may cause
investments in that country to lose money. These developments may occur more
frequently in emerging market countries. Emerging market securities may be even
more susceptible to political or economic developments than those in more
developed countries. The value of the U.S. dollar may rise, causing reduced
returns for U.S. persons investing abroad. A foreign country may not have the
same accounting and financial reporting standards as the U.S. Some emerging
market countries may have little to no accounting or financial reporting
standards. Foreign stock markets, brokers and companies are generally subject to
less supervision and regulation than their U.S. counterparts. There may be
little to no supervision and regulation in some emerging market countries.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
periods prior to January 31, 1997, when the Fund began operating, represent the
performance of the Advisor's similarly managed collective investment fund. This
past performance has been adjusted to reflect current expenses for Trust Shares
of the Fund. The Advisor's collective fund was not a registered mutual fund so
it was not subject to the same investment and tax restrictions as the Fund. If
it had been, the collective fund's performance would have been lower.
THIS BAR CHART SHOWS THE FUND'S PERFORMANCE DURING 1997.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1997 (3.43%)
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
10.29% -17.26%
(3/31/97) (12/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS -6.26%.
<PAGE>
PROSPECTUS 7
EMERGING MARKETS EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
(MSCI) EMERGING MARKETS FREE INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR (3/29/96)
<S> <C> <C>
EMERGING MARKETS EQUITY FUND -3.43% 5.67%
MSCI EMERGING MARKETS FREE INDEX -13.40% -8.51%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Morgan Stanley Capital
International Emerging Markets Free Index is a widely recognized index of
500 stocks from approximately 17 different emerging market countries.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.30%
Other Expenses .49%
---------
Total Annual Fund Operating Expenses 1.79%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$182 $563 $970 $2105
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.08%
AND 1.57%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
8 PROSPECTUS
INTERNATIONAL EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Foreign common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Attempts to identify undervalued companies with
STRATEGY good fundamentals
INVESTOR PROFILE Investors who: want an increase in the value of
their investment without regard to income; are
willing to accept the increased risks of
international investing for the possibility of
higher returns; and want exposure to a diversified
portfolio of international stocks
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Ing Groep..................... 3.2%
Ubs Ag - Registered........... 2.6%
Novartis, Registered.......... 2.5%
Bank Of Ireland............... 2.5%
Nestle Sa Registered.......... 2.5%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The International Equity Fund invests primarily in common stocks
and other equity securities of foreign companies. In selecting investments for
the Fund, we diversify the Fund's investments among at least three foreign
countries. The Fund invests primarily in developed countries, but may invest in
countries with emerging markets. Our "bottom-up" approach to stock selection
focuses on individual stocks and fundamental characteristics of companies. Our
goal is to find companies with top management, quality products and sound
financial positions, that are trading at a discount. Due to the Fund's
investment strategy, the Fund may buy and sell securities frequently. This may
result in higher transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of foreign companies. As a result,
the Fund is subject to the risk that stock prices will fall over short or
extended periods of time. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in foreign
markets may be more volatile than investments in U.S. markets. Diplomatic,
political or economic developments may cause foreign investments to lose money.
The value of the U.S. dollar may rise, causing reduced returns for U.S. persons
investing abroad. A foreign country may not have the same accounting and
financial reporting standards as the U.S. Foreign stock markets, brokers and
companies are generally subject to less supervision and regulation than their
U.S. counterparts. Emerging markets securities may be even more susceptible to
these risks.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
periods prior to December 1995, when the Fund began operating, represent the
performance of the Advisor's similarly managed collective investment fund. This
past performance has been adjusted to reflect current expenses for Trust Shares
of the Fund. The Advisor's collective fund was not a registered mutual fund so
it was not subject to the same investment and tax restrictions as the Fund. If
it had been, the collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 22.08%
1997 13.35%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
12.19% -7.79%
(6/30/97) (12/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 16.44%.
<PAGE>
PROSPECTUS 9
INTERNATIONAL EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR (2/2/95)
<S> <C> <C>
INTERNATIONAL EQUITY FUND 13.35% 24.95%
MSCI EAFE INDEX 1.78% 6.47%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The MSCI EAFE Index is a widely
recognized index of over 900 securities listed on the stock exchanges in
Europe, Australia and the Far East.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.25%
Other Expenses .24%
---------
Total Annual Fund Operating Expenses 1.49%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$152 $471 $813 $1779
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.24%
AND 1.48%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
10 PROSPECTUS
INTERNATIONAL EQUITY INDEX FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL To provide investment results that correspond to
the performance of the MSCI EAFE-GDP Index
INVESTMENT FOCUS Foreign common stocks in MSCI EAFE-GDP Index
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Statistical analysis to track the Index
STRATEGY
INVESTOR PROFILE Aggressive investors who want exposure to foreign
markets and are willing to accept the increased
risks of foreign investing for the possibility of
higher returns
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Allianz....................... 2.2%
Assicurazioni Generali........ 2.1%
Tim........................... 1.8%
Telecom Italia Spa............ 1.4%
Daimler Benz.................. 1.4%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The International Equity Index Fund invests primarily in common
stocks of foreign companies. In selecting investments for the Fund, we choose
companies included in the MSCI EAFE-GDP Index, an index of equity securities of
companies located in Europe, Australia and the Far East. While the Fund is
structured to have overall investment characteristics similar to those of the
Index, it selects a sample of stocks within the index using a statistical
process. So, the Fund will not hold all stocks included in the index.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of foreign companies. As a result,
the Fund is subject to the risk that stock prices will fall over short or
extended periods of time. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in foreign
markets may be more volatile than investments in U.S. markets. Diplomatic,
political or economic developments may cause foreign investments to lose money.
The value of the U.S. dollar may rise, causing reduced returns for U.S. persons
investing abroad. A foreign country may not have the same accounting and
financial reporting standards as the U.S. Foreign stock markets, brokers and
companies are generally subject to less supervision and regulation than their
U.S. counterparts. Emerging markets securities may be even more susceptible to
these risks.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 10.73%
1996 6.04%
1997 8.99%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
11.84% -5.5%
(6/30/97) (12/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 23.22%.
<PAGE>
PROSPECTUS 11
INTERNATIONAL EQUITY INDEX FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA AND FAR EAST-GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED
INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (9/1/94)
<S> <C> <C> <C>
INTERNATIONAL EQUITY
INDEX FUND 8.99% 8.57% 6.39%
MSCI EAFE-GDP INDEX 4.35% 6.62% 5.26%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The MSCI EAFE-GDP Index is a
widely recognized index of over 900 securities listed on the stock exchanges
in Europe, Australia and the Far East. The index is weighted by the gross
domestic product of the various countries in the index.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .90%
Other Expenses .29%
---------
Total Annual Fund Operating Expenses 1.19%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$121 $378 $654 $1443
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .77%
AND 1.07%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
12 PROSPECTUS
MID-CAP EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS U.S. mid-cap common stocks
SHARE PRICE VOLATILITY Moderate to high
PRINCIPAL INVESTMENT Attempts to identify companies with above average
STRATEGY growth potential at an attractive price
INVESTOR PROFILE Investors who want the value of their investment to
grow and who are willing to accept more volatility
for the possibility of higher returns
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
U.S. Filter Corporation....... 3.8%
Allied Waste Industries
Incorporated................ 3.2%
Networks Associates
Incorporated................ 3.1%
Men's Wearhouse............... 3.1%
Harley-Davidson
Incorporated................ 3.0%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Mid-Cap Equity Fund invests primarily in a diversified portfolio
of common stocks and other equity securities of U.S. companies. In selecting
investments for the Fund, we choose companies that have small- to mid-sized
market capitalizations (i.e., companies with market capitalizations of $500
million to $7 billion) and that have above average growth potentials at
attractive prices. We evaluate companies based on their industry sectors and the
market in general. The Fund maintains large holdings in the industries that
appear to perform best during a given business cycle. We analyze companies that
are in favored industries based on their fundamental characteristics, such as
growth rates and earnings. We do not consider current income in selecting
investments for the Fund. Due to the Fund's investment strategy, the Fund may
buy and sell securities frequently. This may result in higher transaction costs
and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in mid-cap common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, small- to mid-sized companies may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these companies may have somewhat limited product
lines, markets and financial resources, and may depend upon a relatively small-
to medium-sized management group.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 31.22%
1996 15.42%
1997 21.23%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
14.22% -2.89%
(9/30/97) (3/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 6.66%.
<PAGE>
PROSPECTUS 13
MID-CAP EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P MIDCAP 400 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (1/3/94)
<S> <C> <C> <C>
MID-CAP EQUITY FUND 21.23% 22.45% 32.54%
S&P MIDCAP 400 INDEX 32.23% 27.32% 18.95%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of securities in a particular
market or market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The S&P
MidCap 400 Index is a widely recognized index of 400 U.S. mid-cap common
stocks chosen for market size, liquidity and industry group representation.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.15%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses 1.28%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$130 $406 $702 $1545
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04%
AND 1.17%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
14 PROSPECTUS
SMALL CAP EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS
PRIMARY Capital appreciation
SECONDARY Current income
INVESTMENT FOCUS U.S. small-cap common stocks
SHARE PRICE VOLATILITY Moderate
PRINCIPAL INVESTMENT Attempts to identify undervalued small-cap stocks
STRATEGY
INVESTOR PROFILE Investors who primarily want the value of their
investment to grow, but want to receive some income
from their investment
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Norrell Corporation........... 3.1%
Regal Beloit Corporation...... 2.9%
Harman International.......... 2.6%
Texas Industries Inc.......... 2.5%
Sotheby's Holdings
Incorporated - Class A...... 2.3%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Small Cap Equity Fund invests primarily in common stocks of U.S.
companies. In selecting investments for the Fund, we choose common stocks of
small sized companies (i.e., companies with market capitalizations under $1
billion) that we believe are undervalued in the market.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in small-cap common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, small sized companies may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, small-sized companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
periods prior to January 1997, when the Fund began operating, represent the
performance of the Advisor's similarly managed collective investment fund. This
past performance has been adjusted to reflect current expenses for Trust Shares
of the Fund. The Advisor's collective fund was not a registered mutual fund so
it was not subject to the same investment and tax restrictions as the Fund. If
it had been, the collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 30.99%
1996 34.25%
1997 32.59%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
14.95% -2.11%
(6/30/97) (12/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS -.08%.
<PAGE>
PROSPECTUS 15
SMALL CAP EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (8/31/94)
<S> <C> <C> <C>
SMALL CAP EQUITY FUND 32.59% 32.60% 29.40%
FRANK RUSSELL 2000 SMALL STOCK INDEX 22.36% 22.34% 21.05%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Frank Russell 2000 Small Stock
Index is a widely recognized index of the 2,000 smallest U.S. companies out
of the 3,000 largest companies.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.15%
Other Expenses .17%
---------
Total Annual Fund Operating Expenses 1.32%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$134 $418 $723 $1590
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.05%
AND 1.22%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
16 PROSPECTUS
SMALL CAP GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON
OCTOBER 7, 1998)
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS U.S. small-cap common stocks of growth companies
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Identifies small-cap companies with above-average growth potential
STRATEGY
INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income
</TABLE>
INVESTMENT STRATEGY
The Small Cap Growth Fund invests primarily in U.S. companies that
demonstrate above-average growth potential. We invest in companies with an
established operating history and a solid balance sheet. In selecting
investments for the Fund, we choose companies with market capitalizations of up
to about $3 billion. Due to its investment strategy, the Fund may buy and sell
securities frequently. This may result in higher transactions costs and
additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of smaller U.S. companies. As a
result, the Fund is subject to the risk that stock prices will fall over short
or extended periods of time. Stock markets tend to move in cycles, with periods
of rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in small-or
mid-cap companies involve greater risk than investments in larger, more
established companies because of the greater business risks of small size,
limited markets and financial resources, smaller product lines and lack of depth
of management. These securities are often traded over-the-counter and may not be
traded in high volumes. Consequently, securities prices could be less stable
than those of larger, more established companies.
<PAGE>
PROSPECTUS 17
SMALL CAP GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON OCTOBER 7, 1998)
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.15%
Other Expenses* .20%
---------
Total Annual Fund Operating Expenses 1.35%
</TABLE>
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C>
$137 $428
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00%
AND 1.20%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
18 PROSPECTUS
SUNBELT EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Southern U.S. common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Attempts to identify companies with positive
STRATEGY earnings trends
INVESTOR PROFILE Aggressive investors with long-term investment
goals who are willing to accept higher volatility
for the possibility of higher returns
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Hunt J B Transportation
Services Inc. .............. 3.0%
Fairfield Communities
Incorporated................ 2.6%
PMT Services, Incorporated.... 2.3%
Stone Energy Coporation....... 2.0%
SCB Computer Technology,
Incorporated................ 1.9%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Sunbelt Equity Fund invests substantially all of its assets in
common stocks and other equity securities of companies in the southern region of
the U.S. These companies are headquartered and/or conduct a substantial portion
of their business in the southern region of the U.S., which includes Texas,
Arkansas, Alabama, Mississippi, Tennessee, Kentucky, Florida, Virginia, Georgia,
North Carolina, South Carolina and Louisiana. Our investment strategy is based
on the belief that a portfolio of companies in this region with positive
earnings trends will generate above-average returns over time. This focus on
favorable earnings characteristics is the cornerstone of our philosophy. We do
not consider current income in selecting investments for the Fund.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in southern U.S. common stocks. As a result, the Fund
is subject to the risk that stock prices will fall over short or extended
periods of time. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices. This price volatility is the principal
risk of investing in the Fund. Because the Fund focuses its investments in
southern companies, economic conditions in or government policies imposed by
southern states may cause the Fund to be more volatile than an equity fund that
invests in companies located across the U.S.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
periods prior to January 1994, when the Fund began operating, represent the
performance of the Advisor's similarly managed collective investment fund. This
past performance has been adjusted to reflect current expenses for Trust Shares
of the Fund. The Advisor's collective fund was not a registered mutual fund so
it was not subject to the same investment and tax restrictions as the Fund. If
it had been, the collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 25.33%
1989 25.72%
1990 4.38%
1991 49.78%
1992 18.80%
1993 22.70%
1994 -4.69%
1995 24.39%
1996 18.42%
1997 21.34%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
21.62% -19.36%
(3/31/91) (12/31/87)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 5.98%.
<PAGE>
PROSPECTUS 19
SUNBELT EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 GROWTH INDEX AND THE
S&P SMALLCAP 600 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/1/80)
<S> <C> <C> <C> <C>
SUNBELT EQUITY FUND 21.34% 15.89% 18.81% 14.28%
FRANK RUSSELL 2000 GROWTH
INDEX 12.95% 12.74% 13.49% 8.11%
S&P SMALLCAP 600 INDEX 25.49% 17.48% 15.37% 9.35%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Frank Russell 2000 Index is a
widely recognized index of the 2,000 largest U.S. companies with higher
growth rates. The S&P SmallCap 600 Index is a widely recognized index of 600
U.S. small cap stocks.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.15%
Other Expenses .13%
---------
Total Annual Fund Operating Expenses 1.28%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$130 $406 $702 $1545
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04%
AND 1.17%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
20 PROSPECTUS
TAX SENSITIVE GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON
DECEMBER 15, 1998)
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long-term capital growth, with nominal dividend income
INVESTMENT FOCUS U.S. common stocks of growth companies
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify companies that have above-average growth potential and uses a low
STRATEGY portfolio turnover strategy to reduce capital gains distributions.
INVESTOR PROFILE Taxable investors who want to increase the value of their investment while minimizing
taxable capital gains distributions.
</TABLE>
INVESTMENT STRATEGY
The Tax Sensitive Growth Stock Fund primarily invests in a
diversified portfolio of common stocks of financially strong U.S. growth
companies. Many of these companies have a history of stable or rising dividend
payout policies. We invest the Fund's assets across all market capitalizations.
We attempt to minimize the impact of capital gains taxes on investment returns
by using a low turnover rate (generally 50% or less) strategy, in conjunction
with other tax management strategies. These strategies may lead to lower capital
gains distributions and, therefore, lower capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund primarily invests in common stocks. As a result, the Fund is subject to
the risk that stock prices will fall over short or extended periods of time.
Stock markets tend to move in cycles, with periods of rising prices and periods
of falling prices. This price volatility is the principal risk of investing in
the Fund. In addition, the Fund may invest in small-cap companies. These
companies involve greater risk than investments in larger, more established
companies because of the greater business risks of small size, limited markets
and financial resources, smaller product lines and lack of depth of management.
These securities are often traded over-the-counter and may not be traded in high
volumes. Consequently, securities prices could be less stable than those of
larger, more established companies.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility
of an investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The periods prior
to October 1998, when the Fund began operating, represent the performance of the
Advisor's similarly managed collective investment fund. This past performance
has been adjusted to reflect current expenses for Trust shares of the Fund. The
Advisor's collective fund was not a registered mutual fund so it was not subject
to the same investment and tax restrictions as the Fund. If it had been, the
collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1996 21.04%
<S> <C>
1997 28.76%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
18.10% -0.04%
(6/30/97) (12/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 14.54%.
<PAGE>
PROSPECTUS 21
TAX SENSITIVE GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON DECEMBER 15, 1998)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX AND THE LIPPER GROWTH AND
INCOME FUNDS INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR (12/31/95)
<S> <C> <C>
TAX SENSITIVE GROWTH STOCK FUND 28.76% 24.84%
S&P 500 INDEX 33.55% 28.04%
LIPPER GROWTH AND INCOME FUNDS INDEX 26.96% 23.78%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. Unlike a mutual fund, an index does not
have an investment advisor and does not pay any commissions or expenses. If
an index had expenses, its performance would be lower. The S&P 500 Index is
a widely recognized index of 500 stocks designed to mimic the overall equity
market's industry weightings. 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 EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees 1.15%
Other Expenses* .20%
---------
Total Annual Fund Operating Expenses 1.35%
</TABLE>
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C>
$137 $428
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a portion of its
fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00%
AND 1.20%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver
at any time. For more information about these fees, see "Investment Advisors."
<PAGE>
22 PROSPECTUS
VALUE INCOME STOCK FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS
PRIMARY Current income
SECONDARY Capital appreciation
INVESTMENT FOCUS U.S. common stocks
SHARE PRICE VOLATILITY Moderate
PRINCIPAL INVESTMENT Attempts to identify high dividend-paying,
STRATEGY undervalued stocks
INVESTOR PROFILE Investors who are looking for current income and
capital appreciation with less volatility than the
average stock fund
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
AS OF 6/30/98*
<S> <C>
Pharmacia & Upjohn
Incorporated................ 2.5%
Ameritech Corporation......... 2.4%
Baxter International
Incorporated................ 2.3%
Unocal Corporation............ 2.3%
Kimberly-Clark Corporation.... 2.3%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Value Income Stock Fund invests primarily in common stocks and
other equity securities of U.S. companies. In selecting investments for the
Fund, we primarily choose companies that have a market capitalization of at
least $500 million and that have a history of paying regular dividends. We focus
on high dividend-paying stocks that trade below their historical value. Our
"bottom-up" approach to stock selection emphasizes individual stocks over
economic trends.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, common stocks held by the Fund may stop
paying dividends or pay less in dividends than we expected.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
periods prior to February 1993, when the Fund began operating, represent the
performance of the Advisor's similarly managed collective investment fund. This
past performance has been adjusted to reflect current expenses for Trust Shares
of the Fund. The Advisor's collective fund was not a registered mutual fund so
it was not subject to the same investment and tax restrictions as the Fund. If
it had been, the collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990 -4.93%
1991 39.30%
1992 20.05%
1993 11.14%
1994 3.54%
1995 35.93%
1996 19.46%
1997 27.08%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
18.56% -14.86%
(3/31/91) (9/30/90)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 7.79%.
<PAGE>
PROSPECTUS 23
VALUE INCOME STOCK FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P BARRA VALUE 500 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (10/31/89)
<S> <C> <C> <C>
VALUE INCOME STOCK FUND 27.08% 18.88% 19.38%
S&P/BARRA VALUE 500 INDEX 29.98% 20.68% 15.43%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. Unlike a mutual fund, an index does not
have an investment advisor and does not pay any commissions or expenses. If
an index had expenses, its performance would be lower. The S&P/BARRA Value
500 Index is a widely recognized index of the stocks in the S&P 500 Index
that have lower price-to-book ratios.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Other Expenses .17%
---------
Total Annual Fund Operating Expenses .97%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns may be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$99 $309 $536 $1190
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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.
<PAGE>
24 PROSPECTUS
EACH FUND'S PRINCIPAL INVESTMENTS
FUND INVESTMENTS
The table below shows each Fund's principal investments. In other words,
the table describes the type or types of investments that we believe will
most likely help each Fund achieve its investment goal.
<TABLE>
<CAPTION>
BALANCED CAPITAL EMERGING INTERNATIONAL INTERNATIONAL MID-CAP
FUND GROWTH MARKETS EQUITY EQUITY EQUITY
FUND EQUITY FUND INDEX FUND
FUND FUND
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bonds X
- ---------------------------------------------------------------------------------------
U.S. Stocks X X X
- ---------------------------------------------------------------------------------------
Foreign Stocks X X X
- ---------------------------------------------------------------------------------------
<CAPTION>
SMALL SMALL CAP SUNBELT TAX SENSITIVE VALUE
CAP GROWTH STOCK EQUITY GROWTH STOCK INCOME
EQUITY FUND FUND FUND STOCK
FUND FUND
- --------------------
<S> <C> <C> <C> <C> <C>
Bonds
- --------------------
U.S. Stocks X X X X X
- --------------------
Foreign Stocks
- --------------------
</TABLE>
Each Fund also may invest in other securities, use other strategies and engage
in other investment practices, which are described in detail in our Statement of
Additional Information. Of course, we cannot guarantee that any Fund will
achieve its investment goal.
The investments listed above and the investments and strategies described
throughout this prospectus are those that we use under normal conditions. During
unusual economic or market conditions, or for temporary defensive or liquidity
purposes, each Fund may invest up to 100% of its assets in cash, money market
instruments, repurchase agreements and short-term obligations. The Small Cap
Equity Fund also may invest in investment grade fixed income securities and mid-
to large-cap common stocks. When a Fund is investing for temporary defensive
purposes, it is not pursuing its investment goal.
INVESTMENT ADVISORS
The Investment Advisors make investment decisions for the Funds and continuously
review, supervise and administer their Funds' respective investment program. The
Board of Trustees supervises the Advisors and establishes policies that the
Advisors must follow in their management activities.
STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802,
serves as the Advisor to the Balanced, Capital Growth, Emerging Markets Equity,
International Equity, Mid-Cap Equity, Small Cap Equity, and Value Income Stock
Funds. As of May 31, 1998, STI Capital had approximately 11.7 billion in assets
under management. For the fiscal year ended May 31, 1998, STI Capital received
advisory fees of:
<TABLE>
<S> <C>
BALANCED FUND............................ .83%
CAPITAL GROWTH FUND...................... 1.04%
EMERGING MARKETS EQUITY FUND............. 1.08%
INTERNATIONAL EQUITY FUND................ 1.24%
MID-CAP EQUITY FUND...................... 1.04%
SMALL CAP EQUITY FUND.................... 1.05%
VALUE INCOME STOCK FUND.................. .80%
</TABLE>
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Advisor to the Small Cap Growth Stock, Sunbelt
Equity and Tax Sensitive Growth Stock Funds. As of May 31, 1998, Trusco had
approximately 22 billion in assets under management. For the fiscal year ended
May 31, 1998, Trusco received advisory fees of 1.04% for the Sunbelt Equity
Fund. The Small Cap Growth Stock and Tax Sensitive Growth Stock Funds had not
commenced operations as of May 31, 1998.
STI and Trusco co-manage the International Equity Index Fund. For the fiscal
year ended May 31, 1998, STI and Trusco received and shared advisory fees of
.77% for the Fund.
The Advisors may use their affiliates as brokers for Fund transactions.
PORTFOLIO MANAGERS
Mr. Anthony Gray has served as Chairman and Chief Investment Officer of STI
since 1979. He has managed the Capital Growth Fund since it began operating in
June 1992. He has more than 30 years of investment experience.
Mr. Mills Riddick, CFA, has served as Managing Director of STI since 1994. He
has managed the Value Income Stock Fund since April 1995. He has more than 15
years of investment experience, and has been a portfolio manager at STI since
1989. Prior to joining STI, Mr. Riddick served as a broker with Drexel Burnham
Lambert.
<PAGE>
PROSPECTUS 25
PURCHASING, SELLING AND EXCHANGING FUND SHARES
Mr. Brett Barner, CFA, has served as Vice President of STI since 1994. He has
managed the Small Cap Equity Fund since it began operating in January 1997. He
has more than 10 years of investment experience and has been a portfolio manager
with STI since 1990. Prior to joining STI, Mr. Barner served as a consultant
with Drexel Burnham Lambert and Shearson Lehman Brothers.
Mr. Elliott A. Perny has served as Senior Executive Vice President of STI since
September 1992. He has managed the Mid-Cap Equity Fund since October 1996. He
has more than 25 years of investment experience, and has served as a portfolio
manager at STI since 1991. Prior to joining STI, Mr. Perny served as a portfolio
manager at Florida National Bank and Atlantic Bank.
The Balanced Fund is co-managed by Mr. Anthony R. Gray and Mr. L. Earl Denney,
CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney, CFA, has
served as Senior Vice President of STI since 1983, has more than 20 years of
investment experience. Prior to joining STI, Mr. Denney served as a fixed income
portfolio manager with American National Bank.
Mr. James Foster has served as Vice President of Trusco since 1989. He has
managed the Sunbelt Equity Fund since it began operating in January 1994. He has
more than 27 years of investment experience.
Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed
the International Equity and Emerging Markets Equity Funds since May 1997. He
has more than 6 years of investment experience. Prior to joining STI, he was a
senior international equity analyst for American Express Financial Advisors from
1996 to 1997 and for the Principal Financial Group from 1992 to 1995.
Mr. Mark D. Garfinkel, CFA, has served as a portfolio manager at Trusco since
1994. He has managed the Small Cap Growth Stock Fund since it began operating in
October 1998. He has more than 10 years of investment experience and has been a
portfolio manager with SunTrust Banks or an affiliate since 1990.
Mr. Jonathan Mote, CFA, CFP, has served as a portfolio manager at Trusco since
August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began
operating in December 1998. He has more than 13 years of investment experience.
Prior to joining Trusco, Mr. Mote served as a portfolio manager with SunTrust
Banks or an affiliate.
PURCHASING FUND SHARES
HOW TO PURCHASE FUND SHARES
Generally you may not purchase Trust Shares directly. Rather, Trust Shares are
sold to financial institutions or intermediaries, including subsidiaries of
SunTrust Banks, Inc. (SunTrust) on behalf of accounts for which they act as
fiduciary, agent, investment advisor, or custodian. As a result, you, as a
customer of a financial institution, may purchase Trust Shares through accounts
maintained with financial institutions and potentially through the Preferred
Portfolio Account (an asset allocation account available through SunTrust
Securities, Inc.). Trust Shares will be held of record by (in the name of) your
financial institution. Depending upon the terms of your account, however, you
may have, or be given, the right to vote your Trust Shares. We may reject any
purchase order if we determine that accepting the order would not be in the best
interests of the STI Classic Funds or its shareholders.
SIMPLY SPEAKING . . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open
for business (a Business Day).
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order. We calculate each
Fund's NAV once each Business Day at the regularly-scheduled close of normal
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So,
to receive the current Business Day's NAV,
<PAGE>
26 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
generally we must receive your purchase order from your financial institution
before 4:00 p.m. Eastern time.
SIMPLY SPEAKING . . .
FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS
You may have to transmit your purchase and sale requests to your financial
institution at an earlier time for your transaction to become effective that
day. This allows the financial institution time to process your request and
transmit it to us. For more information about how to purchase or sell Fund
shares through your financial institution, you should contact your financial
institution directly.
HOW WE CALCULATE NAV
In calculating NAV, we generally value a Fund's portfolio at market price. If
market prices are unavailable or we think that they are unreliable, fair value
prices may be determined in good faith using methods approved by the Board of
Trustees. Some Funds hold portfolio securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the Funds
do not calculate NAV. As a result, the NAV of these Funds' shares may change on
days when you cannot purchase or sell Fund shares.
SIMPLY SPEAKING . . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the
assets in the Fund.
SELLING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting your financial institution. Your financial institution will give you
information about how to sell your shares. The sale price of each share will be
the next NAV determined after we receive your request from your financial
institution.
SIMPLY SPEAKING . . .
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although we have certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, we are
not responsible for any losses or costs incurred by following telephone
instructions we reasonably believe to be genuine. If you or your financial
institution transact with us over the telephone, you will generally bear the
risk of any loss.
REDEMPTIONS IN KIND
We generally pay sale (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) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay brokerage costs to sell the
securities distributed to you, as well as taxes on any capital gains from the
sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information.
<PAGE>
PROSPECTUS 27
HISTORICAL FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Trust Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions. As of May 31, 1998, the Small Cap
Growth Stock and Tax Sensitive Growth Stock Funds had not commenced operations.
This information has been audited by Arthur Andersen, LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain our annual report, which contains more performance information,
at no charge by calling 1-800-874-4700.
SIMPLY SPEAKING . . .
FINANCIAL HIGHLIGHTS
Study these tables to see how each Fund performed since it began investment
operations.
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET UNREALIZED DISTRIBUTIONS
VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF
PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- -------------
BALANCED FUND
- -------------
Trust Shares
1998......................... $ 11.94 $ 0.31 $ 2.19 $ (0.32) $ (1.03) $ 13.09
1997......................... 11.55 0.33 1.47 (0.32) (1.09) 11.94
1996......................... 10.26 0.33 1.41 (0.34) (0.11) 11.55
1995......................... 9.76 0.33 0.49 (0.32) -- 10.26
1994(1)...................... 10.00 0.11 (0.29) (0.06) -- 9.76
- --------------------
CAPITAL GROWTH FUND
- --------------------
Trust Shares
1998......................... $ 15.09 $ 0.09 $ 3.96 $ (0.09) $ (2.57) $ 16.48
1997......................... 14.90 0.12 3.13 (0.12) (2.94) 15.09
1996......................... 12.18 0.12 3.32 (0.13) (0.59) 14.90
1995......................... 11.99 0.16 0.57 (0.14) (0.40) 12.18
1994......................... 11.95 0.16 0.31 (0.17) (0.26) 11.99
- -----------------------------
EMERGING MARKETS EQUITY FUND
- -----------------------------
Trust Shares
1998......................... $ 10.79 $ 0.16 $ (1.86) $ (0.08) $ (0.14) $ 8.87
1997(2)...................... 10.00 0.04 0.75 -- -- 10.79
- ------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
Trust Shares
1998......................... $ 13.63 $ 0.04 $ 2.69 $ (0.04) $ (1.32) $ 15.00
1997......................... 11.40 0.03 2.57 (0.02) (0.35) 13.63
1996(3)...................... 10.00 0.05 1.35 -- -- 11.40
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME (LOSS)
RATIO OF NET AVERAGE NET TO AVERAGE
RATIO OF INVESTMENT ASSETS NET ASSETS
NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING
END OF PERIOD AVERAGE NET TO AVERAGE WAIVERS AND WAIVERS AND
TOTAL RETURN (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C>
- -------------
BALANCED FUND
- -------------
Trust Shares
1998......................... 22.15% $ 188,465 0.96% 2.51% 1.08% 2.39%
1997......................... 16.66 151,358 0.95 2.89 1.08 2.76
1996......................... 17.26 111,638 0.95 3.00 1.09 2.86
1995......................... 8.72 89,051 0.95 3.44 1.11 3.28
1994(1)...................... (1.78)** 90,579 0.95* 2.76* 1.25* 2.46*
- --------------------
CAPITAL GROWTH FUND
- --------------------
Trust Shares
1998......................... 29.51% $ 1,532,587 1.16% 0.61% 1.27% 0.50%
1997......................... 24.66 1,085,128 1.15 0.83 1.25 0.73
1996......................... 28.97 981,498 1.15 0.90 1.27 0.78
1995......................... 6.63 984,205 1.15 1.38 1.28 1.25
1994......................... 3.87 891,870 1.15 1.25 1.29 1.11
- -----------------------------
EMERGING MARKETS EQUITY FUND
- -----------------------------
Trust Shares
1998......................... (15.74%) $ 34,554 1.56% 1.14% 1.78% 0.92%
1997(2)...................... 7.90** 39,495 1.55* 1.37* 2.04* 0.88*
- ------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
Trust Shares
1998......................... 21.87% $ 628,870 1.47% 0.61% 1.48% 0.60%
1997......................... 23.29 489,325 1.46 0.51 1.51 0.46
1996(3)...................... 14.00** 213,306 1.46* 1.36* 1.65* 1.17*
<CAPTION>
PORTFOLIO
TURNOVER RATE
-------------
- -------------
BALANCED FUND
- -------------
Trust Shares
1998......................... 154%
1997......................... 197
1996......................... 155
1995......................... 157
1994(1)...................... 106
- --------------------
CAPITAL GROWTH FUND
- --------------------
Trust Shares
1998......................... 194%
1997......................... 141
1996......................... 156
1995......................... 128
1994......................... 124
- -----------------------------
EMERGING MARKETS EQUITY FUND
- -----------------------------
Trust Shares
1998......................... 74%
1997(2)...................... 24
- ------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
Trust Shares
1998......................... 108%
1997......................... 139
1996(3)...................... 113
</TABLE>
* Annualized.
** Return is for period indicated and has not been annualized.
(1) Commenced operations on January 3, 1994.
<PAGE>
28 PROSPECTUS
HISTORICAL FINANCIAL INFORMATION
(2) Commenced operations on January 31, 1997.
(3) Commenced operations on December 1, 1995.
<PAGE>
PROSPECTUS 29
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET UNREALIZED DISTRIBUTIONS
VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF
PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
INTERNATIONAL EQUITY INDEX FUND
- ------------------------------
Trust Shares
1998......................... $ 11.34 $ 0.11 $ 2.65 $ (0.11) $ (0.68) $ 13.31
1997......................... 10.96 0.10 0.69 (0.11) (0.30) 11.34
1996......................... 10.24 0.10 0.84 (0.13) (0.09) 10.96
1995(4)...................... 10.00 0.08 0.19 (0.02) (0.01) 10.24
- -----------------------
MID-CAP EQUITY FUND (A)
- ------------------------
Trust Shares
1998......................... $ 13.21 $ -- $ 2.54 $ -- $ (1.96) $ 13.79
1997......................... 12.76 0.03 1.69 (0.05) (1.22) 13.21
1996......................... 11.00 0.08 2.63 (0.08) (0.87) 12.76
1995......................... 9.85 0.08 1.15 (0.08) -- 11.00
1994(5)...................... 10.00 0.02 (0.16) (0.01) -- 9.85
- ---------------------
SMALL-CAP EQUITY FUND
- ---------------------
Trust Shares
1998......................... $ 11.07 $ 0.14 $ 2.41 $ (0.12) $ (0.62) $ 12.88
1997(2)...................... 10.00 0.05 1.04 (0.02) -- 11.07
- -------------------
SUNBELT EQUITY FUND
- -------------------
Trust Shares
1998......................... $ 13.28 $ 0.01 $ 3.03 $ -- $ (1.20) $ 15.12
1997......................... 14.11 (0.09) 0.25 -- (0.99) 13.28
1996......................... 10.03 (0.04) 4.32 -- (0.20) 14.11
1995......................... 9.70 (0.01) 0.38 -- (0.04) 10.03
1994(1)...................... 10.00 -- (0.30) -- -- 9.70
- ------------------------
VALUE INCOME STOCK FUND
- ------------------------
Trust Shares
1998......................... $ 13.71 $ 0.26 $ 2.62 $ (0.27) $ (2.42) $ 13.90
1997......................... 13.15 0.30 2.32 (0.30) (1.76) 13.71
1996......................... 11.59 0.35 2.71 (0.34) (1.16) 13.15
1995......................... 10.54 0.32 1.56 (0.32) (0.51) 11.59
1994......................... 10.23 0.29 0.70 (0.32) (0.36) 10.54
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME (LOSS)
RATIO OF NET AVERAGE NET TO AVERAGE
RATIO OF INVESTMENT ASSETS NET ASSETS
NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING
END OF PERIOD AVERAGE NET TO AVERAGE WAIVERS AND WAIVERS AND
TOTAL RETURN (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------- ------------- ------------- ------------- ------------- -------------
<S> <C>
- ------------------------------
INTERNATIONAL EQUITY INDEX FUND
- ------------------------------
Trust Shares
1998......................... 25.82% $ 56,200 1.06% 0.88% 1.18% 0.76%
1997......................... 7.48 53,516 1.05 0.71 1.15 0.61
1996......................... 9.29 90,980 1.05 0.84 1.19 0.70
1995(4)...................... 2.69** 89,446 1.05* 1.13* 1.31* 0.87*
- -----------------------
MID-CAP EQUITY FUND (A)
- ------------------------
Trust Shares
1998......................... 21.14% $ 337,825 1.16% (0.29%) 1.27% (0.40%)
1997......................... 14.23 287,370 1.15 0.23 1.26 0.12
1996......................... 25.54 253,905 1.15 0.70 1.29 0.56
1995......................... 12.56 125,562 1.15 0.88 1.32 0.71
1994(5)...................... (1.39)** 57,036 1.15* 1.20* 1.68* 0.67*
- ---------------------
SMALL-CAP EQUITY FUND
- ---------------------
Trust Shares
1998......................... 23.59% $ 390,841 1.21% 1.07% 1.31% 0.97%
1997(2)...................... 10.97** 131,049 1.20* 1.86* 1.37* 1.69*
- -------------------
SUNBELT EQUITY FUND
- -------------------
Trust Shares
1998......................... 23.86% $ 431,921 1.16% (0.90%) 1.27% (1.01%)
1997......................... 1.48 381,371 1.15 (0.65) 1.26 (0.76)
1996......................... 43.19 412,430 1.15 (0.34) 1.28 (0.47)
1995......................... 3.81 258,908 1.15 (0.12) 1.30 (0.27)
1994(1)...................... (2.99)** 128,280 1.15* (0.19)* 1.58* (0.62)*
- ------------------------
VALUE INCOME STOCK FUND
- ------------------------
Trust Shares
1998......................... 23.10% $ 1,725,418 0.92% 1.85% 0.92% 1.85%
1997......................... 22.18 1,488,062 0.91 2.40 0.91 2.40
1996......................... 27.91 1,244,399 0.92 2.86 0.92 2.86
1995......................... 19.06 991,977 0.95 3.16 0.95 3.16
1994......................... 9.95 573,082 0.88 3.21 0.97 3.12
<CAPTION>
PORTFOLIO
TURNOVER RATE
-------------
- ------------------------------
INTERNATIONAL EQUITY INDEX FUND
- ------------------------------
Trust Shares
1998......................... 1%
1997......................... 2
1996......................... 30
1995(4)...................... 10
- -----------------------
MID-CAP EQUITY FUND (A)
- ------------------------
Trust Shares
1998......................... 129%
1997......................... 152
1996......................... 116
1995......................... 66
1994(5)...................... 8
- ---------------------
SMALL-CAP EQUITY FUND
- ---------------------
Trust Shares
1998......................... 55%
1997(2)...................... 27
- -------------------
SUNBELT EQUITY FUND
- -------------------
Trust Shares
1998......................... 70%
1997......................... 72
1996......................... 106
1995......................... 80
1994(1)...................... 21
- ------------------------
VALUE INCOME STOCK FUND
- ------------------------
Trust Shares
1998......................... 99%
1997......................... 105
1996......................... 134
1995......................... 126
1994......................... 149
</TABLE>
* Annualized.
** Return is for period indicated and has not been annualized.
(1) Commenced operations on January 3, 1994.
(2) Commenced operations on January 31, 1997.
(4) Commenced operations on June 6, 1994.
(5) Commenced operations on February 2, 1994.
(A) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund
changed its name to the Mid-Cap Equity Fund.
<PAGE>
PROSPECTUS 29
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income quarterly, except the International Equity,
International Equity Index and Emerging Markets Equity Funds. These Funds
distribute income annually. The Funds make distributions of capital gains, if
any, at least annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.
SIMPLY SPEAKING . . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to
receive the distribution.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OF FUND
SHARES.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
SIMPLY SPEAKING . . .
FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you
reinvest them.
<PAGE>
HOW TO OBTAIN MORE INFORMATION
INVESTMENT ADVISORS
STI Capital Management, N.A.
Trusco Capital Management, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the STI Classic Funds is included in our SAI.
The SAI has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMIANNUAL REPORTS
These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies, and recent market conditions and trends.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE:
Call 1-800-874-4770
BY MAIL:
Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.
FROM THE SEC: You can also obtain these documents, and other information about
the STI Classic Funds, from the SEC's website ("http://www.sec.gov"). You may
review and copy documents at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009. The
Fund's Investment Company Act registration number is 811-06557.
<PAGE>
PROSPECTUS
HOW TO READ
THIS PROSPECTUS
The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important information
about the Investor Shares and the Flex Shares of the Bond Funds that you should
know before investing. Please read this prospectus and keep it for future
reference.
We arranged the prospectus into different sections so that you can easily review
this important information. On the next page, we discuss general information you
should know about investing in the Funds.
<TABLE>
<C> <S>
IF YOU WOULD LIKE MORE DETAILED INFORMATION
ABOUT EACH FUND, PLEASE SEE:
2 FLORIDA TAX-EXEMPT BOND FUND
4 GEORGIA TAX-EXEMPT BOND FUND
6 INVESTMENT GRADE BOND FUND
8 INVESTMENT GRADE TAX-EXEMPT BOND FUND
10 LIMITED-TERM FEDERAL MORTGAGE
SECURITIES FUND
12 SHORT-TERM BOND FUND
14 SHORT-TERM U.S. TREASURY SECURITIES FUND
16 U.S. GOVERNMENT SECURITIES FUND
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FOLLOWING TOPICS, PLEASE SEE:
18 EACH FUND'S PRINCIPAL INVESTMENTS
19 THE ADVISORS AND THEIR PORTFOLIO MANAGERS
20 PURCHASING, SELLING AND EXCHANGING FUND SHARES
25 HISTORICAL FINANCIAL INFORMATION
ABOUT EACH FUND
27 HOW FUND SHARES ARE DISTRIBUTED
28 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS
28 TAXES
TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC
FUNDS PLEASE REFER TO THE BACK COVER OF THE
PROSPECTUS
</TABLE>
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING"
EXPLANATIONS.
- --------------------------------------------------------------------------------
FUND SUMMARY
INVESTMENT STRATEGY
WHAT ARE THE RISKS OF INVESTING?
PERFORMANCE INFORMATION
WHAT IS AN INDEX?
FEES AND EXPENSES
FUND INVESTMENTS
INVESTMENT ADVISORS
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
OCTOBER 1, 1998
<PAGE>
PROSPECTUS 1
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in mutual
funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect securities markets generally, as well as those that affect
particular companies or governments. These price movements, sometimes called
volatility, will vary depending on the types of securities a Fund owns and the
markets where these securities trade.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
Each Fund has its own investment goal and strategies for reaching that goal. But
we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be
changed without shareholder approval. Before investing, make sure that the
Fund's goal matches your own.
The Advisors invest each Fund's assets in a way that the Advisor believes will
help the Fund achieve its goal. An Advisor's judgments about the stock markets,
economy and companies, or selecting investments may not reflect actual market
movements, economic conditions or company performance.
CHOOSING INVESTOR OR FLEX SHARES
Investor Shares and Flex Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have it
invested, and whether you plan to make additional investments.
INVESTOR SHARES
- - Front-end sales charge
- - Lower annual expenses
- - $2,000 minimum initial investment
FLEX SHARES
- - Deferred sales charge
- - Higher annual expenses
- - $10,000 minimum initial investment
<PAGE>
2 PROSPECTUS
FLORIDA TAX-EXEMPT BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Current income exempt from federal income taxes for
Florida residents without undue risk
INVESTMENT FOCUS Florida municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued
STRATEGY sectors and less in overvalued ones
INVESTOR PROFILE Florida residents who want income exempt from
federal income taxes
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Jacksonville, Sales Tax
Revenue....................... 3.4%
Orlando, Florida.............. 3.2%
Florida State Div Bd Fin...... 3.1%
Brevard County, Florida....... 2.9%
Palm Beech Solid Waste........ 2.6%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Florida Tax-Exempt Bond Fund invests substantially all of its
assets in municipal securities with income exempt from federal income taxes.
Issuers of these securities can be located in Florida, the District of Columbia,
Puerto Rico and other U.S. territories and possessions. In selecting investments
for the Fund, we try to limit risk as much as possible. Based on our analysis of
municipalities, credit risk, market trends and investment cycles, we attempt to
invest more of the Fund's assets in undervalued market sectors and less in
overvalued sectors. We also try to identify and invest in municipal issuers with
improving credit and avoid those with deteriorating credit. It is anticipated
that the Fund's average weighted maturity will range from 6 to 25 years.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in Florida debt securities. As a result, the Fund is
subject to the risk that the prices of debt securities will decline due to
rising interest rates. This risk is greater for long-term debt securities than
for short-term debt securities. The Fund's concentration of investments in
securities of issuers located in Florida subjects the Fund to economic
conditions and government policies of Florida. Debt securities may decline in
credit quality due to economic or governmental events. In addition, an issuer
may be unable to make timely payments of principal or interest to the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1995 15.70%
<S> <C>
1996 3.73%
1997 7.96%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
6.13% -1.56%
(3/31/95) (3/31/96)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.21%.
<PAGE>
PROSPECTUS 3
FLORIDA TAX-EXEMPT BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (1/18/94)
<S> <C> <C> <C>
FLORIDA TAX-EXEMPT BOND FUND 3.60% 7.52% 5.28%
LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/1/95)
<S> <C> <C> <C>
FLORIDA TAX-EXEMPT BOND FUND 5.09% 6.17%
LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX
9.23% 7.97%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Lehman Brothers
10-Year Municipal Bond Index is a widely recognized index of long-term
investment grade tax-exempt bonds with maturities between 8 and 12 years.
The index represents various market sectors and geographic locations.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .65% .65%
Distribution and Service (12b-1) Fees .18% 1.00%
Other Expenses .52% .37%
--- ---
Total Annual Fund Operating Expenses 1.35% 2.02%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 507 $ 787 $ 1087 $ 1938
Flex Shares $ 405 $ 634 $ 1088 $ 2348
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 507 $ 787 $ 1087 $ 1938
Flex Shares $ 205 $ 634 $ 1088 $ 2348
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .51%,
.00% AND .87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .51%, .49% AND 1.37%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
4 PROSPECTUS
GEORGIA TAX-EXEMPT BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Current income exempt from federal and Georgia
income taxes for Georgia residents without undue
risk
INVESTMENT FOCUS Georgia municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued
STRATEGY sectors and less in overvalued ones
INVESTOR PROFILE Georgia residents who want income exempt from
federal and state income taxes
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Henry County, Georgia......... 3.4%
Dalton Georgia Utilities,
RS............................ 2.9%
Georgia State................. 2.9%
Henry County, Georgia......... 2.6%
Burke County, Georgia......... 2.6%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Georgia Tax-Exempt Bond Fund invests substantially all of its
assets in municipal securities with income exempt from federal and Georgia
income taxes. Issuers of these securities can be located in Georgia, the
District of Columbia, Puerto Rico and other U.S. territories and possessions. In
selecting investments for the Fund, we try to limit risk as much as possible.
Based on our analysis of municipalities, credit risk, market trends and
investment cycles, we attempt to invest more of the Fund's assets in undervalued
market sectors and less in overvalued sectors. We try to diversify the Fund's
holdings within Georgia. We also try to identify and invest in municipal issuers
with improving credit and avoid those with deteriorating credit. It is
anticipated that the Fund's average weighted maturity will range from 6 to 25
years.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in Georgia debt securities. As a result, the Fund is
subject to the risk that the prices of debt securities will decline due to
rising interest rates. This risk is greater for long-term debt securities than
for short-term debt securities. The Fund's concentration of investments in
securities of issuers located in Georgia subjects the Fund to economic
conditions and government policies of Georgia. Debt securities may decline in
credit quality due to economic or governmental events. In addition, an issuer
may be unable to make timely payments of principal or interest to the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1995 13.13%
<S> <C>
1996 3.43%
1997 7.96%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
4.84% -.73%
(3/31/95) (3/31/96)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 1.92%.
<PAGE>
PROSPECTUS 5
GEORGIA TAX-EXEMPT BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND
INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (1/19/94)
<S> <C> <C> <C>
GEORGIA TAX-EXEMPT
BOND FUND 3.91% 6.72% 3.72%
LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/6/95)
<S> <C> <C>
GEORGIA TAX-EXEMPT BOND FUND 5.32% 5.58%
LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 7.97%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Lehman Brothers
10-Year Municipal Bond Index is a widely recognized index of long-term
investment grade tax-exempt bonds with maturities between 8 and 12 years.
The index represents various market sectors and geographic locations.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .65% .65%
Distribution and Service (12b-1) Fees .18% 1.00%
Other Expenses .48% .38%
--- ---
Total Annual Fund Operating Expenses 1.31% 2.03%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 503 $ 775 $ 1066 $ 1895
Flex Shares $ 406 $ 637 $ 1093 $ 2358
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 503 $ 775 $ 1066 $ 1895
Flex Shares $ 206 $ 637 $ 1093 $ 2358
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .50%,
.00% AND .87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .50%, .49% AND 1.37%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
6 PROSPECTUS
INVESTMENT GRADE BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High total return through current income and
capital appreciation, while preserving the
principal amount invested
INVESTMENT FOCUS Investment grade U.S. government and corporate debt
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify relatively inexpensive
STRATEGY securities in a selected market index
INVESTOR PROFILE Investors who want to receive income from their
investment, as well as an increase in the value of
the investment
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
United States Treasury Bond... 11.6%
United States Treasury Bond... 8.6%
United States Treasury Bond... 7.0%
Merrill Lynch................. 4.9%
FNMA.......................... 4.9%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Investment Grade Bond Fund invests primarily in investment grade
corporate debt securities, U.S. Treasury obligations and mortgage-backed
securities. In selecting investments for the Fund, we try to minimize risk while
attempting to outperform selected market indices. Currently, our selected index
is the Lehman Brothers Government/Corporate Bond Index, a widely recognized,
unmanaged index of investment grade government and corporate debt securities. We
seek to invest more in portions of the Index that seem relatively inexpensive,
and less in those that seem expensive. We allocate the Fund's investments among
various market sectors based on our analysis of historical data, yield
information and credit ratings. We anticipate that the Fund's average weighted
maturity will range from 4 to 10 years. Due to the Fund's investment strategy,
the Fund may buy and sell securities frequently. This may result in higher
transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in investment grade debt securities. As a result, the
Fund is subject to the risk that the prices of debt securities will decline due
to rising interest rates. This risk is greater for long-term debt securities
than for short-term debt securities. In addition, an issuer may be unable to
make timely payments of principal or interest to the Fund. Some investment grade
debt securities have speculative characteristics. In addition, the Fund is
subject to the risk of investing in mortgage-backed securities. See
"Mortgage-Backed Securities" to the right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. The mortgages
underlying mortgage-backed securities may mature or be paid off before the
stated maturity date. This has four drawbacks. First, the Fund may lose money
on its investment. Second, the monthly income payments to the Fund may
fluctuate. Third, we cannot predict the maturity of the Fund's investment
with certainty. Fourth, we would invest any resulting proceeds elsewhere,
generally at a lower interest rate.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future. The performance of Flex Shares and Investor Shares will differ slightly
due to differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1993 10.43
<S> <C>
1994 -3.57
1995 17.26
1996 1.93
1997 8.64
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
6.02% -2.67%
(6/30/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 4.13%.
<PAGE>
PROSPECTUS 7
INVESTMENT GRADE BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (6/11/92)
<S> <C> <C> <C>
INVESTMENT GRADE
BOND FUND 4.56% 7.73% 5.93%
LEHMAN GOVERNMENT/
CORPORATE BOND INDEX 9.75% 10.43% 8.13%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/7/95)
<S> <C> <C>
INVESTMENT GRADE BOND FUND 6.14% 6.04%
LEHMAN GOVERNMENT/CORPORATE BOND INDEX 9.75% 8.08%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Lehman Brothers
Government/Corporate Bond Index is a widely recognized index of government
and corporate debt securities rated investment grade or better, with
maturities of at least 1 year.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .74% .74%
Distribution and Service (12b-1) Fees .43% 1.00%
Other Expenses .22% .38%
--- ---
Total Annual Fund Operating Expenses 1.39% 2.12%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE
END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 511 $ 799 $ 1107 $ 1981
Flex Shares $ 415 $ 664 $ 1139 $ 2452
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 511 $ 799 $ 1107 $ 1981
Flex Shares $ 215 $ 664 $ 1139 $ 2452
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .64%,
.31% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .64%, .64% AND 1.66%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
8 PROSPECTUS
INVESTMENT GRADE TAX-EXEMPT BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High total return through (i) current income that
is exempt from federal income taxes and (ii)
capital appreciation, while preserving the
principal amount invested
INVESTMENT FOCUS Investment grade municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued
STRATEGY sectors and less in overvalued ones
INVESTOR PROFILE Investors who want to receive tax-free current
income and an increase in the value of their
investment
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
New York Ser J. GO............ 4.7%
Washington State.............. 3.1%
Illinois State................ 3.0%
King County................... 2.7%
Allegheny Cnty, PA Airport
Rev........................... 2.3%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Investment Grade Tax-Exempt Bond Fund invests primarily in
investment grade tax-exempt obligations, like municipal securities. The issuers
of these securities may be located in any U.S. state, territory or possession.
In selecting investments for the Fund, we try to limit risk as much as possible.
Based on our analysis of municipalities, credit risk, market trends and
investment cycles, we attempt to invest more of the Fund's assets in undervalued
market sectors and less in overvalued sectors. We also try to identify and
invest in municipal issuers with improving credit and avoid those with
deteriorating credit. We anticipate that the Fund's average weighted maturity
will range from 4 to 10 years. Due to the Fund's investment strategy, the Fund
may buy and sell securities frequently. This may result in higher transaction
costs and capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in investment grade debt securities. As a result, the
Fund is subject to the risk that the prices of debt securities will decline due
to rising interest rates. This risk is greater for long-term debt securities
than for short-term debt securities. Debt securities may decline in credit
quality due to economic or governmental events. In addition, an issuer may be
unable to make timely payments of principal or interest to the Fund. Some
investment grade bonds may have speculative characteristics.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1993 14.36
<S> <C>
1994 -0.60
1995 14.52
1996 5.00
1997 7.37
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
5.87% -3.14%
(3/31/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.59%.
<PAGE>
PROSPECTUS 9
INVESTMENT GRADE TAX-EXEMPT BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR G.O. INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (6/9/92)
<S> <C> <C> <C>
INVESTMENT GRADE
TAX-EXEMPT BOND FUND 3.32% 7.51% 7.27%
LEHMAN BROTHERS 5-YEAR G.O. INDEX 6.48% 7.54% 6.38%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/1/95)
<S> <C> <C>
INVESTMENT GRADE TAX-EXEMPT BOND FUND 4.85% 6.38%
LEHMAN BROTHERS 5-YEAR G.O. INDEX 6.48% 6.35%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Lehman Brothers
5-Year G.O. Index is a widely recognized index of municipal bonds with
maturities ranging from 4 to 6 years. The index represents various market
sectors and geographic locations.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .74% .74%
Distribution and Service (12b-1) Fees .43% 1.00%
Other Expenses .27% .37%
--- ---
Total Annual Fund Operating Expenses 1.44% 2.11%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE END OF
THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 516 $ 813 $ 1132 $ 2035
Flex Shares $ 414 $ 661 $ 1134 $ 2441
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 516 $ 813 $ 1132 $ 2035
Flex Shares $ 214 $ 661 $ 1134 $ 2441
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .62%,
.28% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .62%, .66% AND 1.65%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
10 PROSPECTUS
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital
INVESTMENT FOCUS Mortgage-backed securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify securities that are less prone
STRATEGY to pre-payment risk
INVESTOR PROFILE Conservative investors who want to receive income
from their investment
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
United States Treasury Note... 15.5%
FHLMC-CNMA Remic.............. 11.1%
FNMA.......................... 8.8%
FHLMC......................... 8.1%
FNMA.......................... 8.1%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Limited-Term Federal Mortgage Securities Fund invests primarily
in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA
and collateralized mortgage obligations. These securities typically have an
average maturity from 1 to 5 years. In selecting investments for the Fund, we
try to identify securities that we expect to perform well in rising and falling
markets. We also attempt to reduce the risk that the underlying mortgages are
pre-paid by focusing on securities that we believe are less prone to this risk.
For example, Fannie Mae or GNMA securities that were issued years ago may be
less prone to pre-payment risk because there have been many opportunities for
pre-payment, but none have occurred. Due to the Fund's investment strategy, the
Fund may buy and sell securities frequently. This may result in higher
transaction costs and capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in debt securities. As a result, the Fund is subject
to the risk that the prices of debt securities will decline due to rising
interest rates. This risk is greater for long-term debt securities than for
short-term debt securities. In addition, the Fund is subject to the risk of
investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the
right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. Collateralized
mortgage obligations (CMOs) are a type of mortgage-backed security that are
divided into separate maturity classes. Mortgage income is applied first to
the CMO with the shortest maturity, second to the CMO with the next shortest,
and so on. The mortgages underlying mortgage-backed securities may mature or
be paid off before the stated maturity date. This has four drawbacks. First,
the Fund may lose money on its investment. Second, the monthly income
payments to the Fund may fluctuate. Third, we cannot predict the maturity of
the Fund's investment with certainty. Fourth, we would invest any resulting
proceeds elsewhere, generally at lower interest rates.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future. The performance of Flex Shares and Investor Shares will differ slightly
due to differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1995 12.02
<S> <C>
1996 4.29
1997 6.37
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
4.01% .16%
(3/31/95) (3/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.81%.
<PAGE>
PROSPECTUS 11
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MERRILL LYNCH 1-5 YEAR SHORT/
INTERMEDIATE U.S TREASURY INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (7/17/94)
<S> <C> <C> <C>
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 3.69% 6.60% 5.80%
MERRILL LYNCH 1-5 YEAR SHORT INTERMEDIATE U.S TREASURY INDEX 7.11% 8.08% 7.28%
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
FLEX SHARES 1 YEAR (6/7/95)
<S> <C> <C>
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 4.11% 5.51%
MERRILL LYNCH 1-5 YEAR SHORT INTERMEDIATE U.S. TREASURY INDEX 7.11% 6.70%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Merrill Lynch 1-5
Year Short/ Intermediate U.S. Treasury Index is a widely recognized index
of U.S. Treasury securities with maturities 1 year or greater and no more
than 5 years.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
2.50% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .65% .65%
Distribution and Service (12b-1) Fees .23% 1.00%
Other Expenses .64% 1.08%
--- ---
Total Annual Fund Operating Expenses 1.52% 2.73%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE END OF
THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 401 $ 718 $ 1058 $ 2017
Flex Shares $ 476 $ 847 $ 1445 $ 3061
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 401 $ 718 $ 1058 $ 2017
Flex Shares $ 276 $ 847 $ 1445 $ 3061
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .54%,
.00% AND .92%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .54%, .00% AND 1.27%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
12 PROSPECTUS
SHORT-TERM BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital
INVESTMENT FOCUS Investment grade U.S. government and corporate debt
securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT Attempts to identify securities that offer a
STRATEGY comparably better return than similar securities
for a given level of credit risk
INVESTOR PROFILE Income oriented investors who are willing to accept
increased risk for the possibility of returns
greater than money market investing
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
United States Treasury Note... 7.1%
United States Treasury Note... 5.4%
U.S. Treasury Stripped........ 4.5%
United States Treasury Note... 4.0%
United States Treasury Note... 3.8%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Short-Term Bond Fund invests primarily in a diversified
portfolio of short- to medium-term investment grade U.S. Treasury, corporate
debt, mortgage-backed and asset-backed securities. The Fund intends to maintain
an average weighted maturity of 3 years or less. In selecting investments for
the Fund, we attempt to identify securities that offer a comparably better
investment return for a given level of credit risk. For example, short-term
bonds generally have better returns than money market instruments, with a fairly
modest increase in credit risk. We manage the Fund from a total return
perspective. That is, we make day to day investment decisions for the Fund with
a view towards maximizing returns. We analyze yields, market sectors and credit
risk in an effort to identify attractive investments with the best risk/reward
trade-off.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in debt securities. As a result, the Fund is subject
to the risk that the prices of debt securities will decline due to rising
interest rates. In addition, an issuer may be unable to make timely payments of
principal or interest to the Fund. Also, the Fund may invest in bonds rated
"investment grade." Some investment grade bonds may have speculative
characteristics. In addition, the Fund is subject to the risk of investing in
mortgage-backed and asset-backed securities. See "Mortgage-Backed and
Asset-Backed Securities" to the right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. The owner of an
asset-backed security owns a share of the underlying pool of assets, such as
truck and auto loans, leases and credit card receivables. The mortgages
receivables, or other assets underlying mortgage-backed securities may mature
or be paid off before the stated maturity date. This has four drawbacks.
First, the Fund may lose money on its investment. Second, the monthly income
payments to the Fund may fluctuate. Third, we cannot predict the maturity of
the Fund's investment with certainty. Fourth, we would invest any resulting
proceeds elsewhere, generally at a lower interest rate.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future. The performance of Flex Shares and Investor Shares will differ slightly
due to differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1994 -.33
<S> <C>
1995 11.68
1996 3.66
1997 6.46
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
3.81% -.63%
(6/30/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 3.00%.
<PAGE>
PROSPECTUS 13
SHORT-TERM BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/ GOVERNMENT
SPONSORED/CORPORATE INDEX AND THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN
INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (3/22/93)
<S> <C> <C> <C>
SHORT-TERM BOND FUND 4.36% 6.48% 4.66%
SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63%
SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 6.10% 6.61% 5.34%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/20/95)
<S> <C> <C>
SHORT-TERM BOND FUND 4.21% 5.42%
SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX 6.67% 6.59%
SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 6.10% 6.26%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Salomon 1-3 Year
Treasury/Government Sponsored/Corporate Index is a widely recognized index
of U.S. Treasury, government agency and investment grade corporate debt
securities with maturities greater than 1 and less than 3 years. The
Salomon One Year Treasury Benchmark On-the-Run Index is a widely
recognized index of U.S. Treasury securities.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
2.00% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .65% .65%
Distribution and Service (12b-1) Fees .23% 1.00%
Other Expenses .84% 1.21%
--- ---
Total Annual Fund Operating Expenses 1.72% 2.86%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES
AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
Investor Shares $ 371 $ 731 $ 1115 $ 2190
Flex Shares $ 489 $ 886 $ 1508 $ 3185
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 371 $ 731 $ 1115 $ 2190
Flex Shares $ 289 $ 886 $ 1508 $ 3185
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .52%,
.00% AND .87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .52%, .00% AND 1.22%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
14 PROSPECTUS
SHORT-TERM U.S. TREASURY SECURITIES FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital
INVESTMENT FOCUS Short-term U.S. Treasury securities only
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT Attempts to identify Treasury securities with
STRATEGY maturities that offer a comparably better return
potential and yield than either shorter maturity or
longer maturity securities for a given level of
interest rate risk
INVESTOR PROFILE Income oriented investors who are willing to accept
increased risk for the possibility of returns
greater than money market investing
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
United States Treasury Note... 33.4%
United States Treasury Note... 25.0%
United States Treasury Note... 8.5%
United States Treasury Note... 4.9%
United States Treasury Note... 4.5%
* HOLDINGS MAY VARY
</TABLE>
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. We manage the Fund from a total
return perspective. That is, we make day to day investment decisions for the
Fund with a view toward maximizing returns and yield. We try to select those
U.S. Treasury securities that offer the best risk/reward trade-off.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. Treasury securities. As a result, the Fund is
subject to the risk that the prices of debt securities will decline due to
rising interest rates.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1994 1.28
<S> <C>
1995 8.39
1996 4.38
1997 5.70
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
2.60% -.13%
(3/31/95) (3/31/94)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.68%.
<PAGE>
PROSPECTUS 15
SHORT-TERM U.S. TREASURY SECURITIES FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/ GOVERNMENT
SPONSORED/CORPORATE INDEX AND THE SALOMON 6 MONTH TREASURY INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (3/18/93)
<S> <C> <C> <C>
SHORT-TERM U.S. TREASURY SECURITIES FUND 4.64% 5.78% 4.44%
SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63%
SALOMON 6 MONTH TREASURY BILL INDEX 5.41% 5.53% 4.98%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/22/95)
<S> <C> <C>
SHORT-TERM U.S. TREASURY SECURITIES FUND 3.43% 4.95%
SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX 6.67% 6.59%
SALOMON 6 MONTH TREASURY BILL INDEX 5.41% 5.63%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Salomon 1-3 Year
Treasury/Government Sponsored/Corporate Index is a widely recognized index
of U.S. Treasury, government agency and investment grade corporate debt
securities with maturities greater than 1 year and less than 3 years. The
Salomon 6 Month Treasury Bill Index is a widely recognized index of U.S.
Treasury bills.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
1.00% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .65% .65%
Distribution and Service (12b-1) Fees .18% 1.00%
Other Expenses .51% 1.23%
--- ---
Total Annual Fund Operating Expenses 1.34% 2.88%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE
END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 235 $ 520 $ 827 $ 1697
Flex Shares $ 491 $ 892 $ 1518 $ 3204
IF YOU DO NOT SELL YOUR
SHARES:
Investor Shares $ 235 $ 520 $ 827 $ 1697
Flex Shares $ 291 $ 892 $ 1518 $ 3204
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .47%,
.00% AND .82%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .47%, .00% AND 1.07%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
16 PROSPECTUS
U.S. GOVERNMENT SECURITIES FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital
INVESTMENT FOCUS Mortgage-backed securities and U.S. Treasury
obligations
SHARE PRICE VOLATILITY Low to medium
PRINCIPAL INVESTMENT Attempts to increase income without adding undue
STRATEGY risk
INVESTOR PROFILE Conservative investors who want to receive income
from their investment
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
United States Treasury Note... 5.1%
United States Treasury Bond... 5.0%
GNMA.......................... 4.7%
FHLMC......................... 3.8%
FNMA Remic.................... 3.2%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The U.S. Government Securities Fund invests primarily in U.S.
government debt securities, such as mortgage-backed securities and U.S. Treasury
obligations. In an attempt to provide a consistently high dividend without
adding undue risk, the Fund focuses its investments in mortgage-backed
securities. The average maturity of the Fund's portfolio will typically range
from 7 to 14 years.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. government debt securities. As a result, the
Fund is subject to the risk that the prices of debt securities will decline due
to rising interest rates. This risk is greater for long-term debt securities
than for short-term debt securities. In addition, the Fund is subject to the
risk of investing in mortgage-backed securities. See "Mortgage-Backed
Securities" to the right.
SIMPLY SPEAKING . . .
MORTGAGE-BACKED SECURITIES
A mortgage-backed security pools all interest and principal payments from the
underlying mortgages and pays it to the security's owner. The mortgages
underlying mortgage-backed securities may mature or be paid off before the
stated maturity date. This has four drawbacks. First, the Fund may lose money
on its investment. Second, the monthly income payments to the Fund may
fluctuate. Third, we cannot predict the maturity of the Fund's investment
with certainty. Fourth, we would invest any resulting proceeds elsewhere,
generally at lower interest rate.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1995 16.96
<S> <C>
1996 2.08
1997 8.60
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
5.81% -2.31%
(6/30/95) (3/31/96)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 3.71%.
<PAGE>
PROSPECTUS 17
U.S. GOVERNMENT SECURITIES FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT
BOND INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (6/9/94)
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES FUND 4.58% 7.67% 5.98%
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX 7.72% 8.65% 7.58%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/7/95)
<S> <C> <C>
U.S. GOVERNMENT SECURITIES FUND 5.96% 5.76%
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX 7.72% 6.98%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Lehman Brothers
Intermediate Government Bond Index is a widely recognized index of U.S.
Treasury securities and government agency securities with maturities
ranging from 1 to 10 years.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND
SHARES."
</TABLE>
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .74% .74%
Distribution and Service (12b-1) Fees .38% 1.00%
Other Expenses .65% .59%
--- ---
Total Annual Fund Operating Expenses 1.77% 2.33%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE END OF
THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 548 $ 911 $ 1298 $ 2381
Flex Shares $ 436 $ 727 $ 1245 $ 2666
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $ 548 $ 911 $ 1298 $ 2381
Flex Shares $ 236 $ 727 $ 1245 $ 2666
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .58%,
.00% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .58%, .51% AND 1.68%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "Distribution of Fund Shares."
<PAGE>
18 PROSPECTUS
EACH FUND'S PRINCIPAL INVESTMENTS
FUND INVESTMENTS
The table below shows each Fund's principal investments. In other words,
the table describes the type or types of investments that we believe will
most likely help each Fund achieve its investment goal.
<TABLE>
<CAPTION>
FLORIDA GEORGIA INVESTMENT INVESTMENT LIMITED-TERM SHORT-TERM SHORT-TERM U.S.
TAX- EXEMPT TAX-EXEMPT GRADE BOND GRADE FEDERAL BOND U.S. GOVERNMENT
BOND FUND BOND FUND FUND TAX-EXEMPT MORTGAGE FUND TREASURY SECURITIES
BOND FUND SECURITIES SECURITIES FUND
FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Asset-Backed Securities X
- --------------------------------------------------------------------------------------------------------------------------------
Corporate Debt Securities X X
- --------------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities X X X X
- --------------------------------------------------------------------------------------------------------------------------------
Municipal Securities X X X
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities X X X
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Each Fund also may invest in other securities, use other strategies and engage
in other investment practices, which are described in detail in our Statement of
Additional Information. Of course, we cannot guarantee that any Fund will
achieve its investment goal.
The investments listed above and the investments and strategies described
throughout this prospectus are those that we use under normal conditions. During
unusual economic or market conditions or for temporary defensive or liquidity
purposes, each Fund may invest up to 100% of its assets in cash, money market
instruments, repurchase agreements and short-term obligations. In addition, the
Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade
Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term Federal Mortgage
Securities Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Fund
and U.S. Government Securities Fund each may shorten its average weighted
maturity to as little as 90 days. When a Fund is investing for temporary
defensive purposes, it is not pursuing its investment goal.
INVESTMENT ADVISORS
The Investment Advisors make investment decisions for the Funds and continuously
review, supervise and administer their Funds' respective investment programs.
The Board of Trustees supervises the Advisors and establishes policies that the
Advisors must follow in their management activities.
STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802,
serves as the Advisor to the Investment Grade Bond, Limited-Term Federal
Mortgage Securities, Investment Grade Tax-Exempt Bond and Florida Tax-Exempt
Bond Funds. As of May 31, 1998, STI had approximately $11.7 billion in assets
under management. For the fiscal year ended May 31, 1998, STI received advisory
fees of:
<TABLE>
<S> <C>
FLORIDA TAX-EXEMPT BOND FUND............. .51%
INVESTMENT GRADE BOND FUND............... .64%
INVESTMENT GRADE TAX-EXEMPT BOND FUND.... .62%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES
FUND................................... .54%
</TABLE>
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Advisor to the U.S. Government Securities,
Short-Term Bond, and Short-Term U.S. Treasury Securities Funds. As of May 31,
1998, Trusco had approximately $22
<PAGE>
PROSPECTUS 19
THE ADVISORS AND THEIR PORTFOLIO MANAGERS
billion in assets under management. For the fiscal year ended May 31, 1998,
Trusco received advisory fees of:
<TABLE>
<S> <C>
SHORT-TERM BOND FUND..................... .52%
SHORT-TERM U.S. TREASURY SECURITIES
FUND................................... .47%
U.S. GOVERNMENT SECURITIES FUND.......... .58%
</TABLE>
SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia 30303, serves as the
Advisor to the Georgia Tax-Exempt Bond Fund. As of May 31, 1998, SunTrust Bank,
Atlanta had approximately $40 billion under management. For the fiscal year
ended May 31, 1998, SunTrust Bank, Atlanta received advisory fees of .50% for
the Georgia Tax-Exempt Bond Fund.
The Advisors may use their affiliates as brokers for Fund transactions.
PORTFOLIO MANAGERS
Mr. L. Earl Denney, CFA, has served as Senior Vice President of STI since 1983.
He has managed the Investment Grade Bond Fund since it began operating in June
1992. He has more than 20 years of experience in fixed income investment
management. Prior to joining STI, he was fixed income portfolio manager with
American National Bank.
The U.S. Government Securities Fund has been co-managed by Mr. Charles B.
Leonard and Mr. Michael L. Ford since it began operating in June 1994. Mr.
Leonard, CFA, has served as First Vice President of Trusco since 1988, and has
more than 25 years of investment experience. Mr. Ford has been an Associate of
Trusco since April 1994, and has more than 11 years of investment experience.
Prior to joining Trusco, Mr. Ford served as a senior securities analyst at
Liberty Capital Advisors from 1992 to 1994 and served as a securities analyst at
Southern Farm Bureau Life Insurance Company from 1990 to 1992.
The Limited-Term Federal Mortgage Securities Fund has been co-managed by Mr. L.
Earl Denney, CFA, and Mr. Dave E. West, CFA, since it began operating in June
1994. Mr. Denney has served as Senior Vice President of STI since 1983. Mr.
Denney has more than 20 years of experience in fixed income investment
management. Prior to joining STI, he was fixed income portfolio manager with
American National Bank. Mr. West has served as a Vice President of STI since
1994, and has served as a fixed-income portfolio manager with STI since 1989.
Mr. David Yealy has served as a Vice President of Trusco since 1993. He has
managed the Short-Term Bond Fund and Short-Term U.S. Treasury Securities Fund
since July 1996. He has more than 13 years of investment experience.
Mr. Ronald Schwartz, CFA, has served as a Senior Vice President since 1992. He
has managed the Investment Grade Tax-Exempt Bond Fund and Florida Tax-Exempt
Bond Fund since each Fund began operating in June 1992 and January 1994,
respectively. He has more than 18 years of investment experience. Prior to
joining STI, he served as a trader at the Bank of Boston.
Ms. Gay Cash has served as a Vice President of SunTrust Bank, Atlanta since
1987. She has managed Georgia Tax-Exempt Bond Fund since it began operating in
January 1994. She has more than 18 years of investment experience.
<PAGE>
20 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
PURCHASING FUND SHARES
HOW TO PURCHASE FUND SHARES
You may purchase Investor and Flex Shares directly from us by:
- - mail
- - telephone
- - wire
- - direct deposit, or
- - Automated Clearing House (ACH).
SIMPLY SPEAKING . . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open
for business (a Business Day).
To purchase shares directly from us, please call 1-800-874-4770. Write your
check, payable in U.S. dollars, to "STI Classic Funds" and include the name of
the appropriate Fund(s) on the check. We cannot accept third-party checks,
credit cards, credit card checks, or cash. You may also purchase shares through
Investment Consultants of certain correspondent banks of SunTrust Banks, Inc.
(SunTrust), or other financial institutions that have executed dealer agreements
with us. We may reject any purchase order if we determine that accepting the
order would not be in the best interests of the STI Classic Funds or its
shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order plus, in the case of
Investor Shares, the applicable front-end sales charge. We calculate each Fund's
NAV once each Business Day at the regularly-scheduled close of normal trading on
the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, to receive
the current Business Day's NAV, generally we must receive your purchase order
before 4:00 p.m. Eastern time.
SIMPLY SPEAKING . . .
FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS
If you purchase, sell or exchange Fund shares through a financial institution
(rather than directly from us), you may have to transmit your purchase, sale
and exchange requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows the financial
institution time to process your request and transmit it to us. For more
information about how to purchase, sell or exchange Fund shares through your
financial institution, you should contact your financial institution directly.
HOW WE CALCULATE NAV
In calculating NAV, we generally value a Fund's portfolio at market price. If
market prices are unavailable or we think that they are unreliable, fair value
prices may be determined in good faith using methods approved by the Board of
Trustees.
SIMPLY SPEAKING . . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the
assets in the Fund.
MINIMUM PURCHASES
To purchase Investor Shares for the first time, you must invest at least $2,000
in any Fund. To purchase Flex Shares for the first time, you must invest at
least $10,000 in any Fund ($2,000 for retirement plans). To purchase additional
shares of any Fund, you must invest at least $1,000 or, if you pay by a
statement coupon, $100. We may accept investments of smaller amounts, for either
class of shares, at our discretion.
<PAGE>
PROSPECTUS 21
PURCHASING, SELLING AND EXCHANGING FUND SHARES
FUNDLINK
FUNDLINK is a telephone activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK, you must first contact your SunTrust Bank
Investment Consultant and complete the FUNDLINK application and authorization
agreements. Once you have signed up to use FUNDLINK, simply call us at
1-800-428-6970 to complete all of your purchase and redemption transactions.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a SunTrust affiliate bank, you
may purchase shares of either class automatically through regular deductions
from your account. With a $500 minimum initial investment, you may begin
regularly scheduled investments from $50 up to $100,000 once or twice a month.
If you are buying Flex Shares, you should plan on investing at least $10,000 per
Fund during the first two years. The Distributor may close your account if you
do not meet this minimum investment requirement at the end of two years.
SALES CHARGES
FRONT-END SALES CHARGES - INVESTOR SHARES
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
<TABLE>
<CAPTION>
YOUR SALES YOUR SALES
CHARGE CHARGE
AS A AS A
PERCENTAGE PERCENTAGE
OF OF
OFFERING YOUR NET
FUND IF YOUR INVESTMENT IS: PRICE INVESTMENT
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND LESS THAN $100,000 3.75% 3.90%
INVESTMENT GRADE TAX-EXEMPT BOND FUND $100,000 BUT LESS THAN $250,000 3.25% 3.36%
INVESTMENT GRADE BOND FUND $250,000 BUT LESS THAN $1,000,000 2.50% 2.56%
FLORIDA TAX-EXEMPT BOND FUND $1,000,000 AND OVER 1.50% 1.52%
GEORGIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------------------------------------------------
LIMITED-TERM FEDERAL LESS THAN $100,000 2.50% 2.56%
MORTGAGE SECURITIES FUND $100,000 BUT LESS THAN $250,000 1.75% 1.78%
$250,000 BUT LESS THAN $1,000,000 1.25% 1.27%
$1,000,000 AND OVER NONE NONE
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BOND FUND LESS THAN $100,000 2.00% 2.04%
$100,000 BUT LESS THAN $250,000 1.50% 1.52%
$250,000 BUT LESS THAN $1,000,000 1.00% 1.01%
$1,000,000 AND OVER NONE NONE
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM U.S. TREASURY LESS THAN $100,000 1.00% 1.01%
SECURITIES FUND $100,000 BUT LESS THAN $250,000 0.75% 0.76%
$250,000 BUT LESS THAN $1,000,000 0.50% 0.50%
$1,000,000 AND OVER NONE NONE
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
22 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
WAIVER OF FRONT-END SALES CHARGE -
INVESTOR SHARES
The front-end sales charge will be waived on Investor Shares purchased: (1)
through reinvestment of dividends and distributions; (2) through a SunTrust
Securities, Inc. asset allocation account; (3) by persons repurchasing shares
they redeemed within the last 60 days (see Repurchase of Investor Shares); (4)
by employees, and members of their immediate family, of SunTrust and its
affiliates; (5) by persons reinvesting distributions from qualified employee
benefit retirement plans and rollovers from individual retirement accounts
("IRAs") previously with the Trust department of a bank affiliated with
SunTrust; (6) by persons investing an amount less than or equal to the value of
an account distribution when an account for which a bank affiliated with
SunTrust acted in a fiduciary, administrative, custodial or investment advisory
capacity is closed; or (7) through dealers, retirement plans, asset allocation
programs and financial institutions that, under their dealer agreements with the
Distributor or otherwise, do not receive any or receive a reduced portion of the
front-end sales charge.
REPURCHASE OF INVESTOR SHARES
You may repurchase any amount of Investor Shares of any Fund at NAV (without the
normal front-end sales charge), equal to or less than the value of any amount of
Investor Shares (for which you paid a front-end sales charge) that you redeemed
within the past 60 days. In effect, this allows you to repurchase shares that
you may have had to redeem, without repaying the front-end sales charge. To
exercise this privilege, we must receive your purchase order within 60 days of
your redemption. In addition, you must notify us when you send in your purchase
order that you are repurchasing shares.
REDUCED SALES CHARGES - INVESTOR SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Investor Shares you already own to the
amount that you are currently purchasing. We will combine the value of your
current purchases with the current value of any Investor Shares you purchased
previously for (i) your account, (ii) your spouse's account, (iii) a joint
account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust or
estate may also use this right of accumulation. We will only consider the value
of Investor Shares purchased previously that were sold subject to a sales
charge. To be entitled to a reduced sales charge based on shares already owned,
you must ask us for the reduction at the time of purchase. You must provide us
with your account number(s) and, if applicable, the account numbers for your
spouse and/or children (and provide the children's ages). We may amend or
terminate this right of accumulation at any time.
LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase
Investor Shares of a Fund over a 13-month period and receive the same sales
charge as if you had purchased all the shares at the same time. We will only
consider the value of Investor Shares sold subject to a sales charge. To be
entitled to a reduced sales charge based on shares you intend to purchase over
the 13-month period, you must send us a Letter of Intent. As a result, neither
Investor Shares of the Money Market Funds nor Investor Shares purchased with
dividends or distributions will be included in the calculation. In calculating
the total amount of purchases you may include in your letter purchases made up
to 90 days before the date of the Letter. The 13-month period begins on the date
of the first purchase, including those purchases made in the 90-day period
before the date of the Letter. Please note that the purchase price of these
prior purchases will not be adjusted.
You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
us to hold in escrow 3.75% of the total amount you intend to purchase. If you do
not complete the total intended purchase at the end of the 13-month period, the
transfer agent will redeem the necessary portion of the escrowed
<PAGE>
PROSPECTUS 23
PURCHASING, SELLING AND EXCHANGING FUND SHARES
shares to make up the difference between the reduced rate sales charge (based on
the amount you intended to purchase) and the sales charge that would normally
apply (based on the actual amount you purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, we will combine same day purchases of Investor Shares (that
are subject to a sales charge) made by you, your spouse and your minor children
(under age 21). This combination also applies to Investor Shares you purchase
with a Letter of Intent.
CONTINGENT DEFERRED SALES CHARGES - FLEX SHARES
You do not pay a front-end sales charge when you purchase Flex Shares. But if
you sell your shares within the first year after your purchase, you will pay a
contingent deferred sales charge equal to 2.00% of either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
we receive your sale request, whichever is less. The sales charge does not apply
to Flex Shares you purchase through reinvestment of dividends or distributions.
So, you never pay a deferred sales charge on any increase in your investment
above the initial offering price. This sales charge does not apply to exchanges
of Flex Shares of one Fund for Flex Shares of another Fund.
The contingent deferred sales charge will be waived if you sell your Flex Shares
for the following reasons: (1) to make certain withdrawals from a retirement
plan (not including IRAs); (2) because of death or disability; or (3) for
certain payments under the Systematic Withdrawal Plan (which is discussed
below).
SIMPLY SPEAKING . . .
OFFERING PRICE OF FUND SHARES
The offering price of Investor Shares is the NAV next calculated after we
receive your request, plus the front-end sales load. The offering price of
Flex Shares is simply the next calculated NAV.
SELLING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. To sell your shares
by telephone, the amount of your sale must be at least $1,000. If you would like
to sell $25,000 or more of your shares, please notify us in writing and include
a signature guarantee (a notarized signature is not sufficient). The sale price
of each share will be the next NAV determined after we receive your request
less, in the case of Flex Shares, any applicable deferred sales charge.
SIMPLY SPEAKING . . .
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, we are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you
or your financial institution transact with us over the telephone, you will
generally bear the risk of any loss.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with a
SunTrust affiliated bank, electronically transferred to your account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within five Business Days after we
receive your request.
<PAGE>
24 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent
to you by check. If you recently purchased your shares by check or through ACH,
redemption proceeds may not be available until your check has cleared (which may
take up to 15 Business Days).
REDEMPTIONS IN KIND
We generally pay sale (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) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay brokerage costs to sell the
securities distributed to you, as well as taxes on any capital gains from the
sale as with any redemption.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below the required minimum, $2,000 for Investor
Shares and $10,000 for Flex Shares, you may be required to sell your shares. You
will always be given at least 60 days' written notice to give you time to add to
your account and avoid selling your shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information.
EXCHANGING FUND SHARES
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone. You may also exchange shares through your financial
institution by mail or telephone. Exchange requests must be for an amount of at
least $1,000. You may exchange your shares up to four times during a calendar
year. If you exchange your shares more than four times during a year, you may be
charged a $10.00 fee for each additional exchange. You will be notified before
any fee is charged. If you recently purchased shares by check or through ACH,
you may not be able to exchange your shares until your check has cleared (which
may take up to 15 Business Days). This exchange privilege may be changed or
canceled at any time upon 60 days' notice.
SIMPLY SPEAKING . . .
EXCHANGES
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after we receive your exchange request.
INVESTOR SHARES
You may exchange Investor Shares of any Fund for Investor Shares of any other
Fund. If you exchange shares that you purchased without a sales charge or with a
lower sales charge into a Fund with a sales charge or with a higher sales
charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange.
FLEX SHARES
You may exchange Flex Shares of any Fund for Flex Shares of any other Fund, or
for Investor Shares of the Money Market Funds. No contingent deferred sales
charge is imposed on redemptions of Money Market Funds shares you acquire in an
exchange, provided you hold your shares for at least one year from your initial
purchase. If you exchange Flex Shares for Investor Shares of a Money Market
Fund, you may only exchange those Money Market Fund Investor Shares for Flex
Shares.
<PAGE>
PROSPECTUS 25
HISTORICAL FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Investor and Flex
Shares of each Fund. This information is intended to help you understand each
Fund's financial performance for the past five years, or, if shorter, the period
of the Fund's operations. Some of this information reflects financial
information for a single Fund share. The total returns in the table represent
the rate that you would have earned (or lost) on an investment in a Fund,
assuming you reinvested all of your dividends and distributions.
This information has been audited by Arthur Andersen, LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain our annual report, which contains more performance information,
at no charge by calling 1-800-874-4700.
SIMPLY SPEAKING . . .
FINANCIAL HIGHLIGHTS
Study these tables to see how each Fund performed since it began investment
operations.
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED NET
NET ASSET GAINS DISTRIBUTIONS ASSET
VALUE NET (LOSSES) FROM NET DISTRIBUTIONS VALUE
BEGINNING OF INVESTMENT ON INVESTMENT FROM REALIZED END OF
PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS PERIOD
------------ ------------- --------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -----------------------------
Investor Shares
1998.............................. $ 10.29 $ 0.42 $ 0.44 $ (0.42) $ (0.01) $ 10.72
1997.............................. 10.07 0.44 0.25 (0.44) (0.03) 10.29
1996.............................. 10.18 0.44 (0.06) (0.44) (0.05) 10.07
1995.............................. 9.75 0.42 0.43 (0.42) -- 10.18
1994(1)........................... 10.00 0.13 (0.25) (0.13) -- 9.75
Flex Shares
1998.............................. $ 10.30 $ 0.37 $ 0.45 $ (0.37) $ (0.01) $ 10.74
1997.............................. 10.08 0.39 0.25 (0.39) (0.03) 10.30
1996(2)........................... 10.19 0.39 (0.06) (0.39) (0.05) 10.08
- ------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------
Investor Shares
1998.............................. $ 9.74 $ 0.39 $ 0.40 $ (0.39) $ (0.01) $ 10.13
1997.............................. 9.58 0.40 0.21 (0.40) (0.05) 9.74
1996.............................. 9.65 0.41 (0.05) (0.41) (0.02) 9.58
1995.............................. 9.44 0.40 0.21 (0.40) -- 9.65
1994(3)........................... 10.00 0.13 (0.56) (0.13) -- 9.44
Flex Shares
1998.............................. $ 9.73 $ 0.34 $ 0.40 $ (0.34) $ (0.01) $ 10.12
1997.............................. 9.56 0.35 0.22 (0.35) (0.05) 9.73
1996(4)........................... 9.72 0.36 (0.14) (0.36) (0.02) 9.56
- ----------------------------
INVESTMENT GRADE BOND FUND
- ----------------------------
Investor Shares
1998.............................. $ 10.16 $ 0.55 $ 0.49 $ (0.55) $ -- $ 10.65
1997.............................. 10.06 0.56 0.10 (0.56) -- 10.16
1996.............................. 10.26 0.56 (0.20) (0.56) -- 10.06
1995.............................. 9.89 0.57 0.38 (0.58) -- 10.26
1994.............................. 10.44 0.46 (0.35) (0.46) (0.20) 9.89
Flex Shares
1998.............................. $ 10.17 $ 0.51 $ 0.49 $ (0.51) $ -- $ 10.66
1997.............................. 10.07 0.51 0.10 (0.51) -- 10.17
1996(5)........................... 10.33 0.52 (0.26) (0.52) -- 10.07
- ----------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ----------------------------------------
Investor Shares
1998.............................. $ 11.24 $ 0.39 $ 0.49 $ (0.39) $ (0.32) $ 11.41
1997.............................. 11.12 0.40 0.33 (0.40) (0.21) 11.24
1996.............................. 11.30 0.41 0.19 (0.41) (0.37) 11.12
1995.............................. 10.69 0.42 0.61 (0.42) -- 11.30
1994.............................. 10.79 0.33 0.25 (0.33) (0.35) 10.69
Flex Shares
1998.............................. $ 11.23 $ 0.33 $ 0.49 $ (0.33) $ (0.32) $ 11.40
1997.............................. 11.11 0.35 0.33 (0.35) (0.21) 11.23
1996(2)........................... 11.30 0.37 0.18 (0.37) (0.37) 11.11
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF EXPENSES TO INCOME TO
NET NET AVERAGE NET AVERAGE NET
ASSETS RATIO OF INVESTMENT ASSETS ASSETS
END OF EXPENSES TO INCOME TO (EXCLUDING (EXCLUDING
TOTAL PERIOD AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND
RETURN(A) (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------ --------- ----------- ----------- ---------------- ----------------
<S> <C>
- -----------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -----------------------------
Investor Shares
1998.............................. 8.46% $ 3,381 0.86% 3.98% 1.34% 3.50%
1997.............................. 7.00 3,226 0.85 4.28 1.31 3.82
1996.............................. 3.76 4,025 0.85 4.28 1.36 3.77
1995.............................. 9.04 3,320 0.85 4.36 1.50 3.71
1994(1)........................... (1.22)** 2,280 0.85* 3.67* 3.20* 1.32*
Flex Shares
1998.............................. 8.04% $ 8,160 1.36% 3.45% 2.01% 2.80%
1997.............................. 6.48 3,000 1.35 3.78 2.28 2.85
1996(2)........................... 3.27* 2,692 1.35* 3.79* 2.54* 2.60*
- ------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------
Investor Shares
1998.............................. 8.26% $ 3,975 0.86% 3.89% 1.30% 3.45%
1997.............................. 6.47 3,511 0.85 4.10 1.33 3.62
1996.............................. 3.69 3,418 0.85 4.17 1.41 3.61
1995.............................. 6.70 3,268 0.85 4.31 1.43 3.73
1994(3)........................... (4.29)** 3,300 0.85* 3.93* 2.36* 2.42*
Flex Shares
1998.............................. 7.74% $ 8,264 1.36% 3.39% 2.02% 2.73%
1997.............................. 6.06 4,662 1.35 3.60 2.07 2.88
1996(4)........................... 2.25* 4,207 1.35* 3.66* 2.35* 2.66*
- ----------------------------
INVESTMENT GRADE BOND FUND
- ----------------------------
Investor Shares
1998.............................. 10.49% $ 33,269 1.14% 5.29% 1.38% 5.05%
1997.............................. 6.66 33,165 1.15 5.48 1.41 5.22
1996.............................. 3.50 36,155 1.15 5.40 1.44 5.11
1995.............................. 10.04 33,772 1.15 5.79 1.49 5.45
1994.............................. 0.86 35,775 1.14 4.39 1.41 4.12
Flex Shares
1998.............................. 9.99% $ 13,111 1.65% 4.76% 2.11% 4.30%
1997.............................. 6.16 5,763 1.64 5.00 2.20 4.44
1996(5)........................... 2.50* 4,621 1.64* 4.84* 2.49* 3.99*
- --------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- --------------------------------------
Investor Shares
1998.............................. 8.05% $ 28,159 1.16% 3.43% 1.43% 3.16%
1997.............................. 6.69 31,857 1.15 3.56 1.38 3.33
1996.............................. 5.40 37,427 1.15 3.61 1.42 3.34
1995.............................. 9.91 41,693 1.15 3.88 1.43 3.60
1994.............................. 5.37 46,182 1.14 2.96 1.51 2.59
Flex Shares
1998.............................. 7.50% $ 8,399 1.64% 2.95% 2.10% 2.49%
1997.............................. 6.19 4,681 1.63 3.08 2.15 2.56
1996(2)........................... 4.91* 5,536 1.63* 3.12* 2.25* 2.50*
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
- -----------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -----------------------------
Investor Shares
1998.............................. 69%
1997.............................. 135
1996.............................. 63
1995.............................. 105
1994(1)........................... 53
Flex Shares
1998.............................. 69%
1997.............................. 135
1996(2)........................... 63
- ------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- ------------------------------
Investor Shares
1998.............................. 7%
1997.............................. 15
1996.............................. 60
1995.............................. 25
1994(3)........................... 26
Flex Shares
1998.............................. 7%
1997.............................. 15
1996(4)........................... 60
- ----------------------------
INVESTMENT GRADE BOND FUND
- ----------------------------
Investor Shares
1998.............................. 109%
1997.............................. 298
1996.............................. 184
1995.............................. 238
1994.............................. 259
Flex Shares
1998.............................. 109%
1997.............................. 298
1996(5)........................... 184
- --------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- --------------------------------------
Investor Shares
1998.............................. 378%
1997.............................. 489
1996.............................. 514
1995.............................. 592
1994.............................. 432
Flex Shares
1998.............................. 378%
1997.............................. 489
1996(2)........................... 514
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on January 18, 1994.
(2) Commenced operations on June 1, 1995.
(3) Commenced operations on January 19, 1994.
(4) Commenced operations on June 6, 1995.
(5) Commenced operations on June 7, 1995.
(A) Total return figures do not reflect applicable sales loads.
<PAGE>
26 PROSPECTUS
HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED
NET ASSET GAINS DISTRIBUTIONS
VALUE NET (LOSSES) FROM NET DISTRIBUTIONS NET ASSET
BEGINNING OF INVESTMENT ON INVESTMENT FROM REALIZED VALUE END
PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
------------ ------------- --------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ---------------------------------------------
Investor Shares
1998..................................... $ 10.00 $ 0.56 $ 0.12 $ (0.56) $ (0.01) $ 10.11
1997..................................... 9.97 0.56 0.04 (0.56) (0.01) 10.00
1996..................................... 10.11 0.60 (0.14) (0.60) -- 9.97
1995(7).................................. 9.98 0.58 0.13 (0.58) -- 10.11
Flex Shares
1998..................................... $ 10.02 $ 0.52 $ 0.11 $ (0.52) $ (0.01) $ 10.12
1997..................................... 9.99 0.52 0.04 (0.52) (0.01) 10.02
1996(8).................................. 10.14 0.55 (0.15) (0.55) -- 9.99
- ----------------------
SHORT-TERM BOND FUND
- ----------------------
Investor Shares
1998..................................... $ 9.91 $ 0.53 $ 0.17 $ (0.53) $ (0.01) $ 10.07
1997..................................... 9.88 0.51 0.06 (0.51) (0.03) 9.91
1996..................................... 10.01 0.52 (0.10) (0.53) (0.02) 9.88
1995..................................... 9.81 0.51 0.19 (0.50) -- 10.01
1994..................................... 10.03 0.40 (0.21) (0.40) (0.01) 9.81
Flex Shares
1998..................................... $ 9.91 $ 0.50 $ 0.17 $ (0.50) $ (0.01) $ 10.07
1997..................................... 9.88 0.48 0.06 (0.48) (0.03) 9.91
1996(9).................................. 10.02 0.47 (0.12) (0.47) (0.02) 9.88
- ---------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ---------------------------------------
Investor Shares
1998..................................... $ 9.88 $ 0.49 $ 0.09 $ (0.50) $ -- $ 9.96
1997..................................... 9.84 0.50 0.04 (0.50) -- 9.88
1996..................................... 9.94 0.54 (0.10) (0.54) -- 9.84
1995..................................... 9.83 0.46 0.11 (0.46) -- 9.94
1994..................................... 9.99 0.32 (0.12) (0.31) (0.05) 9.83
Flex Shares
1998..................................... $ 9.85 $ 0.47 $ 0.10 $ (0.46) $ -- $ 9.94
1997..................................... 9.82 0.47 0.03 (0.47) -- 9.85
1996(10)................................. 9.96 0.48 (0.14) (0.48) -- 9.82
- -------------------------------
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------
Investor Shares
1998..................................... $ 10.02 $ 0.57 $ 0.43 $ (0.57) $ -- $ 10.45
1997..................................... 9.90 0.58 0.12 (0.58) -- 10.02
1996..................................... 10.26 0.59 (0.33) (0.59) (0.03) 9.90
1995(11)................................. 10.00 0.56 0.26 (0.56) -- 10.26
Flex Shares
1998..................................... $ 10.02 $ 0.52 $ 0.44 $ (0.52) $ -- $ 10.46
1997..................................... 9.91 0.53 0.11 (0.53) -- 10.02
1996(8).................................. 10.31 0.52 (0.37) (0.52) (0.03) 9.91
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF EXPENSES TO INCOME TO
NET NET AVERAGE NET AVERAGE NET
ASSETS RATIO OF INVESTMENT ASSETS ASSETS
END OF EXPENSES TO INCOME TO (EXCLUDING (EXCLUDING
TOTAL PERIOD AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND
RETURN(A) (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------ ------ ----------- ----------- ---------------- ----------------
<S> <C>
- ---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ---------------------------------------------
Investor Shares
1998..................................... 6.95% $2,705 0.91% 5.50% 1.51% 4.90%
1997..................................... 6.17 2,426 0.90 5.55 1.48 4.97
1996..................................... 4.59 2,512 0.90 5.75 2.25 4.40
1995(7).................................. 7.45** 623 0.90* 6.27* 7.74* (0.57)*
Flex Shares
1998..................................... 6.49% $1,543 1.26% 5.16% 2.72% 3.70%
1997..................................... 5.80 1,409 1.25 5.20 2.66 3.79
1996(8).................................. 4.10* 1,349 1.25* 5.38* 3.59* 3.04*
- ----------------------
SHORT-TERM BOND FUND
- ----------------------
Investor Shares
1998..................................... 7.19% $1,949 0.86% 5.27% 1.71% 4.42%
1997..................................... 5.97 2,182 0.85 5.16 1.58 4.43
1996..................................... 4.23 2,700 0.85 5.20 1.72 4.33
1995..................................... 7.44 2,609 0.85 5.24 1.56 4.53
1994..................................... 1.81 2,381 0.85 3.94 2.52 2.27
Flex Shares
1998..................................... 6.84% $2,110 1.21% 4.93% 2.85% 3.29%
1997..................................... 5.62 1,073 1.20 4.82 3.02 3.00
1996(9).................................. 3.73* 966 1.20* 4.77* 4.06* 1.91*
- ---------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ---------------------------------------
Investor Shares
1998..................................... 6.04% $3,277 0.81% 5.07% 1.33% 4.55%
1997..................................... 5.59 3,921 0.80 5.05 1.35 4.50
1996..................................... 4.52 4,192 0.80 5.43 1.32 4.91
1995..................................... 6.03 7,144 0.80 4.74 1.33 4.21
1994..................................... 2.01 4,841 0.78 3.11 1.41 2.48
Flex Shares
1998..................................... 5.90% $1,413 1.06% 4.81% 2.87% 3.00%
1997..................................... 5.19 1,091 1.05 4.75 2.51 3.29
1996(10)................................. 3.72* 2,423 1.05* 5.03* 2.97* 3.11*
- -------------------------------
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------
Investor Shares
1998..................................... 10.23% $3,225 1.16% 5.53% 1.76% 4.93%
1997..................................... 7.21 2,243 1.15 5.76 1.79 5.12
1996..................................... 2.47 2,396 1.15 5.68 2.50 4.33
1995(11)................................. 8.61** 589 1.15* 6.08* 6.84* 0.39*
Flex Shares
1998..................................... 9.78% $4,022 1.67% 5.02% 2.32% 4.37%
1997..................................... 6.57 2,801 1.66 5.26 2.42 4.50
1996(8).................................. 1.42* 2,826 1.66* 5.18* 2.86* 3.98*
<CAPTION>
PORTFOLIO
TURNOVER
RATE
---------
- ---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ---------------------------------------------
Investor Shares
1998..................................... 163%
1997..................................... 133
1996..................................... 83
1995(7).................................. 68
Flex Shares
1998..................................... 163%
1997..................................... 133
1996(8).................................. 83
- ----------------------
SHORT-TERM BOND FUND
- ----------------------
Investor Shares
1998..................................... 87%
1997..................................... 118
1996..................................... 163
1995..................................... 200
1994..................................... 75
Flex Shares
1998..................................... 87%
1997..................................... 118
1996(9).................................. 163
- ---------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ---------------------------------------
Investor Shares
1998..................................... 39%
1997..................................... 93
1996..................................... 94
1995..................................... 88
1994..................................... 117
Flex Shares
1998..................................... 39%
1997..................................... 93
1996(10)................................. 94
- -------------------------------
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------
Investor Shares
1998..................................... 14%
1997..................................... 21
1996..................................... 83
1995(11)................................. 30
Flex Shares
1998..................................... 14%
1997..................................... 21
1996(8).................................. 83
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(7) Commenced operations on July 17, 1994.
(8) Commenced operations on June 7, 1995.
(9) Commenced operations on June 20, 1995.
(10) Commenced operations on June 22, 1995.
(11) Commenced operations on June 9, 1994.
(A) Total return figures do not reflect applicable sales loads.
<PAGE>
PROSPECTUS 27
HOW FUND SHARES ARE DISTRIBUTED
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Fund's assets continuously, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. For
Investor Shares, maximum distribution fees, as a percentage of average daily net
assets, are as follows:
<TABLE>
<S> <C> <C>
Georgia Tax-Exempt Bond Fund .18%
Florida Tax-Exempt Bond Fund .18%
Investment Grade Bond Fund .43%
Investment Grade Tax-Exempt Bond Fund .43%
Limited-Term Federal Mortgage Securities Fund .23%
Short-Term Bond Fund .23%
Short-Term U.S. Treasury Securities Fund .18%
U.S. Government Securities Fund .38%
</TABLE>
For Flex Shares, the maximum distribution fee is 1.00% of the average daily net
assets of each Fund.
<PAGE>
28 PROSPECTUS
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares income dividends daily and pays these dividends monthly. The
Funds make distributions of capital gains, if any, at least annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.
SIMPLY SPEAKING . . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to
receive the distribution.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE
OF FUND SHARES.
The Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond and Investment Grade
Tax-Exempt Bond Funds intend to distribute federally tax-exempt income. Each
Fund may invest a portion of its assets in securities that generate taxable
income for federal or state income taxes. Income exempt from federal tax may be
subject to state and local taxes. Any capital gains distributed by these Funds
may be taxable.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
SIMPLY SPEAKING . . .
FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you
reinvest them.
<PAGE>
HOW TO OBTAIN MORE INFORMATION
INVESTMENT ADVISORS
STI Capital Management, N.A.
Trusco Capital Management, Inc.
SunTrust Bank, Atlanta
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the STI Classic Funds is included in our SAI.
The SAI has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMIANNUAL REPORTS
These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies, and recent market conditions and trends.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE:
Call 1-800-874-4770
BY MAIL:
Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.
BY INTERNET:
http://www.suntrust.com
FROM THE SEC: You can also obtain these documents, and other information about
the STI Classic Funds, from the SEC's website ("http://www.sec.gov"). You may
review and copy documents at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009. The
Fund's Investment Company Act registration number is 811-06557.
<PAGE>
PROSPECTUS
HOW TO READ
THIS PROSPECTUS
The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important information
about the Investor Shares and Flex Shares of the Equity Funds that you should
know before investing. Please read this prospectus and keep it for future
reference.
We arranged the prospectus into different sections so that you can easily review
this important information. On the next page, we discuss general information you
should know about investing in the Funds.
<TABLE>
<C> <S>
IF YOU WOULD LIKE MORE DETAILED INFORMATION
ABOUT EACH FUND, PLEASE SEE:
2 BALANCED FUND
4 CAPITAL GROWTH FUND
6 INTERNATIONAL EQUITY FUND
8 INTERNATIONAL EQUITY INDEX FUND
10 MID-CAP EQUITY FUND
12 SMALL CAP EQUITY FUND
14 SMALL CAP GROWTH STOCK FUND
16 SUNBELT EQUITY FUND
18 TAX SENSITIVE GROWTH STOCK FUND
20 VALUE INCOME STOCK FUND
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FOLLOWING TOPICS, PLEASE SEE:
22 EACH FUND'S PRINCIPAL INVESTMENTS
22 THE ADVISORS AND THEIR PORTFOLIO MANAGERS
24 PURCHASING, SELLING AND EXCHANGING FUND SHARES
29 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND
31 HOW FUND SHARES ARE DISTRIBUTED
32 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS
32 TAXES
TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC
FUNDS PLEASE REFER TO THE BACK COVER OF THE
PROSPECTUS
</TABLE>
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING"
EXPLANATIONS.
- --------------------------------------------------------------------------------
FUND SUMMARY
INVESTMENT STRATEGY
WHAT ARE THE RISKS OF INVESTING?
PERFORMANCE INFORMATION
WHAT IS AN INDEX?
FEES AND EXPENSES
FUND INVESTMENTS
INVESTMENT ADVISORS
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
OCTOBER 1, 1998
<PAGE>
PROSPECTUS 1
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in mutual
funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect securities markets generally, as well as those that affect
particular companies or governments. These price movements, sometimes called
volatility, will vary depending on the types of securities a Fund owns and the
markets where these securities trade. The Equity Funds invest primarily in
common stocks and other equity securities. Historically, equity securities have
outperformed other types of investments on a long-term basis, but have been
subject to more price fluctuation in the short run.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
Each Fund has its own investment goal and strategies for reaching that goal. But
we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be
changed without shareholder approval. Before investing, make sure that the
Fund's goal matches your own.
The Advisors invest each Fund's assets in a way that the Advisor believes will
help the Fund achieve its goal. An Advisor's judgments about the stock markets,
economy and companies, or selecting investments may not reflect actual market
movements, economic conditions or company performance.
CHOOSING INVESTOR OR FLEX SHARES
Investor Shares and Flex Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have it
invested, and whether you plan to make additional investments.
INVESTOR SHARES
- - Front-end sales charge
- - Lower annual expenses
- - $2,000 minimum initial investment
FLEX SHARES
- - Deferred sales charge
- - Higher annual expenses
- - $10,000 minimum initial investment
<PAGE>
2 PROSPECTUS
BALANCED FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS Capital appreciation and current income
INVESTMENT FOCUS
PRIMARY U.S. common stocks
SECONDARY Bonds
SHARE PRICE VOLATILITY Moderate
PRINCIPAL INVESTMENT Attempts to identify companies with a history of
STRATEGY earnings growth and bonds with minimal risk
INVESTOR PROFILE Investors who want income from their investment,
as well as an increase in its value
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
General Electric
Company...................... 1.9%
Bristol Myers
Squibb Company............... 1.3%
Carnival Corporation,
Class A...................... 1.3%
United Technologies
Corporation.................. 1.2%
CVS Corporation................ 1.1%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Balanced Fund invests in common and preferred stocks,
convertible securities, U.S. government obligations and investment grade
corporate bonds. In selecting stocks for the Fund, we attempt to identify high-
quality companies with a history of earnings growth. In selecting bonds, we try
to minimize risk while attempting to outperform selected market indices. Due to
its investment strategy, the Fund may buy and sell securities frequently. This
may result in higher transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests in both common stocks and bonds. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, the value of bonds held by the Fund may
decline due to rising interest rates. An issuer may be unable to make timely
payments of principal or interest. The Fund may have more assets than usual
invested in bonds during periods of rising interest rates or less assets than
usual invested in bonds during falling interest rates. Some investment grade
bonds may have speculative characteristics. Fixed income securities regardless
of credit quality, also experience price volatility, especially in response to
interest rate changes.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 25.08%
1996 11.85%
1997 20.71%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
11.19% 0.64%
(6/30/97) (3/31/97)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 12.48%.
<PAGE>
PROSPECTUS 3
BALANCED FUND
This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the S&P 500 Index and the Lehman Brothers
Government/Corporate Bond Index.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (1/4/94)
<S> <C> <C> <C>
BALANCED FUND 16.23% 17.59% 11.52%
S&P 500 INDEX 33.35% 31.13% 23.48%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX 9.75% 10.43% 6.92%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/14/95)
<S> <C> <C>
BALANCED FUND 17.86% 16.42%
S&P 500 INDEX 33.35% 29.81%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX 9.75% 8.08%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The S&P 500 Index is a
widely recognized index of 500 stocks designed to mimic the overall equity
market's industry weightings. The Lehman Brothers Government/ Corporate
Bond Index is a widely recognized index of government and corporate debt
securities rated investment grade or better with maturities of at least 1
year.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .95 % .95%
Distribution and Service (12b-1) Fees .28 % 1.00%
Other Expenses .37 % .29%
--- ---
Total Annual Fund Operating Expenses 1.60 % 2.24%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with 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:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $532 $861 $1213 $2204
Flex Shares $627 $700 $1200 $2575
IF YOU DO NOT SELL YOUR
SHARES:
Investor Shares $532 $861 $1213 $2204
Flex Shares $427 $700 $1200 $2575
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .83%,
.07% AND 1.27%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .83%, .91%, AND 2.03%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
4 PROSPECTUS
CAPITAL GROWTH FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS U.S. common stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify companies with above average
STRATEGY growth potential
INVESTOR PROFILE Investors who want the value of their investment to
grow, but do not need to receive income on their
investment
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
General Electric Company....... 2.8%
Bristol Myers Squibb
Company....................... 1.9%
Carnival Corporation,
Class A....................... 1.9%
United Technologies
Corporation................... 1.8%
Microsoft Corporation.......... 1.7%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Capital Growth Fund invests primarily in U.S. common stocks and
other equity securities that we believe are undervalued by the stock market. In
selecting investments for the Fund, we choose companies that we believe have
above average growth potential. We rotate the Fund's investments among various
market sectors based on our research of business cycles. Our strategy focuses on
large-cap stocks with a strong growth history. Due to its investment strategy,
the Fund may buy and sell securities frequently. This may result in higher
transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 9.27%
1994 -8.01%
1995 30.33%
1996 19.50%
1997 30.34%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
16.84% -4.33%
(6/30/97) (12/31/94)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 16.80%.
<PAGE>
PROSPECTUS 5
CAPITAL GROWTH FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 5 YEARS (6/9/92)
<S> <C> <C> <C> <C>
CAPITAL GROWTH FUND 25.50% 14.46% 16.04%
S&P 500 INDEX 33.35% 20.25% 19.65%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/1/95)
<S> <C> <C> <C>
CAPITAL GROWTH FUND 27.77% 25.26%
S&P 500 INDEX 33.35% 29.81%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. Unlike a mutual fund, an
index does not have an investment advisor and does not pay any commissions
or expenses. If an index had expenses, its performance would be lower. The
S&P 500 Index is a widely recognized index of 500 stocks designed to mimic
the overall equity market's industry weightings.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees 1.15 % 1.15%
Distribution and Service (12b-1) Fees .68 % 1.00%
Other Expenses .19 % .25%
--- ---
Total Annual Fund Operating Expenses 2.02 % 2.40%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 572 $ 985 $ 1422 $ 2635
Flex Shares $ 443 $ 748 $ 1280 $ 2736
IF YOU DO NOT SELL YOUR
SHARES:
Investor Shares $ 572 $ 985 $ 1422 $ 2635
Flex Shares $ 243 $ 748 $ 1280 $ 2736
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%,
.59% AND 1.82%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, 1.00% AND 2.29%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
6 PROSPECTUS
INTERNATIONAL EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Foreign common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Attempts to identify undervalued companies with
STRATEGY good fundamentals
INVESTOR PROFILE Investors who: want an increase in the value of
their investment without regard to income; are
willing to accept the increased risks of
international investing for the possibility of
higher returns; and want exposure to a diversified
portfolio of international stocks
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Ing Groep...................... 3.2%
Ubs Ag-Registered.............. 2.6%
Novartis, Registered........... 2.5%
Bank of Ireland................ 2.5%
Nestle Sa Registered........... 2.5%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The International Equity Fund invests primarily in common stocks
and other equity securities of foreign companies. In selecting investments for
the Fund, we diversify the Fund's investments among at least three foreign
countries. The Fund invests primarily in developed countries, but may invest in
countries with emerging markets. Our "bottom-up" approach to stock selection
focuses on individual stocks and fundamental characteristics of companies. Our
goal is to find companies with top management, quality products and sound
financial positions, that are trading at a discount. Due to the Fund's
investment strategy, the Fund may buy and sell securities frequently. This may
result in higher transaction costs and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of foreign companies. As a result,
the Fund is subject to the risk that stock prices will fall over short or
extended periods of time. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in foreign
markets may be more volatile than investments in U.S. markets. Diplomatic,
political or economic developments may cause foreign investments to lose money.
The value of the U.S. dollar may rise, causing reduced returns for U.S. persons
investing abroad. A foreign country may not have the same accounting and
financial reporting standards as the U.S. Foreign stock markets, brokers and
companies are generally subject to less supervision and regulation than their
U.S. counterparts. Emerging markets securities may be even more susceptible to
these risks.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses. The periods prior to December 1995, when the Fund began
operating, represent the performance of the Advisor's similarly managed
collective investment fund. This past performance has been adjusted to reflect
current expenses for Trust Shares of the Fund. The periods from December 1995 to
January 1996 represent the performance of Trust Shares of the Fund. Trust Shares
have lower expenses than Investor and Flex Shares, which results in higher
performance shown below. The Advisor's collective fund was not a registered
mutual fund so it was not subject to the same investment and tax restrictions as
the Fund. If it had been, the collective fund's performance would have been
lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR. THE
PERIODS FROM JANUARY 1996 TO THE PRESENT REPRESENT THE PERFORMANCE OF INVESTOR
SHARES OF THE FUND. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 21.58%
1997 13.01%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
12.07% -7.80%
(6/30/97) (12/31/97)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 16.10%.
<PAGE>
PROSPECTUS 7
INTERNATIONAL EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR (2/2/95)
<S> <C> <C>
INTERNATIONAL EQUITY FUND
Investor Shares 8.76% 23.04%
Flex Shares 10.24% 24.12%
MSCI EAFE INDEX 11.78% 6.47%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The MSCI EAFE Index is
a widely recognized index of over 900 securities listed on the stock
exchanges in Europe, Australia, and the Far East.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on
Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees 1.25% 1.25%
Distribution and Service (12b-1) Fees .33% 1.00%
Other Expenses .34% .34%
--- ---
Total Annual Fund Operating Expenses 1.92% 2.59%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with 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:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $563 $955 $1373 $2534
Flex Shares $462 $805 $1375 $2925
<CAPTION>
IF YOU DO NOT SELL YOUR
SHARES:
<S> <C> <C> <C> <C>
Investor Shares $563 $955 $1373 $2534
Flex Shares $262 $805 $1375 $2925
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.24%,
.24% AND 1.83%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.24%, .95% AND 2.53%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
8 PROSPECTUS
INTERNATIONAL EQUITY INDEX FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL To provide investment results that correspond to
the performance of the MSCI EAFE-GDP Index
INVESTMENT FOCUS Foreign common stocks in MSCI EAFE-GDP Index
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Statistical analysis to track the Index
STRATEGY
INVESTOR PROFILE Aggressive investors who want exposure to foreign
markets and are willing to accept the increased
risks of foreign investing for the possibility of
higher returns
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Allianz........................ 2.2%
Assicurazioni Generali......... 2.1%
Tim............................ 1.8%
Telecom Italia Spa............. 1.4%
Daimler Benz................... 1.4%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The International Equity Index Fund invests primarily in common
stocks of foreign companies. In selecting investments for the Fund, we choose
companies included in the MSCI EAFE-GDP Index, an index of equity securities of
companies located in Europe, Australia and the Far East. While the Fund is
structured to have overall investment characteristics similar to those of the
index, it selects a sample of stocks within the Index using a statistical
process. So, the Fund will not hold all stocks included in the index.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of foreign companies. As a result,
the Fund is subject to the risk that stock prices will fall over short or
extended periods of time. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in foreign
markets may be more volatile than investments in U.S. markets. Diplomatic,
political or economic developments may cause foreign investments to lose money.
The value of the U.S. dollar may rise, causing reduced returns for U.S. persons
investing abroad. A foreign country may not have the same accounting and
financial reporting standards as the U.S. Foreign stock markets, brokers and
companies are generally subject to less supervision and regulation than their
U.S. counterparts. Emerging markets securities may be even more susceptible to
these risks.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 10.20%
1996 5.78%
1997 8.44%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
11.64% -5.59%
(6/30/97) (12/31/97)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 23.11%.
<PAGE>
PROSPECTUS 9
INTERNATIONAL EQUITY INDEX FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA AND FAR EAST - GROSS DOMESTIC PRODUCT WEIGHTED (MSCI
EAFE-GDP) INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (6/6/94)
<S> <C> <C> <C>
INTERNATIONAL EQUITY INDEX FUND 4.35% 6.75% 4.80%
MSCI EAFE-GDP INDEX 4.35% 6.62% 5.26%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/8/95)
<S> <C> <C>
INTERNATIONAL EQUITY INDEX
FUND 5.84% 6.75%
MSCI EAFE-GDP INDEX 4.35% 6.08%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The MSCI EAFE-GDP
Index is a widely recognized index of over 900 securities listed on the
stock exchanges in Europe, Australia, and the Far East. The index is
weighted by the gross domestic product of the various countries in the
index.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .90% .90%
Distribution and Service (12b-1) Fees .38% 1.00%
Other Expenses .57% 1.63%
--- ---
Total Annual Fund Operating Expenses 1.85% 3.53%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $556 $935 $1338 $2463
Flex Shares $556 $1083 $1831 $3801
IF YOU DO NOT SELL YOUR
SHARES:
Investor Shares $556 $935 $1338 $2463
Flex Shares $356 $1083 $1831 $3801
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .77%,
.12% AND 1.47%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .77%, .21% AND 2.12%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
10 PROSPECTUS
MID-CAP EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS U.S. mid-cap common stocks
SHARE PRICE VOLATILITY Moderate to high
PRINCIPAL INVESTMENT Attempts to identify companies with above average
STRATEGY growth potential at an attractive price
INVESTOR PROFILE Investors who want the value of their investment to
grow and who are willing to accept more volatility
for the possibility of higher returns
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
U.S. Filter Corporation........ 3.8%
Allied Waste Industries
Incorporated................. 3.2%
Networks Associates
Incorporated................. 3.1%
Men's Wearhouse................ 3.1%
Harley-Davidson Incorporated... 3.0%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Mid-Cap Equity Fund invests primarily in a diversified
portfolio of common stocks and other equity securities of U.S. companies. In
selecting investments for the Fund, we choose companies that have small- to
mid-sized market capitalizations (i.e., companies with market capitalizations of
$500 million to $7 billion) and that have above average growth potentials at
attractive prices. We evaluate companies based on their industry sectors and the
market in general. The Fund maintains large holdings in the industries that
appear to perform best during a given business cycle. We analyze companies that
are in favored industries based on their fundamental characteristics, such as
growth rates and earnings. We do not consider current income in selecting
investments for the Fund. Due to the Fund's investment strategy, the Fund may
buy and sell securities frequently. This may result in higher transaction costs
and additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in mid-cap common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, small- to mid-sized companies may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these companies may have somewhat limited product
lines, markets and financial resources, and may depend upon a relatively small-
to medium-sized management group.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 30.57%
1996 14.93%
1997 20.67%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
14.13% -3.00%
(9/30/97) (3/31/97)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 6.39%.
<PAGE>
PROSPECTUS 11
MID-CAP EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P MIDCAP 400 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
INVESTOR SHARES 1 YEAR 3 YEARS (2/1/94)
<S> <C> <C> <C>
MID-CAP EQUITY FUND 16.15% 20.34% 14.61%
S&P MIDCAP 400 INDEX 32.23% 27.32% 19.20%
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION
FLEX SHARES 1 YEAR (6/5/95)
<S> <C> <C>
MID-CAP EQUITY FUND 17.92% 19.01%
S&P MIDCAP 400 INDEX 32.23% 27.23%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The S&P MidCap 400
Index is a widely recognized index of 400 U.S. mid-cap common stocks
chosen for market size, liquidity, and industry group representation.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees 1.15% 1.15%
Distribution and Service (12b-1) Fees .43% 1.00%
Other Expenses .27% .33%
--- ---
Total Annual Fund Operating Expenses 1.85% 2.48%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $ 556 $ 935 $ 1338 $ 2463
Flex Shares $ 451 $ 773 $ 1321 $ 2816
IF YOU DO NOT SELL YOUR
SHARES:
Investor Shares $ 556 $ 935 $ 1338 $ 2463
Flex Shares $ 251 $ 773 $ 1321 $ 2816
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%,
.31% AND 1.62%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, .85% AND 2.22%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
12 PROSPECTUS
SMALL CAP EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS
PRIMARY Capital appreciation
SECONDARY Current income
INVESTMENT FOCUS U.S. small-cap common stocks
SHARE PRICE VOLATILITY Moderate
PRINCIPAL INVESTMENT Attempts to identify undervalued small-cap stocks
STRATEGY
INVESTOR PROFILE Investors who primarily want the value of their
investment to grow, but want to receive some income
from their investment
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Norrell Corporation............ 3.1%
Regal Beloit Corporation....... 2.9%
Harman International........... 2.6%
Texas Industries Inc........... 2.5%
Sotheby's Holdings
Incorporated-
Class A.................... 2.3%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Small Cap Equity Fund invests primarily in common stocks of
U.S. companies. In selecting investments for the Fund, we choose common stocks
of small sized companies (i.e., companies with market capitalizations under $1
billion) that we believe are undervalued in the market.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in small-cap common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, small-sized companies may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, small-sized companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
periods prior to January 1997, when the Fund began operating, represent the
performance of the Advisor's similarly managed collective investment fund. This
past performance has been adjusted to reflect current expenses for Trust Shares
of the Fund. The periods from January 1997 to June 1997 represent the
performance of Trust Shares of the Fund. The periods from June 1997 to the
present represent the performance of Flex Shares of the Fund. Trust Shares have
lower expenses than Flex Shares, which results in higher performance shown
below. The Advisor's collective fund was not a registered mutual fund so it was
not subject to the same investment and tax restrictions as the Fund. If it had
been the collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR. THE
BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED,
RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1995 30.99%
1996 34.25%
1997 31.79%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
14.91% -2.39%
(6/30/97) (12/31/97)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS -.59%.
<PAGE>
PROSPECTUS 13
SMALL CAP EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 3 YEARS (8/31/94)
<S> <C> <C> <C>
SMALL CAP EQUITY FUND 29.79% 32.34% 10.96%
FRANK RUSSELL 2000 SMALL STOCK INDEX 22.36% 22.34% 21.05%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The Frank Russell 2000
Small Stock Index is a widely recognized index of the 2,000 smallest U.S.
companies out of the 3,000 largest companies.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C>
None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)*
</TABLE>
*THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C>
Investment Advisory Fees 1.15%
Distribution and Service (12b-1) Fees 1.00%
Other Expenses .40%
---
Total Annual Fund Operating Expenses 2.55%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Flex Shares $ 458 $ 793 $ 1355 $ 2885
IF YOU DO NOT SELL YOUR
SHARES:
Flex Shares $ 258 $ 793 $ 1355 $ 2885
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 1.05%, .82% AND 2.27%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
14 PROSPECTUS
SMALL CAP GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON
OCTOBER 7, 1998)
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS U.S. small-cap common stocks of growth companies
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Identifies small-cap companies with above-average growth potential
STRATEGY
INVESTOR PROFILE Investors who want the value of their investment to grow, but who do not need current
income
</TABLE>
INVESTMENT STRATEGY
The Small Cap Growth Fund invests primarily in U.S. companies that
demonstrate above-average growth potential. We invest in companies with an
established operating history and a solid balance sheet. In selecting
investments for the Fund, we choose companies with market capitalizations of up
to about $3 billion. Due to its investment strategy, the Fund may buy and sell
securities frequently. This may result in higher transactions costs and
additional capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of smaller U.S. companies. As a
result, the Fund is subject to the risk that stock prices will fall over short
or extended periods of time. Stock markets tend to move in cycles, with periods
of rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in small- or
mid-cap companies involve greater risk than investments in larger, more
established companies because of the greater business risks of small size,
limited markets and financial resources, smaller product lines and lack of depth
of management. These securities are often traded over-the-counter and may not be
traded in high volumes. Consequently, securities prices could be less stable
than those of large, more established companies.
<PAGE>
PROSPECTUS 15
SMALL CAP GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON OCTOBER 7, 1998)
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C>
None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)*
</TABLE>
*THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
This table describes the Fund's expenses that you may pay indirectly if you hold
Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C>
Investment Advisory Fees 1.15%
Distribution and Service (12b-1) Fees 1.00%
Other Expenses* .25%
---
Total Annual Fund Operating Expenses 2.40%
</TABLE>
* 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. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE END OF THE
PERIOD: 1 YEAR 3 YEARS
<S> <C> <C> <C>
Flex Shares $ 443 $ 748
IF YOU DO NOT SELL YOUR SHARES:
Flex Shares $ 243 $ 748
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a
portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING
EXPENSES ARE 1.00% AND 2.25%, RESPECTIVELY. The Advisor could discontinue
this voluntary waiver at any time. For more information about these fees, see
"Investment Advisors."
<PAGE>
16 PROSPECTUS
SUNBELT EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Southern U.S. common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT Attempts to identify companies with positive
STRATEGY earnings trends
INVESTOR PROFILE Aggressive investors with long-term investment
goals who are willing to accept higher volatility
for the possibility of higher returns
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Hunt J B Transportation
Services Inc................. 3.0%
Fairfield Communities
Incorporated................. 2.6%
PMT Services, Incorporated..... 2.3%
Stone Energy Corporation....... 2.0%
SCB Computer Technology,
Incorporated................. 1.9%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Sunbelt Equity Fund invests substantially all of its assets in
common stocks and other equity securities of companies in the southern region of
the U.S. These companies are headquartered and/or conduct a substantial portion
of their business in the southern region of /the U.S., which includes Texas,
Arkansas, Alabama, Mississippi, Tennessee, Kentucky, Florida, Virginia, Georgia,
North Carolina, South Carolina and Louisiana. Our investment strategy is based
on the belief that a portfolio of companies in this region with positive
earnings trends will generate above average returns over time. This focus on
favorable earnings characteristics is the cornerstone of our philosophy. We do
not consider current income in selecting investments for the Fund.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in southern U.S. common stocks. As a result, the Fund
is subject to the risk that stock prices will fall over short or extended
periods of time. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices. This price volatility is the principal
risk of investing in the Fund. Because the Fund focuses its investments in
southern companies, economic conditions in or government policies imposed by
southern states may cause the Fund to be more volatile than an equity fund that
invests in companies located across the U.S.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses. The periods prior to January 1994, when the Fund began
operating, represent the performance of the Advisor's similarly managed
collective investment fund. This past performance has been adjusted to reflect
current expenses for Investor Shares of the Fund. The Advisor's collective fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the collective fund's
performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR. THE
PERIODS FROM JANUARY 1994 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE
INVESTOR SHARES OF THE FUND. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF
SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 21.80%
1994 -5.20%
1988 24.37%
1989 25.19%
1990 -5.28%
1991 49.14%
1992 18.13%
1993 21.80%
1994 -5.20%
1995 23.99%
1996 17.80%
1997 20.79%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
21.67% -19.18%
(3/31/91) (12/31/87)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 5.75%.
<PAGE>
PROSPECTUS 17
SUNBELT EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 GROWTH INDEX AND THE
S&P SMALLCAP 600 INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS 10 YEARS (12/1/80)
<S> <C> <C> <C> <C>
SUNBELT EQUITY FUND
Investor Shares 16.25% 14.41% 17.69% 12.67%
Flex Shares* 18.04% 15.27% 18.49% 20.60%
FRANK RUSSELL 2000
GROWTH INDEX 12.95% 12.74% 13.49% 8.11%
S&P SMALLCAP 600 INDEX 25.49% 17.48% 15.37% 9.35%
</TABLE>
*THE PERIODS FROM JANUARY 1994 TO JUNE 1995 REPRESENT THE PERFORMANCE OF
INVESTOR SHARES OF THE FUND.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular
market or securities in a market sector. You cannot invest directly in an
index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would
be lower. The Frank Russell 2000 Growth Index is a widely recognized index
of the 2,000 largest U.S. companies with higher growth rates. The S&P
SmallCap 600 Index is a widely recognized index of 600 U.S. small cap
stocks.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees 1.15% 1.15%
Distribution and Service (12b-1) Fees .43% 1.00%
Other Expenses .29% .44%
--- ---
Total Annual Fund Operating Expenses 1.87% 2.59%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE
END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $558 $941 $1348 $2483
Flex Shares $462 $805 $1375 $2925
IF YOU DO NOT SELL YOUR SHARES:
Investor Shares $558 $941 $1348 $2483
Flex Shares $262 $805 $1375 $2925
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor and the Distributor are
voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES,
DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%,
.29% AND 1.62%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION
FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, .74% AND 2.22%,
RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary
waivers at any time. For more information about these fees, see "Investment
Advisors" and "How Fund Shares are Distributed."
<PAGE>
18 PROSPECTUS
TAX SENSITIVE GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON
DECEMBER 15, 1998)
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Long-term capital growth, with nominal dividend income
INVESTMENT FOCUS U.S. common stocks of growth companies
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT Attempts to identify companies that have above-average growth potential and uses a low
STRATEGY portfolio turnover strategy to reduce capital gains distributions.
INVESTOR PROFILE Taxable investors who want to increase the value of their investment while minimizing
taxable capital gains distributions.
</TABLE>
INVESTMENT STRATEGY
The Tax Sensitive Growth Stock Fund primarily invests in a
diversified portfolio of common stocks of financially strong U.S. growth
companies. Many of these companies have a history of stable or rising dividend
payout policies. We invest the Fund's assets across all market capitalizations.
We attempt to minimize the impact of capital gains taxes on investment returns
by using a low turnover rate (generally 50% or less) strategy, in conjunction
with other tax management strategies. These strategies may lead to lower capital
gains distributions and, therefore, lower capital gains taxes.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund primarily invests in common stocks. As a result, the Fund is subject to
the risk that stock prices will fall over short or extended periods of time.
Stock markets tend to move in cycles, with periods of rising prices and periods
of falling prices. This price volatility is the principal risk of investing in
the Fund. In addition, the Fund may invest in small-cap companies. These
companies involve greater risk than investments in larger, more established
companies because of the greater business risks of small size, limited markets
and financial resources, smaller product lines and lack of depth of management.
These securities are often traded over-the-counter and may not be traded in high
volumes. Consequently, securities prices could be less stable than those of
larger, more established companies.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility
of an investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The periods prior
to October 1998, when the Fund began operating, represent the performance of the
Advisor's similarly managed collective investment fund. This past performance
has been adjusted to reflect current expenses for Flex shares of the Fund. The
Advisor's collective fund was not a registered mutual fund so it was not subject
to the same investment and tax restrictions as the Fund. If it had been, the
collective fund's performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1996 19.75%
1997 27.31%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
17.78% -0.35%
(6/30/97) (12/31/97)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 13.88%.
<PAGE>
PROSPECTUS 19
TAX SENSITIVE GROWTH STOCK FUND
(AVAILABLE FOR PURCHASE ON DECEMBER 15, 1998)
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX AND THE LIPPER GROWTH AND
INCOME FUNDS INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR (12/31/95)
<S> <C> <C>
TAX SENSITIVE GROWTH STOCK FUND 25.31% 23.48%
S&P 500 INDEX 33.35% 28.04%
LIPPER GROWTH AND INCOME FUNDS INDEX 26.96% 23.78%
</TABLE>
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. Unlike a mutual fund, an
index does not have an investment advisor and does not pay any commissions
or expenses. If an index had expenses, its performance would be lower. The
S&P 500 Index is a widely recognized index of 500 stocks designed to mimic
the overall equity market's industry weightings. 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.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C> <C>
None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)*
</TABLE>
*THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
This table describes the Fund's expenses that you may pay indirectly if you hold
Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C>
Investment Advisory Fees 1.15%
Distribution and Service (12b-1) Fees 1.00%
Other Expenses* .25%
---
Total Annual Fund Operating Expenses 2.40%
*OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS
<S> <C> <C>
Flex Shares $443 $748
IF YOU DO NOT SELL YOUR SHARES:
Flex Shares $243 $748
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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 Advisor is voluntarily waiving a
portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING
EXPENSES ARE 1.00% AND 2.25%, RESPECTIVELY. The Advisor could discontinue this
voluntary waiver at any time. For more information about these fees, see
"Investment Advisors."
<PAGE>
20 PROSPECTUS
VALUE INCOME STOCK FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOALS
PRIMARY Current income
SECONDARY Capital appreciation
INVESTMENT FOCUS U.S. common stocks
SHARE PRICE VOLATILITY Moderate
PRINCIPAL INVESTMENT Attempts to identify high dividend-paying,
STRATEGY undervalued stocks
INVESTOR PROFILE Investors who are looking for current income and
capital appreciation with less volatility than the
average stock fund
</TABLE>
<TABLE>
<S> <C>
TOP FIVE HOLDINGS
AS OF 6/30/98*
Pharmacia & Upjohn
Incorporated................. 2.5%
Ameritech Corporation.......... 2.4%
Baxter International
Incorporated................. 2.3%
Unocal Corporation............. 2.3%
Kimberly-Clark Corporation..... 2.3%
* HOLDINGS MAY VARY
</TABLE>
INVESTMENT STRATEGY
The Value Income Stock Fund invests primarily in common stocks and
other equity securities of U.S. companies. In selecting investments for the
Fund, we primarily choose companies that have a market capitalization of at
least $500 million and that have a history of paying regular dividends. We focus
on high dividend-paying stocks that trade below their historical value. Our
"bottom-up" approach to stock selection emphasizes individual stocks over
economic trends.
WHAT ARE THE RISKS OF
INVESTING IN THIS FUND?
The Fund invests primarily in U.S. common stocks. As a result, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices. This price volatility is the principal risk of
investing in the Fund. In addition, common stocks held by the Fund may stop
paying dividends or pay less in dividends than we expected.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future. The
performance of Flex Shares and Investor Shares will differ slightly due to
differences in expenses. The periods prior to February 1993, when the Fund began
operating, represent the performance of the Advisor's similarly managed
collective investment fund. This past performance has been adjusted to reflect
current expenses for Investor Shares of the Fund. The Advisor's collective fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the collective fund's
performance would have been lower.
THIS BAR CHART SHOWS CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR. THE
PERIODS FROM FEBRUARY 1993 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE
FUND'S INVESTOR SHARES. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES
CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990 -4.93%
1991 39.30%
1992 20.05%
1993 10.86%
1994 2.87%
1995 35.50%
1996 19.06%
1997 26.57%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
18.56% -14.86%
(3/31/91) (9/30/90)
</TABLE>
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 7.56%.
<PAGE>
PROSPECTUS 21
VALUE INCOME STOCK FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P/BARRA VALUE INDEX.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (10/31/89)
<S> <C> <C> <C>
VALUE INCOME STOCK FUND
Investor Shares 21.80% 17.52% 18.69%
Flex Shares* 23.65% 18.22% 23.28%
S&P/BARRA VALUE INDEX 29.98% 20.68% 15.43%
</TABLE>
* THE PERIODS FROM FEBRUARY 1993 TO JUNE 1995 REPRESENT THE PERFORMANCE OF
INVESTOR SHARES OF THE FUND.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market
sector. You cannot invest directly in an index. Unlike a mutual fund, an
index does not have an investment advisor and does not pay any commissions
or expenses. If an index had expenses, its performance would be lower. The
S&P/BARRA Value Index is a widely recognized index of the stocks in the
S&P 500 Index that have lower price-to-book ratios.
FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from
your investment in a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
3.75% None
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)*
None 2.00%
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)**
</TABLE>
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING
FUND SHARES."
**THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR
PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
Investment Advisory Fees .80% .80%
Distribution and Service (12b-1) Fees .33% 1.00%
Other Expenses .19% .22%
--- ---
Total Annual Fund Operating Expenses 1.32% 2.02%
</TABLE>
- ---------------------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns may be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
IF YOU SELL YOUR SHARES AT
THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Investor Shares $504 $778 $1071 $1906
Flex Shares $405 $634 $1088 $2348
IF YOU DO NOT SELL YOUR
SHARES:
Investor Shares $504 $778 $1071 $1906
Flex Shares $205 $634 $1088 $2348
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, 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.
<PAGE>
22 PROSPECTUS
EACH FUND'S PRINCIPAL INVESTMENTS
FUND INVESTMENTS
THE TABLE BELOW SHOWS EACH FUND'S PRINCIPAL INVESTMENTS. IN OTHER WORDS,
THE TABLE DESCRIBES THE TYPE OR TYPES OF INVESTMENTS THAT WE BELIEVE WILL
MOST LIKELY HELP EACH FUND ACHIEVE ITS INVESTMENT GOAL.
<TABLE>
<CAPTION>
BALANCED CAPITAL INTERNATIONAL INTERNATIONAL MID-CAP SMALL CAP SMALL CAP SUNBELT
FUND GROWTH EQUITY FUND EQUITY INDEX EQUITY EQUITY GROWTH EQUITY
FUND FUND FUND FUND STOCK FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Bonds X
- -----------------------------------------------------------------------------------------------------------------------------
U.S. Stocks X X X X X X
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Stocks X X
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAX SENSITIVE VALUE INCOME
GROWTH STOCK STOCK FUND
FUND
<S> <C> <C>
- --------------------------
Bonds
- --------------------------
U.S. Stocks X X
- --------------------------
Foreign Stocks
- --------------------------
</TABLE>
Each Fund may also invest in other securities, use other strategies and engage
in other investment practices, which are described in detail in our Statement of
Additional Information. Of course, we cannot guarantee that any Fund will
achieve its investment goal.
The investments listed above and the investments and strategies described
throughout this prospectus are those that we use under normal conditions. During
unusual economic or market conditions, or for temporary defensive or liquidity
purposes, each Fund may invest up to 100% of its assets in cash, money market
instruments, repurchase agreements and short-term obligations. The Small Cap
Equity Fund also may invest in investment grade fixed income securities and mid-
to large-cap common stocks. When a Fund is investing for temporary defensive
purposes, it is not pursuing its investment goal.
INVESTMENT ADVISORS
The Investment Advisors make investment decisions for the Funds and continuously
review, supervise and administer their Funds' respective investment program. The
Board of Trustees supervises the Advisors and establishes policies that the
Advisors must follow in their management activities.
STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802,
serves as the Advisor to the Capital Growth, Value Income Stock, Small Cap
Equity, Mid-Cap Equity, Balanced, and International Equity Funds. As of May 31,
1998, STI Capital had approximately $11.7 billion in assets under management.
For the fiscal year ended May 31, 1998, STI Capital received advisory fees of:
<TABLE>
<S> <C>
BALANCED FUND............................ .83%
CAPITAL GROWTH FUND...................... 1.04%
INTERNATIONAL EQUITY FUND................ 1.24%
MID-CAP EQUITY FUND...................... 1.04%
SMALL CAP EQUITY FUND.................... 1.05%
VALUE INCOME STOCK FUND.................. .80%
</TABLE>
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Advisor to the Small Cap Growth Stock, Sunbelt
Equity and Tax Sensitive Growth Stock Funds. As of May 31, 1998, Trusco had
approximately $22 billion in assets under management. For the fiscal year ended
May 31, 1998, Trusco received advisory fees of 1.04% for the Sunbelt Equity
Fund. The Small Cap Growth Stock and Tax Sensitive Growth Stock Funds had not
commenced operations as of May 31, 1998.
STI and Trusco co-manage the International Equity Index Fund. For the fiscal
year ended May 31, 1998, STI and Trusco received and shared advisory fees of
.77% for the Fund.
The Advisors may use their affiliates as brokers for Fund transactions.
PORTFOLIO MANAGERS
Mr. Anthony Gray has served as Chairman and Chief Investment Officer of STI
since 1979. He has managed the Capital Growth Fund since it began operating in
June 1992. He has more than 30 years of investment experience.
Mr. Mills Riddick, CFA, has served as Managing Director of STI since 1994. He
has managed the Value Income Stock Fund since April 1995. He has more than 15
years of investment experience, and has been a portfolio manager at STI since
1989. Prior to joining STI, Mr. Riddick served as a broker with Drexel Burnham
Lambert.
Mr. Brett Barner, CFA, has served as Vice President of STI since 1994. He has
managed the Small Cap Equity
<PAGE>
PROSPECTUS 23
EACH FUND'S PRINCIPAL INVESTMENTS
Fund since it began operating in January 1997. He has more than 10 years of
investment experience and has been a portfolio manager with STI since 1990.
Prior to joining STI, Mr. Barner served as a consultant with Drexel Burnham
Lambert and Shearson Lehman Brothers.
Mr. Elliott A. Perny has served as Senior Executive Vice President of STI since
September 1992. He has managed the Mid-Cap Equity Fund since October 1996. He
has more than 25 years of investment experience, and has served as a portfolio
manager at STI since 1991. Prior to joining STI, Mr. Perny served as a portfolio
manager at Florida National Bank and Atlantic Bank.
The Balanced Fund is co-managed by Mr. Anthony R. Gray and Mr. L. Earl Denney,
CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney, CFA, has
served as Senior Vice President of STI since 1983, has more than 20 years of
investment experience. Prior to joining STI, Mr. Denney served as a fixed income
portfolio manager with American National Bank.
Mr. James Foster has served as Vice President of Trusco since 1989. He has
managed the Sunbelt Equity Fund since it began operating in January 1994. He has
more than 27 years of investment experience.
Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed
the International Equity Fund since May 1997. He has more than 6 years of
investment experience. Prior to joining STI, he was a senior international
equity analyst for American Express Financial Advisors from 1996 to 1997 and for
the Principal Financial Group from 1992 to 1995.
Mr. Mark D. Garfinkel, CFA, has served as a portfolio manager at Trusco since
1994. He has managed the Small Cap Growth Stock Fund since it began operating in
October 1998. He has more than 10 years of investment experience and has been a
portfolio manager with SunTrust Banks or an affiliate since 1990.
Mr. Jonathan Mote, CFA, CFD, has served as a portfolio manager at Trusco since
August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began
operating in December 1998. He has more than 13 years of investment experience.
Prior to joining Trusco, Mr. Mote served as a portfolio manager with SunTrust
Banks or an affiliate.
PURCHASING FUND SHARES
HOW TO PURCHASE FUND SHARES
You may purchase Investor and Flex Shares directly from us by:
- - mail
- - telephone
- - wire
- - direct deposit, or
- - Automated Clearing House (ACH).
SIMPLY SPEAKING . . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open
for business (a Business Day).
To purchase shares directly from us, please call 1-800-874-4770. Write your
check, payable in U.S. dollars, to "STI Classic Funds" and include the name of
the appropriate Fund(s) on the check. We cannot accept third-party checks,
credit cards, credit card checks or cash. You may also purchase shares through
Investment Consultants of certain correspondent banks of SunTrust Banks, Inc.
(SunTrust), or other financial institutions that have executed dealer agreements
with us. We may reject any purchase order if we determine that accepting the
order would not be in the best interests of the STI Classic Funds or its
shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order plus, in the case of
Investor Shares, the applicable front-end sales charge. We calculate each Fund's
NAV once each Business Day at the regularly-scheduled close of normal trading on
the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, to receive
the current Business Day's NAV, generally we must receive your purchase order
before 4:00 p.m. Eastern time.
<PAGE>
24 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
SIMPLY SPEAKING . . .
FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS
If you purchase, sell or exchange Fund shares through a financial institution
(rather than directly from us), you may have to transmit your purchase, sale
and exchange requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows the financial
institution time to process your request and transmit it to us. For more
information about how to purchase, sell or exchange Fund shares through your
financial institution, you should contact your financial institution directly.
HOW WE CALCULATE NAV
In calculating NAV, we generally value a Fund's portfolio at market price. If
market prices are unavailable or we think that they are unreliable, fair value
prices may be determined in good faith using methods approved by the Board of
Trustees. Some Funds hold portfolio securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the Funds
do not calculate NAV. As a result, the NAV of these Funds' shares may change on
days when you cannot purchase or sell Fund shares.
SIMPLY SPEAKING . . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the
assets in the Fund.
MINIMUM PURCHASES
To purchase Investor Shares for the first time, you must invest at least $2,000
in any Fund. To purchase Flex Shares for the first time, you must invest at
least $10,000 in any Fund ($2,000 for retirement plans). To purchase additional
shares of any Fund, you must invest at least $1,000 or, if you pay by a
statement coupon, $100. We may accept investments of smaller amounts, for either
class of shares, at our discretion.
FUNDLINK
FUNDLINK is a telephone activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK, you must first contact your SunTrust Bank
Investment Consultant and complete the FUNDLINK application and authorization
agreements. Once you have signed up to use FUNDLINK, simply call us at
1-800-428-6970 to complete all of your purchase and redemption transactions.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a SunTrust affiliate bank, you
may purchase shares of either class automatically through regular deductions
from your account. With a $500 minimum initial investment, you may begin
regularly scheduled investments from $50 up to $100,000 once or twice a month.
If you are buying Flex Shares, you should plan on investing at least $10,000 per
Fund during the first two years. The Distributor may close your account if you
do not meet this minimum investment requirement at the end of two years.
SALES CHARGES
FRONT-END SALES CHARGES - INVESTOR SHARES
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
<TABLE>
<CAPTION>
YOUR SALES CHARGE
AS A PERCENTAGE YOUR SALES CHARGE
OF AS A PERCENTAGE OF
IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT
<S> <C> <C>
- -------------------------------------------------------------------
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%
</TABLE>
<PAGE>
PROSPECTUS 25
PURCHASING, SELLING AND EXCHANGING FUND SHARES
WAIVER OF FRONT-END SALES CHARGE -
INVESTOR SHARES
The front-end sales charge will be waived on Investor Shares purchased: (1)
through reinvestment of dividends and distributions; (2) through a SunTrust
Securities, Inc. asset allocation account; (3) by persons repurchasing shares
they redeemed within the last 60 days (see Repurchase of Investor Shares); (4)
by employees, and members of their immediate family, of SunTrust and its
affiliates; (5) by persons reinvesting distributions from qualified employee
benefit retirement plans and rollovers from individual retirement accounts
("IRAs") previously with the Trust department of a bank affiliated with
SunTrust; (6) by persons investing an amount less than or equal to the value of
an account distribution when an account for which a bank affiliated with
SunTrust acted in a fiduciary, administrative, custodial or investment advisory
capacity is closed; or (7) through dealers, retirement plans, asset allocation
programs and financial institutions that, under their dealer agreements with the
Distributor or otherwise, do not receive any or receive a reduced portion of the
front-end sales charge.
REPURCHASE OF INVESTOR SHARES
You may repurchase any amount of Investor Shares of any Fund at NAV (without the
normal front-end sales charge), equal to or less than the value of any amount of
Investor Shares (for which you paid a front-end sales charge) that you redeemed
within the past 60 days. In effect, this allows you to repurchase shares that
you may have had to redeem, without repaying the front-end sales charge. To
exercise this privilege, we must receive your purchase order within 60 days of
your redemption. In addition, you must notify us when you send in your purchase
order that you are repurchasing shares.
REDUCED SALES CHARGES - INVESTOR SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Investor Shares you already own to the
amount that you are currently purchasing. We will combine the value of your
current purchases with the current value of any Investor Shares you purchased
previously for (i) your account, (ii) your spouse's account, (iii) a joint
account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust or
estate may also use this right of accumulation. We will only consider the value
of Investor Shares purchased previously that were sold subject to a sales
charge. To be entitled to a reduced sales charge based on shares already owned,
you must ask us for the reduction at the time of purchase. You must provide us
with your account number(s) and, if applicable, the account numbers for your
spouse and/or children (and provide the children's ages). We may amend or
terminate this right of accumulation at any time.
LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase
Investor Shares of a Fund over a 13-month period and receive the same sales
charge as if you had purchased all the shares at the same time. We will only
consider the value of Investor Shares sold subject to a sales charge. To be
entitled to a reduced sales charge based on shares you intend to purchase over
the 13-month period, you must send us a Letter of Intent. As a result, neither
Investor Shares of the Money Market Funds nor Investor Shares purchased with
dividends or distributions will be included in the calculation. In calculating
the total amount of purchases you may include in your letter purchases made up
to 90 days before the date of the Letter. The 13-month period begins on the date
of the first purchase, including those purchases made in the 90-day period
before the date of the Letter. Please note that the purchase price of these
prior purchases will not be adjusted.
You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
us to hold in escrow 3.75% of the total
<PAGE>
26 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
amount you intend to purchase. If you do not complete the total intended
purchase at the end of the 13-month period, the transfer agent will redeem the
necessary portion of the escrowed shares to make up the difference between the
reduced rate sales charge (based on the amount you intended to purchase) and the
sales charge that would normally apply (based on the actual amount you
purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, we will combine same day purchases of Investor Shares (that
are subject to a sales charge) made by you, your spouse and your minor children
(under age 21). This combination also applies to Investor Shares you purchase
with a Letter of Intent.
CONTINGENT DEFERRED SALES CHARGES - FLEX SHARES
You do not pay a front-end sales charge when you purchase Flex Shares. But if
you sell your shares within the first year after your purchase, you will pay a
contingent deferred sales charge equal to 2.00% of either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
we receive your sale request, whichever is less. The sales charge does not apply
to Flex Shares you purchase through reinvestment of dividends or distributions.
So, you never pay a deferred sales charge on any increase in your investment
above the initial offering price. This sales charge does not apply to exchanges
of Flex Shares of one Fund for Flex Shares of another Fund.
The contingent deferred sales charge will be waived if you sell your Flex Shares
for the following reasons: (1) to make certain withdrawals from a retirement
plan (not including IRAs); (2) because of death or disability; or (3) for
certain payments under the Systematic Withdrawal Plan (which is discussed
below).
SIMPLY SPEAKING . . .
OFFERING PRICE OF FUND SHARES
The offering price of Investor Shares is the NAV next calculated after we
receive your request, plus the front-end sales load. The offering price of
Flex Shares is simply the next calculated NAV.
SELLING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. To sell your shares
by telephone, the amount of your sale must be at least $1,000. If you would like
to sell $25,000 or more of your shares, please notify us in writing and include
a signature guarantee (a notarized signature is not sufficient). The sale price
of each share will be the next NAV determined after we receive your request
less, in the case of Flex Shares, any applicable deferred sales charge.
SIMPLY SPEAKING . . .
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, we are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you
or your financial institution transact with us over the telephone, you will
generally bear the risk of any loss.
<PAGE>
PROSPECTUS 27
PURCHASING, SELLING AND EXCHANGING FUND SHARES
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with a
SunTrust affiliated bank, electronically transferred to your account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within five Business Days after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $7.00 fee) or sent to you by check. If you recently purchased your shares
by check or through ACH, redemption proceeds may not be available until your
check has cleared (which may take up to 15 Business Days).
REDEMPTIONS IN KIND
We generally pay sale (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) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay brokerage costs to sell the
securities distributed to you, as well as taxes on any capital gains from the
sale as with any redemption.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below the required minimum, $2,000 for Investor
Shares and $10,000 for Flex Shares, you may be required to sell your shares. You
will always be given at least 60 days' written notice to give you time to add to
your account and avoid selling your shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information.
EXCHANGING FUND SHARES
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone. You may also exchange shares through your financial
institution by mail or telephone. Exchange requests must be for an amount of at
least $1,000. You may exchange your shares up to four times during a calendar
year. If you exchange your shares more than four times during a year, you may be
charged a $10.00 fee for each additional exchange. You will be notified before
any fee is charged. If you recently purchased shares by check or through ACH,
you may not be able to exchange your shares until your check has cleared (which
may take up to 15 Business Days). This exchange privilege may be changed or
canceled at any time upon 60 days' notice.
SIMPLY SPEAKING . . .
EXCHANGES
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will based on the NAV next
calculated after we receive your exchange request.
INVESTOR SHARES
You may exchange Investor Shares of any Fund for Investor Shares of any other
Fund. If you exchange shares that you purchased without a sales charge or with a
lower sales charge into a Fund with a sales charge or with a higher sales
charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange.
<PAGE>
28 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
FLEX SHARES
You may exchange Flex Shares of any Fund for Flex Shares of any other Fund, or
for Investor Shares of the Money Market Funds. No contingent deferred sales
charge is imposed on redemptions of Money Market Funds shares you acquire in an
exchange, provided you hold your shares for at least one year from your initial
purchase. If you exchange Flex Shares for Investor Shares of a Money Market
Fund, you may only exchange those Money Market Fund Investor Shares for Flex
Shares.
<PAGE>
PROSPECTUS 29
HISTORICAL FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Investor and Flex
Shares of the Funds. This information is intended to help you understand each
Fund's financial performance for the past five years, or, if shorter, the period
of the Fund's operations. Some of this information reflects financial
information for a single Fund share. The total returns in the table represent
the rate that you would have earned (or lost) on an investment in a Fund,
assuming you reinvested all of your dividends and distributions. As of May 31,
1998, the Small Cap Growth Stock and Tax Sensitive Growth Stock Funds had not
commenced operations.
This information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain our annual report, which contains more performance information,
at no charge by calling 1-800-874-4700.
SIMPLY SPEAKING . . .
FINANCIAL HIGHLIGHTS
Study these tables to see how each Fund performed since it began investment
operations.
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED DISTRIBUTIONS
NET ASSET NET GAINS DISTRIBUTIONS FROM
VALUE INVESTMENT (LOSSES) FROM NET REALIZED NET ASSET
BEGINNING INCOME ON INVESTMENT CAPITAL VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN (A)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------
BALANCED FUND
- -------------
Investor Shares
1998........................... $11.99 $ 0.28 $ 2.19 $(0.29) $(1.03) $13.14 21.72%
1997........................... 11.60 0.29 1.48 (0.29) (1.09) 11.99 16.27
1996........................... 10.30 0.30 1.41 (0.30) (0.11) 11.60 16.88
1995........................... 9.79 0.28 0.51 (0.28) -- 10.30 8.29
1994(1)........................ 10.00 0.03 (0.24) -- -- 9.79 (2.10)**
Flex Shares
1998........................... $11.90 $ 0.20 $ 2.16 $(0.21) $(1.03) $13.02 20.85%
1997........................... 11.53 0.22 1.45 (0.21) (1.09) 11.90 15.40
1996(2)........................ 10.36 0.24 1.29 (0.25) (0.11) 11.53 15.58*
- --------------------
CAPITAL GROWTH FUND
- --------------------
Investor Shares
1998........................... $15.06 $(0.01) $ 3.95 $ -- $(2.57) $16.43 28.71%
1997........................... 14.89 0.03 3.10 (0.02) (2.94) 15.06 23.74
1996........................... 12.17 0.03 3.32 (0.04) (0.59) 14.89 28.18
1995........................... 11.98 0.09 0.57 (0.07) (0.40) 12.17 5.93
1994........................... 11.93 0.09 0.31 (0.09) (0.26) 11.98 3.26
Flex Shares
1998........................... $14.96 $(0.04) $ 3.87 $ -- $(2.57) $16.22 28.12%
1997........................... 14.84 (0.01) 3.07 -- (2.94) 14.96 23.24
1996(3)........................ 12.20 0.02 3.26 (0.05) (0.59) 14.84 27.48*
- ------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
Investor Shares
1998........................... $13.58 $ 0.02 $ 2.64 $ -- $(1.32) $14.92 21.39%
1997........................... 11.38 (0.01) 2.56 -- (0.35) 13.58 22.85
1996(4)........................ 10.44 0.04 0.90 -- -- 11.38 9.00**
Flex Shares
1998........................... $13.47 $ 0.07 $ 2.46 $ -- $(1.32) $14.68 20.54%
1997........................... 11.37 (0.04) 2.49 -- (0.35) 13.47 21.98
1996(4)........................ 10.44 0.02 0.91 -- -- 11.37 8.91**
- ------------------------------
INTERNATIONAL EQUITY INDEX FUND
- ------------------------------
Investor Shares
1998........................... $11.26 $ 0.16 $ 2.53 $(0.07) $(0.68) $13.20 25.25%
1997........................... 10.88 0.03 0.72 (0.07) (0.30) 11.26 7.12
1996........................... 10.20 0.05 0.85 (0.13) (0.09) 10.88 8.90
1995(5)........................ 10.00 0.05 0.17 (0.01) (0.01) 10.20 2.18**
Flex Shares
1998........................... $11.24 $ 0.17 $ 2.44 $ -- $(0.68) $13.17 24.50%
1997........................... 10.87 (0.05) 0.72 -- (0.30) 11.24 6.41
1996(6)........................ 10.24 -- 0.82 (0.10) (0.09) 10.87 8.32**
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES TO (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
END OF AVERAGE NET AVERAGE WAIVERS AND WAIVERS AND TURNOVER
PERIOD (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ ------------ ---------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
- -------------
BALANCED FUND
- -------------
Investor Shares
1998........................... $ 8,313 1.26% 2.21% 1.59% 1.88% 154%
1997........................... 6,012 1.25 2.58 1.64 2.19 197
1996........................... 4,896 1.25 2.70 1.89 2.06 155
1995........................... 3,765 1.25 3.17 1.80 2.62 157
1994(1)........................ 2,311 1.25* 2.46* 4.91* (1.20)* 106
Flex Shares
1998........................... $ 27,625 2.02% 1.41% 2.23% 1.20% 154%
1997........................... 6,067 2.01 1.84 2.45 1.40 197
1996(2)........................ 3,131 2.00* 1.85* 2.97* 0.88* 155
- --------------------
CAPITAL GROWTH FUND
- --------------------
Investor Shares
1998........................... $271,044 1.81% (0.03%) 2.01% (0.23%) 194%
1997........................... 218,660 1.80 0.19 2.02 (0.03) 141
1996........................... 191,078 1.80 0.24 2.08 (0.04) 156
1995........................... 160,875 1.80 0.73 2.10 0.43 128
1994........................... 170,795 1.80 0.64 2.11 0.33 124
Flex Shares
1998........................... $106,670 2.26% (0.46%) 2.37% (0.57%) 194%
1997........................... 36,753 2.27 (0.29) 2.43 (0.45) 141
1996(3)........................ 10,969 2.27* (0.29)* 2.68* (0.70)* 156
- ------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
Investor Shares
1998........................... $ 17,383 1.82% 0.24% 1.91% 0.15% 108%
1997........................... 10,674 1.81 0.18 2.05 (0.06) 139
1996(4)........................ 3,448 1.81* 1.73* 3.14* 0.40* 113
Flex Shares
1998........................... $ 21,164 2.52% (0.46%) 2.58% (0.52%) 108%
1997........................... 8,375 2.51 (0.27) 3.03 (0.79) 139
1996(4)........................ 953 2.51* 1.08* 5.86* (2.27)* 113
- ------------------------------
INTERNATIONAL EQUITY INDEX FUND
- ------------------------------
Investor Shares
1998........................... $ 7,141 1.46% 0.50% 1.84% 0.12% 1%
1997........................... 5,592 1.45 0.28 1.88 (0.15) 2
1996........................... 5,597 1.45 0.48 2.06 (0.13) 30
1995(5)........................ 3,960 1.45* 0.67* 2.44* (0.32)* 10
Flex Shares
1998........................... $ 1,469 2.11% (0.03%) 3.52% (1.44%) 1%
1997........................... 900 2.10 (0.39) 3.69 (1.98) 2
1996(6)........................ 917 2.10* (0.24)* 4.14* (2.28)* 30
</TABLE>
* Annualized.
** Return is for period indicated and has not been annualized.
(1) Commenced operations on January 4, 1994.
(2) Commenced operations on June 14, 1995.
<PAGE>
30 PROSPECTUS
HISTORICAL FINANCIAL INFORMATION
(3) Commenced operations on June 1, 1995.
(4) Commenced operations on January 2, 1996.
(5) Commenced operations on June 6, 1994.
(6) Commenced operations on June 8, 1995.
(A) Total return figures do not reflect applicable sales loads.
<TABLE>
<CAPTION>
NET
REALIZED
AND
UNREALIZED DISTRIBUTIONS
NET ASSET NET GAINS DISTRIBUTIONS FROM
VALUE INVESTMENT (LOSSES) FROM NET REALIZED NET ASSET
BEGINNING INCOME ON INVESTMENT CAPITAL VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN (A)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------
MID-CAP EQUITY FUND (B)
- -----------------------
Investor Shares
1998........................... $13.17 $(0.03) $ 2.49 $ -- $(1.96) $13.67 20.56%
1997........................... 12.74 (0.03) 1.69 (0.01) (1.22) 13.17 13.76
1996........................... 10.99 0.03 2.62 (0.03) (0.87) 12.74 24.93
1995........................... 9.84 0.03 1.15 (0.03) -- 10.99 11.96
1994(7)........................ 10.00 0.01 (0.17) -- -- 9.84 (1.60)**
Flex Shares
1998........................... $13.04 $(0.04) $ 2.38 $ -- $(1.96) $13.42 19.80%
1997........................... 12.69 (0.07) 1.64 -- (1.22) 13.04 13.06
1996(8)........................ 11.13 -- 2.45 (0.02) (0.87) 12.69 23.00*
- ---------------------
SMALL CAP EQUITY FUND
- ---------------------
Flex Shares
1998(9)........................ $11.28 $ 0.03 $ 2.17 $(0.06) $(0.62) $12.80 22.29%**
- -------------------
SUNBELT EQUITY FUND
- -------------------
Investor Shares
1998........................... $13.06 $(0.07) $ 2.98 $ -- $(1.20) $14.77 23.25%
1997........................... 13.95 (0.14) 0.24 -- (0.99) 13.06 1.05
1996........................... 9.96 (0.11) 4.30 -- (0.20) 13.95 2.58
1995........................... 9.69 (0.05) 0.36 -- (0.04) 9.96 3.20
1994(10)....................... 10.00 (0.02) (0.29) -- -- 9.69 (3.10)**
Flex Shares
1998........................... $13.00 $(0.09) $ 2.89 $ -- $(1.20) $14.60 22.48
1997........................... 13.97 (0.14) 0.16 -- (0.99) 13.00 0.46
1996(8)........................ 10.20 (0.07) 4.04 -- (0.20) 13.97 39.86*
- ------------------------
VALUE INCOME STOCK FUND
- ------------------------
Investor Shares
1998........................... $13.68 $ 0.20 $ 2.62 $(0.21) $(2.42) $13.87 22.71%
1997........................... 13.13 0.25 2.32 (0.26) (1.76) 13.68 21.69
1996........................... 11.58 0.30 2.71 (0.30) (1.16) 13.13 27.39
1995........................... 10.52 0.28 1.56 (0.27) (0.51) 11.58 18.71
1994........................... 10.23 0.26 0.67 (0.27) (0.37) 10.52 9.27
Flex Shares
1998........................... $13.61 $ 0.12 $ 2.57 $(0.13) $(2.42) $13.75 21.76%
1997........................... 13.08 0.18 2.29 (0.18) (1.76) 13.61 20.91
1996(11)....................... 11.59 0.26 2.65 (0.26) (1.16) 13.08 26.52*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
END OF TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER
PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ ---------- ---------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------
MID-CAP EQUITY FUND (B)
- -----------------------
Investor Shares
1998........................... $ 24,930 1.61% (0.75%) 1.84% (0.98%) 129%
1997........................... 20,245 1.60 (0.21) 1.85 (0.46) 152
1996........................... 17,971 1.60 0.25 1.96 (0.11) 116
1995........................... 7,345 1.60 0.43 2.27 (0.24) 66
1994(7)........................ 3,004 1.60* 0.74* 4.60* (2.26)* 8
Flex Shares
1998........................... $ 19,042 2.21% (1.37%) 2.47% (1.63%) 129%
1997........................... 10,120 2.20 (0.85) 2.58 (1.23) 152
1996(8)........................ 5,029 2.20* (0.37)* 3.04* (1.21)* 116
- ---------------------
SMALL CAP EQUITY FUND
- ---------------------
Flex Shares
1998(9)........................ $ 40,613 2.06%* 0.01%* 2.35%* (0.28%)* 55%
- -------------------
SUNBELT EQUITY FUND
- -------------------
Investor Shares
1998........................... $ 30,860 1.61% (1.35%) 1.86% (1.60%) 70%
1997........................... 28,095 1.60 (1.10) 1.84 (1.34) 72
1996........................... 29,002 1.60 (0.79) 1.93 (1.12)* 106
1995........................... 22,180 1.60 (0.57) 1.98 (0.95) 80
1994(10)....................... 16,077 1.60* (0.63)* 2.04* (1.07)* 21
Flex Shares
1998........................... $ 8,070 2.21% (1.96%) 2.58% (2.33%) 70%
1997........................... 5,689 2.20 (1.72) 2.69 (2.21) 72
1996(8)........................ 2,705 2.20* (1.43)* 3.62* (2.85)* 106
- ------------------------
VALUE INCOME STOCK FUND
- ------------------------
Investor Shares
1998........................... $210,591 1.27% 1.47% 1.27% 1.47% 99%
1997........................... 165,999 1.30 2.01 1.31 2.00 105
1996........................... 130,597 1.30 2.47 1.37 2.40 134
1995........................... 92,256 1.30 2.80 1.41 2.69 126
1994........................... 60,589 1.25 2.80 1.44 2.61 149
Flex Shares
1998........................... $180,530 2.01% 0.78% 2.01% 0.78% 99%
1997........................... 73,466 2.00 1.33 2.03 1.30 105
1996(11)....................... 26,298 2.00* 1.72* 2.15* 1.57* 134
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(7) Commenced operations on February 1, 1994.
(8) Commenced operations on June 5, 1995.
(9) Commenced operations on June 5, 1997.
(10) Commenced operations on January 4, 1994.
(11) Commenced operations on June 1, 1995.
(A) Total return figures do not reflect applicable sales loads.
(B) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund
changed its name to the Mid-Cap Equity Fund.
<PAGE>
PROSPECTUS 31
HOW FUND SHARES ARE DISTRIBUTED
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Fund's assets continuously, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. For
Investor Shares, maximum distribution fees, as a percentage of average daily net
assets, are as follows:
<TABLE>
<S> <C>
Balanced Fund .28%
Capital Growth Fund .68%
International Equity Fund .33%
International Equity Index Fund .38%
Mid-Cap Equity Fund .43%
Sunbelt Equity Fund .43%
Value Income Stock Fund .33%
</TABLE>
For Flex Shares, the maximum distribution fee is 1.00% of the average daily net
assets of each Fund.
<PAGE>
32 PROSPECTUS
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income quarterly, except the International Equity and
International Equity Index Funds. These Funds distribute income annually. The
Funds make distributions of capital gains, if any, at least annually. You will
receive dividends and distributions in the form of additional Fund shares unless
you elect to receive payment in cash. To elect cash payment, you must notify us
in writing prior to the date of the distribution. Your election will be
effective for dividends and distributions paid after we receive your written
notice. To cancel your election, simply send us written notice.
SIMPLY SPEAKING . . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to
receive the distribution.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE
OF FUND SHARES.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
SIMPLY SPEAKING . . .
FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you
reinvest them.
<PAGE>
HOW TO OBTAIN MORE INFORMATION
INVESTMENT ADVISORS
STI Capital Management, N.A.
Trusco Capital Management, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the STI Classic Funds is included in our SAI.
The SAI has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMIANNUAL REPORTS
These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies, and recent market conditions and trends.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE:
Call 1-800-874-4770
BY MAIL:
Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.
BY INTERNET:
http://www.suntrust.com
FROM THE SEC: You can also obtain these documents, and other information about
the STI Classic Funds, from the SEC's website ("http://www.sec.gov"). You may
review and copy documents at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009. The
Fund's Investment Company Act registration number is 811-06557.
<PAGE>
PROSPECTUS
The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important information
about the Investor Shares of the Money Market Funds that you should know before
investing. Please read this prospectus and keep it for future reference.
We arranged the prospectus into different sections so that you can easily review
this important information. On the next page, we discuss general information you
should know about investing in the Funds.
<TABLE>
<C> <S>
IF YOU WOULD LIKE MORE DETAILED INFORMATION
ABOUT EACH FUND, PLEASE SEE:
2 PRIME QUALITY MONEY MARKET FUND
4 TAX-EXEMPT MONEY MARKET FUND
6 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FOLLOWING TOPICS, PLEASE SEE:
8 EACH FUND'S PRINCIPAL INVESTMENTS
8 THE ADVISOR
9 PURCHASING, SELLING AND EXCHANGING FUND SHARES
12 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND
13 HOW FUND SHARES ARE DISTRIBUTED
14 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS
14 TAXES
TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC
FUNDS PLEASE REFER TO THE BACK COVER OF THE
PROSPECTUS
</TABLE>
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING"
EXPLANATIONS.
- --------------------------------------------------------------------------------
FUND SUMMARY
INVESTMENT STRATEGY
WHAT ARE THE RISKS OF INVESTING?
PERFORMANCE INFORMATION
WHAT IS AN INDEX?
FUND EXPENSES
FUND INVESTMENTS
INVESTMENT ADVISOR
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
OCTOBER 1, 1998
<PAGE>
PROSPECTUS 1
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in mutual
funds.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
Each Money Market Fund tries to maintain a constant price per share of $1.00,
but we cannot guarantee this.
Each Fund has its own investment goal and strategies for reaching that goal. But
we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be
changed without shareholder approval. Before investing, make sure that the
Fund's goal matches your own.
The Advisor invests each Fund's assets in a way that the Advisor believes will
help the Fund achieve its goal. The Advisor's judgments about the stock markets,
economy and companies, or selecting investments may not reflect actual market
movements, economic conditions or company performance.
<PAGE>
2 PROSPECTUS
PRIME QUALITY MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital and liquidity
INVESTMENT FOCUS Money market instruments
PRINCIPAL INVESTMENT Attempts to identify money market instruments with the most attractive risk/return
STRATEGY trade-off
INVESTOR PROFILE Conservative investors who want to receive current income from their investment
</TABLE>
INVESTMENT STRATEGY
The Prime Quality Money Market Fund invests exclusively in high
quality U.S. money market instruments and foreign money market instruments
denominated in U.S. dollars. In selecting investments for the Fund, we try to
increase income without adding undue risk. We analyze maturity, yields, market
sectors and credit risk. Investments are made in money market instruments with
the most attractive risk/return trade-off.
MONEY MARKET FUNDS
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These include CDs, bankers'
acceptances, commercial paper, U.S. Treasury securities, some municipal
securities, and repurchase agreements. A money market fund follows strict rules
about credit risk, maturity and diversification of its investments. An
investment in a money market fund is not a bank deposit. Although a money market
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in a money market fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 2.60%
1994 3.60%
1995 5.30%
1996 4.82%
1997 4.97%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
1.33% .64%
(6/30/95) (6/30/93)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.47%.
<PAGE>
PROSPECTUS 3
PRIME QUALITY MONEY MARKET FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE FIRST TIER AVERAGE.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (6/8/92)
<S> <C> <C> <C>
PRIME QUALITY
MONEY MARKET FUND 4.97% 4.25% 4.11%
IBC/DONOGHUE
FIRST TIER AVERAGE 5.01% 4.32% 4.25%
</TABLE>
TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The IBC/Donoghue First Tier
Average is a widely recognized composite of money market funds that invest
in the highest credit quality short-term money market instruments.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Distribution and Service (12b-1) Fees .20%
Other Expenses .17%
---------
Total Annual Fund Operating Expenses 1.02%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<S> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$104 $325 $563 $1248
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, administration and custody services. The 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 Advisor, the Distributor and the Administrator are voluntarily waiving a
portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES,
OTHER EXPENSES AND TOTAL OPERATING EXPENSES ARE .51%, .13%, .13% AND .77%,
RESPECTIVELY. The Advisor, Distributor and Administrator could discontinue
these voluntary waivers at any time. For more information about these fees,
see "Investment Advisor" and "How Fund Shares are Distributed."
<PAGE>
4 PROSPECTUS
TAX-EXEMPT MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current interest income exempt from federal income taxes, while preserving capital
and liquidity
INVESTMENT FOCUS Municipal money market instruments
PRINCIPAL INVESTMENT Attempts to increase income without added risk by analyzing credit quality
STRATEGY
INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their
investment
</TABLE>
INVESTMENT STRATEGY
The Tax-Exempt Money Market Fund invests substantially all of its
assets in money market instruments issued by municipalities and issuers that pay
income exempt from federal income taxes. In selecting investments for the Fund,
we analyze the credit quality and structure of each security to minimize risk.
We actively manage the Fund's average maturity based on current interest rates
and our outlook of the market.
MONEY MARKET FUNDS
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These include CDs, bankers'
acceptances, commercial paper, U.S. Treasury securities, some municipal
securities, and repurchase agreements. A money market fund follows strict rules
about credit risk, maturity and diversification of its investments. An
investment in a money market fund is not a bank deposit. Although a money market
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in a money market fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 1.90%
1994 2.37%
1995 3.36%
1996 2.94%
1997 3.11%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
.89% .42%
(6/30/95) (3/31/93)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 1.47%.
<PAGE>
PROSPECTUS 5
TAX-EXEMPT MONEY MARKET FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE TAX-FREE STOCKBROKER &
GENERAL PURPOSE AVERAGE.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (6/8/92)
<S> <C> <C> <C>
TAX-EXEMPT
MONEY MARKET FUND 3.11% 2.73% 2.68%
IBC/DONOGHUE
TAX-FREE STOCKBROKER &
GENERAL PURPOSE AVERAGE 3.14% 2.77% 2.77%
</TABLE>
TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The IBC/Donoghue Tax-Free
Stockbroker & General Purpose Average is a widely recognized composite of
money market funds that invest in short-term municipal securities exempt
from Federal taxation.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .55%
Distribution and Service (12b-1) Fees .15%
Other Expenses .15%
---------
Total Annual Fund Operating Expenses .85%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<S> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$87 $271 $471 $1049
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, administration and custody services. The 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 Advisor and the Distributor are voluntarily waiving a portion of their
fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING
EXPENSES ARE .49%, .10% AND .74%, RESPECTIVELY. The Advisor and Distributor
could discontinue these voluntary waivers at any time. For more information
about these fees, see "Investment Advisor" and "How Fund Shares are
Distributed."
<PAGE>
6 PROSPECTUS
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income, while preserving capital and liquidity
INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements
PRINCIPAL INVESTMENT Attempts to increase income without adding undue risk by analyzing yields
STRATEGY
INVESTOR PROFILE Conservative investors who want to receive current income
</TABLE>
INVESTMENT STRATEGY
The U.S. Government Securities Money Market Fund invests exclusively
in U.S. Treasury bills, notes, bonds and components of these securities,
government agency securities, and repurchase agreements involving these
securities. In selecting investments for the Fund, we try to increase income
without adding undue risk by analyzing yields. We actively manage the maturity
of the Fund and its portfolio to maximize the Fund's yield based on current
market interest rates and our outlook on the market.
MONEY MARKET FUNDS
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These include CDs, bankers'
acceptances, commercial paper, U.S. Treasury securities, some municipal
securities, and repurchase agreements. A money market fund follows strict rules
about credit risk, maturity and diversification of its investments. An
investment in a money market fund is not a bank deposit. Although a money market
fund seeks to keep a constant price per share of $1.00, you may lose money by
investing in a money market fund.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES
FROM YEAR TO YEAR.*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993 2.52%
1994 3.48%
1995 5.25%
1996 4.66%
1997 4.85%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
1.32% .61%
(6/30/95) (6/30/93)
</TABLE>
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S
TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.38%.
<PAGE>
PROSPECTUS 7
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE U.S. TREASURY & REPO
AVERAGE.
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (6/8/92)
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND 4.85% 4.15% 4.00%
IBC/DONOGHUE
U.S. TREASURY & REPO AVERAGE 4.89% 4.21% 4.13%
</TABLE>
TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397.
SIMPLY SPEAKING . . .
WHAT IS AN INDEX?
An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The IBC/Donoghue U.S. Treasury &
Repo Average is a widely recognized composite of money market funds that
invest in U.S. Treasury securities and repurchase agreements.
FUND EXPENSES
This table describes the Fund's expenses that you may pay indirectly if
you hold Fund shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Advisory Fees .65%
Distribution and Service (12b-1) Fees .17%
Other Expenses .15%
---------
Total Annual Fund Operating Expenses .97%
</TABLE>
- --------------------------------------------------
EXAMPLE
- --------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of each period. The Example also assumes that each year your
investment has a 5% return and Fund expenses remain the same. Although your
actual costs and returns might be different, your approximate costs of investing
$10,000 in the Fund would be:
<TABLE>
<S> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$99 $309 $536 $1190
</TABLE>
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, administration and custody services. The 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 Advisor and the Distributor are voluntarily waiving a portion of their
fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING
EXPENSES ARE .50%, .12% AND .77%, RESPECTIVELY. The Advisor and Distributor
could discontinue these voluntary waivers at any time. For more information
about these fees, see "Investment Advisor" and "How Fund Shares are
Distributed."
<PAGE>
8 PROSPECTUS
EACH FUND'S PRINCIPAL INVESTMENTS
FUND INVESTMENTS
The table below shows each Fund's principal investments. In other words,
the table describes the type or types of investments that we believe will
most likely help each Fund achieve its investment goal.
<TABLE>
<CAPTION>
PRIME QUALITY TAX-EXEMPT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Bank Obligations X
- ------------------------------------------------------------------------------------------------------------------------
Commercial Paper X X
- ------------------------------------------------------------------------------------------------------------------------
Corporate Obligations X
- ------------------------------------------------------------------------------------------------------------------------
Foreign Securities (U.S. Dollar denominated) X
- ------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities X
- ------------------------------------------------------------------------------------------------------------------------
Municipal Securities X
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities X X
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Each Fund also may invest in other securities, use other strategies and engage
in other investment practices, which are described in detail in our Statement of
Additional Information. Of course, we cannot guarantee that any Fund will
achieve its investment goal.
INVESTMENT ADVISOR
The Investment Advisor makes investment decisions for the Funds and continuously
reviews, supervises and administers its Funds' respective investment programs.
The Board of Trustees supervises the Advisor and establishes policies that the
Advisor must follow in its day-to-day management activities.
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Advisor to the Prime Quality Money Market Fund,
U.S. Government Securities Money Market Fund and Tax-Exempt Money Market Fund.
As of May 31, 1998, Trusco had approximately $22 billion in assets under
management. For the fiscal year ended May 31, 1998, Trusco received advisory
fees of:
<TABLE>
<S> <C>
PRIME QUALITY MONEY MARKET FUND.......... .51%
TAX-EXEMPT MONEY MARKET FUND............. .49%
U.S. GOVERNMENT SECURITIES MONEY MARKET
FUND................................... .50%
</TABLE>
The Advisor may use its affiliates as brokers for Fund transactions.
<PAGE>
PROSPECTUS 9
PURCHASING, SELLING AND EXCHANGING FUND SHARES
PURCHASING FUND SHARES
HOW TO PURCHASE FUND SHARES
You may purchase Investor Shares directly from us by:
- - mail
- - telephone
- - wire
- - direct deposit, or
- - Automated Clearing House (ACH).
SIMPLY SPEAKING . . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open
for business (a Business Day). But you may not purchase shares on federal
holidays.
To purchase shares directly from us, please call 1-800-874-4770. Write your
check, payable in U.S. dollars, to "STI CLASSIC FUNDS" and include the name of
the appropriate Fund(s) on the check. We cannot accept third-party checks,
credit cards, credit card checks or cash. You may also purchase shares through
Investment Consultants of certain correspondent banks of SunTrust Banks, Inc.
(SunTrust), or other financial institutions that have executed dealer agreements
with us. We may reject any purchase order if we determine that accepting the
order would not be in the best interests of the STI Classic Funds or its
shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order. We expect that the
NAV of each Fund will remain constant at $1.00 per share. We calculate each
Fund's NAV once each Business Day at the regularly-scheduled close of normal
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). Your
purchase order will be effective on the Business Day we receive it if:
- - we receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money
Market Fund or before 1:00 p.m. Eastern time for the Prime Quality and U.S.
Government Securities Money Market Funds; and
- - we receive federal funds (readily available) before we calculate NAV (normally
4:00 p.m. Eastern time).
Otherwise, your purchase order will be effective the following Business Day, as
long as we receive funds before we calculate NAV the following day.
SIMPLY SPEAKING . . .
FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS
If you purchase, sell or exchange Fund shares through a financial institution
(rather than directly from us), you may have to transmit your purchase, sale
and exchange requests to your financial institution at an earlier time for
your transaction to become effective that day. This allows the financial
institution time to process your request and transmit it to us. For more
information about how to purchase, sell or exchange Fund shares through your
financial institution, you should contact your financial institution directly.
HOW WE CALCULATE NAV
In calculating NAV, we generally value a Fund's portfolio using the amortized
cost valuation method, which is described in detail in our Statement of
Additional Information. If we think that amortized cost is unreliable, fair
value prices may be determined in good faith using methods approved by the Board
of Trustees. We expect each Fund's NAV to remain constant at $1.00 per share,
although we cannot guarantee this.
<PAGE>
10 PROSPECTUS
PURCHASING, SELLING AND EXCHANGING FUND SHARES
SIMPLY SPEAKING . . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the
assets in the Fund.
MINIMUM PURCHASES
To purchase Investor Shares for the first time, you must invest at least $2,000
in any Fund. To purchase additional shares of any Fund, you must invest at least
$1,000 or, if you pay by a statement coupon, $100. We may accept investments of
smaller amounts at our discretion.
FUNDLINK
FUNDLINK is a telephone activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK, you must first contact your SunTrust Bank
Investment Consultant and complete the FUNDLINK application and authorization
agreements. Once you have signed up to use FUNDLINK, simply call us at
1-800-428-6970 to complete all of your purchase and redemption transactions.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a SunTrust affiliate bank, you
may purchase shares of either class automatically through regular deductions
from your account. With a $500 minimum initial investment, you may begin
regularly scheduled investments from $50 up to $100,000 once or twice a month.
The Distributor may close your account if you do not meet this minimum
investment requirement at the end of two years.
SELLING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. To sell your shares
by telephone, the amount of your sale must be at least $1,000. If you would like
to sell $25,000 or more of your shares, please notify us in writing and include
a signature guarantee (a notarized signature is not sufficient). The sale price
of each share will be the next NAV determined after we receive your request.
Your sale order will be effective that same Business Day if we receive your
order before:
- - 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund; or
- - 1:00 p.m. Eastern time for the Prime Quality Money Market and U.S. Government
Securities Money Market Funds.
SIMPLY SPEAKING . . .
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, we are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you
or your financial institution transact with us over the telephone, you will
generally bear the risk of any loss.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each
<PAGE>
PROSPECTUS 11
PURCHASING, SELLING AND EXCHANGING FUND SHARES
withdrawal will be mailed to you by check or, if you have an account with a
SunTrust affiliated bank, electronically transferred to your account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within five Business Days after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $7.00 fee) or sent to you by check. If you recently purchased your shares
by check or through ACH, redemption proceeds may not be available until your
check has cleared (which may take up to 15 Business Days).
REDEMPTIONS IN KIND
We generally pay sale (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) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay brokerage costs to sell the
securities distributed to you, as well as taxes on any capital gains from the
sale as with any redemption.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below the $2,000 required minimum you may be
required to sell your shares. You will always be given at least 60 days' written
notice to give you time to add to your account and avoid selling your shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information.
EXCHANGING FUND SHARES
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone. You may also exchange shares through your financial
institution by mail or telephone. Exchange requests must be for an amount of at
least $1,000. You may exchange your shares up to four times during a calendar
year. If you exchange your shares more than four times during a year, you may be
charged a $10.00 fee for each additional exchange. You will be notified before
any fee is charged. If you recently purchased shares by check or through ACH,
you may not be able to exchange your shares until your check has cleared (which
may take up to 15 Business Days). This exchange privilege may be changed or
canceled at any time upon 60 days' notice.
Shares you exchange for the first time from a Money Market Fund (which has no
sales charge) into a Fund with a sales charge are subject to that sales charge.
Similarly, shares you exchange for the first time into a Fund with a higher
sales charge are subject to an incremental sales charge (the difference between
the lower and higher applicable sales charges). If you exchange shares into a
Fund with the same, lower or no sales charge there is no incremental sales
charge for the exchange.
SIMPLY SPEAKING . . .
EXCHANGES
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after we receive your exchange request.
<PAGE>
12 PROSPECTUS
HISTORICAL FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Investor Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions.
This information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-874-4700.
SIMPLY SPEAKING . . .
FINANCIAL HIGHLIGHTS
Study these tables to see how each Fund performed since it began investment
operations.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
------------ --------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------
PRIME QUALITY MONEY MARKET FUND
- ---------------------------------
Investor Shares
1998..................................... $ 1.00 $0.05 $ -- $(0.05) $ -- $1.00
1997..................................... 1.00 0.05 -- (0.05) -- 1.00
1996..................................... 1.00 0.05 -- (0.05) -- 1.00
1995..................................... 1.00 0.05 -- (0.05) -- 1.00
1994..................................... 1.00 0.03 -- (0.03) -- 1.00
- -------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -------------------------------
Investor Shares
1998..................................... $ 1.00 $0.03 $ -- $(0.03) $ -- $1.00
1997..................................... 1.00 0.03 -- (0.03) -- 1.00
1996..................................... 1.00 0.03 -- (0.03) -- 1.00
1995..................................... 1.00 0.03 -- (0.03) -- 1.00
1994..................................... 1.00 0.02 -- (0.02) -- 1.00
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- ----------------------------------------------
Investor Shares
1998..................................... $ 1.00 $0.05 $ -- $(0.05) $ -- $1.00
1997..................................... 1.00 0.05 -- (0.05) -- 1.00
1996..................................... 1.00 0.05 -- (0.05) -- 1.00
1995..................................... 1.00 0.04 -- (0.04) -- 1.00
1994..................................... 1.00 0.03 -- (0.03) -- 1.00
<CAPTION>
RATIO OF RATIO OF NET
NET RATIO OF INVESTMENT
RATIO OF INVESTMENT EXPENSES TO INCOME TO
NET EXPENSES INCOME AVERAGE NET AVERAGE NET
ASSETS TO TO ASSETS ASSETS
END OF AVERAGE AVERAGE (EXCLUDING (EXCLUDING
TOTAL PERIOD NET NET WAIVERS AND WAIVERS AND
RETURN (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------ --------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------
PRIME QUALITY MONEY MARKET FUND
- ---------------------------------
Investor Shares
1998..................................... 5.04 % $411,821 0.76% 4.93% 0.98% 4.71%
1997..................................... 4.84 283,544 0.75 4.74 0.97 4.52
1996..................................... 5.08 215,696 0.75 4.94 1.00 4.69
1995..................................... 4.62 157,616 0.75 4.55 1.01 4.29
1994..................................... 2.71 129,415 0.75 2.67 0.99 2.43
- -------------------------------
TAX-EXEMPT MONEY MARKET FUND
- -------------------------------
Investor Shares
1998..................................... 3.09 % $134,538 0.62% 3.04% 0.83% 2.83%
1997..................................... 2.97 102,013 0.62 2.92 0.83 2.71
1996..................................... 3.16 95,223 0.62 3.10 0.85 2.87
1995..................................... 3.00 87,647 0.55 3.00 0.87 2.68
1994..................................... 1.96 61,675 0.54 1.93 0.88 1.59
- ---------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- ---------------------------------------------
Investor Shares
1998..................................... 4.90 % $ 58,753 0.76% 4.79% 0.96% 4.59%
1997..................................... 4.69 63,178 0.75 4.59 0.96 4.38
1996..................................... 4.99 58,608 0.75 4.88 0.99 4.64
1995..................................... 4.51 46,639 0.75 4.51 1.02 4.24
1994..................................... 2.63 32,395 0.75 2.54 0.97 2.32
</TABLE>
<PAGE>
PROSPECTUS 13
HOW FUND SHARES ARE DISTRIBUTED
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Fund's assets continuously, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
Maximum distribution fees, as a percentage of average daily net assets, are as
follows:
<TABLE>
<S> <C> <C>
Prime Quality Money Market Fund .20%
Tax-Exempt Money Market Fund .15%
U.S. Government Securities Money Market Fund .17%
</TABLE>
<PAGE>
14 PROSPECTUS
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares daily and distributes its income monthly. The Funds make
distributions of capital gains, if any, at least annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.
SIMPLY SPEAKING . . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to
receive the distribution.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.
Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE
OF FUND SHARES.
The Tax-Exempt Money Market Fund intends to distribute federally tax-exempt
income. Each Fund may invest a portion of its assets in securities that generate
taxable income for federal or state income taxes. Income exempt from federal tax
may be subject to state and local taxes. Any capital gains distributed by this
Fund may be taxable.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings which experienced the smallest gain or
largest loss are sold first in an effort to minimize capital gains and enhance
after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.
SIMPLY SPEAKING . . .
FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you
reinvest them.
<PAGE>
HOW TO OBTAIN MORE INFORMATION
INVESTMENT ADVISOR
Trusco Capital Management, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the STI Classic Funds is included in our SAI.
The SAI has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMIANNUAL REPORTS
These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies, and recent market conditions and trends.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE:
Call 1-800-874-4770
BY MAIL:
Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.
BY INTERNET:
http://www.suntrust.com
FROM THE SEC: You can also obtain these documents, and other information about
the STI Classic Funds, from the SEC's website ("http://www.sec.gov"). You may
review and copy documents at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009. The
Fund's Investment Company Act registration number is 811-06557.
<PAGE>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES
MONEY MARKET FUND
INVESTMENT ADVISOR TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios. This Prospectus sets forth concisely
the information about the Shares of the Classic Institutional Cash Management
Money Market Fund and the Classic Institutional U.S. Treasury Securities Money
Market Fund (each a "Fund" and, together, the "Classic Institutional Money
Market Funds"). THE CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET
FUND SEEKS TO MANAGE ITS INVESTMENTS IN A MANNER CONSISTENT WITH THE CRITERIA
FOR OBTAINING AN AAA RATING BY MOODY'S INVESTORS SERVICE AND/OR AN AAA RATING BY
STANDARD & POOR'S CORPORATION. Investors are advised to read this Prospectus and
retain it for future reference.
A Statement of Additional Information relating to the Funds dated the same
date as this Prospectus has been filed with the Securities and Exchange
Commission and is available without charge through the Distributor, SEI
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-874-4770. The Statement of Additional Information is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE TRUST'S SHARES ARE NOT SPONSORED, ENDORSED, OR GUARANTEED BY, AND DO NOT
CONSTITUTE OBLIGATIONS OR DEPOSITS OF, THE ADVISOR OR ANY OF ITS AFFILIATES OR
CORRESPONDENTS INCLUDING SUNTRUST BANKS, INC., ARE NOT GUARANTEED OR INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1998
<PAGE>
2
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
3
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Trust's Statement of
Additional Information in connection with the offering made by this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Trust or SEI Investments Distribution Co.
(the "Distributor"). This Prospectus does not constitute an offering by the
Trust or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.
Shares of the Classic Institutional Money Market Funds are offered primarily to
various types of institutional investors ("Shareholders"), including SunTrust
Banks, Inc. and its affiliates and correspondents, for the investment of funds
for which they act in a fiduciary, agency, investment advisory or custodial
capacity.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary...................... 4
Financial Highlights................. 5
The Trust............................ 6
Funds and Investment Objectives...... 6
Investment Policies and Strategies... 6
General Investment Policies and
Strategies.......................... 7
Investment Risks..................... 7
Investment Limitations............... 8
Performance Information.............. 9
Purchase of Fund Shares.............. 9
Redemption of Fund Shares............ 10
Dividends and Distributions.......... 10
Tax Information...................... 11
STI Classic Funds Information........ 12
The Trust............................ 12
Board of Trustees.................... 12
Investment Advisor................... 12
Banking Laws......................... 13
Distribution......................... 13
Administration....................... 14
Transfer Agent and Dividend
Disbursing Agent.................... 14
Custodian............................ 14
Legal Counsel........................ 14
Independent Public Accountants....... 14
Other Information.................... 14
Voting Rights........................ 14
Reporting............................ 15
Shareholder Inquiries................ 15
Description of Permitted
Investments......................... 15
Appendix............................. A-1
</TABLE>
<PAGE>
4
EXPENSE SUMMARY
Below is a summary of the estimated annual operating expenses for shares of each
Classic Institutional Money Market Fund. A hypothetical example based on the
summary is also shown. Actual expenses may vary.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASSIC
INSTITUTIONAL CLASSIC INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY SECURITIES
MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Management Fees (after voluntary reductions)(1)............. .11% .03%
All Other Expenses (after voluntary reductions)(2).......... .09% .17%
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after voluntary reductions)(3).... .20% .20%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from each
Fund. The Advisor reserves the right to terminate its waiver at any time in
its sole discretion. Absent such waivers and reimbursements, Advisory Fees
for the Funds would be as follows: Classic Institutional Cash Management
Money Market Fund--.20%, Classic Institutional U.S. Treasury Securities
Money Market Fund-- .20%. See "Investment Advisors." A person that purchases
shares through an account with a financial institution may be charged
separate fees by the financial institution.
(2) The Administrator is waiving, on a voluntary basis, a portion of its fee
from each Fund. The Administrator reserves the right to terminate its waiver
at any time in its sole discretion. Absent such waivers and reimbursements,
Other Expenses for the Funds would be as follows: Classic Institutional Cash
Management Money Market Fund--.11%, Classic Institutional U.S. Treasury
Securities Money Market Fund--.19%.
(3) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Classic Institutional Cash Management Money
Market Fund--.31%, Classic Institutional U.S. Treasury Securities Money
Market Fund--.39%.
<TABLE>
<CAPTION>
CLASSIC INSTITUTIONAL CLASSIC INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY SECURITIES
MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses on a $1,000 investment
assuming: (1) a 5% annual return and (2) redemption at the end of
each time period:
One Year....................................................... $ 2 $ 2
Three Years.................................................... 6 6
Five Years..................................................... 11 11
Ten Years...................................................... 26 26
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON THE ESTIMATED TOTAL OPERATING EXPENSES OF A FUND AND
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is
to assist the investor in understanding the various costs and expenses that may
be directly or indirectly borne by investors in the Trust.
<PAGE>
5
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Classic Institutional Money Market Funds. The financial highlights for the Funds
for the periods from inception through May 31, 1998 have been audited by Arthur
Andersen LLP, independent public accountants, whose report appears in STI
Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
For the Period From Inception Through May 31, 1998
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
----------- ----------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
- ---------------------------------------------------------
Institutional Shares
1998................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00 5.63%
1997(A)................ 1.00 0.02 -- (0.02 ) -- 1.00 2.51*
- --------------------------------------------------------------
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------
Institutional Shares
1998................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00 5.50%
1997(A)................ 1.00 0.02 -- (0.02 ) -- 1.00 2.46*
<CAPTION>
RATIO OF NET
RATIO OF NET RATIO OF EXPENSES INVESTMENT INCOME
RATIO OF INVESTMENT TO AVERAGE NET TO AVERAGE NET
NET ASSETS EXPENSES TO INCOME TO ASSETS (EXCLUDING ASSETS (EXCLUDING
END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND
PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------ ------------- ------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------
CLASSIC INSTITUTIONAL CASH
- ---------------------------
Institutional Shares
1998................... $ 374,802 0.16 % 5.49 % 0.30 % 5.35 %
1997(A)................ 395,673 0.06 5.49 0.52 5.03
- ---------------------------
CLASSIC INSTITUTIONAL U.S.
- ---------------------------
Institutional Shares
1998................... $ 140,334 0.18 % 5.34 % 0.38 % 5.14 %
1997(A)................ 20,238 0.09 5.27 0.51 4.85
</TABLE>
(A) Commenced operations on December 12, 1996.
* Total return is for the period indicated and has not been annualized.
<PAGE>
6
THE TRUST
STI CLASSIC FUNDS (the "Trust") is a diversified, open-end management investment
company that provides a convenient and economical means of investing in several
professionally managed portfolios of securities. The Trust currently offers
units of beneficial interest ("shares") in a number of separate Funds. This
Prospectus relates to the Classic Institutional Money Market Funds described
below.
FUNDS AND INVESTMENT OBJECTIVES
THE CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND seeks to provide as
high a level of current income as is consistent with preservation of capital and
liquidity by investing exclusively in high quality money market instruments
issued by corporations and the U.S. Government.
THE CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND seeks to
provide as high a level of current income as is consistent with preservation of
capital and liquidity by investing exclusively in bills, notes and bonds issued
by the U.S. Treasury and repurchase agreements ("U.S. Treasury obligations")
with approved dealers collateralized by U.S. Treasury obligations.
It is a fundamental policy of each Classic Institutional Money Market Fund to
use its best efforts to maintain a constant net asset value of $1.00 per share.
There can be no assurance that either Fund will achieve its investment objective
or maintain a net asset value of $1.00 per share on a continuous basis.
Each Classic Institutional Money Market Fund intends to comply with federal
regulations applicable to money market funds using the amortized cost method for
calculating net asset value, which require each Fund to invest only in U.S.
dollar denominated obligations, to maintain an average maturity on a
dollar-weighted basis of 90 days or less and to acquire eligible securities that
present minimal credit risk and have a maturity of 397 days or less. The Classic
Institutional U.S. Treasury Securities Money Market Fund seeks to manage its
investments in a manner consistent with the criteria for obtaining an Aaa rating
by Moody's Investors Service ("Moody's") and/or an AAA rating by Standard &
Poor's Corporation ("S&P"). These requirements will also limit the Classic
Institutional U.S. Treasury Securities Money Market Fund's ability to generate
high current income. For a further discussion of these rules, see "Description
of Permitted Investments."
INVESTMENT POLICIES AND STRATEGIES
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
The Classic Institutional Cash Management Money Market Fund will invest in money
market instruments denominated in U.S. dollars consisting of: (i) U.S. Treasury
obligations; (ii) receipts; (iii) obligations issued or guaranteed as to
principal and interest by agencies and instrumentalities of the U.S. Government;
(iv) commercial paper issued by domestic and foreign issuers rated in the
highest short-term rating category by one or more nationally recognized
statistical rating organizations (an "NRSRO") as described in the "Appendix" or,
if not rated, determined by the Advisor to be of comparable quality; (v) high
quality obligations (including certificates of deposit, time deposits, bankers'
acceptances, Eurodollar and Yankee bank obligations) of U.S. commercial banks
(including foreign branches of such banks), and U.S. and London branches of
foreign banks or savings and loan and thrift institutions that are
<PAGE>
7
members of the Federal Reserve System, the Federal Deposit Insurance
Corporation, or savings and loan associations; (vi) high quality short-term
corporate obligations issued by companies with commercial paper meeting the
ratings indicated in (iv) above, or, if not rated, determined by the Advisor to
be of comparable quality; (vii) repurchase agreements involving such
obligations; (viii) high quality obligations of supranational entities
satisfying the credit ratings described in (iv) above, or, if not rated,
determined by the Advisor to be of comparable quality; (ix) high quality medium
term notes; (x) municipal securities; (xi) mortgage-backed securities and (xii)
asset-backed securities. The Fund may not invest more than 25% of its total
assets in obligations issued by foreign branches of U.S. banks and London
branches of foreign banks. The Fund may purchase securities subject to standby
commitments. The Fund may also purchase restricted securities. As a money market
fund, the Fund is subject to limitations on the percentage of its assets that
may be invested in any one issuer and on the percentage that may be invested in
securities carrying the second highest rating assigned by the requisite NRSROs.
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
The Classic U.S. Treasury Securities Money Market Fund will invest exclusively
in U.S. Treasury obligations and any repurchase agreements with dealers will be
selected pursuant to guidelines adopted by the Trust's Board of Trustees and
collateralized by U.S. Treasury obligations.
The Fund, however, seeks to invest exclusively in securities that would qualify
to be rated in the highest ratings category of an NRSRO, such as S&P or Moody's.
As a result, the Fund's ability to maintain an average dollar-weighted portfolio
maturity to the maximum extent permitted by Rule 2a-7 will be limited, and the
Fund's performance may be affected adversely.
GENERAL INVESTMENT POLICIES AND STRATEGIES
In the event that a security owned by a Fund is downgraded below the stated
rating categories, the Advisor will review and take appropriate action with
regard to the security.
Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its total assets. No Fund may purchase additional securities while
its outstanding borrowings exceed 5% of its assets.
It is a non-fundamental policy of each Fund to invest no more than 10% of its
net assets in illiquid securities. An illiquid security is a security which
cannot be disposed of in the usual course of business within seven days at a
price approximating its carrying value. Rule 144A securities and Section 4(2)
commercial paper that meet the criteria established by the Board of Trustees of
the Trust may be considered liquid.
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
FOREIGN SECURITIES
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
risks and considerations include differences in accounting, auditing and
financial reporting standards, generally higher commission rates on foreign
portfolio
<PAGE>
8
transactions, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investment in foreign countries and potential
restrictions of the flow of international capital and currencies. Foreign
companies may also be subject to less government regulation than U.S. companies.
Moreover, the dividends payable on the foreign securities may be subject to
foreign withholding taxes, thus reducing the net amount of income available for
distribution to the Fund's Shareholders. Foreign securities often trade with
less frequency and volume than domestic securities and, therefore, may exhibit
greater price volatility.
GOVERNMENT SECURITIES
Guarantees of a Fund's securities by the U.S. Government, its agencies or
instrumentalities guarantee only the payment of principal and interest on the
guaranteed securities, and do not guarantee the securities' yield or value or
the yield or value of a Fund's shares.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to the risk of prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund generally will
reinvest the proceeds in securities with a yield that reflects prevailing
interest rates, which may be lower than the prepaid security.
ZERO COUPON OBLIGATIONS
Each Fund may invest, subject to its investment objective and policies, in zero
coupon obligations. Zero coupon obligations are sold at original issue discount
and do not make periodic payments. Zero coupon obligations may be subject to
greater fluctuations in value due to interest rate changes than interest bearing
obligations. A Fund will be required to include the imputed interest in zero
coupon obligations in its current income. Because each Fund distributes all of
its net investment income to Shareholders, the Fund may have to sell portfolio
securities to distribute the income attributable to these obligations and
securities at a time when the Advisor would not have chosen to sell such
obligations or securities.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a Fund without the
consent of the holders of a majority of the Fund's outstanding shares. The term
"majority of the outstanding shares" means the vote of (i) 67% or more of a
Fund's shares present at a meeting, if more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of a
Fund's outstanding shares, whichever is less.
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if as a result more than 5% of the total assets of a
Fund would be invested in the securities of such issuer; provided, however, that
a Fund may invest up to 25% of its assets in "first tier" securities of a single
issuer for a period of up to three business days.
2. Purchase any securities which would cause more than 25% of the total assets
of a Fund to be invested in the securities of one or more
<PAGE>
9
issuers conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the U.S. Government, its agencies and instrumentalities,
repurchase agreements involving such securities and, with respect to only the
Classic Institutional Cash Management Money Market Fund, obligations issued by
domestic branches of U.S. banks or U.S. branches of foreign banks subject to the
same regulations as U.S. banks. For purposes of this limitation, (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii)
supranational entities will be considered to be a separate industry.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
PERFORMANCE INFORMATION
From time to time each Classic Institutional Money Market Fund may advertise its
"current yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"current yield" of a Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "current yield" because of the compounding effect of this
assumed reinvestment.
PURCHASE OF FUND SHARES
Shares of the Fund are sold primarily to various types of institutional
investors, including subsidiaries of SunTrust Banks, Inc. ("SunTrust"), for the
investment of funds for which they act in a fiduciary, agency, investment
advisory or custodial capacity. Shares are sold without a sales charge, although
the institutional investors may charge their customer accounts for services
provided in connection with the purchase of shares. The minimum initial
investment is $10,000,000. Institutional investors may impose an earlier cut-off
time for receipt of purchase orders directed through them to allow for
processing and transmittal of the reorders to Federated Services Company (the
"Transfer Agent") for effectiveness the same day. Information concerning these
services and any charges will be provided to customers by the institutional
investors. Shares will be held of record by the institutional investors,
although customers may have or be given the right to vote the shares depending
upon the terms of their relationship with the institutional investor.
Confirmations of share purchases and redemptions will be sent to the
institutional investor as the shareholder of record.
Shares may be purchased on days on which the New York Stock Exchange is open for
business (a "Business Day"). However, shares cannot be purchased or redeemed for
same day settlement on days the Federal Reserve is closed.
<PAGE>
10
Purchase orders for the Funds will be effective as of the Business Day received
by the Transfer Agent and eligible to receive dividends declared the same day if
the Transfer Agent receives the order before 1:00 p.m. Eastern time, and the
Custodian receives federal funds before 4:00 p.m. Eastern time on such day.
Otherwise, purchase orders for the Funds will be effective the next Business Day
provided the Custodian receives readily available funds before 4:00 p.m. Eastern
time on the next such Business Day. The purchase price is the net asset value
per share next computed after the order is received and accepted by the Trust.
The net asset value per share is calculated as of the regularly scheduled close
of normal trading on the New York Stock Exchange (currently 4:00 p.m. Eastern
time) each Business Day based on the amortized cost method described in the
Statement of Additional Information and is expected to remain constant at $1.00
per share.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or
Shareholder(s).
Neither the Trust's Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon telephone or wire instructions
reasonably believed to be genuine. The Trust maintains procedures, including
identification methods and other means, for ascertaining the identity of callers
and authenticity of instructions.
REDEMPTION OF FUND SHARES
An order to redeem shares must be transmitted to the Transfer Agent by the
institutional investor as the record owner of shares. Institutional investors
may establish procedures for their customers to request redemption of shares
held in their account with the institutional investor. Customers should contact
their institutional investor for information concerning these procedures.
Redemption orders must be received by the Transfer Agent on a Business Day
before 1:00 p.m. Eastern time. Redemption orders received after the time noted
above will be executed the following day. The Trust reserves the right to wire
redemption proceeds within five Business Days after receiving the redemption
orders if, in the judgment of the Advisor, an earlier payment could adversely
impact a Fund.
The Trust intends to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, payment may be made wholly or
partly in liquid portfolio securities with a market value equal to the
redemption price. In such circumstances, an investor may incur brokerage costs
in converting such securities to cash.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (exclusive of capital gains) of each of the
Classic Institutional Money Market Funds are declared on each Business Day to
Shareholders at the close of business on the day of declaration. Net income for
dividend purposes consists of: (i) interest accrued and original issue discount
earned on the Fund's assets, (ii) plus the amortization of market discount and
minus the amortization of market premium on such assets, (iii) less accrued
expenses directly attributable to the Fund and the general expenses of the Trust
prorated to the Fund on the basis of its relative net assets. Shares begin
earning dividends on the Business Day the purchase order is effective and
continue earning dividends through and including the Business Day before the
redemption order is effective. Dividends are
<PAGE>
11
paid within ten Business Days after the end of each month in the form of
additional shares of the same Fund unless the Shareholder has elected prior to
the date of distribution to receive payment in cash. Such election, or any
revocation thereof, must be made in writing at least 15 days prior to the date
of distribution to the Transfer Agent and will become effective with respect to
dividends paid after its receipt. Dividends are paid within ten Business Days
after a Shareholder's complete redemption of its shares in a Fund.
TAX INFORMATION
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of each Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies by the Internal
Revenue Code of 1986, as amended (the "Code"), so that it will be relieved of
federal income tax on that part of its net investment income and net capital
gains (the excess of long-term capital gains over net short-term capital loss)
which is distributed to Shareholders. Each Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment companies.
TAX STATUS OF DISTRIBUTIONS
The Institutional Money Market Funds will each distribute all of their net
investment income (including, for this purpose, net short-term capital gains) to
Shareholders. Dividends from net investment income will be taxable to
Shareholders as ordinary income whether received in cash or in additional
shares. Each Fund will make annual reports to Shareholders of the federal income
tax status of all distributions. Dividends declared by a Fund in October,
November or December of any year and payable to Shareholders of record on a date
in that month will be deemed to have been paid by the Fund and received by the
Shareholders on December 31, of that year, if paid by the Fund any time during
the following January.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by a Shareholder provided certain state specific conditions are
satisfied. Not all states permit such income dividends to be tax-exempt and some
require that a certain minimum percentage of an investment company's income be
derived from state tax-exempt interest. Each Fund will inform Shareholders
annually of the percentage of income and distributions derived from direct U.S.
obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered tax
exempt in their particular states.
A sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
<PAGE>
12
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated January 15, 1992. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each Fund. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Share-
holders, costs of custodial services and registering the shares under federal
and state securities laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
BOARD OF TRUSTEES
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described below, certain
companies provide essential management services to the Trust.
INVESTMENT ADVISOR
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the
Institutional Money Market Funds. As of May 31, 1998, Trusco had approximately
$22 billion in assets under management. The principal business address of Trusco
is 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303.
The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $76
billion as of June 30, 1998. SunTrust ranks among the twenty largest U.S.
banking companies. Its three principal subsidiaries, SunTrust Banks of Florida,
Inc., SunTrust Banks of Georgia, Inc. and SunTrust Banks of Tennessee, Inc.,
provide a wide range of personal and corporate banking, trust, and investment
services through more than 600 locations in the three-state area. Total
discretionary assets under management with SunTrust Banks, Inc. equalled
approximately $103 billion as of June 30, 1998.
The Trust and the Advisor have entered into an advisory agreement (the "Advisory
Agreement"). Under the Advisory Agreement, the Advisor makes the investment
decisions for the assets of the Funds and continuously reviews, supervises and
administers each Fund's investment program. The Advisor discharges its
responsibilities subject to the supervision of, and policies established by, the
Trustees of the Trust. STI CLASSIC FUNDS ARE NOT DEPOSITS, ARE NOT INSURED OR
GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY, AND ARE NOT ENDORSED OR
GUARANTEED BY AND DO NOT CONSTITUTE OBLIGATIONS OF SUNTRUST BANKS, INC. OR ANY
OF ITS AFFILIATES. INVESTMENTS IN THE FUNDS INVOLVE RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE AND SHARES AT
REDEMPTION MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THERE IS NO
GUARANTEE THAT ANY STI CLASSIC FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. With
respect to each Fund, the Advisor may execute brokerage or other agency
transactions through affiliates of the Advisor.
For the services provided and expenses incurred pursuant to the Advisory
Agreement: Trusco is entitled to receive advisory fees
<PAGE>
13
computed daily and paid monthly at the annual rate of .20% of the average daily
net assets of each Fund.
From time to time, the Advisor may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. Currently, the
Advisor has agreed to voluntary reductions in its fees in amounts necessary to
maintain the total operating expenses at the amounts set forth in the Expense
Summary. Voluntary reductions of fees may be terminated at anytime.
For the fiscal year ended May 31, 1998, the Advisor received advisory fees
computed daily and paid monthly at the annual rate of .07% of the average daily
net assets of the Institutional Cash Management Money Market Fund, and received
advisory fees computed daily and paid monthly at the annual rate of .01% of the
Institutional U.S. Treasury Securities Money Market Fund.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, currently
(a) prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 or its affiliates from sponsoring, organizing, controlling,
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and generally prohibit banks
from underwriting securities, but (b) do not prohibit such a bank holding
company or affiliate or banks generally from acting as an investment advisor,
transfer agent, or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of a customer. The
Advisor believes that it may perform the services for STI Classic Funds
contemplated by its Advisory Agreement described in this Prospectus without
violation of applicable banking laws or regulations. However, future changes in
legal requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent the Advisor from continuing to perform services for the Funds. If the
Advisor was prohibited from providing services to the Funds, the Board of
Trustees would consider selecting another qualified firm. Any new investment
advisory agreements would be subject to Shareholder approval.
If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the Advisor, or its affiliates, would consider the
possibility of offering to perform additional services for STI Classic Funds. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which the Advisor, or such affiliates, might
offer to provide such services.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DISTRIBUTION
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company ("SEI Investments"), and the Trust are parties to a
distribution agreement. No compensation is paid to the Distributor for
distribution services. Shares of the Classic Institutional Money Market Funds
are offered primarily to institutional investors,
<PAGE>
14
including affiliates and correspondents for the investment of funds in which
they act in a fiduciary, agency or custodial capacity.
Each Fund may execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as Administrator to the Trust.
The Administrator provides the Trust with certain administrative services, other
than investment advisory services, including regulatory reporting, all necessary
office space, equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate as follows:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS FEE
- --------------------------------------------- ---------
<S> <C>
$1 - $1 billion .12%
over $1 billion to $5 billion .09%
over $5 billion to $8 billion .07%
over $8 billion to $10 billion .065%
over $10 billion .06%
</TABLE>
From time to time, the Administrator may voluntarily waive all or a portion of
its fee to limit the net expenses of the Funds to the amounts in the Funds'
Expense Summary.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779 is the transfer agent for the shares of the Trust and dividend
disbursing agent for the Trust.
CUSTODIAN
SunTrust Bank, Atlanta, c/o STI Trust & Investment Operations, Inc., 303
Peachtree Street N.E., 14th Floor, Atlanta, Georgia 30308 serves as custodian of
the assets of each Fund. The custodian holds cash, securities and other assets
of the Funds as required by the Investment Company Act of 1940.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
OTHER INFORMATION
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. Each Fund or
class of a Fund will vote separately on matters relating solely to that Fund or
class. As a Massachusetts business trust, the Trust is not required to hold
annual meetings of Shareholders but approval will be sought for certain changes
in the operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
<PAGE>
15
REPORTING
The Trust issues unaudited financial information and audited financial
statements annually. The Trust furnishes proxy statements and other reports to
Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders may contact their financial institution's representative in order
to obtain information on account statements, procedures and other related
information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, however, the payment of principal and
interest on such obligations may be guaranteed up to certain amounts and for a
certain period by a letter of credit issued by a financial institution (such as
a bank or insurance company) unaffiliated with the issuers of such securities.
The purchase of asset-backed securities raises risk considerations peculiar to
the financing of the instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in the obligations
superior to that of the holders of the asset-backed securities. There also is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on those securities. Asset-backed
securities entail prepayment risk, which may vary depending on the type of
asset, but is generally less than the prepayment risk associated with
mortgage-backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
<PAGE>
16
EURODOLLAR AND YANKEE BANK OBLIGATIONS -- Eurodollar bank obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
United States by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the United States
by foreign banks.
ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be
disposed of within seven business days at approximately the price at which they
are being carried on the Fund's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, where there is no
secondary market for such security, and repurchase agreements with durations (or
maturities) over seven days in length.
MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered
corporate or agency debt that differs from traditionally underwritten corporate
bonds only in the process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed
by the full faith and credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the instrumentalities' right to
borrow from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"): CMOs are debt obligations or
multiclass pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially
<PAGE>
17
earlier than their stated maturities or final distribution dates, resulting in a
loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and investes in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax-exempt commercial paper tax
anticipation notes, revenue anticipation notes, bond anticipation notes,
certificates of indebtedness, demand notes and construction loan notes and
participation interests in municipal notes. Municipal bonds include general
obligation bonds, revenue or special obligation bonds, private activity and
industrial development bonds and participation interests in municipal bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. The payment of principal and interest
on private activity and industrial development bonds generally is dependent
solely on the ability of a facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as security for such payment.
TAXABLE MUNICIPAL SECURITIES -- Taxable municipal securities are municipal
securities the interest on which is not exempt from federal income tax. Taxable
municipal securities include "private activity bonds" that are issued by or on
behalf of states or political subdivisions thereof to finance privately-owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking lots, and low income
housing. The payment of the principal and interest on private activity bonds is
not backed by a pledge of tax revenues, and is dependent solely on the ability
of the facility's user to meet its financial obligations, and may be secured by
a pledge of real and personal property so financed. Interest on these bonds may
not be exempt from federal income tax.
<PAGE>
18
RECEIPTS -- Receipts are interests in separately traded interest and principal
component parts of U.S. Treasury obligations that are issued by banks and
brokerage firms and are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts are sold as
zero coupon securities which means that they are sold at a substantial discount
and redeemed at face value at their maturity date without interim cash payments
of interest or principal. This discount is amortized over the life of the
security and such amortization will constitute the income earned on the security
for both accounting and tax purposes. Because of these features, receipts may be
subject to greater price volatility than interest paying U.S. Treasury
obligations. See also "Taxes".
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. A Fund bears a risk of loss in the event the other
party defaults on its obligations and the Fund is delayed or prevented from
exercising its right to dispose of the collateral or if the Fund realizes a loss
on the sale of the collateral. A Fund will enter into repurchase agreements only
with financial institutions deemed to present minimal risk of bankruptcy during
the term of the agreement based on established guidelines. Repurchase agreements
are considered loans under the Investment Company Act of 1940.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS -- Investments by a money market
fund are subject to limitations imposed under regulations adopted by the
Securities and Exchange Commission. Under these regulations, money market funds
may only acquire obligations that present minimal credit risk and that are
"eligible securities," which means they are (i) rated, at the time of
investment, by at least two NRSROs organizations (one if it is the only
organization rating such obligation) in the highest rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest rating
category or, if unrated, determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and securities that have a
short-term rating. In the case of taxable money market funds, investments in
second tier securities are subject to the further constraints in that (i) no
more than 5% of a Fund's assets may be invested in second tier securities and
(ii) any investment in securities of any one such issuer is limited to the
greater of 1% of the Fund's total assets or $1 million. A taxable money market
fund may also hold more than 5% of its assets in first tier securities of a
single issuer for three "business days" (that is, any day other than a Saturday,
Sunday or customary business holiday).
RESTRICTED SECURITIES -- Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of 1933
or an exemption from registration. Rule 144A securities are securities that have
not been registered under the Securities Act of 1933 but which may be traded
between certain institutional investors including investment companies. The
Trust's Board of Trustees is responsible for developing
<PAGE>
19
guidelines and procedures for determining the liquidity of restricted
securities, and for monitoring the Advisor's implementation of the guidelines
and procedures.
SECURITIES LENDING -- In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
SUPRANATIONAL AGENCY OBLIGATIONS -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, Inter-American Development Bank, International Bank
for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and Nordic Investment
Bank.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits are considered to be illiquid
securities.
U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Federal Farm Credit Bank, the
Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association securities), others are supported by the right of the
issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank securities),
while still others are supported only by the credit of the instrumentality
(e.g., Fannie Mae securities). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the obligation so that in the event of a default prior to maturity
there might not be a market and thus no means of realizing on the obligation
prior to maturity. Guarantees as to the timely payment of principal and interest
do not extend to the value or yield of these securities nor to the value of the
Fund's shares.
<PAGE>
20
U.S. TREASURY OBLIGATIONS -- U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES").
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
A Fund will segregate liquid high grade debt securities or cash in an amount at
least equal to these commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes in
market interest rates and it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed. Although a Fund generally purchases securities on
a when-issued or forward commitment basis with the intention of actually
acquiring securities for its portfolio, a Fund may dispose of a when-issued
security or forward commitment prior to settlement if it deems appropriate.
ZERO COUPON OBLIGATIONS -- Zero coupon obligations are debt securities that do
not bear any interest, but instead are issued at a deep discount from par. The
value of a zero coupon obligation increases over time to reflect the interest
accreted. Such obligations will not result in the payment of interest until
maturity, and will have greater price volatility than similar securities that
are issued at par and pay interest periodically.
<PAGE>
A-1
APPENDIX
X. COMMERCIAL PAPER AND SHORT-TERM RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff")
and IBCA Limited ("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+ and 1. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1 reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a safety regarding timely
payment but not as high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to have superior ability and strong ability for repayment, respectively.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISOR
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
* DISTRIBUTOR
SEI Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* TRANSFER AGENT
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222-3779
* CUSTODIAN
SunTrust Bank, Atlanta c/o STI Trust & Investment
Operations, Inc.
303 Peachtree Street N.E.
14th Floor
Atlanta, GA 30308
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
DISTRIBUTOR
SEI Investments
Distribution Co.
PROSPECTUS
CLASSIC INSTITUTIONAL
CASH MANAGEMENT
MONEY MARKET FUND
CLASSIC INSTITUTIONAL
U.S. TREASURY SECURITIES
MONEY MARKET FUND
INVESTMENT ADVISOR
TRUSCO CAPITAL MANAGEMENT, INC.
OCTOBER 1, 1998
[LOGO]
<PAGE>
STI CLASSIC FUNDS
INVESTMENT ADVISORS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
SUNTRUST BANK, ATLANTA
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
STI Classic Funds (the "Trust") and should be read in conjunction with the
Trust's prospectuses dated October 1, 1998. Prospectuses may be obtained
through the Distributor, SEI Investments Distribution Co., One Freedom Valley
Road, Oaks, Pennsylvania 19456.
TABLE OF CONTENTS
PAGE
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . . . . .B-3
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
INVESTMENT ADVISORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
THE CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . B-31
LEGAL COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . B-31
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . B-35
COMPUTATION OF YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . . . . B-39
PURCHASING SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-43
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-44
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . B-44
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-45
FUND TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-48
TRADING PRACTICES AND BROKERAGE. . . . . . . . . . . . . . . . . . . . . . B-48
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . B-53
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . B-53
LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . . . . B-54
YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-54
5% AND 25% SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . B-55
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-64
October 1, 1998
<PAGE>
THE TRUST
STI Classic Funds (the "Trust") is a diversified, open-end management investment
company established under Massachusetts law as a Massachusetts business trust
under a Declaration of Trust dated January 15, 1992. The Declaration of Trust
permits the Trust to offer separate series ("Funds") of units of beneficial
interest ("shares") and different classes of shares of each Fund. Shareholders
at present may purchase shares of the Trust's money market funds through two
separate classes (Trust Shares and Investor Shares) and shares of the Trust's
other funds through three separate classes (Trust Shares, Investor Shares and
Flex Shares), which provide for variations in sales charges, distribution costs,
transfer agent fees, voting rights and dividends. Except for these differences,
each Trust Share, Investor Share and Flex Share, if any, of each Fund represents
an equal proportionate interest in that portfolio. See "Description of Shares."
This Statement of Additional Information relates to the:
<TABLE>
<CAPTION>
TRUST SHARES INVESTOR SHARES FLEX SHARES
<S> <C> <C> <C>
MONEY MARKET FUNDS
Prime Quality Money Market Fund X X
U.S. Government Securities Money Market Fund X X
Tax-Exempt Money Market Fund X X
BOND FUNDS
Investment Grade Tax-Exempt Bond Fund X X X
Short-Term U.S. Treasury Securities Fund X X X
Short-Term Bond Fund X X X
U.S. Government Securities Fund X X X
Limited-Term Federal Mortgage Securities Fund X X X
TAX-EXEMPT BOND FUNDS
Investment Grade Tax-Exempt Bond Fund X X X
Florida Tax-Exempt Bond Fund X X X
Georgia Tax-Exempt Bond Fund X X X
EQUITY FUNDS
Capital Growth Fund X X X
Value Income Stock Fund X X X
Mid-Cap Equity Fund X X X
Sunbelt Equity Fund X X X
International Equity Index Fund X X X
International Equity Fund X X X
Small Cap Equity Fund X X
Emerging Markets Equity Fund X
Small Cap Growth Stock Fund X X
Tax Sensitive Growth Stock Fund X X
BALANCED FUND
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
TRUST SHARES INVESTOR SHARES FLEX SHARES
<S> <C> <C> <C>
Balanced Fund X X X
</TABLE>
These various series are collectively referred to herein as the "Funds."
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to shareholders, costs of custodial services, and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation, and other extraordinary expenses, brokerage costs, interest charges,
taxes, and organization expenses.
DESCRIPTION OF PERMITTED INVESTMENTS
AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY RECEIPTS (EDRS) AND
GLOBAL DEPOSITORY RECEIPTS (GDRS)
ADRs, EDRs, and GDRs are securities, typically issued by a U.S. financial
institution or a non-U.S. financial institution in the case of an EDR or GDR (a
"depositary"). The institution has ownership interests in a security, or a pool
of securities, issued by a foreign issuer and deposited with the depositary.
ADRs, EDRs and GDRs may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary. An unsponsored facility may
be established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.
ASSET-BACKED SECURITIES
Asset-backed securities are securities backed by non-mortgage assets such as
company receivables, truck and auto loans, leases and credit card receivables.
Other asset-backed securities may be created in the future. These securities
may be traded over-the-counter and typically have a short-intermediate maturity
structure depending on the paydown characteristics of the underlying financial
assets which are passed through to the security holder. These securities are
generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pool of assets. Asset-backed
securities may also be debt obligations, which are known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning these assets and
issuing debt obligations.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and, for a certain
period, by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is
a risk that another party could acquire an interest in the obligations superior
to that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities.
Asset-backed securities entail prepayment risk, which may vary depending on the
type of asset, but is generally less than the prepayment risk associated with
mortgage-backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.
B-3
<PAGE>
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
BANK OBLIGATIONS
Bank obligations are short-term obligations issued by U.S. and foreign banks,
including bankers' acceptances, certificates of deposit, custodial receipts, and
time deposits. Eurodollar and Yankee Bank Obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
U.S. by foreign branches of U.S. banks or by foreign banks.
COMMON AND PREFERRED STOCKS
Common and preferred stocks represent units of ownership in a corporation.
Owners of common stock typically are entitled to vote on important matters.
Owners of preferred stock ordinarily do not have voting rights, but are entitled
to dividends at a specified rate. Preferred stock has a prior claim to common
stockholders with respect to dividends.
CONVERTIBLE SECURITIES
Convertible securities are securities issued by corporations that are
exchangeable for a set number of another security at a prestated price. The
market value of a convertible security tends to move with the market value of
the underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call option
provisions.
CUSTODIAL RECEIPTS
The custodian arranges for the issuance of the certificates or receipts
evidencing ownership and maintains the register. Receipts include "Treasury
Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). TRs, TIGRs and CATS
are sold as zero coupon securities.
DEBT SECURITIES
Debt securities represent money borrowed that obligates the issuer (E.G., a
corporation, municipality, government, government agency) to repay the borrowed
amount at maturity (when the obligation is due and payable) and usually to pay
the holder interest at specific times (E.G., bonds, notes, debentures).
DOLLAR ROLLS
Dollar rolls are transactions in which securities are sold for delivery in the
current month and the seller contracts to repurchase substantially similar
securities on a specified future date. Any difference between the sale price
and the purchase price (plus interest earned on the cash proceeds of the sale)
is applied against the past interest income on the securities sold to arrive at
an implied borrowing rate.
Dollar rolls may be renewed prior to cash settlement and initially may involve
only a firm commitment agreement by the Fund to buy a security.
B-4
<PAGE>
If the broker-dealer to whom the Fund sells the security becomes insolvent, the
Fund's right to repurchase the security may be restricted. Other risks involved
in entering into dollar rolls include the risk that the value of the security
may change adversely over the term of the dollar roll and that the security the
Fund is required to repurchase may be worth less than the security that the Fund
originally held. To avoid any leveraging concerns, the Fund will place U.S.
Government or other liquid, high grade assets in a segregated account in an
amount sufficient to cover its repurchase obligation.
THE EURO
On January 1, 1999, the European Monetary Union (EMU) plans to implement a new
currency unit, the Euro, which is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. The
countries initially expected to convert or tie their currencies to the Euro
include Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland,
Finland, Italy, Portugal, and Spain. Implementation of this plan will mean that
financial transactions and market information, including share quotations and
company accounts, in participating countries will be denominated in Euros.
Approximately 46% of the stock exchange capitalization of the total European
market may be reflected in Euros, and participating governments will issue their
bonds in Euros. Monetary policy for participating countries will be uniformly
managed by a new central bank, the European Central Bank (ECB).
Although it is not possible to predict the impact of the Euro implementation
plan on the Funds, the transition to the Euro may change the economic
environment and behavior of investors, particularly in European markets. For
example, investors may begin to view those countries participating in the EMU as
a single entity, and the Advisors may need to adapt investment strategies
accordingly. The process of implementing the Euro also may adversely affect
financial markets worldwide and may result in changes in the relative strength
and value of the U.S. dollar or other major currencies, as well as possible
adverse tax consequences. The transition to the Euro is likely to have a
significant impact on fiscal and monetary policy in the participating countries
and may produce unpredictable effects on trade and commerce generally. These
resulting uncertainties could create increased volatility in financial markets
world-wide.
FOREIGN SECURITIES
Foreign securities include equity securities of foreign entities, obligations of
foreign branches of U.S. banks and of foreign banks, including, without
limitation, European Certificates of Deposit, European Time Deposits, European
Bankers' Acceptances, Canadian Time Deposits, Europaper and Yankee Certificates
of Deposit, and investments in Canadian Commercial Paper and foreign securities.
These instruments have investment risks that differ in some respects from those
related to investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements than
those applicable to domestic branches of U.S. banks.
In making investment decisions for the Fund, the Advisor evaluates the risks
associated with investing Fund assets in a particular country, including risks
stemming from a country's financial infrastructure and settlement practices;
B-5
<PAGE>
the likelihood of expropriation, nationalization or confiscation of invested
assets; prevailing or developing custodial practices in the country; the
country's laws and regulations regarding the safekeeping, maintenance and
recovery of invested assets, the likelihood of government-imposed exchange
control restrictions which could impair the liquidity of Fund assets maintained
with custodians in that country, as well as risks from political acts of foreign
governments ("country risks"). Of course, the Advisor cannot assure that the
Fund will not suffer losses resulting from investing in foreign countries.
Holding Fund assets in foreign countries through specific foreign custodians
presents additional risks, including but not limited to the risks that a
particular foreign custodian or depository will not exercise proper care with
respect to Fund assets or will not have the financial strength or adequate
practices and procedures to properly safeguard Fund assets.
By investing in foreign securities, the Funds attempt to take advantage of
differences between both economic trends and the performance of securities
markets in the various countries, regions and geographic areas as prescribed by
each Fund's investment objective and policies. During certain periods the
investment return on securities in some or all countries may exceed the return
on similar investments in the United States, while at other times the investment
return may be less than that on similar U.S. securities. Shares of the
International Equity Index, International Equity, and Emerging Markets Equity
Funds, when included in appropriate amounts in a portfolio otherwise consisting
of domestic securities, may provide a source of increased diversification. The
International Equity Index, International Equity, and Emerging Markets Equity
Funds seek increased diversification by combining securities from various
countries and geographic areas that offer different investment opportunities and
are affected by different economic trends. The international investments of the
International Equity Index, International Equity, and Emerging Markets Equity
Funds may reduce the effect that events in any one country or geographic area
will have on its investment holdings. Of course, negative movement by a Fund's
investments in one foreign market represented in its portfolio may offset
potential gains from the Fund's investments in another country's markets.
Emerging countries are all countries that are considered to be developing or
emerging countries by the World Bank or the International Finance Corporation,
as well as countries classified by the United Nations or otherwise regarded by
the international financial community as developing. Currently, the countries
excluded from this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan, and
Switzerland.
FORWARD FOREIGN CURRENCY CONTRACTS
Forward foreign currency contracts involve obligations to purchase or sell a
specific currency amount at a future date, agreed upon by the parties, at a
price set at the time of the contract. A Fund may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in the foreign currency. A Fund may realize a gain or
loss from currency transactions.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchase the right, in exchange for a premium, to assume a position in a futures
contract at a specified exercise price during the term of the option.
B-6
<PAGE>
A Fund may use futures contracts, and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired. They may also be used to minimize fluctuations in foreign currencies
or to gain exposure to a particular market or instrument. A Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific index at the
close of the last trading day of the contract and the price at which the
agreement is made.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract which has
previously been "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, a Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Funds may be required to make
delivery of the instruments underlying the futures contracts they hold. The
inability to close options and futures positions also could have an adverse
impact on the ability to effectively hedge the underlying securities.
The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in
a futures contract may result in immediate and substantial loss (or gain) to a
Fund. For example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit if
the contract were closed out. Thus, a purchase or sale of a futures contract
may result in losses in excess of the amount invested in the contract. However,
because the Funds will be engaged in futures transactions only for hedging
purposes, the Advisors do not believe that the Funds will generally be subject
to the risks of loss frequently associated with futures transactions. The Funds
presumably would have sustained comparable losses if, instead of the futures
contract, they had invested in the underlying financial instrument and sold it
after the decline. The risk of loss from the purchase of options is less as
compared with the purchase or sale of futures contracts because the maximum
amount at risk is the premium paid for the option.
Utilization of futures transactions by the Funds does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the fund securities being hedged. It is also
possible that the Funds could both lose money on futures contracts and
experience a decline in value of its fund securities. There is also the risk of
loss by the Funds of margin deposits in the event of the bankruptcy of a broker
with whom the Funds have an open position in a futures contract or related
option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or
B-7
<PAGE>
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
GICs
A GIC is a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the general
assets of the issuer, and the contract is paid at maturity from the general
assets of the issuer. Generally, GICs are not assignable or transferable
without the permission of the issuing insurance company. For this reason, an
active secondary market in GICs does not currently exist and GICs are considered
to be illiquid investments.
HIGH YIELD SECURITIES
High yield securities, commonly referred to as junk bonds, are debt obligations
rated below investment grade, I.E., below BBB by Standard & Poor's Corporation
("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's"), or their unrated
equivalents. The risks associated with investing in high yield securities
include:
(1) High yield, lower rated bonds involve greater risk of default or price
declines than investments in investment grade securities (E.G.,
securities rated BBB or higher by S&P or Baa or higher by Moody's) due
to changes in the issuer's creditworthiness.
(2) The market for high risk, high yield securities may be thinner and
less active, causing market price volatility and limited liquidity in
the secondary market. This may limit the ability of a Fund to sell
these securities at their fair market values either to meet redemption
requests, or in response to changes in the economy or the financial
markets.
(3) Market prices for high risk, high yield securities may also be
affected by investors' perception of the issuer's credit quality and
the outlook for economic growth. Thus, prices for high risk, high
yield securities may move independently of interest rates and the
overall bond market.
(4) The market for high risk, high yield securities may be adversely
affected by legislative and regulatory developments.
HEDGING TECHNIQUES
Hedging in an investment strategy designed to offset investment risks. Hedging
activities include, among other things, the use of options and futures. There
are risks associated with hedging activities, including: (1) the success of a
hedging strategy may depend on an ability to predict movements in the prices of
individual securities, fluctuations in markets, and movements in interest rates;
(2) there may be an imperfect or no correlation between the changes in market
value of the securities held by a Fund and the prices of futures and option on
futures; (3) there may not be a liquid secondary market for a futures contract
or option; and (4) trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in futures contracts
and options.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed of within seven days
at approximately the price at which they are being carried on a Fund's books.
B-8
<PAGE>
INVESTMENT COMPANY SHARES
The Funds may purchase shares of other mutual funds to the extent consistent
with applicable law. Investment companies typically incur fees that are
separate from those fees incurred directly by the Funds. A Fund's purchase of
such investment company securities results in the layering of expenses, such
that you would indirectly bear a proportionate share of investment company
operating expenses, such as advisory fees.
INVESTMENT GRADE OBLIGATIONS
Investment grade obligations are debt obligations rated BBB by S&P or Baa by
Moody's, or their unrated equivalents. These securities are deemed to have
speculative characteristics.
LOAN PARTICIPATIONS
Loan participations are interest in loans to U.S. corporations which are
administered by the lending bank or agent for a syndicate of lending banks. In
a loan participation, the borrower corporation is the issuer of the
participation interest except to the extent the Fund derives its rights from the
intermediary bank. Because the intermediary bank does not guarantee a loan
participation, a loan participation is subject to the credit risks associated
with the underlying corporate borrower.
In the event of bankruptcy or insolvency of the corporate borrower, a loan
participation may be subject to certain defenses that can be asserted by the
borrower as a result of improper conduct by the intermediary bank. In addition,
in the event the underlying corporate borrower fails to pay principal and
interest when due, the Fund may be subject to delays, expenses, and risks that
are greater than those that would have been involved if the Fund had purchased a
direct obligation of the borrower. Under the terms of a Loan Participation, the
Fund may be regarded as a creditor of the intermediary bank (rather than of the
underlying corporate borrower), so that the Fund may also be subject to the risk
that the intermediary bank may become insolvent.
The secondary market for loan participations is limited and any such
participation purchased by the Fund may be regarded as illiquid.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are instruments that entitle the holder to a share of
all interest and principal payments from mortgages underlying the security. The
mortgages backing these securities include conventional thirty-year fixed rate
mortgages, graduated payment mortgages, adjustable rate mortgages, and floating
mortgages.
GOVERNMENT PASS-THROUGH SECURITIES
These are securities that are issued or guaranteed by a U.S. Government
agency representing an interest in a pool of mortgage loans. The primary
issuers or guarantors of these mortgage-backed securities are the
Government National Mortgage Association ("GNMA"), Fannie Mae, and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S.
Government as GNMA certificates are, but Fannie Mae and FHLMC securities
are supported by the instrumentalities' right to borrow from the U.S.
Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions
of interest to certificate holders. GNMA and Fannie Mae also guarantee
timely distributions of scheduled principal. In the past, FHLMC has only
guaranteed the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-
B-9
<PAGE>
backed securities (FHLMC Gold PCS) which also guarantee timely payment of
monthly principal reductions. Government and private guarantees do not
extend to the securities' value, which is likely to vary inversely with
fluctuations in interest rates.
Obligations of GNMA are backed by the full faith and credit of the United
States Government. Obligations of Fannie Mae and FHLMC are not backed by
the full faith and credit of the United States Government but are
considered to be of high quality since they are considered to be
instrumentalities of the United States. The market value and interest
yield of these mortgage-backed securities can vary due to market interest
rate fluctuations and early prepayments of underlying mortgages. These
securities represent ownership in a pool of federally insured mortgage
loans with a maximum maturity of 30 years. However, due to scheduled and
unscheduled principal payments on the underlying loans, these securities
have a shorter average maturity and, therefore, less principal volatility
than a comparable 30-year bond. Since prepayment rates vary widely, it is
not possible to accurately predict the average maturity of a particular
mortgage-backed security. The scheduled monthly interest and principal
payments relating to mortgages in the pool will be "passed through" to
investors. Government mortgage-backed securities differ from conventional
bonds in that principal is paid back to the certificate holders over the
life of the loan rather than at maturity. As a result, there will be
monthly scheduled payments of principal and interest. In addition, there
may be unscheduled principal payments representing prepayments on the
underlying mortgages. Although these securities may offer yields higher
than those available from other types of U.S. Government securities,
mortgage-backed securities may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of
the prepayment feature. For instance, when interest rates decline, the
value of these securities likely will not rise as much as comparable debt
securities due to the prepayment feature. In addition, these prepayments
can cause the price of a mortgage-backed security originally purchased at a
premium to decline in price to its par value, which may result in a loss.
PRIVATE PASS-THROUGH SECURITIES
Private pass-through securities are mortgage-backed securities issued by a
non-governmental agency, such as a trust. While they are generally
structured with one or more types of credit enhancement, private
pass-through securities generally lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality. The two
principal types of private mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").
CMOs
CMOs are securities collateralized by mortgages, mortgage pass-throughs,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool
is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). CMOs are rated in one of the two highest categories by S&P or
Moody's. Many CMOs are issued with a number of classes or series which
have different expected maturities. Investors purchasing such CMOs are
credited with their portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal based on a predetermined priority schedule. Accordingly, the
CMOs in the longer maturity series are less likely than other mortgage
pass-throughs to be prepaid prior to their stated maturity. Although some
of the mortgages underlying CMOs may be supported by various types of
insurance, and some CMOs may be backed by
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<PAGE>
GNMA certificates or other mortgage pass-throughs issued or guaranteed by
U.S. Government agencies or instrumentalities, the CMOs themselves are not
generally guaranteed.
REMICs
REMICs are private entities formed for the purpose of holding a fixed pool
of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities and are rated in
one of the two highest categories by S&P or Moody's.
Investors may purchase beneficial interests in REMICs, which are known as
"regular" interests, or "residual" interests. Guaranteed REMIC
pass-through certificates ("REMIC Certificates") issued by Fannie Mae or
FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed
mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC
guarantees the timely payment of interest. GNMA REMIC Certificates are
backed by the full faith and credit of the U.S. Government.
STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities are securities that are created when a
U.S. Government agency or a financial institution separates the interest
and principal components of a mortgage-backed security and sells them as
individual securities. The holder of the "principal-only" security (PO)
receives the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security (IO) receives
interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.
DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES
Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life.
The Advisors believe that the estimated average life is the most
appropriate measure of the maturity of a mortgage-backed security.
Accordingly, in order to determine whether such security is a permissible
investment for a Fund, it will be deemed to have a remaining maturity equal
to its average life as estimated by that Fund's Advisor. An average life
estimate is a function of an assumption regarding anticipated prepayment
patterns. The assumption is based upon current interest rates, current
conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market
participants could produce somewhat different average life estimates with
regard to the same security. There can be no assurance that the average
life as estimated by an Advisor will be the actual average life.
MUNICIPAL FORWARDS
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Municipal forwards are forward commitments for the purchase of tax-exempt bonds
with a specified coupon to be delivered by an issuer at a future date, typically
exceeding 45 days but normally less than one year after the commitment date.
Municipal forwards are normally used as a refunding mechanism for bonds that may
only be redeemed on a designated future date (see "When-Issued Securities and
Municipal Forwards" for more information).
MUNICIPAL LEASE OBLIGATIONS
Municipal lease obligations are securities issued by state and local governments
and authorities to finance the acquisition of equipment and facilities. They
make take the form of a lease, an installment purchase contract, an conditional
sales contract, or a participation interest in any of the above.
MUNICIPAL SECURITIES
MUNICIPAL BONDS include general obligation bonds, revenue or special
obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds. General obligation bonds are
backed by the taxing power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility (for example, tolls from a
bridge). Certificates of participation represent an interest in an
underlying obligation or commitment, such as an obligation issued in
connection with a leasing arrangement. The payment of principal and
interest on private activity and industrial development bonds generally is
totally dependent on the ability of a facility's user to meet its financial
obligations and the pledge, if any, of real and personal property as
security for the payment.
MUNICIPAL NOTES consist of general obligation notes, tax anticipation notes
(notes sold to finance working capital needs of the issuer in anticipation
of receiving taxes on a future date), revenue anticipation notes (notes
sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes. A Fund's
investments in any of the notes described above will be limited to those
obligations (i) where both principal and interest are backed by the full
faith and credit of the United States, (ii) which are rated MIG-2 or
V-MIG-2 at the time of investment by Moody's, (iii) which are rated SP-2 at
the time of investment by S&P, or (iv) which, if not rated by S&P or
Moody's, are in the Advisor's judgement, of at least comparable quality to
MIG-2, VMIG-2 or SP-2.
Municipal bonds must be rated at least BBB or better by S&P or at least Baa
or better by Moody's at the time of purchase for the Tax-Exempt Bond Funds
or in one of the two highest short-term rating categories by S&P or Moody's
for the Tax-Exempt Money Market Fund or, if not rated by S&P or Moody's,
must be deemed by the Advisor to have essentially the same characteristics
and quality as bonds having the above ratings. A Fund may purchase
industrial development and pollution control bonds if the interest paid is
exempt from Federal income tax. These bonds are issued by or on behalf of
public authorities to raise money to finance various privately-operated
facilities for business and manufacturing, housing, sports and pollution
control. These bonds are also used to finance public facilities such as
airports, mass transit systems, ports and parking. The payment of the
principal and interest on such bonds is dependent solely on the ability of
the facility's user to meet its financial obligations and the pledge, if
any, of real and personal property so financed as security for such
payment.
OTHER TYPES OF TAX-EXEMPT INSTRUMENTS which are permissible investments
include floating rate notes. Investments in such floating rate instruments
will normally involve industrial development or revenue bonds which provide
that the rate of interest is set as a specific percentage of a designated
base rate (such
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as the prime rate) at a major commercial bank, and that the Fund can demand
payment of the obligation at all times or at stipulated dates on short
notice (not to exceed 30 days) at par plus accrued interest. Such
obligations are frequently secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying
credit or of the bank, as the case may be, must, in the Advisor's opinion
be equivalent to the long-term bond or commercial paper ratings stated
above. The Advisor will monitor the earning power, cash flow and liquidity
ratios of the issuers of such instruments and the ability of an issuer of a
demand instrument to pay principal and interest on demand. The Funds may
also purchase participation interests in municipal securities (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives a Fund an undivided interest in the underlying
municipal security. If it is unrated, the participation interest will be
backed by an irrevocable letter of credit or guarantee of a credit-worthy
financial institution or the payment obligations otherwise will be
collateralized by U.S. Government securities. Participation interests may
have fixed, variable or floating rates of interest and may include a demand
feature. A participation interest without a demand feature or with a
demand feature exceeding seven days may be deemed to be an illiquid
security subject to the Funds' investment limitations restricting their
purchases of illiquid securities. A Fund may purchase other types of
tax-exempt instruments as long as they are of a quality equivalent to the
bond or commercial paper ratings stated above.
Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the
Funds nor an Advisor will review the proceedings relating to the issuance
of municipal securities or the basis for such opinions.
OPTIONS
A Fund may write call options on a covered basis only, and will not engage in
option writing strategies for speculative purposes. A call option gives the
purchaser of such option the right to buy, and the writer, in this case the
Fund, the obligation to sell the underlying security at the exercise price
during the option period. The advantage to the Funds of writing covered calls
is that the Funds receive a premium which is additional income. However, if the
security rises in value, the Funds may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium
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received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term capital
gain in the amount of the premium on the option, less the commission paid. Such
a gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, a
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security, and the proceeds
of the sale of the security plus the amount of the premium on the option, less
the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security, and the time remaining until the expiration date.
The Funds will write call options only on a covered basis, which means that a
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Fund would be required to continue to hold a security which it might otherwise
wish to sell, or deliver a security it would want to hold. Options written by
the Funds will normally have expiration dates between one and nine months from
the date written. The exercise price of a call option may be below, equal to,
or above the current market value of the underlying security at the time the
option is written.
OTHER INVESTMENTS
The Funds are not prohibited from investing in bank obligations issued by
clients of SEI Investments Company ("SEI Investments"), the parent company of
the Administrator and the Distributor. The purchase of Fund shares by these
banks or their customers will not be a consideration in deciding which bank
obligations the Funds will purchase. The Funds will not purchase obligations
issued by the Advisors.
PAY-IN-KIND SECURITIES
Pay-In-Kind securities are debt obligations or preferred stock, that pay
interest or dividends in the form of additional debt obligations or preferred
stock.
REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a
security and simultaneously commits to return the security to the seller (a
primary securities dealer as recognized by the Federal Reserve Bank of New York
or a national member bank as defined in Section 3(d)(1) of the Federal Deposit
Insurance Act, as amended) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves
the obligation of the seller to pay the agreed upon price, which obligation is,
in effect, secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisors monitor
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the appropriate Custodian or its agent must
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take possession of the underlying collateral. However, if the seller defaults,
a Fund could realize a loss on the sale of the underlying security to the extent
that the proceeds of the sale including accrued interest are less than the
resale price provided in the agreement including interest. In addition, even
though the Bankruptcy Code provides protection for most repurchase agreements,
if the seller should be involved in bankruptcy or insolvency proceedings, a Fund
may incur delay and costs in selling the underlying security or may suffer a
loss of principal and interest if the Fund is treated as an unsecured creditor
and required to return the underlying security to the seller's estate.
RESTRICTED SECURITIES
Restricted securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") or an exemption
from registration. Permitted investments for the Funds include restricted
securities, and each such Fund may invest up to 15% of its net assets (10% for
the Money Market Funds) in illiquid securities, subject to each Fund's
investment limitations on the purchase of illiquid securities. Restricted
securities, including securities eligible for re-sale under 1933 Act Rule 144A,
that are determined to be liquid are not subject to this limitation. This
determination is to be made by a Fund's Advisor pursuant to guidelines adopted
by the Board of Trustees. Under these guidelines, the particular Advisor will
consider the frequency of trades and quotes for the security, the number of
dealers in, and potential purchasers for, the securities, dealer undertakings to
make a market in the security, and the nature of the security and of the
marketplace trades. In purchasing such Restricted Securities, each Advisor
intends to purchase securities that are exempt from registration under Rule 144A
under the 1933 Act.
SECURITIES LENDING
Each Fund may lend securities pursuant to agreements which require that the
loans be continuously secured by collateral at all times equal to 100% of the
market value of the loaned securities which consists of: cash, securities of the
U.S. Government or its agencies, or any combination of cash and such securities.
Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for a Fund exceed one-third of the value of the
Fund's total assets taken at fair market value. A Fund will continue to receive
interest on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a
Fund will normally pay lending fees to such broker-dealers and related expenses
from the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
appropriate Advisor to be of good standing and when, in the judgment of that
Advisor, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Funds may use the Distributor or
a broker-dealer affiliate of an Advisor as a broker in these transactions.
SHORT-TERM OBLIGATIONS
Short-term obligations are debt obligations maturing (becoming payable) in 397
days or less, including commercial paper and short-term corporate obligations.
Short-term corporate obligations are short-term obligations issued by
corporations.
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<PAGE>
STANDBY COMMITMENTS AND PUTS
The Funds may purchase securities at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
when they can simultaneously acquire the right to sell the securities back to
the seller, the issuer or a third party (the "writer") at an agreed-upon price
at any time during a stated period or on a certain date. Such a right is
generally denoted as a "standby commitment" or a "put." The purpose of engaging
in transactions involving puts is to maintain flexibility and liquidity to
permit the Funds to meet redemptions and remain as fully invested as possible in
municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability
to pay for the securities at the time the put is exercised. A Fund would limit
its put transactions to institutions which the Advisor believes present minimal
credit risks, and the Advisor would use its best efforts to initially determine
and continue to monitor the financial strength of the sellers of the options by
evaluating their financial statements and such other information as is available
in the marketplace. It may, however be difficult to monitor the financial
strength of the writers because adequate current financial information may not
be available. In the event that any writer is unable to honor a put for
financial reasons, a Fund would be a general creditor (I.E., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular
provisions of the contract between the Fund and the writer may excuse the writer
from repurchasing the securities; for example, a change in the published rating
of the underlying securities or any similar event that has an adverse effect on
the issuer's credit or a provision in the contract that the put will not be
exercised except in certain special cases, for example, to maintain portfolio
liquidity. The Fund could, however, at any time sell the underlying portfolio
security in the open market or wait until the portfolio security matures, at
which time it should realize the full par value of the security.
The securities purchased subject to a put may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could, of course, sell the portfolio
security. The maturity of the underlying security will generally be different
from that of the put. There will be no limit to the percentage of portfolio
securities that the Fund may purchase subject to a standby commitment or put,
but the amount paid directly or indirectly for all standby commitments or puts
which are not integral parts of the security as originally issued held in the
Fund will not exceed 1/2 of 1% of the value of the total assets of such Fund
calculated immediately after any such put is acquired.
STRIPS
Separately Traded Interest and Principal Securities ("STRIPS") are component
parts of U.S. Treasury Securities traded through the Federal Book-Entry System.
An Advisor will only purchase STRIPS that it determines are liquid or, if
illiquid, do not violate the affected Fund's investment policy concerning
investments in illiquid securities. Consistent with Rule 2a-7 under the
Investment Company Act of 1940, as amended, (the "1940 Act"), the Money Market
Funds' Advisor will only purchase STRIPS for Money Market Funds that have a
remaining maturity of 397 days or less; therefore, the Money Market Funds
currently may only purchase interest component parts of U.S. Treasury
securities. While there is no limitation on the percentage of a Fund's assets
that may be comprised of STRIPS, the Money Market Funds' Advisor will monitor
the level of such holdings to avoid the risk of impairing shareholders'
redemption rights and of deviations in the value of shares of the Money Market
Funds.
SUPRANATIONAL AGENCY OBLIGATIONS
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Supranational agency obligations are obligations of supranational entities
established through the joint participation of several governments, including
the Asian Development Bank, Inter-American Development Bank, International Bank
for Reconstruction and Development (also known as the "World Bank"), African
Development Bank, European Economic Community, European Investment Bank, and the
Nordic Investment Bank.
SWAPS, CAPS, FLOORS, COLLARS
Swaps, caps, floors and collars are hedging tools designed to permit the
purchaser to preserve a return or spread on a particular investment or portion
of its portfolio. They are also used to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. In a
typical interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times a "notional principal amount." This is done in
return for payments equal to a fixed rate times the same amount, for a specific
period of time. If a swap agreement provides for payment in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances. This is usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specific interest rate exceeds an
agreed-upon level. Meanwhile, the seller of an interest rate floor is obligated
to make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap
and selling a floor.
Swap agreements are subject to risks related to the counterparty's ability to
perform, and may decline in value if the counterparty's creditworthiness
deteriorates. The Fund may also suffer losses if it is unable to terminate
outstanding swap agreements or reduce its exposure through offsetting
transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside liquid high-grade securities in a
segregated account. The Fund will enter into swaps only with counterparties
believed to be creditworthy.
U.S. GOVERNMENT AGENCY OBLIGATIONS
U.S. Government agency obligations are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Agencies of the United
States Government which issue obligations consist of, among others, the Export
Import Bank of the United States, Farmers Home Administration, Federal Farm
Credit Bank, Federal Housing Administration, Government National Mortgage
Association ("GNMA"), Maritime Administration, Small Business Administration and
The Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued by, among others, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate
Credit Banks, Federal Land Banks, Fannie Mae and the United States Postal
Service as well as government trust certificates. Some of these securities are
supported by the full faith and credit of the United States Treasury, others are
supported by the right of the issuer to borrow from the Treasury and still
others are supported only by the credit of the instrumentality. Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing the value of the obligation prior to maturity.
U.S. TREASURY OBLIGATIONS
U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S.
Treasury. They also consist of separately traded interest and principal
component parts of these obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities (STRIPS).
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VARIABLE AND FLOATING RATE SECURITIES
Variable and floating rate instruments involve certain obligations that may
carry variable or floating rates of interest, and may involve a conditional or
unconditional demand feature. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market rates or indices.
The interest rates on these securities may be reset daily, weekly, quarterly, or
some other reset period, and may have a set floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
VARIABLE RATE MASTER DEMAND NOTES
Variable rate master demand notes permit the investment of fluctuating amounts
at varying market rates of interest pursuant to direct arrangements between a
Fund, as lender, and a borrower. Such notes provide that the interest rate on
the amount outstanding varies on a daily, weekly or monthly basis depending upon
a stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There
is no secondary market for the notes and it is not generally contemplated that
such instruments will be traded. The quality of the note or the underlying
credit must, in the opinion of the appropriate Advisor, be equivalent to the
ratings applicable to permitted investments for the particular Fund. The
appropriate Advisor will monitor on an ongoing basis the earning power, cash
flow and liquidity ratios of the issuers of such instruments and will similarly
monitor the ability of an issuer of a demand instrument to pay principal and
interest on demand. Variable rate master demand notes may or may not be backed
by bank letters of credit.
WARRANTS
Warrants give holders the right, but not the obligation, to buy shares of a
company at a given price, usually higher than the market price, during a
specified period.
WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS
When-issued securities are securities that are delivered and paid for normally
within 45 days after the date of commitment to purchase. Municipal forwards
call for delivery of the underlying municipal security normally after 45 days
but before one year after the commitment date.
Although a Fund will only make commitments to purchase when-issued securities
and municipal forwards with the intention of actually acquiring the securities,
a Fund may sell them before the settlement date. When-issued securities are
subject to market fluctuation, and accrue no interest to the purchaser during
this pre-settlement period. The payment obligation and the interest rate that
will be received on the securities are each fixed at the time the purchaser
enters into the commitment. Purchasing municipal forwards and when-issued
securities entails leveraging and can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction itself. In that case, there could be an unrealized
loss at the time of delivery.
Segregated accounts will be established with the appropriate custodian, and a
Fund will maintain high quality, liquid assets in an amount at least equal in
value to its commitments to purchase when-issued securities and municipal
forwards. If the value of these assets declines, the Fund will place additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments.
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ZERO COUPON OBLIGATIONS
Zero coupon obligations are debt obligations that do not bear any interest, but
instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
Such obligations will not result in the payment of interest until maturity, and
will have greater price volatility than similar securities that are issued at
face value or par and pay interest periodically.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective. The pharase "principally invests" as
used in the prospectus means that the Fund invests at least 65% of its assets in
the securities as described in the sentence. Each tax-exempt fund invests at
least 80% of its total assets in securities with income exempt from federal
income and alternative minimum taxes.
INVESTMENT LIMITATIONS
The following are fundamental policies of each Fund and cannot be changed with
respect to a Fund without the consent of the holders of a majority of that
Fund's outstanding shares. The term "majority of the outstanding shares" means
the vote of (i) 67% or more of a Fund's shares present at a meeting, if more
than 50% of the outstanding shares of the Fund are present or represented by
proxy, or (ii) more than 50% of a Fund's outstanding shares, whichever is less.
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and, to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter or such longer
period as the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur
and is not for investment purposes. All borrowings in excess of 5% of the
value of a Fund's total assets will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.
4. Make loans, except that (a) a Fund may purchase or hold debt instruments in
accordance with its investment objective and policies; (b) a Fund may enter
into repurchase agreements, and (c) the Bond Funds, Balanced Fund, U.S.
Government Securities Fund, Limited-Term Federal Mortgage Securities Fund,
International Equity Index Fund, International Equity Fund, Value Income
Stock Fund, Small Cap Equity Fund and Emerging Markets Equity Fund may
engage in securities lending as described in the Prospectuses and in this
Statement of Additional Information.
5. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10% of
the Fund's total assets, taken at current value at the time of the
incurrence of such loan, except as permitted with respect to securities
lending.
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6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts (except for financial futures
contracts) and interests in a pool of securities that are secured by
interests in real estate (except that each Bond Fund may purchase
mortgage-backed and other mortgage-related securities, including
collateralized mortgage obligations and REMICs). However, subject to their
permitted investment spectrum, any Fund may invest in companies which
invest in real estate, commodities or commodities contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a security.
9. Purchase securities of other investment companies except for money market
funds and CMOs and REMICs deemed to be investment companies and then only
as permitted by the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations thereunder, except that the Mid-Cap Equity, Sunbelt
Equity, Balanced, Georgia Tax-Exempt Bond, Florida Tax-Exempt Bond, U.S.
Government Securities, Limited-Term Federal Mortgage Securities,
International Equity Index, International Equity, Small Cap Equity and
Emerging Market Equity Funds' purchases of investment company shares are
not limited to money market funds. Under these rules and regulations, a
Fund is prohibited from acquiring the securities of other investment
companies if, as a result of such acquisition, the Fund owns more than 3%
of the total voting stock of the company; securities issued by any one
investment company represent more than 5% of the total assets of a Fund; or
securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Fund.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
11. Purchase securities of any issuer (except securities issued or guaranteed
by the United States, its agencies or instrumentalities and repurchase
agreements involving such securities) if as a result more than 5% of the
total assets of a Fund would be invested in the securities of such issuer;
provided, however, that a Fund may invest up to 25% of its total assets
without regard to this restriction as permitted by applicable law.
12. Purchase any securities which would cause more than 25% of the total assets
of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, repurchase agreements involving such securities or
tax-exempt securities issued by governments or political subdivisions of
governments and, with respect to only the Money Market Funds, obligations
issued by domestic branches of U.S. banks or U.S. branches of foreign banks
subject to the same regulations as U.S. banks. For purposes of this
limitation, (i) utility companies will be divided to according to their
services, for example, gas, gas transmission, electric and telephone will
each be considered a separate industry; (ii) financial service companies
will be classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance will each
be considered a separate industry; and (iii) supranational entities will be
considered to be a separate industry.
B-20
<PAGE>
NON-FUNDAMENTAL POLICIES
No Fund may purchase or hold illiquid securities (I.E., securities that cannot
be disposed of for their approximate carrying value in seven days or less (which
term includes repurchase agreements and time deposits maturing in more than
seven days) if, in the aggregate, more than 15% of its net assets (10% for the
Prime Quality Money Market, U.S. Government Securities Money Market, and
Tax-Exempt Money Market Funds) would be invested in illiquid securities.
With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
INVESTMENT ADVISORS
The Trust and STI Capital Management, N.A., Trusco Capital Management, Inc., and
SunTrust Bank, Atlanta (the "Advisors") have entered into advisory agreements
with the Trust (the "Advisory Agreements"). The Advisors are indirect
wholly-owned subsidiaries of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a
southeastern regional bank holding company with assets of $ 76 billion as of
June 30, 1998. The Advisory Agreements provide that each Advisor shall not be
protected against any liability to the Trust or its Shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
Each Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to an Advisor but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by certain states, the Advisor and/or the
Administrator will bear the amount of such excess. The Advisor will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
The continuance of each Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to each
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. Each Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds, by a majority of the outstanding shares of the Funds, on
not less than 30 days' nor more than 60 days' written notice to the Advisor, or
by the Advisor on 90 days' written notice to the Trust.
For the fiscal years ended May 31, 1998, 1997, and 1996, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
FEES PAID FEES WAIVED OR REIMBURSED
---------------------------------------------------------------------------------------
FUND 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Quality Money Market Fund $ 9,510,944 $ 7,586,108 $ 5,346,850 $ 2,699,560 $ 2,181,008 $ 1,602,546
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-21
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
FEES PAID FEES WAIVED OR REIMBURSED
---------------------------------------------------------------------------------------
FUND 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Securities Money $ 1,983,590 $ 1,935,898 $ 2,068,133 $ 580,236 $ 518,656 $ 577,384
Market Fund
Tax-Exempt Money Market Fund $ 2,219,251 $ 1,687,976 $ 1,422,777 $ 881,321 $ 673,486 $ 685,205
Investment Grade Bond Fund $ 4,852,764 $ 4,147,888 $ 3,868,222 $ 794,236 $ 644,859 $ 709,139
Investment Grade Tax-Exempt Bond $ 1,118,253 $ 1,081,635 $ 917,948 $ 208,488 $ 190,250 $ 202,552
Fund
Short-Term Bond Fund $ 554,291 $ 485,613 $ 361,936 $ 164,522 $ 138,732 $ 149,827
Florida Tax-Exempt Bond Fund $ 419,460 $ 220,701 $ 107,618 $ 120,797 $ 72,605 $ 72,476
Georgia Tax-Exempt Bond Fund $ 300,256 $ 181,715 $ 83,243 $ 93,650 $ 63,837 $ 63,991
U.S. Government Securities Fund(1) $ 187,053 $ 91,748 $ 16,097 $ 54,354 $ 58,637 $ 53,312
Short-Term U.S. Treasury $ 150,659 $ 83,694 $ 36,729 $ 77,862 $ 72,064 $ 72,116
Securities Fund
Limited-Term Federal Mortgage $ 739,677 $ 540,017 $ 224,595 $ 158,869 $ 150,604 $ 119,538
Securities Fund
Capital Growth Fund $17,607,676 $12,775,800 $12,099,047 $ 1,818,241 $ 1,227,247 $ 1,408,275
Sunbelt Equity Fund $ 4,772,466 $ 4,399,351 $ 3,424,453 $ 515,457 $ 442,535 $ 465,317
Value Income Stock Fund $15,826,018 $12,025,425 $ 9,447,738 $ 0 $ 392 $ 318,958
Mid-Cap Equity Fund $ 3,846,835 $ 3,008,690 $ 2,057,932 $ 422,281 $ 318,871 $ 318,958
Balanced Fund $ 1,561,250 $ 1,025,089 $ 823,692 $ 225,921 $ 151,557 $ 166,361
Small Cap Equity Fund $ 3,249,839 $ 273,710 * $ 329,047 $ 48,251 *
Emerging Markets Equity Fund $ 442,518 $ 84,210 * $ 90,361 $ 52,769 *
International Equity Fund $ 7,131,219 $ 4,336,172 $ 746,780 $ 69,504 $ 157,567 $ 151,947
International Equity Index Fund $ 466,136 $ 578,197 $ 740,676 $ 76,513 $ 80,147 $ 144,349
Small Cap Growth Stock Fund * * * * * *
Tax Sensitive Growth Stock Fund * * * * * *
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Not in operation during the period.
B-22
<PAGE>
1 Trusco Capital Management, Inc., advisor to the U.S. Government Securities
Fund, reimbursed expenses of $27,216.
Each Advisor has agreed to waive its fees or reimburse expenses in order to
limit Fund expenses.
BANKING LAWS
Current interpretations of federal banking laws and regulations:
- - prohibit SunTrust and the Advisors from sponsoring, organizing,
controlling, or distributing the Funds' shares; but
- - do not prohibit SunTrust or the Advisors generally from acting as an
investment advisor, transfer agent, or custodian to the Funds or from
purchasing Fund shares as agent for and upon the order of a customer.
The Advisors believe that they may perform advisory and related services for the
Trust without violating applicable banking laws or regulations. However, the
legal requirements and interpretations about the permissible activities of banks
and their affiliates may change in the future. These changes could prevent the
Advisors from continuing to perform services for the Trust. If this happens,
the Board of Trustees would consider selecting other qualified firms.
Shareholders would approve any new investment advisory agreements would be
subject to Shareholder approval.
If current restrictions on bank activities with mutual funds were relaxed, the
Advisors, or their affiliates, would consider performing additional services for
the Trust. We cannot predict whether these changes will be enacted. We also
cannot predict the terms that the Advisors, or their affiliates, might offer to
provide additional services.
THE ADMINISTRATOR
The Trust and SEI Investments Mutual Funds Services (the "Administrator") are
parties to the Administration Agreement. The Administration Agreement provides
that the Administrator shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Administration Agreement shall remain in effect for
a period of five years after the date of the Agreement and shall continue in
effect for successive periods of two years subject to review at least annually
by the Trustees of the Trust unless terminated by either party on not less than
ninety days' written notice to the other party.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as
administrator or sub-administrator to the following other mutual funds: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK
Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered
Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds, First American
Funds, Inc., First American Investment Funds, Inc., First American Strategy
Funds, Inc., HighMark Funds, Monitor Funds, Morgan Grenfell Investment Trust,
The Nevis Funds, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor
Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset
B-23
<PAGE>
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
International Trust, SEI Institutional International Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Variable Trust, TIP Funds and TIP Institutional Funds.
For its administrative services, the Administrator is entitled to a fee, which
is calculated daily and paid monthly, at an annual rate of: .12% of the first
$1 billion of average aggregate net assets, .09% on the next $4 billion of
average aggregate net assets, .07% of the next $3 billion of average aggregate
net assets, .065% of the next $2 billion of average aggregate net assets, and
.06% thereafter.
For the fiscal years ended May 31, 1998, 1997, and 1996, the Funds paid the
following administration fees:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FEES PAID FEES WAIVED
------------------------------------------------------------------------------------------
FUND 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Quality Money Market Fund $ 784,975 $ 661,962 $ 315,880 $ 570,531 $ 347,518 $ 449,492
U.S. Government Securities Money $ 236,106 $ 212,454 $ 219,380 $ 46,908 $ 41,257 $ 72,463
Market Fund
Tax-Exempt Money Market Fund $ 398,493 $ 288,647 $ 274,701 $ 9,560 $ 0 $ 0
Investment Grade Bond Fund $ 549,688 $ 435,278 $ 443,569 $ 0 $ 0 $ 0
Investment Grade Tax-Exempt Bond Fund $ 128,433 $ 115,500 $ 108,204 $ 0 $ 0 $ 0
Florida Tax-Exempt Bond Fund $ 60,551 $ 30,279 $ 19,989 $ 0 $ 0 $ 0
Georgia Tax-Exempt Bond Fund $ 44,095 $ 25,353 $ 16,304 $ 0 $ 0 $ 0
Short-Term Bond Fund $ 80,065 $ 64,664 $ 56,317 $ 0 $ 0 $ 0
U.S. Government Securities Fund $ 23,704 $ 13,641 $ 7,311 $ 0 $ 0 $ 0
Short-Term U.S. Treasury Securities $ 25,973 $ 16,075 $ 12,012 $ 0 $ 0 $ 0
Fund
Limited-Term Federal Mortgage $ 99,420 $ 71,264 $ 37,854 $ 0 $ 0 $ 0
Securities Fund
Capital Growth Fund $1,218,000 $ 817,905 $ 842,411 $ 0 $ 0 $ 0
Sunbelt Equity Fund $ 329,793 $ 283,101 $ 842,411 $ 0 $ 0 $ 0
Value Income Stock Fund $1,427,644 $1,009,167 $ 845,706 $ 0 $ 0 $ 0
Mid-Cap Equity Fund $ 266,851 $ 194,430 $ 147,613 $ 0 $ 0 $ 0
Balanced Fund $ 136,092 $ 83,063 $ 74,634 $ 0 $ 0 $ 0
Small Cap Equity Fund $ 229,578 $ 18,406 * $ 0 $ 0 *
Emerging Markets Equity Fund $ 29,039 $ 6,932 * $ 0 $ 0 *
International Equity Fund $ 415,520 $ 240,114 $ 50,404 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FEES PAID FEES WAIVED
------------------------------------------------------------------------------------------
FUND 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Index Fund $ 43,285 $ 48,464 $ 70,690 $ 0 $ 0 $ 0
Small Cap Growth Stock Fund * * * * * *
Tax Sensitive Growth Stock Fund * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during the period.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Trust have entered into a distribution agreement (the
"Distribution Agreement") dated May 29, 1992. Under the Distribution Agreement,
the Distributor must use all reasonable efforts, consistent with its other
business, in connection with the continuous offering of Shares of the Trust.
The Distributor will receive no compensation for distribution of Trust Shares.
In addition, the Investor Shares of the Funds have a distribution plan (the
"Investor Plan"), and the Flex Shares of the Funds have a distribution and
service plan (the "Flex Plan").
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the disinterested Trustees, or by a majority vote of the
outstanding securities of the Trust upon not more than 60 days' written notice
by either party.
For the fiscal years ended May 31, 1998, 1997, and 1996, the aggregate sales
charges payable to the Distributor with respect to the Investor Shares of the
Funds were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR
DISTRIBUTOR
------------------------------------------------------------------------------
FUND 1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund $ 54,658 $ 32,358 $ 50,016 $ 0 $ 62 $ 143
Georgia Tax-Exempt Bond Fund $ 7,871 $ 6,999 $ 1,208 $ 0 $ 97 $ 6
Florida Tax-Exempt Bond Fund $ 7,296 $ 3,657 $ 1,386 $ 0 $ 24 $ 14
Short-Term Bond Fund $ 1,056 $ 617 $ 1,204 $ 10 $ 0 $ 0
Investment Grade Tax-Exempt Bond Fund $ 10,402 $ 14,487 $ 12,005 $ 36 $ 20 $ 30
U.S. Government Securities Fund $ 23,873 $ 766 $ 7,279 $ 0 $ 3 $ 0
Short-Term U.S. Treasury Securities $ 547 $ 796 $ 2,641 $ 4 $ 0 $ 9
Fund
Limited-Term Federal Mortgage $ 485 $ 882 $ 4,067 $ 0 $ 11 $ 50
Securities Fund
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
B-25
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR
DISTRIBUTOR
------------------------------------------------------------------------------
FUND 1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Growth Fund $560,435 $264,747 $258,267 $ 312 $ 958 $ 243
Sunbelt Equity Fund $ 57,613 $ 36,784 $ 46,854 $ 0 $ 47 $ 61
Value Income Stock Fund $576,856 $335,991 $306,061 $ 361 $ 100 $ 3,104
International Equity Fund $ 93,755 $ 0 $ 29,032 $ 16 $ 0 $ 85
International Equity Index Fund $ 5,285 $ 0 $ 19,058 $ 16 $ 0 $ 50
Mid-Cap Equity Fund $ 83,073 $ 31,167 $ 91,344 $ 26 $ 61 $ 197
Balanced Fund $ 48,373 $ 13,525 $ 16,540 $ 0 $ 0 $ 22
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth, Value Income Stock, Small Cap Equity, 3.375% 2.925% 2.250% 1.350%
Mid-Cap Equity, Balanced, Sunbelt Equity,
International Equity Index, International Equity, U.S.
Government Securities, Investment Grade Tax-Exempt
Bond, Investment Grade Bond, and Florida Tax-Exempt
Bond and Georgia Tax-Exempt Bond Funds
Limited-Term Federal Mortgage Securities Fund 2.250% 1.575% 1.125% None
Short-Term Bond Fund 1.800% 1.350% 0.900% None
Short-Term U.S. Treasury Securities Fund 0.900% 0.675% 0.450% None
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal years ended May 31, 1998, 1997 and 1996, the aggregate sales
charges payable to the Distributor with respect to the Flex Shares of the Funds
were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR
FUND DISTRIBUTOR
-------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund $ 10,040 $ 5,684 $ 4,329 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR
FUND DISTRIBUTOR
-------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Georgia Tax-Exempt Bond Fund $ 3,920 $ 2,915 $ 2,896 $ 0 $ 0 $ 0
Florida Tax-Exempt Bond Fund $ 2,566 $ 1,632 $ 153 $ 0 $ 0 $ 0
Short-Term Bond Fund $ 1,395 $ 1,678 $ 344 $ 0 $ 0 $ 0
Investment Grade Tax-Exempt Bond Fund $ 2,900 $ 10,407 $ 2,782 $ 0 $ 0 $ 0
U.S. Government Securities Fund $ 2,014 $ 2,823 $ 1,067 $ 0 $ 0 $ 0
Short-Term U.S. Treasury Securities $ 2,377 $ 8,261 $ 3,687 $ 0 $ 0 $ 0
Fund
Limited-Term Federal Mortgage $ 2,805 $ 2,067 $ 1,442 $ 0 $ 0 $ 0
Securities Fund
Capital Growth Fund $ 60,500 $ 18,958 $ 6,283 $ 0 $ 0 $ 0
Sunbelt Equity Fund $ 4,183 $ 8,144 $ 324 $ 0 $ 0 $ 0
Value Income Stock Fund $ 112,674 $ 41,778 $ 10,574 $ 0 $ 0 $ 0
International Equity Fund $ 23,393 $ 0 $ 60 $ 0 -- $ 0
International Equity Index Fund $ 992 $ 0 $ 392 $ 0 -- $ 0
Mid-Cap Equity Fund $ 8,666 $ 10,239 $ 5,222 $ 0 $ 0 $ 0
Balanced Fund $ 11,758 $ 4,299 $ 713 $ 0 $ 0 $ 0
Small Cap Equity Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ *
Small Cap Growth Stock Fund * * * * * *
Tax Sensitive Growth Stock Fund * * * * * *
</TABLE>
*Not in operation during the period.
INVESTOR SHARES AND FLEX SHARES DISTRIBUTION PLANS
The Distribution Agreement and the Investor Plan adopted by the Trust provide
that Investor Shares of the Fund will pay the Distributor fees of up to the
following respective levels: .20% of the average daily net assets of the Prime
Quality Money Market Fund; .17% of the average daily net assets of the U.S.
Government Securities Money Market Fund; .15% of the average daily net assets of
the Tax-Exempt Money Market Fund; .18% of the average daily net assets of the
Short-Term U.S. Treasury Securities Fund; .23% of the average daily net assets
of the Short-Term Bond Fund; .43% of the average daily net assets of the
Investment Grade Bond Fund; .43% of the average daily net assets of the
Investment Grade Tax-Exempt Bond Fund; .68% of the average daily net assets of
the Capital Growth Fund; .33% of the average daily net assets of the Value
Income Stock Fund; .43% of the average daily net assets of the Mid-Cap Equity
Fund; .43% of the average daily net assets of the Sunbelt Equity Fund; .28% of
the average daily net assets of the Balanced Fund; .18% of the average daily net
assets of the Florida Tax-
B-27
<PAGE>
Exempt Bond Fund; .18% of the average daily net assets of the Georgia Tax-Exempt
Bond Fund; .38% of the average daily net assets of the U.S. Government
Securities Fund; .38% of the average daily net assets of the International
Equity Index Fund; .33% of the average daily net assets of the International
Equity Fund; and .23% of the average daily net assets of the Limited-Term
Federal Mortgage Securities Fund.
The Distribution Agreement and the Flex Plan adopted by the Trust provide that
each Flex Shares Fund will pay the Distributor a fee of up to .75% of the
average daily net assets of that Fund. The Distributor can use these fees to
compensate broker-dealers and service providers, including SunTrust and its
affiliates, which provide administrative and/or distribution services to
Investor Shares or Flex Shares Shareholders or their customers who beneficially
own Investor Shares or Flex Shares. In addition, Flex Shares are subject to a
service fee of up to .25% of the average daily net assets of the Flex Shares of
each Fund. This service fee will be used for services provided and expenses
incurred in maintaining shareholder accounts, responding to shareholder
inquiries and providing information on their investments.
Services for which broker-dealers and service providers may be compensated
include establishing and maintaining customer accounts and records; aggregating
and processing purchase and redemption requests from customers; placing net
purchase and redemption orders with the Distributor; automatically investing
customer account cash balances; providing periodic statements to customers;
arranging for wires; answering customer inquiries concerning their investments;
assisting customers in changing dividend options, account designations, and
addresses; performing sub-accounting functions; processing dividend payments
from the Trust on behalf of customers; and forwarding Shareholder communications
from the Trust (such as proxies, Shareholder reports, and dividend distribution
and tax notices) to these customers with respect to investments in the Trust.
Certain state securities laws may require those financial institutions providing
such distribution services to register as dealers pursuant to state law.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Trust, according to an opinion issued
to the staff of the SEC by the Office of the Comptroller of the Currency,
financial institutions are not prohibited from acting in other capacities for
investment companies, such as providing shareholder services. Should future
legislative, judicial, or administrative action prohibit or restrict the
activities of financial institutions in connection with providing shareholder
services, the Trust may be required to alter materially or discontinue its
arrangements with such financial institutions.
The Trust has adopted the Investor Plan and the Flex Plan in each case in
accordance with the provisions of Rule 12b-1 under the 1940 Act, which Rule
regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares.
Continuance of the Investor Plan and the Flex Plan must be approved annually by
a majority of the Trustees of the Trust and by a majority of the disinterested
Trustees. The Investor Plan and the Flex Plan require that quarterly written
reports of amounts spent under the Investor Plan and the Flex Plan,
respectively, and the purposes of such expenditures be furnished to and reviewed
by the Trustees. The Investor Plan and the Flex Plan may not be amended to
increase materially the amount which may be spent thereunder without approval by
a majority of the outstanding shares of the affected class of shares of the
Trust. All material amendments of the Plans will require approval by a majority
of the Trustees of the Trust and of the disinterested Trustees.
There is no sales charge on purchases of Flex Shares, but Flex Shares are
subject to a contingent deferred sales charge if they are redeemed within one
year of purchase. Pursuant to the Distribution Agreement and the Flex Plan,
Flex Shares are subject to an ongoing distribution and service fee calculated on
each of the Bond Funds', Tax-Exempt Bond Funds', Equity Funds' and Balanced
Fund's aggregate average daily net assets attributable to its Flex Shares.
B-28
<PAGE>
For the fiscal years ended May 31, 1998, 1997 and 1996, the Funds paid the
following amounts pursuant to the Investor Plan:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
DISTRIBUTION FEES - AMOUNT PAID
------------------------------------------
FUND 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Quality Money Market Fund $ 465,411 $ 342,798 $ 273,316
U.S. Government Securities Money Market Fund $ 69,957 $ 66,016 $ 44,107
Tax-Exempt Money Market Fund $ 125,986 $ 89,912 $ 80,845
Investment Grade Bond Fund $ 96,090 $ 94,495 $ 78,963
Investment Grade Tax-Exempt Bond Fund $ 76,472 $ 100,819 $ 113,467
Short-Term Bond Fund $ 33 $ 0 $ 5,067
Florida Tax-Exempt Bond Fund $ 0 $ 0 $ 6,021
Georgia Tax-Exempt Bond Fund $ 0 $ 0 $ 5,001
U.S. Government Securities Fund $ 385 $ 1,150 $ 4,218
Short-Term U.S. Treasury Securities Fund $ 0 $ 0 $ 8,499
Limited-Term Federal Mortgage Securities Fund $ 161 $ 0 $ 2,360
Capital Growth Fund $1,442,648 $1,109,436 $ 912,685
Sunbelt Equity Fund $ 90,212 $ 80,282 $ 99,366
Value Income Stock Fund $ 630,527 $ 437,882 $ 304,282
Mid-Cap Equity Fund $ 70,254 $ 56,187 $ 51,485
Balanced Fund $ 5,628 $ 2,390 $ 10,808
International Equity Fund $ 34,499 $ 10,778 $ 0
International Equity Index Fund $ 7,582 $ 8,005 $ 369
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
For the fiscal years ended May 31, 1998, 1997 and 1996, the Funds paid the
following amounts pursuant to the Flex Plan:
B-29
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
DISTRIBUTION FEES - AMOUNT PAID
----------------------------------------
FUND 1998 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Bond Fund $ 56,167 $ 29,558 $ 9,277
Investment Grade Tax-Exempt Bond Fund $ 39,461 $ 36,489 $ 21,786
Short-Term Bond Fund $ 379 $ 0 $ 0
Florida Tax-Exempt Bond Fund $ 30,177 $ 5,962 $ 2,675
Georgia Tax-Exempt Bond Fund $ 30,028 $ 20,094 $ 7,409
U.S. Government Securities Fund $ 17,051 $ 15,260 $ 4,460
Short-Term U.S. Treasury Securities Fund $ 170 $ 510 $ 321
Limited-Term Federal Mortgage Securities Fund $ 533 $ 0 $ 169
Capital Growth Fund $ 672,585 $ 201,520 $ 37,344
Sunbelt Equity Fund $ 50,902 $ 27,568 $ 1,560
Value Income Stock Fund $1,234,587 $ 433,655 $ 99,703
Mid-Cap Equity Fund $ 123,932 $ 53,907 $ 10,115
Balanced Fund $ 125,786 $ 28,723 $ 6,985
Small Cap Equity Fund $ 155,949 * *
International Equity Fund $ 2,090 $ 18,519 $ 0
International Equity Index Fund $ 148,500 $ 0 $ 580
Small Cap Growth Stock Fund * * *
Tax Sensitive Growth Stock Fund * * *
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
*Not in operation during the period.
THE TRANSFER AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, PA
15222-3779 serves as the Trust's transfer agent.
THE CUSTODIAN
SunTrust Bank, Atlanta, 303 Peachtree Street N.E., 14th Floor, Atlanta, GA
30308 serves as the custodian for the all of the Funds except for the
International Equity, International Equity Index and Emerging Markets Equity
Funds. The Bank of New York, One Wall Street, New York, NY 10286
B-30
<PAGE>
serves as custodian for the International Equity, International Equity Index and
Emerging Markets Equity Funds.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP serves as independent public accountants for the Trust.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. serves as
legal counsel to the Trust.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services. The Trustees and Executive Officers of the
Trust, their respective dates of birth, and their principal occupations for the
last five years are set forth below. Each may have held other positions with
the named companies during that period. The business address of each Trustee
and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456.
Certain officers of the Trust also serve as officers of some or all of the
following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The
Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston
1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition
Funds, First American Funds, Inc., First American Investment Funds, Inc., First
American Strategy Funds, Inc., HighMark Funds, Monitor Funds, Morgan Grenfell
Investment Trust, Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor
Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
International Trust, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic
Variable Trust, TIP Funds and TIP Institutional Funds, each of which is an
open-end management investment company managed by SEI Fund Management or its
affiliates and, except for PBHG Advisor Funds, Inc., are distributed by SEI
Investments Distribution Co.
DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida,
N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital;
Executive Committee Member and Director, Honda Classic Foundation; Director,
Broward Community College Foundation.
WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company,
1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board,
1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment
Committee and member of Executive Committee, Cotton States Life and Health
Insurance Company; Director and
B-31
<PAGE>
Chairman of Investment Committee and member of Executive Committee, Cotton
States Mutual Insurance Company; Chairman, Trust Company of Georgia Advisory
Council.
F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County
Publishing Co., Inc., 1981-1997, publisher of the Paoli News and the Paoli
Republican and Editor of the Paoli Republican, 1981-1997, President, H & W
Distribution, Inc., 1984-1997. Current Trustee on the Board of Trustees for the
SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President,
Trust Department, Harris Trust and Savings Bank and Chairman of the Board of
Directors of The Harris Trust Company of Arizona before January 1981.
T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of
Crawford & Company; held these positions, 1973-1987. Member of the Board of
Directors, 1970-1990, joined company in 1948; spent entire career at Crawford,
currently serves on Boards of Norrell Corporation and Mercy Health Services, the
latter being the holding company of St. Joseph's Hospitals.
DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for
Economic Education, Florida State University, 1991-present. President of
Florida State University, 1976-91; previous four years EVP and Chief Academic
Officer. During educational career, taught at Florida State, Michigan State,
Louisiana State and Southern University. Spent 19 years as faculty member and
administrator at Louisiana State University and served as Head of Economics
Department, member and Chairman of the Graduate Council, Dean of Academic
Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve
Bank of Atlanta, 1983-1988.
JESSE HALL (9/26/29) - Trustee* - Executive Vice President, SunTrust Banks,
Inc., 1985-1994; Director of Crawford & Company since 1979; Member, Atlanta
Estate Planning Council, 1988-1993.
JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD
Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg
Trust.
WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust
Equitable Securities Corporation, January, 1998-present. Chairman and CEO,
Equitable Asset Management, Inc., December 1993-present. Chairman & CEO,
Equitable Trust Company, June 1991-present. Chairman, Equitable Securities
Corporation, July 1972 - January 1998.
MARK NAGLE (10/20/59) - President and Chief Executive Officer - Vice President
and Controller, Funds Accounting since 1996. Vice President of the Administrator
and Distributor since 1996. Vice President of Fund Accounting - BISYS Fund
Services 1995-1996. Senior Vice President - Fidelity Investments 1981-1995.
TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of the Administrator and the Distributor since 1995.
Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn
(law firm), 1991-1994.
B-32
<PAGE>
LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock
Exchange, 1989-1998.
KATHY HEILIG (12/21/58) - Vice President and Assistant Secretary - Treasurer of
SEI Investments Company since 1997. Assistant Controller of SEI Investments
Company since 1995. Vice President of SEI Investments Company since 1991.
Director of Taxes of SEI Investments Company, 1987-1991. Tax Manager - Arthur
Anderson LLP prior to 1987.
JOSEPH M. O'DONNELL (11/13/54) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997. Staff
Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993.
SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor since
1983.
LYNDA J. STRIEGEL (10/30/48) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998.
Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel,
Riggs Bank, N.A., 1991-1995.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President & General Counsel of SEI Investments, the Administrator and the
Distributor since 1994. Vice President of SEI, the Administrator and the
Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm) prior
to 1992.
KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice
President, Assistant Secretary of SEI Investments, the Administrator and
Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.
CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of SEI
Investments Mutual Funds Services since 1992.
RICHARD W. GRANT (10/25/45) - Secretary - 2000 One Logan Square, Philadelphia,
Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, Administrator and Distributor, since 1989.
JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 2000 One Logan Square,
Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law
firm) since 1995, counsel to the Trust, Administrator and Distributor.
Associate, Morgan, Lewis & Bockius LLP, 1993-1995. Associate, Ropes & Gray (law
firm), 1988-1993.
- -------------------------
B-33
<PAGE>
* Messrs. Looney, Goodrum, McNair, Hall and Cammack may be deemed to be
"interested persons" of the Trust as defined in the Investment Company Act
of 1940.
The Trustees and Officers of the Trust own, in the aggregate, less than 1% of
the outstanding shares of the Trust.
For the fiscal year end May 31, 1998, the Trust paid the following amounts to
Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, Trustee $14,000 N/A N/A $14,000 for service on two
boards
Wilton Looney, Trustee $17,000 N/A N/A $17,000 for service on two
boards
Champney A. McNair, Trustee $13,000 N/A N/A $13,000 for service on two
boards
F. Wendell Gooch, Trustee $15,000 N/A N/A $15,000 for service on two
boards
T. Gordy Germany, $15,000 N/A N/A $15,000 for service on two
Trustee boards
Dr. Bernard F. Sliger, Trustee $15,000 N/A N/A $15,000 for service on two
boards
Jesse S. Hall, Trustee $14,000 N/A N/A $14,000 for service on two
boards
Jonathan T. Walton, Trustee* $3,500 N/A N/A $ 3,500 for service on two
boards
William H. Cammack, Trustee N/A N/A N/A $ 0 for service on
two boards
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Messr. Walton's compensation reflects a starting date of June 19, 1998.
PERFORMANCE INFORMATION
From time to time a Fund may advertise its performance. Performance figures are
based on historical earnings and are not intended to indicate future
performance.
CLASSES OF SHARES AND PERFORMANCE
B-34
<PAGE>
The performance of the Trust's Investor Shares and Flex Shares will normally be
lower than for Trust Shares because Investor Shares and Flex Shares are subject
to distribution, service, and certain transfer agent fees not charged to Trust
Shares. Because of their differing distribution expense arrangements, the
performance of Flex Shares in comparison to Investor Shares will vary depending
upon the investor's investment time horizon.
PERFORMANCE COMPARISONS
Each Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds, or
to unmanaged indices. These comparisons may assume reinvestment of dividends
but generally do not reflect deductions for administrative and management costs.
COMPUTATION OF YIELD
SEVEN-DAY YIELD
The current yield of the Money Market Funds will be calculated daily based upon
the seven days ending on the date of calculation (the "base period"). The yield
is computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The
effective compound yield of the Funds is determined by computing the net change
(exclusive of capital changes) in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
365/7
following formula: Effective Yield = [(Base Period Return + 1) ] - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
The Tax-Exempt Money Market Fund's "tax equivalent yield" and "tax equivalent
effective yield" are calculated by determining the rate of return that would
have to be achieved on a fully taxable investment to produce the after-tax
equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder.
Tax-exempt yield is calculated according to the same formula except that E
equals the interest exempt from federal income tax earned during the period.
This tax-exempt yield is then translated into tax-equivalent yield according to
the following formula:
TAX EQUIVALENT YIELD = (E) + T
-------
(1-P)
E = the portion of the yield which is tax-exempt
P = stated income tax rate
T = the portion of the yield which is taxable
B-35
<PAGE>
For the 7-day period ended May 31, 1998, the Money Market Funds' current
effective and tax equivalent yields were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
7-DAY 7-DAY
7-DAY TAX EQUIVALENT TAX EQUIVALENT
FUND CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Quality Money Market Fund Investor 4.95% 5.07% N/A N/A
----------------------------------------------------------------------------------------
Trust 5.11% 5.24% N/A N/A
U.S. Government Securities Investor 4.77% 4.88% N/A N/A
----------------------------------------------------------------------------------------
Money Market Fund Trust 4.91% 5.03% N/A N/A
Tax-Exempt Money Market Fund Investor 3.16% 3.21% 5.23% 5.31%
----------------------------------------------------------------------------------------
Trust 3.27% 3.32% 5.41% 5.50%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The yields of these Funds fluctuate, and the annualization of a week's dividend
is not a representation by the Trust as to what an investment in the Fund will
actually yield in the future. Actual yields will depend on such variables as
asset quality, average asset maturity, the type of instruments a Fund invests
in, changes in interest rates on money market instruments, changes in the
expenses of the Fund and other factors.
THIRTY-DAY YIELD
The Bond, Short-Term U.S. Treasury, Tax-Exempt Bond and Equity Funds may
advertise a 30-day yield. In particular, yield will be calculated according to
the following formula:
6
Yield = (2 (a-b/cd + 1) - 1) where a = dividends and interest earned during the
period; b = expenses accrued for the period (net of reimbursement); c = the
average daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
For the 30-day period ended May 31, 1998, yields on the Funds other than the
Money Market Funds were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUND CLASS OF SHARES YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Grade Bond Fund Trust Shares 5.48%
--------------------------------
Investor Shares 4.96%
--------------------------------
Flex Shares 4.61%
- --------------------------------------------------------------------------------
Investment Grade Tax-Exempt Bond Fund Trust Shares 3.76%
--------------------------------
Investor Shares 3.24%
--------------------------------
Flex Shares 2.92%
- --------------------------------------------------------------------------------
</TABLE>
B-36
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUND CLASS OF SHARES YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Bond Fund Trust Shares 5.37%
--------------------------------
Investor Shares 5.06%
--------------------------------
Flex Shares 4.86%
- --------------------------------------------------------------------------------
Florida Tax-Exempt Bond Fund Trust Shares 3.91%
--------------------------------
Investor Shares 3.57%
--------------------------------
Flex Shares 3.22%
- --------------------------------------------------------------------------------
Georgia Tax-Exempt Bond Fund Trust Shares 3.89%
--------------------------------
Investor Shares 3.55%
--------------------------------
Flex Shares 3.22%
- --------------------------------------------------------------------------------
Short-Term U.S. Treasury Securities Fund Trust Shares 4.97%
--------------------------------
Investor Shares 4.78%
--------------------------------
Flex Shares 4.56%
- --------------------------------------------------------------------------------
U.S. Government Securities Fund Trust Shares 5.64%
--------------------------------
Investor Shares 4.99%
--------------------------------
Flex Shares 4.73%
- --------------------------------------------------------------------------------
Limited-Term Federal Mortgage Securities Fund Trust Shares 5.54%
--------------------------------
Investor Shares 5.15%
--------------------------------
Flex Shares 4.95%
- --------------------------------------------------------------------------------
Capital Growth Fund Trust Shares .33%
--------------------------------
Investor Shares ----
--------------------------------
Flex Shares ----
- --------------------------------------------------------------------------------
Sunbelt Equity Fund Trust Shares ----
--------------------------------
Investor Shares ----
--------------------------------
Flex Shares ---
- --------------------------------------------------------------------------------
Value Income Stock Fund Trust Shares 1.70%
--------------------------------
Investor Shares 1.32%
--------------------------------
Flex Shares .64%
- --------------------------------------------------------------------------------
</TABLE>
B-37
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUND CLASS OF SHARES YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Mid-Cap Equity Fund Trust Shares ---
--------------------------------
Investor Shares ---
--------------------------------
Flex Shares ---
- --------------------------------------------------------------------------------
Balanced Fund Trust Shares 2.19%
--------------------------------
Investor Shares 1.83%
--------------------------------
Flex Shares 1.15%
- --------------------------------------------------------------------------------
Small Cap Equity Fund Trust Shares .88%
--------------------------------
Investor Shares **
--------------------------------
Flex Shares .18%
- --------------------------------------------------------------------------------
Emerging Markets Equity Fund Trust Shares ---
- --------------------------------------------------------------------------------
International Equity Fund Trust Shares ---
--------------------------------
Investor Shares ---
--------------------------------
Flex Shares ---
- --------------------------------------------------------------------------------
International Equity Index Fund Trust Shares ---
--------------------------------
Investor Shares ---
--------------------------------
Flex Shares ---
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Small Cap Growth Stock Fund Trust Shares *
--------------------------------
Investor Shares **
--------------------------------
Flex Shares *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax Sensitive Growth Stock Fund Trust Shares *
--------------------------------
Investor Shares **
--------------------------------
Flex Shares *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
*Not in operation during the period.
**Not offered in this class.
The Tax-Exempt Bond Funds' "tax equivalent yield" and "tax equivalent effective
yield" are calculated by determining the rate of return that would have to be
achieved on a fully taxable investment to produce the after-tax equivalent of
the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt
yield is calculated according to the same formula except that E equals the
interest exempt from federal income tax earned during the period. This
tax-exempt yield is then translated into tax-equivalent yield according to the
following formula:
B-38
<PAGE>
TAX EQUIVALENT YIELD = (E) + T
-------
(1-P)
E = the portion of the yield which is tax-exempt
P = stated income tax rate
T = the portion of the yield which is taxable
Tax equivalent yields assume the payment of federal income taxes at a rate of
39.6% and, for the Georgia Tax-Exempt Bond Fund, Georgia income taxes at a rate
of 6.0%.
For the 30-day period ended May 31, 1998, the tax-equivalent yields for the
Trust Shares were as follows: for the Investment Grade Tax-Exempt Bond Fund -
6.23%, Georgia Tax-Exempt Bond Fund - 7.15%, and Florida Tax-Exempt Bond Fund
- -6.47%.
For the 30-day period ended May 31, 1998, the tax-equivalent yields for the
Investor Shares of the Tax-Exempt Funds were as follows: for the Investment
Grade Tax-Exempt Bond Fund - 5.36%, Georgia Tax-Exempt Bond Fund - 6.53%, and
Florida Tax-Exempt Bond Fund - 5.91%.
For the 30-day period ended May 31, 1998, the tax-equivalent yields for the Flex
Shares of the Tax-Exempt Funds were as follows: for the Investment Grade
Tax-Exempt Bond Fund - 4.83%, Georgia Tax-Exempt Bond Fund - 5.92%, and Florida
Tax-Exempt Bond Fund - 5.33%.
Yields are one basis upon which investors may compare the Funds with other money
market funds; however, yields of other money market funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
CALCULATION OF TOTAL RETURN
From time to time, the Bond, Short-Term U.S. Treasury, Tax-Exempt Bond, Balanced
and Equity Funds may advertise total return. In particular, total return will
n
be calculated according to the following formula: P (1 + T) = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
From time to time, the Trust may include the names of clients of the Advisors in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. SunTrust
Bank's investment advisory affiliates, STI Capital Management, N.A. and Trusco
Capital Management, have been in the top 1% of the SEI Funds Evaluation database
for equity managers over the past ten years. SEI Investment's database includes
research data on over 1,000 investment managers responsible for over $450
billion in assets.
B-39
<PAGE>
Based on the foregoing, the average annual total returns for the Funds from
inception through May 31, 1998 and for the one-year, three year, and five-year
periods ended May 31, 1998 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Quality Money Market Fund Trust(1) 5.22% 5.16% 4.63% 4.35%
-----------------------------------------------------------------------
Investor(1) 5.04% 4.99% 4.45% 4.17%
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Money Market Fund Trust(1) 5.04% 5.00% 4.49% 4.21%
-----------------------------------------------------------------------
Investor(1) 4.90% 4.86% 4.34% 4.06%
- ------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Trust(1) 3.21% 3.19% 2.95% 2.81%
-----------------------------------------------------------------------
Investor(1) 3.09% 3.07% 2.83% 2.70%
- ------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Fund Trust(3) 10.92% 7.27% 6.63% 7.04%
-----------------------------------------------------------------------
Investor-- 6.31% 5.50% 5.43% 6.05%
With Sales
Load(2)
-----------------------------------------------------------------------
Investor-- 10.49% 6.85% 6.25% 6.73%
Without Sales
Load(2)
-----------------------------------------------------------------------
Flex-- 7.99% * * 6.19%
With Sales
Load(25)
-----------------------------------------------------------------------
Flex--Without 9.99% * * 6.19%
Sales Load(25)
- ------------------------------------------------------------------------------------------------------------------------
Investment Grade Tax-Exempt Bond Fund Trust(5) 8.57% 7.17% 7.17% 6.59%
Investor-- 3.98% 5.36% 6.26% 7.16%
With Sales
Load(4)
-----------------------------------------------------------------------
</TABLE>
B-40
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investor-- 8.05.% 6.71% 7.07% 7.84%
Without Sales
Load(4\)
-----------------------------------------------------------------------
Flex--With 5.50% * * 6.20%
Sales Load(26)
-----------------------------------------------------------------------
Flex--Without 7.50% * * 6.20%
Sales Load(26)
- ------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Fund Trust(7) 7.31% 6.01% 5.51% 5.47%
-----------------------------------------------------------------------
Investor-- 5.07% 5.10% 4.89% 4.75%
With Sales
Load(8)
-----------------------------------------------------------------------
Investor-- 7.19% 5.79% 5.31% 5.17%
Without Sales
Load(8)
-----------------------------------------------------------------------
Flex--With 4.84% * * 5.42%
Sales Load(28)
-----------------------------------------------------------------------
Flex-Without 6.84% * * 5.42%
Sales Load(28)
- ------------------------------------------------------------------------------------------------------------------------
Florida Tax-Exempt Bond Fund Trust(10) 8.77% 6.60% * 6.37%
-----------------------------------------------------------------------
Investor-- 4.40% 5.03% * 5.21%
With Sales
Load(9)
-----------------------------------------------------------------------
Investor-- 8.46% 6.39% * 6.14%
Without Sales
Load(9)
-----------------------------------------------------------------------
Flex--With 6.04% * * 5.91%
Sales Load(26)
-----------------------------------------------------------------------
</TABLE>
B-41
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flex--Without 8.04% * * 5.91%
Sales Load(26)
- ------------------------------------------------------------------------------------------------------------------------
Georgia Tax-Exempt Bond Fund Trust(9) 8.37% 6.33% * 4.84%
-----------------------------------------------------------------------
Investor-- 4.19% 4.76% * 3.76%
With Sales
Load(11)
-----------------------------------------------------------------------
Investor-- 8.26% 6.12% * 4.68%
Without Sales
Load(11)
-----------------------------------------------------------------------
Flex--With 5.74% * * 5.34%
Sales Load(31)
-----------------------------------------------------------------------
Flex--Without 7.74% * * 5.34%
Sales Load(31)
- ------------------------------------------------------------------------------------------------------------------------
Short-Term U.S. Treasury Securities Fund Trust(7) 6.30% 5.60% 5.01% 4.89%
-----------------------------------------------------------------------
Investor-- 4.97% 5.03% 4.62% 4.51%
With Sales
Load(6)
-----------------------------------------------------------------------
Investor-- 6.04% 5.38% 4.83% 4.71%
Without Sales
Load(6)
-----------------------------------------------------------------------
Flex--With 3.90% * * 4.96%
Sales Load(27)
Flex--Without 5.90% * * 4.96%
Sales Load(27)
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund Trust(21) 10.76% 6.97% * 7.73%
-----------------------------------------------------------------------
Investor-- 6.10% 5.24% * 6.09%
With Sales
Load(20)
-----------------------------------------------------------------------
</TABLE>
B-42
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investor-- 10.23% 6.59% * 7.12%
Without Sales
Load(20)
-----------------------------------------------------------------------
Flex-With 7.78% * * 5.89%
Sales Load(23)
-----------------------------------------------------------------------
Flex--Without 9.78% * * 5.89%
Sales Load(23)
- ------------------------------------------------------------------------------------------------------------------------
Limited-Term Federal Mortgage Securities Fund Trust(23) 7.12% 6.13% * 6.50%
-----------------------------------------------------------------------
Investor-- 4.24% 5.01% * 5.80%
With Sales
Load(22)
-----------------------------------------------------------------------
Investor-- 6.95% 5.90% * 6.51%
Without Sales
Load(22)
-----------------------------------------------------------------------
Flex--With 4.49% * * 5.46%
Sales Load(23)
-----------------------------------------------------------------------
Flex--Without 6.49% * * 5.46%
Sales Load(23)
- ------------------------------------------------------------------------------------------------------------------------
Capital Growth Fund Trust1(3) 29.51% 27.69% 18.19% 18.16%
-----------------------------------------------------------------------
Investor-- 23.85% 26.86% 16.54% 17.17%
With Sales
Load(4)
-----------------------------------------------------------------------
Investor-- 28.71% 25.26% 17.43% 17.92%
Without Sales
Load(4)
-----------------------------------------------------------------------
Flex--With 26.12% * * 26.26%
Sales Load(26)
-----------------------------------------------------------------------
</TABLE>
B-43
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flex--Without 28.12% * * 26.26%
Sales Load(26)
- ------------------------------------------------------------------------------------------------------------------------
Sunbelt Equity Fund Trust(19) 23.86% 21.64% * 14.45%
-----------------------------------------------------------------------
Investor-- 18.62% 19.56% * 12.94%
With Sales
Load(18)
-----------------------------------------------------------------------
Investor-- 23.25% 21.10% * 13.92%
Without Sales
Load(18)
-----------------------------------------------------------------------
Flex--With 20.48% * * 19.79%
Sales Load(29)
-----------------------------------------------------------------------
Flex--Without 22.48% * * 19.79%
Sales Load(29)
- ------------------------------------------------------------------------------------------------------------------------
Value Income Stock Fund Trust(15) 23.10% 24.37% 20.30% 19.66%
-----------------------------------------------------------------------
Investor-- 18.13% 22.34% 18.89% 18.99%
With Sales
Load(14)
-----------------------------------------------------------------------
Investor-- 22.71% 23.90% 19.80% 19.86%
Without Sales
Load(14)
-----------------------------------------------------------------------
Flex--With 19.76% * * 23.04%
Sales Load(26)
-----------------------------------------------------------------------
Flex--Without 21.76% * * 23.04%
Sales Load(26)
- ------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund Trust(17) 21.14% 20.21% * 16.40%
-----------------------------------------------------------------------
Investor-- 16.07% 18.14% * 14.79%
With Sales
Load(16)
-----------------------------------------------------------------------
</TABLE>
B-44
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investor-- 20.56% 19.66% * 15.81%
Without Sales
Load(16)
-----------------------------------------------------------------------
Flex--With 17.80% * * 18.54%
Sales Load(29)
-----------------------------------------------------------------------
Flex--Without 19.80% * * 18.54%
Sales Load(29)
- ------------------------------------------------------------------------------------------------------------------------
Balanced Fund Trust(19) 22.15% 18.66% * 14.05%
- ------------------------------------------------------------------------------------------------------------------------
Investor-- 17.13% 16.77% * 12.62%
With Sales
Load(18)
-----------------------------------------------------------------------
Investor-- 21.72% 18.26% * 13.60%
Without Sales
Load(18)
-----------------------------------------------------------------------
Flex--With 18.85% * * 17.29%
Sales Load(30)
-----------------------------------------------------------------------
Flex--Without 20.85% * * 17.29%
Sales Load(30)
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Equity Fund Trust(12) 23.59% * * 26.83%
-----------------------------------------------------------------------
Flex--With 20.29% * * 17.48%
Sales Load(35)
-----------------------------------------------------------------------
Flex--Without 22.29% * * 19.52%
Sales Load(35)
- ------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Fund Trust(12) (15.74%) * * (6.91%)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-45
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------------
FUND ONE YEAR THREE YEARS FIVE YEARS SINCE
CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity Fund Trust(33) 21.87% * * 24.03%
-----------------------------------------------------------------------
Investor-- 16.83% * * 20.39%
With Sales
Load(32)
-----------------------------------------------------------------------
Investor-- 21.39% * * 22.33%
Without Sales
Load(32)
-----------------------------------------------------------------------
Flex--With 18.54% * * 21.57%
Sales Load(32)
-----------------------------------------------------------------------
Flex--Without 20.54% * * 21.57%
Sales Load(32)
- ------------------------------------------------------------------------------------------------------------------------
International Equity Index Fund Trust(24) 25.82% 13.91% * 11.04%
-----------------------------------------------------------------------
Investor-- 20.54% 12.03% * 9.53%
With Sales
Load(24)
-----------------------------------------------------------------------
Investor-- 25.25% 13.47% * 10.58%
Without Sales
Load(24)
-----------------------------------------------------------------------
Flex--Without 22.50% * * 12.82%
Sales Load(34)
-----------------------------------------------------------------------
Flex--With 24.50% * * 12.82%
Sales Load(34)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Growth Stock Fund Trust * * * *
-----------------------------------------------------------------------
Flex--With * * * *
Sales Load
-----------------------------------------------------------------------
Flex--Without * * * *
Sales Load
- ------------------------------------------------------------------------------------------------------------------------
Tax Sensitive Growth Stock Fund Trust * * * *
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-46
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flex--With * * * *
Sales Load
- ------------------------------------------------------------------------------------------------------------------------
Flex--Without * * * *
Sales Load
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Commenced operations 6/8/92
2 Commenced operations 6/11/92
3 Commenced operations 7/16/92
4 Commenced operations 6/9/92
5 Commenced operations 10/21/93
6 Commenced operations 3/18/93
7 Commenced operations 3/15/93
8 Commenced operations 3/22/93
9 Commenced operations 1/18/94
10 Commenced operations 1/25/94
11 Commenced operations 1/19/94
12 Commenced operations 1/31/97
13 Commenced operations 7/1/92
14 Commenced operations 2/17/93
15 Commenced operations 2/12/93
16 Commenced operations 2/1/94
17 Commenced operations 2/2/94
18 Commenced operations 1/4/94
19 Commenced operations 1/3/94
20 Commenced operations 6/9/94
21 Commenced operations 7/31/94
22 Commenced operations 7/17/94
23 Commenced operations 6/7/94
24 Commenced operations 6/6/94
25 Commenced operations 6/1/95
26 Commenced operations 6/2/95
27 Commenced operations 6/22/95
28 Commenced operations 6/20/95
29 Commenced operations 6/5/95
30 Commenced operations 6/14/95
31 Commenced operations 6/7/95
32 Commenced operations 1/2/96
33 Commenced operations 12/1/95
34 Commenced operations 6/8/95
35 Commenced operations 6/5/97
36 Commenced operations 6/6/97
*Fund not in operation for entire period.
PURCHASING SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is
closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
REDEEMING SHARES
A Shareholder will at all times be entitled to aggregate cash redemptions from
all Funds of the Trust during any 90-day period of up to the lesser of $250,000
or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the NYSE is restricted, or during the existence of an emergency (as determined
by the Securities and Exchange Commission by rule or regulation) as a result of
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission has by order
permitted. The Trust also reserves the right to suspend sales of shares of a
Fund for any period during which the NYSE, an Advisor, the Administrator and/or,
the Custodian are not open for business.
A number of Fund shareholders are institutions with significant share holdings
that may be redeemed at any time. If a substantial number or amount of
redemptions should occur within a relatively short period of time, a Fund may
have to sell portfolio securities it would otherwise hold and incur the
additional transaction costs. The sale of portfolio securities may result in
the recognition of capital gains, which will be distributed annually and
generally will be taxable to shareholders as ordinary income or capital gains.
Shareholders are notified annually regarding the federal tax status of
distributions they receive (see "Taxes").
B-47
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Money Market Funds is calculated daily by
the Administrator by adding the value of securities and other assets,
subtracting liabilities and dividing by the number of outstanding shares.
Securities will be valued by the amortized cost method which involves valuing a
security at its cost on the date of purchase and thereafter (absent unusual
circumstances) assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in general market rates of
interest on the value of the instrument. While this method provides certainty
in valuation, it may result in periods during which a security's value, as
determined by this method, is higher or lower than the price a Fund would
receive if it sold the instrument. During periods of declining interest rates,
the daily yield of a Fund may tend to be higher than a like computation made by
a company with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in a Fund
would be able to obtain a somewhat higher yield than would result from
investment in a company utilizing solely market values, and existing investors
in a Fund would experience a lower yield. The converse would apply in a period
of rising interest rates.
A Fund's use of amortized cost and the maintenance of a Fund's net asset value
at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940
Act, provided that certain conditions are met. The regulations also require the
Trustees to establish procedures which are reasonably designed to stabilize the
net asset value per share at $1.00 for the Funds. Such procedures include the
determination of the extent of deviation, if any, of the Funds current net asset
value per share calculated using available market quotations from the Funds
amortized cost price per share at such intervals as the Trustees deem
appropriate and reasonable in light of market conditions and periodic reviews of
the amount of the deviation and the methods used to calculate such deviation.
In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to
consider promptly what action, if any, should be initiated, and, if the Trustees
believe that the extent of any deviation may result in material dilution or
other unfair results to Shareholders, the Trustees are required to take such
corrective action as they deem appropriate to eliminate or reduce such dilution
or unfair results to the extent reasonably practicable. Such actions may
include the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; or establishing a net asset value per share by using
available market quotations. In addition, if the Funds incur a significant loss
or liability, the Trustees have the authority to reduce pro rata the number of
shares of the Funds in each Shareholder's account and to offset each
Shareholder's pro rata portion of such loss or liability from the Shareholder's
accrued but unpaid dividends or from future dividends while each other Fund must
annually distribute at least 90% of its investment company taxable income.
The securities of the Bond, Short-Term U.S. Treasury Securities and Equity Funds
are valued by the Administrator pursuant to valuations provided by an
independent pricing service. The pricing service relies primarily on prices of
actual market transactions as well as trader quotations. However, the service
may also use a matrix system to determine valuations of fixed income securities,
which system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees.
Although the methodology and procedures are identical, the net asset value per
share of Trust Shares, Flex Shares and Investor Shares of the Bond, Short-Term
U.S. Treasury Securities and Equity Funds may differ because of variations in
the distribution and service fees and transfer agent fees charged to Investor
Shares.
B-48
<PAGE>
TAXES
The following is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders that are not described in
the Funds' prospectus. No attempt is made to present a detailed explanation of
the Federal tax treatment of the funds or their Shareholders, and the discussion
here and in the Funds' prospectus is not intended as a substitute for careful
tax planning.
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional Information.
New legislation, as well as administrative changes or court decisions, may
change the conclusions expressed herein, and may have a retroactive effect with
respect to the transactions contemplated herein.
FEDERAL INCOME TAX
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
investment income excludable from gross income plus 90% of its investment
company taxable income (generally, net investment income plus net short-term
capital gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of a
Fund's gross income each taxable year must be derived from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock or securities, or certain other income; (ii) at the close
of each quarter of a Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RIC's and other securities, with such other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of a Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of a Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RIC's) of any one issuer, or of two or more issuers engaged
in same or similar businesses if the Fund owns at least 20% of the voting power
of such issuers.
In addition, each Fund will distribute by the end of any calendar year 98% of
its ordinary income for that year and 98% of its capital gain net income for the
one-year period ending on October 31 of that calendar year, plus certain other
amounts. Each Fund intends to make sufficient distributions prior to the end of
each calendar year to avoid liability for the federal excise tax applicable to
regulated investment companies.
If, at the close of each quarter of its taxable year, at least 50% of the value
of a Fund's total assets consists of obligations the interest on which is
excludable from gross income, a Fund may pay "exempt-interest dividends," as
defined in Section 852(b)(5) of the Code, to its shareholders.
As noted in the Prospectus, the Tax-Exempt Money Market Fund, the Investment
Grade Tax-Exempt Bond Fund, and the State Tax-Exempt Bond Funds intend to pay
exempt-interest dividends. Exempt-interest dividends are excludable from a
Shareholder's gross income for regular Federal income tax purposes, but may
nevertheless be subject to the alternative minimum tax (the "Alternative Minimum
Tax") imposed by Section 55 of the Code or the environmental tax (the
"Environmental Tax") imposed by Section 59A of the Code. The Alternative
Minimum Tax is imposed at the rate of 26% (with a maximum rate of 28%) in the
case of non-corporate taxpayers and at the rate of 20% in the case of corporate
taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The
B-49
<PAGE>
Environmental Tax is imposed at the rate of 0.12% and applies only to corporate
taxpayers. The Alternative Minimum Tax and the Environmental Tax may be imposed
in two circumstances. First, exempt-interest dividends derived from certain
"private activity bonds" issued after August 7, 1986, will generally be an item
of tax preference and therefore potentially subject to the Alternative Minimum
Tax for both corporate and non-corporate taxpayers and the Environmental Tax for
corporate taxpayers only. Second, in the case of exempt-interest dividends
received by corporate Shareholders, all exempt-interest dividends, regardless of
when the bonds from which they are derived were issued or whether they are
derived from private activity bonds, will be included in the corporation's
"adjusted current earnings," as defined in Section 56(g) of the Code, in
calculating the corporation's alternative minimum taxable income for purposes of
determining the Alternative Minimum Tax and the Environmental Tax. For tax
years beginning after December 31, 1997, the Alternative Minimum Tax is repealed
for certain corporations.
Distributions of exempt-interest dividends may result in additional Federal
income tax consequences to shareholders in Tax-Exempt Funds. For example,
interest on indebtedness incurred by Shareholders to purchase or carry shares of
a Tax-Exempt Fund will not be deductible for Federal income tax purposes to the
extent that the Fund distributes exempt interest dividends during the taxable
year. The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Certain foreign corporations engaged in a trade or business in the United States
will be subject to a "branch profits tax" on their "dividend equivalent amount"
for the taxable year, which will include exempt-interest dividends. Certain
Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include exempt-interest dividends. Up to 85% of
the Social Security benefits or railroad retirement benefits received by an
individual during any taxable year will be included in the gross income of such
individual if the individual's "modified adjusted gross income" (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.
A Tax-Exempt Fund may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
or private activity bonds. A "substantial user" is defined generally to include
certain persons who regularly use in a trade or business a facility financed
from the proceeds of industrial development bonds or private activity bonds.
Such entities or persons should consult their tax advisors before purchasing
shares of a Tax-Exempt Fund.
Issuers of bonds purchased by a Tax-Exempt Fund (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
Federal income taxation retroactively to the date of issuance of the bonds to
which such dividends are attributable thereof if such representations are
determined to have been inaccurate or if the issuer of such bonds (or the
beneficiary of such bonds) fails to comply with such covenants.
Any gain or loss recognized on a sale or redemption of shares of a Fund by a
Shareholder who is not a dealer in securities will generally be treated as
long-term capital gain or loss if the shares have been held for more than
eighteen months, mid-term if the shares have been held for over one year but not
for over eighteen months, and short-term if for a year or less. If shares held
for six months or less are sold or redeemed for a loss, two special rules apply:
First, if shares on which a net capital gain distribution has been received are
subsequently sold or redeemed, and such shares have been held for six months or
less, any loss recognized will be treated as long-term
B-50
<PAGE>
capital loss to the extent of the long-term capital gain distributions. Second,
any loss recognized by a Shareholder upon the sale or redemption of shares of a
Tax-Exempt Fund held for six months or less will be disallowed to the extent of
any exempt-interest dividends received by the Shareholder with respect to such
shares.
The Funds will make annual reports to Shareholders of the Federal income tax
status of all distributions.
FOREIGN TAXES
Dividends and interests received by a Fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on the Fund's stock or securities. Tax conventions between
certain countries and the United States may reduce or eliminate these taxes.
Foreign countries generally do not impose taxes on capital gains with respect to
investments by foreign investors.
If any of the International Equity Index, International Equity, and Emerging
Markets Equity Funds meets the Distribution Requirement, and if more than 50% of
the value of such Fund's total assets at the close of its taxable year consists
of stock or securities of foreign corporations, such Fund will be eligible to,
and will, file an election with the Internal Revenue Service that will enable
Shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any foreign and U.S. possessions income taxes paid by the Fund.
Pursuant to the election, each Fund will treat those taxes as dividends paid to
its Shareholders. Each Shareholder will be required to include a proportionate
share of those taxes in gross income as income received from a foreign source
and must treat the amount so included as if the Shareholder had paid the foreign
tax directly. The Shareholder may then either deduct the taxes deemed paid by
him or her in computing his or her taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against the
Shareholders' Federal income tax. In no event shall a Shareholder be allowed a
foreign tax credit with respect to shares in a Fund if such shares are held by
the Shareholder for 15 days or less during the 30-day period beginning on the
date which is 15 days before the date on which such shares become ex-dividend
with respect to such dividend. If any of the three above-mentioned Funds make
the election, such Fund will report annually to its Shareholders the respective
amounts per share of the Fund's income from sources within, and taxes paid to,
foreign countries and U.S. possessions.
The International Equity Index, International Equity, and Emerging Markets
Equity Funds' transactions in foreign currencies and forward foreign currency
contracts will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by Funds (I.E.,
may effect whether gains or losses are ordinary or capital), accelerate
recognition of income to the fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
Shareholders. These provisions also may require the Funds to mark-to-market
certain types of the positions in its portfolio (I.E., treat them as if they
were closed out) which may cause the Funds to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy the 90%
and 98% distribution requirements for avoiding income and excise taxes. Each
Fund will monitor its transactions, will make the appropriate tax elections, and
will make the appropriate entries in the books and records when it acquires any
foreign currency or forward foreign currency contract in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a RIC and
minimize the imposition of income and excise taxes.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, an Advisor is responsible for placing the orders to
execute transactions for a Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results
B-51
<PAGE>
taking into account such factors as price (including the applicable dealer
spread), the size, type and difficulty of the transaction involved, the firm's
general execution and operational facilities, and the firm's risk in positioning
the securities involved. While an Advisor generally seeks reasonably
competitive spreads or commissions, the Trust will not necessarily be paying the
lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, an Advisor
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Trust selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers provide transactions at best price and execution for the Trust. Best
price and execution includes many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry.
In some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Trust either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is
a spread (the difference between the buy and sell price) which is the equivalent
of a commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by an Advisor, brokerage business to brokers
or dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends, assisting in
determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by an Advisor in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used exclusively with respect to the fund
or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to
broker-dealers who provide such brokerage and research services, the Trust
believes that the commissions paid to such broker-dealers are not, in general,
higher than commissions that would be paid to broker-dealers not providing such
services and that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In addition, portfolio
transactions which
B-52
<PAGE>
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Trust. Subject to best price
and execution, commissions used for pricing may or may not be generated by the
funds receiving the pricing service.
An Advisor may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in
a manner deemed equitable to each account or fund. It is believed that the
ability of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or Fund may obtain, it is the opinion
of each Advisor and the Trust's Board of Trustees that the advantages of
combined orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Funds, at
the request of the Distributor, give consideration to sales of shares of the
Trust as a factor in the selection of brokers and dealers to execute Trust
portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of an Advisor, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of an Advisor is permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor or an affiliate of an Advisor to receive
and retain such compensation. These rules further require that commissions paid
to the Distributor by the Trust for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other renumeration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." In addition, the Trust may direct commission business to one or more
designated broker-dealers in connection with such broker/dealer's provision of
services to the Trust or payment of certain Trust expenses (E.G., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor, and will review these
procedures periodically.
For the fiscal year ended May 31, 1998, the Funds paid the following brokerage
commissions with respect to portfolio transactions:
B-53
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED
BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED
COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATED BROKERS IN FYE THROUGH AFFILIATED
IN FYE 5/31/98 AFFILIATES IN FYE 5/31/98(2) BROKERS FYE 5/31/98(3)
5/31/98(1)
FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Quality Money $ 165,811 $ 165,811 100% 100%
Market Fund
U.S. Government $ 151,183 $ 151,183 100% 100%
Securities Money Market
Fund
Tax-Exempt Money Market $ 0 $ 0 0% 0%
Fund
Investment Grade Bond $ 14,956 $ 14,956 100% 100%
Fund
Investment Grade Tax- $ 5,295 $ 5,295 100% 100%
Exempt Bond Fund
Capital Growth Fund $ 5,416,600 $ 77,348 1.43% 27.4%
Value Income Stock Fund $ 5,107,117 $ 68,315 1.34% 32.8%
Short-Term Bond Fund $ 0 $ 0 0% 0%
Short-Term U.S. Treasury $ 0 $ 0 0% 0%
Securities Fund
Sunbelt Equity Fund $ 783,859 $ 2,997 0.38% 55.6%
Balanced Fund $ 378,975 $ 7,126 1.88% 50.1%
Mid-Cap Equity Fund $ 1,029,108 $ 11,115 1.08% 46.6%
Florida Tax-Exempt Bond $ 0 $ 0 0% 0%
Fund
Georgia Tax-Exempt Bond $ 423 $ 423 100% 100%
Fund
U.S. Government $ 0 $ 0 0% 0%
Securities Fund
Limited-Term Federal $ 1,295 $ 1,295 100% 100%
Mortgage Securities Fund
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-54
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED
BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED
COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATED BROKERS IN FYE THROUGH AFFILIATED
IN FYE 5/31/98 AFFILIATES IN FYE 5/31/98(2) BROKERS FYE 5/31/98(3)
5/31/98(1)
FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small Cap Equity Fund $ 967,876 $ 5,851 0.60% 50%
Emerging Markets Equity $ 252,185 $ 0 0% 0%
Fund
International Equity $ 21,888 $ 0 0% 0%
Index Fund
International Equity Fund $ 3,098,062 $ 0 0% 0%
Small Cap Growth Stock * * * *
Fund
Tax Sensitive Growth * * * *
Stock Fund
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. These amounts refer to brokerage commissions paid to, or brokered
transactions effected through, SEI Investments Distribution Co., the Trust's
prinicpal underwriter.
For the fiscal years ended May 31, 1997 and 1996, the Funds paid the
following brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED
COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES
------------------------------------------------------------------------
1997 1996 1997 1996
FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Quality Money Market Fund $ 122,053 $ 0 $ 122,053 $ 0
U.S. Government Securities Money $ 141,850 $ 0 $ 141,850 $ 0
Market Fund
Tax-Exempt Money Market Fund $ 0 $ 0 $ 0 $ 0
Investment Grade Bond Fund $ 17,502 $ 0 $ 17,502 $ 0
</TABLE>
B-55
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED
COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES
------------------------------------------------------------------------
1997 1996 1997 1996
FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Grade Tax-Exempt Bond Fund $ 3,552 $ 0 $ 3,552 $ 0
Short-Term Bond Fund $ 0 $ 0 $ 0 $ 0
Short-Term U.S. Treasury Securities $ 0 $ 0 $ 0 $ 0
Fund
Florida Tax-Exempt Bond Fund $ 169 $ 0 $ 169 $ 200
Georgia Tax-Exempt Bond Fund $ 201 $ 0 $ 201 $ 135
U.S. Government Securities Fund $ 0 $ 0 $ 0 $ 0
Limited-Term Federal Mortgage $ 2,053 $ 0 $ 2,053 $ 73
Securities Fund
Capital Growth Fund $ 3,228,364 $ 3,339,393 $ 3,228,364 $ 34,827
Sunbelt Equity Fund $ 903,669 $ 904,698 $ 903,669 $ 5,202
Value Income Stock Fund $ 4,600,079 $ 4,325,977 $ 4,600,079 $ 37,379
Mid-Cap Equity Fund $ 1,090,559 $ 191,298 $ 1,090,559 $ 18,224
Balanced Fund $ 195,918 $ 169,222 $ 195,918 $ 4,280
Small Cap Equity Fund $ 229,856 * $ 229,856 *
Emerging Markets Equity Fund $ 144,635 * $ 0 *
International Equity Index Fund $ 94,672 $ 1,532,834 $ 0 $ 71
International Equity Fund $ 2,875,911 $ 129,411 $ 0 $ 0
Small Cap Growth Stock Fund * * * *
Tax Sensitive Growth Stock Fund * * * *
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*Not in operation during the period.
For the fiscal years ended May 31, 1998 and 1997, the portfolio turnover rate
for each of the non-money market Funds was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
TURNOVER RATE
---------------------
FUND 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Investment Grade Bond Fund 109% 298%
Investment Grade Tax-Exempt Bond Fund 378% 489%
</TABLE>
B-56
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
TURNOVER RATE
---------------------
FUND 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Short-Term U.S. Treasury Securities Fund 39% 93%
Short-Term Bond Fund 87% 118%
U.S. Government Securities Fund 14% 21%
Limited-Term Federal Mortgage Securities Fund 163% 133%
Florida Tax-Exempt Bond Fund 69% 135%
Georgia Tax-Exempt Bond Fund 7% 15%
Capital Growth Fund 194% 141%
Value Income Stock Fund 99% 105%
Mid-Cap Equity Fund 129% 152%
Small-Cap Equity Fund 55% 27%
Balanced Fund 154% 197%
Sunbelt Equity Fund 70% 72%
Emerging Markets Equity 74% 24%
International Equity Fund 108% 139%
International Equity Index Fund 1% 2%
Small Cap Growth Stock Fund * *
Tax Sensitive Growth Stock Fund * *
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
*Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares and classes of shares of the Funds each of which represents an equal
proportionate interest in that Fund with each other share. Shares are entitled
upon liquidation to a PRO RATA share in the net assets of the Funds.
Shareholders have no preemptive rights. The Declaration of Trust provides that
the Trustees of the Trust may create additional series of shares or classes of
series. All consideration received by the Trust for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
B-57
<PAGE>
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held personally liable for the
obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisors, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
YEAR 2000
The Trust depends on the smooth functioning of computer systems in almost
every aspect of its business. Like other mutual funds, businesses and
individuals around the world, the Trust could be adversely affected if the
computer systems used by its service providers do not properly process dates
on and after January 1, 2000 and distinguish between the year 2000 and the
year 1900. The Trust has asked its service providers whether they expect to
have their computer systems adjusted for the year 2000 transition, and is
seeking assurances from each service provider that it expects its system to
accommodate the year 2000 without material adverse consequences to the Trust.
While it is likely that such assurances will be obtained, the Trust and its
shareholders may experience losses if these assurances prove to be incorrect
or as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or third parties, such as custodians, banks,
broker-dealers or others with which the Trust does business.
5% AND 25% SHAREHOLDERS
As of July 14, 1998, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or
more of the shares of the Funds. Persons who owned of record or beneficially
more than 25% of a Fund's outstanding shares may be deemed to control the Fund
within the meaning of the Act. The Trust believes that most of the shares of
the Trust Class of the Funds were held for the record owner's fiduciary, agency
or custodial customers.
TRUST SHARES
B-58
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Prime Quality Money Market Fund SunTrust Bank, Atlanta 1,771,602,838.6700 95.70
P.O. Box 105504
Atlanta, GA 30348
US Government Securities Money SunTrust Bank, Atlanta 422,353,070.5500 98.15
Market Fund P.O. Box 105504
Atlanta, GA 30348
Tax Exempt Money Market Fund SunTrust Bank, Atlanta 545,665,981,0300 100.00
P.O. Box 105504
Atlanta, GA 30348
Investment Grade Bond Fund Trustman 48,241,619,6730 65.80
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 16,573,843.1970 22.61
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 4,822,641.7760 6.58
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Investment Grade Tax Exempt Bond Trustman 7,960,908.5930 61.59
Fund Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 3,199,304.7600 24.75
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-59
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Trustman 1,765,397.9590 13.66
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Capital Growth Fund Trustman 57,503,738.9520 63.00
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 19,503,941.5190 21.37
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Value Income Stock Fund Trustman 72,277,511.3130 60.14
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 28,391,563.0480 23.62
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Short-Term U.S. Treasury Securities Trustman 2,129,919.1430 44.62
Fund Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,834,564.6530 38.43
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-60
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Trustman 684,962.2520 14.35
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Short-Term Bond Fund Trustman 5,747,258.8000 46.25
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 5,639,917.0680 43.21
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Sunbelt Equity Fund Trustman 16,392,594.6100 59.45
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 6,526,198.6690 23.67
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,433,567.4920 5.20
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-61
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Mid-Cap Equity Fund Trustman 12,589,416.6140 53.52
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 8,827,011.0380 37.52
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Balanced Fund Trustman 9,513,571.4340 63.33
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Florida Tax-Exempt Bond Fund Trustman 6,516,097.0450 70.74
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,677,456.4180 18.21
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,018,316.3380 11.05
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Georgia Tax-Exempt Bond Fund Trustman 3,242,799.6550 46.21
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-62
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Trustman 2,727,478.5660 38.87
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,046,579.0340 14.92
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
International Equity Index Fund Trustman 3,268.694.8160 79.05
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 325,899.2180 7.88
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-63
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
International Equity Fund Trustman 25,150,125.1900 59.26
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 13,976,121.7680 33.28
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 2,422,779.7960 5.71
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
U.S. Government Securities Fund Trustman 1,687,909.2120 48.64
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 933,284.3680 26.89
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 817,640.7420 23.56
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Limited Term Federal Mortgage Trustman 8,567,666.2610 62.45
Securities Fund Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-64
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Trustman 4,303,123.9380 31.36
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Emerging Markets Equity Fund Trustman 3,271,650.7040 84.77
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 496,336.6320 12.86
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Small Cap Equity Fund Trustman 17,708,443.010 58.94
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 9,468,242.5490 32.16
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
<CAPTION>
INVESTOR SHARES
- ---------------
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Prime Quality Money Market Fund BHC Securities Inc 411,944,765.8000 84.25
Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103-7042
</TABLE>
B-65
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
U.S. Government Securities Money BHC Securities Inc 28,381,956.9800 48.49
Market Fund Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103-7042
Akerman, Senterfitt & Eidson 5,194,830.9900 8.87
Attorney Account
P.O. Box 231
Orlando, FL 32802-0231
Tax Exempt Money Market Fund BHC Securities Inc 116,228,508.4600 69.32
Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103-7042
STCM 28,600,00.000 17.06
Omnibus Account
P.O. Box 4418, Ctr.3910
Atlanta, GA 30302-4418
Investment Grade Bond Fund BHC Securities Inc. 1,678,711.9560 54.61
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square,
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-66
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Investment Grade Tax-Exempt Bond BHC Securities Inc. 733,560.8630 31.01
Fund Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Capital Growth Fund BHC Securities Inc. 6,981,000.2450 42.64
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Value Income Stock Fund BHC Securities Inc. 8,431,033.5060 56.79
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Short-Term U.S. Treasury BHC Securities Inc. 114,364.5720 40.50
Securities Fund Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-67
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Clarence A. Rittenhouse & 64,742.5960 22.92
Margaret S. Rittenhouse
JT WROS
12993 Lampadaire Drive
Creve Coeur, MO 63141-7361
International Investment 50,179.3010 17.77
Conference Inc.
Attn: Sandy Lawrence
6310 Sunset Drive
Miami, FL 33143-4823
Short-Term Bond Fund BHC Securities Inc. 132,052.2330 70.04
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Bartow Memorial Hospital 12,854.2940 6.82
Foundation Inc.
1239 East Main Street
Bartow, FL 33830-5005
Sunbelt Equity Fund BHC Securities Inc. 1,123,893.6480 55.50
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-68
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Mid-Cap Equity Fund BHC Securities Inc. 1,231,298.3630 69.56
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Balanced Fund BHC Securities Inc. 428,666.5920 62.38
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Florida Tax-Exempt Bond Fund BHC Securities Inc. 99,276.5640 30.93
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Dexter Hawks & 33,415.0370 10.41
Joanne Hawks JT WROS
26 Sea Lane - Cornfield Point
Old Saybrook, CT 06745-1923
Mildred Meinhart Rast 31,390.8780 9.78
821 Lake Port Boulevard
Apt. #A404
Leesburg, FL 34748-7698
</TABLE>
B-69
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Georgia Tax-Exempt Bond Fund BHC Securities Inc. 195,517.1970 55.94
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Patrick J. Doran & 30,776.5460 8.80
Norma R. Doran JTTEN
2024 Fisher Trail NE
Atlanta, GA 30345-3429
International Equity Index Fund BHC Securities Inc. 337,637.2930 70.20
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Community First National Bank 35,953.1240 7.48
RPO Tyler 401(k) RSP
Attn: Kathy Lindstrom
Main At Broadway
Fargo, ND 58103-1906
International Equity Fund BHC Securities Inc. 925,110.9480 77.11
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-70
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
U.S. Government Securities Fund BHC Securities, Inc. 288,086.2340 95.44
Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Limited-Term Federal Mortgage BHC Securities Inc. 227,837.2670 86.86
Securities Fund Trade House Account
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
<CAPTION>
FLEX SHARES
- -----------
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
Short-Term U.S. Treasury BHC Securities Inc. 16,187,4670 11.07
Securities Fund FAO 21558256
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
</TABLE>
B-71
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
BHC Securities Inc. 11,385.1660 7.78
FAO 20216122
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 7,778.0200 5.32
FAO 21180400
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 7,531.7030 5.15
FAO 20834830
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
Short-Term Bond Fund BHC Securities Inc. 23,074.0820 13.08
FAO 21549889
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
</TABLE>
B-72
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
BHC Securities Inc. 9,646.1260 5.47
FAO 21180400
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
Florida Tax-Exempt Bond Fund BHC Securities, Inc. 150,076.6860 16.35
FAO 20439207
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 50,204.2460 5.47
FAO 20951046
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
Georgia Tax-Exempt Bond Fund BHC Securities Inc. 70,480.8470 8.16
FAO 21141197
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
</TABLE>
B-73
<PAGE>
<TABLE>
<CAPTION>
NAME AND NUMBER OF SHARES % OF CLASS
FUND -------- ---------------- ----------
---- ADDRESS
-------
<S> <C> <C> <C>
International Equity Index Fund BHC Securities Inc. 28,461.6380 25.08
FAO 20519082
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities, Inc. 5,833.0970 5.14
FAO 21119083
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
U.S. Government Securities Fund BHC Securities, Inc. 23,978.8070 5.82
FAO 21180443
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
Limited-Term Federal Mortgage BHC Securities Inc. 11,214.5540 7.45
Securities Fund FAO 21838525
Attn: Mutual Funds Dept
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-74
<PAGE>
EXPERTS
The financial statements as of May 31, 1998 have been audited by Arthur Anderen,
LLP, Independent Public Accountants, as indicated in their report dated July 24,
1998 with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
B-75
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
STI Classic Funds:
We have audited the accompnaying statements of net assets of the Value Income
Stock, Mid-Cap Equity, Small Cap Equity, Capital Growth, Balanced, Emerging
Markets Equity, International Equity Index, International Equity, Sunbelt
Equity, Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond, Georgia
Tax-Exempt Bond, Investment Grade Bond, Short-Term Bond, Short-Term U.S.
Treasury Securities, Limited-Term Federal Mortgage Securities, and U.S.
Government Securities Funds of STI Classic Funds (the "Trust") as of May 31,
1998, and the related statemnets of operations, changes in net assets, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on thes financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards requires that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and financial
highlighs are free of material misstatement. An audit inclludes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with th ecustodian and the application of
alternative auditing procedures with respect to unsettled securities
transactions. An audity also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Value Income Stock, Mid-Cap Equity, Small Cap Equity, Capital Growth, Balanced,
Emerging Markets Equity, International Equity Index, International Equity,
Sunbelt Equity, Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond,
Georgia Tax-Exempt Bond, Investment Grade Bond, Short-Term Bond, Short-Term U.S.
Treasury Securities, Limited-Term Federal Mortgage Securities, and U.S.
Government Securities Funds of STI Classic Funds as of May 31, 1998, the results
of their operations, changes in their net assets, and financial highlights for
the periods presented, in conformity wioth generally accepted accounting
principles.
ARTHUR ANDERSON LLP
Philadelphia, PA
July 24, 1998
37
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
VALUE INCOME STOCK FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.3%)
BASIC MATERIALS (12.4%)
Allegheny Teledyne 1,064,900 $ 24,759
B.F. Goodrich 305,400 15,652
Consolidated Papers 573,400 16,593
Eastman Chemical 309,800 20,757
Engelhard 1,110,600 23,114
Hercules 473,300 20,855
Morton International 387,900 11,807
Nalco Chemical 196,500 7,369
PPG Industries 218,700 15,938
Reynolds Metals 517,100 29,992
Sonoco Products 555,830 19,419
Union Camp 263,200 14,394
Weyerhaeuser 355,900 18,084
Witco Chemical 277,800 10,539
Worthington Industries 776,800 13,691
-----------
262,963
-----------
CAPITAL GOODS (12.0%)
AMP 830,000 31,540
Cooper Industries 246,300 15,856
Crown Cork & Seal 652,400 33,843
Federal Signal 737,600 16,504
General Signal 359,800 14,797
Harris 440,000 21,202
Johnson Controls 283,200 16,850
National Service Industries 189,700 9,675
Pall 1,367,500 27,094
Tecumseh Products, Cl A 308,300 15,376
Tenneco 686,900 28,592
Thomas & Betts 423,300 22,620
-----------
253,949
-----------
COMMUNICATION SERVICES (5.4%)
Alltel 790,300 31,167
Ameritech 967,300 41,050
Frontier 347,500 10,577
GTE 553,900 32,299
-----------
115,093
-----------
CONSUMER CYCLICALS (8.7%)
American Greetings, Cl A 442,300 $ 21,009
Genuine Parts 607,600 20,620
H & R Block 517,100 22,752
ITT Industries 562,300 20,735
J.C. Penney 312,600 22,449
May Department Stores 500,000 32,156
TRW 535,200 28,667
Wallace Computer Services 585,500 15,662
-----------
184,050
-----------
CONSUMER STAPLES (16.4%)
American Stores 1,395,200 34,793
Anheuser Busch 693,700 31,867
Bestfoods 412,800 23,297
ConAgra 1,701,700 49,775
Food Lion, Cl A 984,100 9,533
General Mills 474,600 32,391
Hormel Foods 348,600 11,722
International Flavors &
Fragrances 697,700 33,490
Kimberly Clark 996,800 49,404
McCormick 470,900 15,775
R.R. Donnelley & Sons 325,300 14,638
Rubbermaid 527,300 17,203
Seagram 511,300 22,465
-----------
346,353
-----------
ENERGY (9.9%)
Atlantic Richfield 419,900 33,120
Kerr-McGee 402,900 25,483
Mobil 533,100 41,582
Murphy Oil 443,000 22,288
Texaco 776,000 44,814
Unocal 1,209,800 43,099
-----------
210,386
-----------
</TABLE>
38
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FINANCIALS (13.7%)
American Financial Group 393,600 $ 17,786
American General 309,400 20,768
AmSouth Bancorp 401,175 15,420
BankBoston 153,800 16,207
Chase Manhattan Bank 117,600 15,986
Cigna 603,900 41,367
Crestar Financial 284,900 16,364
Hibernia, Cl A 813,200 17,077
Jefferson-Pilot 278,100 15,921
Magna Group 173,100 9,618
Safeco 682,300 31,727
TIG Holdings 429,600 10,633
Transamerica 180,600 20,769
Union Planters 250,700 14,666
Wells Fargo 51,700 18,690
Willis Corroon PLC, ADR 577,000 7,465
-----------
290,464
-----------
HEALTH CARE (6.1%)
Baxter International 612,600 35,033
C.R. Bard 687,500 23,848
Mallinckrodt 660,000 20,336
Pharmacia Upjohn ADR 1,110,200 49,057
-----------
128,274
-----------
TECHNOLOGY (0.9%)
EG&G 582,700 18,355
-----------
UTILITIES (6.8%)
Cinergy 553,300 17,879
Consolidated Natural Gas 570,300 32,258
GPU 562,200 21,645
Pacificorp 664,500 15,325
Questar 315,100 12,781
Scana 679,500 19,578
Sonat 623,100 24,418
-----------
143,884
-----------
<CAPTION>
- -----------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
Total Common Stocks
(Cost $1,754,836) $ 1,953,771
-----------
REPURCHASE AGREEMENTS (8.1%)
Deutsche Bank
5.58%, dated 05/29/98,
matures 06/01/98,
repurchase price $77,181,210
(collateralized by FHLMC
obligation: total market
value $78,688,244) (H) $77,145 77,145
Salomon Brothers
5.58%, dated 05/29/98,
matures 06/01/98, repurchase
price $93,672,579
(collateralized by various
FHLMC and FNMA obligations:
total market value
$102,625,423) (H) 93,629 93,629
-----------
Total Repurchase Agreements
(Cost $170,774) 170,774
-----------
Total Investments (100.4%)
(Cost $1,925,610) 2,124,545
-----------
OTHER ASSETS AND LIABILITIES,
NET (-0.4%) (8,006)
-----------
</TABLE>
39
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
VALUE INCOME STOCK FUND--CONCLUDED
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 124,116,815
outstanding shares of beneficial interest $1,362,503
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 15,185,947
outstanding shares of beneficial interest 173,234
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 13,126,024
outstanding shares of beneficial interest 174,097
Undistributed net investment income 6,050
Accumulated net realized gain on investments 201,720
Unrealized appreciation on investments 198,935
----------
Total Net Assets (100.0%) $2,116,539
----------
----------
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C>
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 13.90
----------
----------
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 13.87
----------
----------
Maximum Offering Price Per Share --
Investor Class ($13.87 / 96.25%) $ 14.41
----------
----------
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 13.75
----------
----------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR
A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
40
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
MID-CAP EQUITY FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.8%)
CAPITAL GOODS (11.9%)
Allied Waste Industries* 515,700 $ 13,666
Danka Business Systems ADR 172,400 2,909
Herman Miller 209,100 5,789
Hubbell, Cl B 93,100 4,382
U.S. Filter* 494,400 15,048
Watsco 126,600 3,719
---------
45,513
---------
COMMUNICATION SERVICES (1.0%)
LCI International* 100,400 3,759
---------
CONSUMER CYCLICALS (23.3%)
Barnes & Noble* 119,100 4,035
BJ's Wholesale Club* 167,400 6,612
Borders Group* 170,100 5,273
Ethan Allen Interiors 108,700 5,469
Family Dollar Stores 330,800 5,479
Harley-Davidson 292,500 10,457
International Speedway* 120,800 3,684
Just for Feet* 104,800 2,299
Men's Wearhouse* 234,900 10,013
Norrell 186,700 4,212
Office Depot* 82,000 2,419
Radiant Systems* 160,700 2,642
Ralph Lauren* 240,600 7,338
Saks Holdings* 214,300 5,049
Samsonite* 169,400 4,870
Staff Leasing* 125,400 3,574
West Marine* 289,400 5,553
---------
88,978
---------
CONSUMER STAPLES (13.3%)
Avis Rent A Car* 283,300 6,870
Cracker Barrel Old Country Stores 218,300 7,040
Dial 233,400 5,791
Hannaford Brothers 94,300 4,167
Interstate Bakeries 318,700 10,278
Papa John's International* 189,300 7,880
US Foodservice* 126,600 4,194
Wendy's International 189,200 4,671
---------
50,891
---------
ENERGY (8.5%)
Anadarko Petroleum 46,100 3,043
EEX* 628,200 6,203
National-Oilwell Inc* 58,100 2,030
Newpark Resources* 316,800 5,762
Santa Fe International 112,200 3,913
Valero Energy 166,300 5,426
Western Atlas* 69,600 6,025
---------
32,402
---------
FINANCIALS (8.5%)
Colonial Bancgroup 158,200 5,122
Dime Bancorp 197,800 5,773
First Security 277,162 6,305
First Virginia Banks 73,200 3,825
Hibernia, Cl A 225,700 4,740
North Fork Bancorporation 234,300 5,638
Western Bancorp 21,500 924
---------
32,327
---------
HEALTH CARE (12.3%)
Acuson Corp* 358,300 6,852
Allergan 46,700 1,961
Biogen* 82,800 3,643
DePuy* 126,500 3,779
Dura Pharmaceuticals* 236,000 6,151
Jones Pharmaceuticals 208,500 6,411
Mylan Laboratories 211,200 6,336
Quorum Health Group* 65,100 1,957
Watson Pharmaceuticals* 229,800 10,054
---------
47,144
---------
</TABLE>
41
<PAGE>
STATEMENT OF NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
MID-CAP EQUITY FUND--CONCLUDED
- ------------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (15.3%)
ADC Telecommunications* 290,900 $ 8,182
Fiserv* 135,200 7,973
Flextronics International* 223,200 8,844
Intuit* 82,900 3,928
Networks Associates* 165,240 10,121
PMT Services* 248,200 4,840
Sawtek* 351,100 9,008
Teradyne* 183,300 5,636
---------
58,532
---------
TRANSPORTATION (3.0%)
CNF Transportation 164,600 6,759
Sanmina* 59,400 4,626
---------
11,385
---------
UTILITIES (0.7%)
Southwest Gas 117,000 2,559
---------
Total Common Stocks
(Cost $333,621) 373,490
---------
REPURCHASE AGREEMENT (3.9%)
Merrill Lynch
5.53%, dated 05/29/98, matures
06/01/98, repurchase price
$14,779,462 (collateralized by
GNMA obligation: total market
value $15,068,947) (H) $14,773 14,773
---------
Total Repurchase Agreement
(Cost $14,773) 14,773
---------
Total Investments (101.7%)
(Cost $348,394) 388,263
---------
OTHER ASSETS AND LIABILITIES,
NET (-1.7%) (6,466)
---------
<CAPTION>
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 24,497,672
outstanding shares of beneficial interest $ 273,201
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 1,823,608
outstanding shares of beneficial interest 20,703
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 1,418,645
outstanding shares of beneficial interest 18,063
Accumulated net operating loss (1)
Accumulated net realized gain on investments 29,962
Net unrealized appreciation on investments 39,869
---------
Total Net Assets 100.0% $ 381,797
---------
---------
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 13.79
---------
---------
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 13.67
---------
---------
Maximum Offering Price Per Share --
Investor Class ($13.67 / 96.25%) $ 14.20
---------
---------
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 13.42
---------
---------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A
DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FORDESCRIPTIONS OF ABBREVIATIONS,
PLEASE SEE PAGE 95.
42
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP EQUITY FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (93.2%)
BASIC MATERIALS (15.5%)
Ameron 78,500 $ 4,720
Carpenter Technology 159,900 8,475
Columbus Mckinnon 94,400 2,749
Commonwealth Industries 299,000 4,373
General Chemical Group 184,400 4,702
H. B. Fuller 105,700 6,619
Jannock Limited 242,900 3,340
Lilly Industries, Cl A 327,500 6,386
Madeco ADR 241,800 3,083
Quimica y Minera Chile ADR 193,200 6,653
Texas Industries 190,400 11,305
Wausau-Mosinee Paper 205,000 4,382
---------
66,787
---------
CAPITAL GOODS (13.4%)
A.M. Castle 189,700 4,268
American Woodmark 132,000 3,663
Belden 104,600 4,151
DT Industries 112,800 3,268
Furon 204,700 3,262
General Binding 15,100 515
Hardinge 64,300 2,540
Kaman 262,400 4,822
LSI Industries 133,300 2,749
Regal Beloit 409,500 13,360
Rock Tenn, Cl A 158,000 2,321
Toro 88,800 3,102
Valmont Industries 232,400 4,648
Watts Industries, Cl A 214,900 5,010
---------
57,679
---------
CONSUMER CYCLICALS (23.1%)
Brown Group 400,500 7,184
Bush Industries 291,700 7,839
Guilford Mills 296,950 8,018
Harman International 272,800 11,611
K2 505,500 10,110
Kimball International* 352,200 8,673
Libbey 126,700 4,989
Norrell 562,700 12,696
Ritchie Bros. Auctioneers* 136,900 3,713
Smith (A.O.) 93,600 4,727
Sotheby's Holdings, Cl A 422,800 9,724
Springs Industries, Cl A 81,900 4,597
Sturm Ruger 304,400 5,669
---------
99,550
---------
CONSUMER STAPLES (11.3%)
Angelica 205,900 4,633
Banta 273,900 8,679
Bowne & Company 122,800 5,257
Chemed 77,500 2,853
Ingles Markets, Cl A 237,000 2,963
Nash Finch 213,900 3,610
Standard Register 260,100 9,380
Universal Foods 388,600 9,254
York Group 117,800 2,113
---------
48,742
---------
ENERGY (3.6%)
Chesapeake Energy 1,086,800 4,687
Giant Industries 424,500 7,986
Quaker State 173,300 2,935
---------
15,608
---------
FINANCIALS (8.4%)
Administradora de Fondos de
Pensiones Provida ADR 176,000 2,959
Annuity & Life Re Holdings* 164,700 3,757
ARM Financial Group 125,000 2,555
Banco Latinamericano
de Exportaciones 115,100 3,856
Klamath First Bancorp 111,100 2,201
National Bancorp of Alaska 14,800 472
Seacoast Banking of Florida 51,300 2,001
</TABLE>
43
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
SMALL CAP EQUITY FUND--CONCLUDED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FINANCIALS--CONTINUED
Student Loan 62,200 $ 3,001
Westcorp 392,300 4,757
Westerfed Financial 166,300 4,074
Willis Corroon PLC, ADR 495,800 6,414
---------
36,047
---------
HEALTH CARE (7.0%)
Block Drug, Cl A 73,400 3,211
Invacare 187,000 4,932
London International Group ADR 279,400 4,890
Medeva PLC, ADR 591,900 6,696
Vital Signs 293,300 5,096
West Company 187,800 5,540
---------
30,365
---------
TECHNOLOGY (4.2%)
Dallas Semiconductor 159,400 5,370
Fluke 183,500 5,895
Innovex 292,800 5,435
Methode Electronics, Cl A 115,900 1,478
---------
18,178
---------
TRANSPORTATION (4.8%)
Knightsbridge Tankers Limited* 150,700 4,351
Pittston Burlington 334,500 5,875
Sea Containers 238,500 9,644
Western Star Truck Holdings 53,600 965
---------
20,835
---------
UTILITIES (1.9%)
Northwest Natural Gas 106,850 2,938
Nui 114,800 2,827
TNP Enterprises 81,500 2,654
---------
8,419
---------
Total Common Stocks
(Cost $377,626) 402,210
---------
<CAPTION>
- -----------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
PREFERRED STOCKS (0.9%)
BASIC MATERIALS (0.9%)
Coeur D'Alene Mines, CV
to 0.8260 Share, Callable
03/15/99 @ 21.622 299,800 $ 3,916
---------
Total Preferred Stocks
(Cost $4,811) 3,916
---------
REPURCHASE AGREEMENT (6.8%)
Greenwich
5.57%, dated 05/29/98,
matures 06/01/98,
repurchase price $29,225,441
(collateralized by FNMA
obligations: total market
value $29,801,117) (H) $29,212 29,212
---------
Total Repurchase Agreement
(Cost $29,212) 29,212
---------
Total Investments (100.9%)
(Cost $411,649) 435,338
---------
OTHER ASSETS AND LIABILITIES,
NET (-0.9%) (3,884)
---------
</TABLE>
44
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 30,355,957
outstanding shares of beneficial interest $348,236
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 3,172,170
outstanding shares of beneficial interest 39,827
Undistributed net investment income 669
Accumulated net realized gain on investments 19,033
Unrealized appreciation on investments 23,689
---------
Total Net Assets 100.0% $ 431,454
---------
---------
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C>
Net Asset Value, Offering and Redemption
Price Per Share-- Trust Shares $ 12.88
---------
---------
Net Asset Value, Offering and Redemption
Price Per Share-- Flex Shares (1) $ 12.80
---------
---------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR
A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
45
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (84.4%)
BASIC MATERIALS (3.1%)
Air Products & Chemicals 195,000 $ 16,965
ConAgra 499,200 14,602
Ecolab 138,900 4,289
Morton International 197,800 6,021
Praxair 350,000 17,259
---------
59,136
---------
CAPITAL GOODS (14.9%)
Allied Signal 623,000 26,633
Allied Waste Industries* 156,300 4,142
Avery Dennison 74,100 3,839
Boeing 186,500 8,882
Culligan Water Technologies* 186,200 10,392
Dover 105,100 3,941
Emerson Electric 108,000 6,561
General Electric 645,700 53,835
Honeywell 275,800 23,150
Hubbell, Cl B 21,400 1,007
Molten Metal Technology* 43,500 10
Newell 343,500 16,574
Parker Hannifin 100,300 4,119
Textron 29,200 2,166
Thermo Electron* 265,600 9,329
Tyco International 476,180 26,368
U.S. Filter* 36,400 1,108
United Technologies 415,400 39,048
USA Waste Services* 549,145 25,913
W.W. Grainger 171,500 18,104
---------
285,121
---------
COMMUNICATION SERVICES (2.6%)
Ameritech 139,400 5,916
BellSouth 50,800 3,277
Century Telephone Enterprises 71,000 3,146
Ericsson Telephone ADR 277,500 7,735
MCI Communications 351,700 18,805
Northern Telecom 39,300 2,515
Southern New England
Telecommunications 10,800 695
Worldcom* 148,700 6,766
---------
48,855
---------
CONSUMER CYCLICALS (13.8%)
Abercrombie & Fitch, Cl A 266,984 11,280
Acnielsen* 1 --
Bed Bath & Beyond* 47,300 2,374
Boron Lepore & Associates* 30,600 903
Carnival 452,700 30,670
Consolidated Stores* 242,400 9,257
Costco* 411,100 23,792
Federated Department Stores* 279,900 14,502
Gannett 77,100 5,084
Home Depot 6,348 499
Intimate Brands 174,400 5,003
Lear* 255,400 13,632
Limited 72,500 2,411
Lowe's Companies 278,600 22,062
Manpower 175,600 7,540
Masco 509,000 28,631
Mattel 350,500 13,275
McGraw-Hill 263,800 20,626
Office Depot* 458,900 13,538
Omnicom Group 12,000 562
Republic Industries* 77,300 1,904
Sherwin Williams 188,963 6,283
Staples* 228,750 5,747
Starwood Lodging Trust REIT 113,234 5,343
Tandy 347,300 15,368
Viking Office Products* 82,200 2,350
Wal-Mart Stores 24,100 1,330
---------
263,966
---------
</TABLE>
46
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (10.5%)
Avon Products 203,600 $ 16,657
Campbell Soup 34,600 1,886
Cendant* 600,623 13,026
Clorox 110,000 9,185
Colgate-Palmolive 84,400 7,343
CVS 413,600 29,030
Flowers Industries 54,800 1,130
Fred Meyer* 107,900 4,640
Gillette 46,600 5,458
International Home Foods* 4,900 133
PepsiCo 232,100 9,473
Philip Morris 531,550 19,867
Ralston Purina 219,400 24,422
Rite Aid 195,800 7,012
Safeway* 529,200 19,283
Sara Lee 218,700 12,876
Unilever ADR 135,850 10,724
US Foodservice* 251,950 8,346
---------
200,491
---------
ENERGY (4.3%)
British Petroleum ADR 166,228 14,732
Chevron 81,800 6,534
EVI Weatherford Inc* 87,875 4,443
Halliburton 393,000 18,618
Mobil 105,800 8,252
Schlumberger 94,600 7,385
Texaco 241,900 13,970
Union Pacific Resources Group 257,959 5,224
Unocal 86,100 3,067
---------
82,225
---------
FINANCIALS (13.8%)
American International Group 181,975 22,531
AmSouth Bancorp 4,800 184
Associates First Capital 142,000 10,623
Banc One 93,610 5,160
Bank of New York 57,400 3,509
Bank United, Cl A 63,100 3,155
BankAmerica 94,700 7,831
BankBoston 75,500 7,956
Beneficial 55,900 7,491
Chase Manhattan Bank 28,100 3,820
Citicorp 28,000 4,175
CMAC Investment 53,500 3,237
Conseco 117,800 5,492
Crestar Financial 20,700 1,189
Cullen/Frost Bankers 79,400 4,302
FHLMC 448,800 20,420
First American of Tennessee 26,000 1,206
First Chicago NBD 57,200 5,001
First Commerce 159,100 12,261
First Commercial 14,000 969
First Security 24,200 551
First Tennessee National 102,600 3,258
Fleet Financial Group 179,588 14,726
FNMA 39,500 2,365
Golden State Bancorp* 14,700 563
H.F. Ahmanson 78,600 5,993
Household International 68,700 9,296
Mellon Bank 314,800 21,229
MGIC Investment 201,200 12,059
National City 30,840 2,089
PNC Bank 187,900 10,851
Regions Financial 72,800 2,994
State Street 9,400 648
Summit Bancorp 16,700 837
Sunamerica 136,000 6,613
Torchmark 326,600 14,003
Travelers 265,894 16,220
U.S. Bancorp 118,100 4,621
Washington Mutual 61,580 4,349
---------
263,777
---------
</TABLE>
47
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND--CONTINUED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
HEALTH CARE (8.7%)
Abbott Laboratories 212,800 $ 15,787
American Home Products 438,600 21,190
Baxter International 98,100 5,610
Boston Scientific* 24,400 1,555
Bristol-Myers Squibb 338,500 36,389
Eli Lilly 177,300 10,893
Healthsouth* 493,619 14,006
Johnson & Johnson 126,500 8,736
Merck 192,482 22,532
Tenet Healthcare* 402,000 14,070
U.S. Surgical 31,700 1,260
Warner Lambert 233,100 14,875
----------
166,903
----------
TECHNOLOGY (9.7%)
3Com* 48,500 1,231
Analog Devices* 57,100 1,410
Automatic Data Processing 174,400 11,096
Ceridian* 355,800 19,213
Cisco Systems* 361,950 27,372
Compaq Computer 143,400 3,917
EMC* 204,700 8,482
IBM 212,100 24,895
Intel 209,500 14,966
Lucent Technologies 123,864 8,787
Microsoft* 339,900 28,828
Networks Associates* 125,300 7,675
Sun Microsystems* 91,500 3,666
Texas Instruments 66,400 3,411
Xerox 189,000 19,420
----------
184,369
----------
TRANSPORTATION (3.0%)
AMR* 29,000 4,464
Burlington Northern Santa Fe 251,700 25,044
Continental Airlines, Cl B* 59,300 3,354
Delta Air Lines 152,300 17,514
Trans World Air* 94,400 6,950
----------
57,326
----------
Total Common Stocks
(Cost $1,282,946) $1,612,169
----------
PREFERRED STOCKS (2.5%)
CAPITAL GOODS (0.2%)
Ingersoll-Rand, CV
to 0.4282 Share 160,000 3,900
----------
CONSUMER STAPLES (0.2%)
Suiza Capital Trust, CV to
0.6390 Share, Callable
04/01/01 @ 51.719 (B)* 60,000 2,910
----------
ENERGY (0.9%)
Belco Oil & Gas, CV to
1.1292 Shares, Callable
03/10/01 @ 25* 71,000 1,376
EVI , CV to 0.6250 Share,
Callable 11/04/00 @ 51.75 (B) 164,400 7,645
Unocal, CV to 1.1748 Shares,
Callable 09/03/00 @ 50 154,000 8,335
----------
17,356
----------
FINANCE (0.3%)
Conseco Financial Trust, CV
to 0.9363 share* 65,000 3,343
United Financial, CV to
1.6530 Shares, Callable
07/01/98 @ 45.188 48,500 1,764
----------
5,107
----------
TECHNOLOGY (0.9%)
Microsoft, CV to 1 Share 187,500 17,508
----------
TRANSPORTATION (0.2%)
Trans World Air, CV to 2.4668
Shares, Callable 03/15/99 @ 50* 58,000 2,124
Trans World Air, CV to 6.3291
Shares, Callable 12/15/00
@ 53.238 (B) 23,000 1,693
----------
3,817
----------
</TABLE>
48
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000)/SHARES VALUE (000)
- -----------------------------------------------------------
Total Preferred Stocks
(Cost $46,619) $ 50,598
----------
CONVERTIBLE BONDS (1.8%)
Coeur D'alene, CV to
57.3066 Shares
7.250%, 10/31/05 $ 2,000 1,705
Continental Airlines, CV to
33.1181 Shares, Callable
04/15/99 @ 104.73
6.750%, 04/15/06 1,350 2,599
Home Depot, CV to 21.6998
Shares, Callable 10/02/99
@ 100.81
3.250%, 10/01/01 10,000 17,325
Molten Metal Technology, CV to
25.8065 Shares, Callable
05/01/99 @ 102.75 (B)
5.500%, 05/01/06 9,500 629
Network Associates, CV to
5.6920 Shares, Callable
02/13/03 @ 49.452 (A) (B)
0.000%, 02/13/18 10,000 4,350
USA Waste Services, CV to
33.0797 Shares, Callable
06/01/99 @ 101.8 (B)
4.500%, 06/01/01 3,000 4,740
USA Waste Services, CV to
35.3243 Shares, Callable
03/15/99 @ 102.5
5.000%, 03/01/06 1,350 2,292
----------
Total Convertible Bonds
(Cost $28,522) 33,640
----------
REGULATED INVESTMENT COMPANIES
(0.6%)
CVS, TRACES* 70,000 4,944
Dollar General, STRYPES* 174,800 6,773
----------
Total Regulated Investment
Companies
(Cost $11,829) 11,717
----------
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS (11.2%)
Deutsche Bank
5.59%, dated 05/29/98, matures
06/01/98, repurchase price
$17,064,601 (collateralized by
FHLMC obligation: total
market value $17,397,784) (H) $ 17,057 $ 17,057
Greenwich
5.59%, dated 05/29/98, matures
06/01/98, repurchase price
$31,543,226 (collateralized
by FHLMC and FNMA
obligations: total market
value $32,161,612) (H) 31,529 31,529
Salomon Brothers
5.59%, dated 05/29/98, matures
06/01/98, repurchase price
$166,139,955 (collateralized
by various FHLMC and FNMA
obligations: total market
value $169,833,329) (H) 166,063 166,063
----------
Total Repurchase Agreements
(Cost $214,649) 214,649
----------
Total Investments (100.7%)
(Cost $1,584,565) 1,922,773
----------
OTHER ASSETS AND LIABILITIES, NET (-0.7%) (12,472)
----------
</TABLE>
49
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND--CONCLUDED
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 93,020,666
outstanding shares of beneficial interest $1,112,047
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 16,497,457
outstanding shares of beneficial interest 194,911
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 6,577,743
outstanding shares of beneficial interest 98,697
Undistributed net investment income 3,728
Accumulated net realized gain on investments 162,710
Net unrealized appreciation on investments 338,208
----------
Total Net Assets (100.0%) $1,910,301
----------
----------
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 16.48
----------
----------
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 16.43
----------
----------
Maximum Offering Price Per Share --
Investor Class ($16.43 / 96.25%) $ 17.07
----------
----------
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 16.22
----------
----------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR
A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
50
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (57.6%)
BASIC MATERIALS (1.7%)
Air Products & Chemicals 15,700 $ 1,366
Ecolab 11,300 349
Morton International 15,900 484
Praxair 29,000 1,430
Viking Office Products* 6,700 192
----------
3,821
----------
CAPITAL GOODS (9.7%)
Allied Signal 50,200 2,146
Allied Waste Industries* 16,600 440
Avery Dennison 6,000 311
Boeing 15,000 714
Culligan Water Technologies* 15,000 837
Dover 5,900 221
Emerson Electric 8,800 535
General Electric 52,400 4,369
Honeywell 22,300 1,872
Hubbell, Cl B 1,700 80
Molten Metal Technology* 19,100 5
Parker Hannifin 8,100 333
Textron 2,200 163
Thermo Electron* 21,400 752
Tyco International 38,598 2,137
U.S. Filter* 2,900 88
United Technologies 33,500 3,149
USA Waste Services* 43,805 2,067
W.W. Grainger 13,900 1,467
----------
21,686
----------
COMMUNICATION SERVICES (1.6%)
Ameritech 10,900 463
BellSouth 3,800 245
Century Telephone Enterprises 5,600 248
Ericsson Telephone ADR 22,400 624
MCI Communications 23,100 1,235
Northern Telecom 3,300 211
Southern New England
Telecommunications 1,500 97
Worldcom* 11,900 541
----------
3,664
----------
CONSUMER CYCLICALS (10.7%)
Abercrombie & Fitch, Cl A* 21,526 909
Bed Bath & Beyond* 3,800 191
Boron Lepore & Associates* 2,500 74
Carnival 36,600 2,480
ConAgra 40,400 1,182
Consolidated Stores* 19,400 741
Costco* 33,200 1,921
CVS 33,300 2,337
Federated Department Stores* 22,600 1,171
Gannett 6,200 409
Home Depot 600 47
Intimate Brands 13,400 384
Lear* 20,000 1,067
Limited 5,700 190
Lowe's Companies 22,400 1,774
Masco 41,100 2,312
Mattel 28,150 1,066
McGraw-Hill 21,300 1,665
Office Depot* 36,000 1,062
Omnicom Group 900 42
Republic Industries* 8,200 202
Sherwin Williams 15,300 509
Staples* 18,500 465
Starwood Lodging Trust REIT 9,155 432
Tandy 27,900 1,235
Wal-Mart Stores 2,600 143
----------
24,010
----------
CONSUMER STAPLES (6.5%)
Avon Products 16,100 1,317
Cendant* 48,358 1,049
Clorox 8,900 743
</TABLE>
51
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
BALANCED FUND--CONTINUED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--CONTINUED
Colgate-Palmolive 7,400 $ 644
Flowers Industries 5,400 111
Fred Meyer* 8,500 365
Gillette 3,700 433
International Home Foods* 400 11
Newell 27,700 1,337
PepsiCo 18,800 767
Philip Morris 42,800 1,600
Ralston Purina 17,700 1,970
Rite Aid 15,800 566
Safeway* 42,400 1,545
Sara Lee 17,700 1,042
Unilever ADR 6,700 529
US Foodservice* 19,580 649
----------
14,678
----------
ENERGY (3.2%)
British Petroleum ADR 13,407 1,188
Chevron 6,600 527
EVI Weatherford Inc* 13,445 680
Halliburton 31,600 1,497
Mobil 8,500 663
Schlumberger 7,600 593
Texaco 23,300 1,346
Union Pacific Resources Group 20,722 420
Unocal 6,900 246
----------
7,160
----------
FINANCIALS (10.1%)
American International Group 14,650 1,814
AmSouth Bancorp 400 15
Associates First Capital 11,400 853
Banc One 7,392 407
Bank of New York 4,500 275
Bank United, Cl A 10,300 515
BankAmerica 8,300 686
BankBoston 5,800 611
Beneficial 4,500 603
Chase Manhattan Bank 2,600 353
Citicorp 2,800 418
CMAC Investment 5,000 302
Conseco 9,600 448
Crestar Financial 1,600 92
Cullen/Frost Bankers 6,200 336
FHLMC 35,900 1,633
First American of Tennessee 1,900 88
First Chicago NBD 4,700 411
First Commerce 12,700 979
First Security 2,000 46
First Tennessee National 14,400 457
Fleet Financial Group 14,499 1,189
FNMA 5,800 347
H.F. Ahmanson 6,300 480
Household International 6,300 852
Mellon Bank 25,400 1,713
MGIC Investment 16,300 977
National City 2,160 146
PNC Bank 16,400 947
Regions Financial 5,900 243
State Street 800 55
Summit Bancorp 1,400 70
Sunamerica 10,900 530
Torchmark 26,400 1,132
Travelers 21,349 1,302
U.S. Bancorp 9,600 376
Washington Mutual 5,310 375
----------
22,076
----------
HEALTH CARE (5.9%)
Abbott Laboratories 16,200 1,202
American Home Products 34,300 1,657
Baxter International 7,900 452
Boston Scientific* 2,000 127
Bristol-Myers Squibb 27,300 2,935
</TABLE>
52
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
HEALTH CARE--CONTINUED
Eli Lilly 14,300 $ 879
Healthsouth* 40,028 1,136
Johnson & Johnson 10,200 704
Merck 15,600 1,826
Tenet Healthcare* 32,500 1,137
U.S. Surgical 2,600 103
Warner Lambert 18,600 1,187
----------
13,345
----------
TECHNOLOGY (6.4%)
3Com* 3,200 81
Analog Devices* 4,600 114
Automatic Data Processing 13,800 878
Ceridian* 28,600 1,544
Cisco Systems* 29,400 2,223
Compaq Computer 11,600 317
EMC* 16,200 671
IBM 17,100 2,007
Intel 15,100 1,079
Lucent Technologies 9,808 696
Microsoft* 23,400 1,985
Networks Associates* 10,200 625
Sun Microsystems* 7,900 316
Texas Instruments 5,400 277
Xerox 15,100 1,552
----------
14,365
----------
TRANSPORTATION (2.0%)
AMR* 2,300 354
Burlington Northern Santa Fe 20,000 1,990
Continental Airlines, Cl B* 4,800 271
Delta Air Lines 12,300 1,415
Trans World Air* 5,800 427
----------
4,457
----------
Total Common Stocks
(Cost $105,720) 129,262
----------
<CAPTION>
- -----------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (1.0%)
CAPITAL GOODS (0.2%)
Ingersoll-Rand, CV to
0.4282 Share* 15,000 $ 366
----------
ENERGY (0.1%)
EVI , CV to 0.6250 Share,
Callable 11/04/00 @
51.75 (B)* 5,600 260
----------
FINANCE (0.2%)
Conseco Financial Trust,
CV to 0.9363 Share* 10,000 514
----------
TECHNOLOGY (0.5%)
Microsoft, CV to 1 Share 12,500 1,167
----------
Total Preferred Stocks
(Cost $2,144) 2,307
----------
CORPORATE OBLIGATIONS (18.5%)
FINANCE (13.3%)
Aristar
6.750%, 05/15/99 $ 1,500 1,510
AT&T Capital, MTN
6.410%, 08/13/99 2,250 2,250
Countrywide Home Loan,
Ser F, MTN
6.840%, 10/22/04 400 412
6.510%, 02/11/05 2,300 2,309
Ford Motor Credit
7.000%, 09/25/01 2,250 2,315
6.500%, 02/28/02 2,100 2,129
General Motors Acceptance
7.125%, 05/01/01 1,900 1,952
General Motors Acceptance, MTN
7.050%, 04/23/02 1,000 1,030
Great Western Financial
8.600%, 02/01/02 800 858
Homeside Lending, MTN
6.875%, 05/15/00 3,400 3,443
</TABLE>
53
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
BALANCED FUND--CONCLUDED
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
International Lease Finance,
Ser J, MTN
5.957%, 01/15/02 $ 700 $ 696
Merrill Lynch, Ser B, MTN
6.060%, 10/15/01 4,000 3,990
Morgan Stanley, Ser C, MTN,
Callable 3/9/2001 @ 100
6.090%, 03/09/11 1,500 1,500
Salomon
7.300%, 05/15/02 1,750 1,816
Salomon Smith Barney
6.250%, 01/15/05 1,750 1,730
SunAmerica
6.200%, 10/31/99 2,000 2,005
----------
29,945
----------
INDUSTRIAL (5.2%)
American Home Products
7.700%, 02/15/00 1,000 1,030
7.900%, 02/15/05 1,850 2,017
Bausch & Lomb
6.750%, 12/15/04 1,000 1,019
Ikon Capital, MTN
6.730%, 06/15/01 1,000 1,014
Lockheed Martin
6.550%, 05/15/99 2,000 2,010
Philip Morris
7.250%, 09/15/01 2,100 2,155
7.500%, 04/01/04 1,000 1,051
Praxair
6.900%, 11/01/06 1,250 1,302
----------
11,598
----------
Total Corporate Obligations
(Cost $41,274) 41,543
----------
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000)/SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS (1.0%)
Marriott International, CV to
8.7600 Shares, Callable
03/25/99 @ 60.371 (A) (D)
0.000%, 03/25/11 $1,000 $ 676
Staples, CV to 45.4545 Shares,
Callable 10/01/98 @ 101.8 (B)
4.500%, 10/01/00 500 862
CONVERTIBLE BONDS--CONTINUED
USA Waste Services, CV to
35.3243 Shares, Callable
03/15/99 @ 102.5
5.000%, 03/01/06 355 603
----------
Total Convertible Bonds
(Cost $1,541) 2,141
----------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS (2.4%)
FHLMC
8.000%, 06/01/02 327 333
7.500%, 09/01/03 863 879
FNMA
7.000%, 10/01/03 4,029 4,086
----------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $5,267) 5,298
----------
U.S. TREASURY OBLIGATIONS (13.4%)
U.S. Treasury Bonds
7.500%, 11/15/16 5,300 6,259
8.125%, 08/15/19 9,200 11,657
6.000%, 02/15/26 4,650 4,725
U.S. Treasury Notes
6.375%, 04/30/99 500 504
5.875%, 11/30/01 2,300 2,321
6.625%, 03/31/02 1,200 1,242
5.875%, 11/15/05 3,400 3,448
----------
Total U.S. Treasury Obligations
(Cost $28,253) 30,156
----------
</TABLE>
54
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
BANK NOTE (0.7%)
Capital One
6.530%, 11/26/99 $ 1,450 $ 1,452
----------
Total Bank Note
(Cost $1,450) 1,452
----------
REGULATED INVESTMENT COMPANIES
(0.2%)
Dollar General, STRYPES* 14,100 546
----------
Total Regulated Investment
Companies
(Cost $556) $ 546
----------
REPURCHASE AGREEMENT (5.2%)
Merrill Lynch
5.53%, dated 05/29/98,
matures 06/01/98, repurchase
price $11,721,271
(collateralized by various
GNMA obligations: total
market value $11,954,302) (H) 11,716 11,716
----------
Total Repurchase Agreement
(Cost $11,716) 11,716
----------
Total Investments (100.0%)
(Cost $197,921) 224,421
----------
OTHER ASSETS AND LIABILITIES,
NET (0.0%) (18)
----------
<CAPTION>
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 14,399,980
outstanding shares of beneficial interest $152,733
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 632,425
outstanding shares of beneficial interest 6,807
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 2,121,418
outstanding shares of beneficial interest 26,099
Undistributed net investment income 784
Accumulated net realized gain on investments 11,480
Net unrealized appreciation on investments 26,500
--------
Total Net Assets 100.0% $224,403
--------
--------
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 13.09
--------
--------
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 13.14
--------
--------
Maximum Offering Price Per Share --
Investor Class ($13.14 / 96.25%) $ 13.65
--------
--------
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 13.02
--------
--------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR
A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
55
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCKS (87.0%)
ARGENTINA (4.2%)
Capex, Cl A 33,700 $ 133
Massalin Particulares, Cl B 38,800 194
Metrogas ADR 32,204 290
Quilmes Industrial 22,000 212
Transportadora de Gas
del Sur ADR 33,000 353
YPF ADR, Cl D 8,650 269
---------
1,451
---------
BRAZIL (6.7%)
Makro Atacadista GDR 15,800 197
Makro Atacadista GDR (B) 11,700 109
Petrobras ADR 13,500 264
Souza Cruz 63,500 439
Telebras ADR 6,330 675
Telesp Celular* 1,690,000 98
Telec De Sao Paulo* 1,690,000 257
Unibanco 9,100 285
---------
2,324
---------
CHILE (2.9%)
Administradora de Fondos de
Pensiones Provida ADR 29,500 496
Banco De A. Edwards 17,000 236
Quimica Y Minera Chile ADR 8,300 286
---------
1,018
---------
COLOMBIA (1.4%)
Banco Ganadero ADR 15,600 291
Bancolombia 87,924 201
---------
492
---------
CZECH REPUBLIC (1.2%)
Spt Telecom* 3,300 424
---------
ECUADOR (0.4%)
LA Cemento Nacional GDR 800 128
---------
GREECE (5.4%)
Greek Telecom 26,085 $ 766
Hellas Can Packaging 25,500 437
Papastratos Cigarettes 25,400 653
---------
1,856
---------
HONG KONG (4.8%)
China Hong Kong Photo 790,000 112
Guangdong Kelon
Electric Holding 188,000 180
HSBC Holdings 14,744 358
National Mutual Asia 866,000 609
Seoul Horizon Trust 17,000 82
Techtronic Industries 1,350,000 314
---------
1,655
---------
HUNGARY (0.4%)
Egis 3,925 144
---------
INDIA (3.6%)
Hindalco GDR 2,700 37
Hindalco Industries GDR 10,500 158
Mahanagar Telephone
Nigam GDR* 26,500 348
Videsh Sanchar Nigam GDR 60,000 712
---------
1,255
---------
INDONESIA (1.4%)
Budi Acid Jaya, F 231,250 21
Citra Marga Nusaphala, F 944,000 31
Dankos Laboratories, F 665,000 28
Indonesian Satellite, F 96,000 128
Modern Photo Film, F 356,000 32
PT Jaya Real Property, F 754,000 23
PT Timbang Timah 350,000 218
---------
481
---------
</TABLE>
56
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
ISRAEL (6.5%)
Bank Leumi Le-Israel 145,000 $ 293
Blue Square Stores* 42,300 524
ECI Telecommunications 25,000 803
Israel Chemicals 274,000 348
Nice Systems ADR* 8,000 292
---------
2,260
---------
MALAYSIA (4.9%)
Aluminium of Malaysia 231,000 42
Berjaya Sports Toto 150,000 314
IOI Corp 325,000 219
Petronas Dagangan 170,000 177
RJ Reynolds 305,000 477
Technology Resources Industries 635,000 461
---------
1,690
---------
MEXICO (12.6%)
Grupo Carso 78,000 402
Grupo Continental 167,750 567
Grupo Financiero Banorte, Cl B 216,935 292
Grupo Radio Centro ADR 16,000 206
Herdez, Cl B 518,000 276
Kimberly Clark, Cl A 100,000 418
Grupo Industrial Maseca ADR 17,000 146
Nacional de Drogas, Cl L 622,000 424
Panamerican Beverage, Cl A 9,000 304
San Luis Cpo 97,000 422
Telefonos de Mexico ADR 19,000 901
---------
4,358
---------
PANAMA (0.3%)
Banco Latinamericano
de Exportaciones 2,800 94
---------
PERU (3.1%)
CPT Telefoncia del Peru 34,000 735
Credicorp 14,630 232
Telefonica del Peru, Cl B 50,500 108
---------
1,075
---------
PHILIPPINES (3.7%)
Bacnotan Consolidated 155,940 $ 239
Benpres Holdings (B)* 72,440 268
First Philippene Holdings 209,250 156
Music* 1,000,000 247
Philippine Long Distance 14,000 360
---------
1,270
---------
POLAND (1.2%)
Bank Handlowy 25,000 430
---------
PORTUGAL (8.7%)
Banco Totta & Acores 35,000 1,296
Cimentos de Portugal 15,720 602
Electricidade de Portugal 12,500 661
Portugal Telecom ADR 8,200 433
---------
2,992
---------
SINGAPORE (1.9%)
Amtek Engineering 246,000 119
Elec & Eltek International 56,400 254
Oversea Chinese Bank 73,000 290
---------
663
---------
SOUTH AFRICA (8.7%)
Amalgated Banks of South Africa 56,235 442
Barlow 26,600 218
Kersaf Investments 68,600 386
Liberty Life Association of Africa 14,400 400
Rembrandt Group 48,800 402
Richemont 26,500 373
South African Breweries 13,600 384
Suncrush 147,535 395
---------
3,000
---------
SOUTH KOREA (1.4%)
Dae Duck Electronics 3,800 186
SK Telecom 968 293
---------
479
---------
</TABLE>
57
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND--CONCLUDED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
THAILAND (1.5%)
Advanced Info Service, F 27,000 $ 147
Delta Electronics, F 37,500 283
KR Precision, F 46,500 91
---------
521
---------
Total Foreign Common Stocks
(Cost $34,886) 30,060
---------
FOREIGN PREFERRED STOCKS (6.9%)
Banco Itau SA 1,070,000 637
Brahma 600,000 350
Cemig 15,603,450 516
Fertilizantes Fosfatados 43,000,000 170
Globex Utilidades 30,800 260
Lojas Renner 5,500,000 189
Petrol Brasileiros 1,300,000 251
---------
Total Foreign Preferred Stocks
(Cost $2,879) 2,373
---------
TIME DEPOSIT (6.7%)
Cayman Time Deposit
5.125%, 06/01/98 2,300,000 2,300
---------
Total Time Deposit
(Cost $2,300) 2,300
---------
Total Investments (100.5%)
(Cost $40,066) 34,733
---------
OTHER ASSETS AND LIABILITIES, NET (-0.5%) (179)
---------
<CAPTION>
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 3,896,622
outstanding shares of beneficial interest $ 41,007
Undistributed net investment income 298
Accumulated net realized loss on
investments and foreign
currency transactions (1,418)
Net unrealized depreciation on investments (5,333)
---------
Total Net Assets (100.0%) $ 34,554
---------
---------
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 8.87
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
58
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCKS (94.1%)
AUSTRALIA (2.2%)
Amcor 13,361 $ 62
Broken Hill Proprietary 20,656 177
Coles Myer 30,235 136
CSR 27,994 82
Lend Lease 4,481 96
Mount Isa Mines Holdings 42,910 22
National Australia Bank 13,886 192
Newscorp 33,881 209
Pacific Dunlop 28,455 51
Rio Tinto 5,542 67
Western Mining 20,202 63
Westpac Banking 36,880 243
---------
1,400
---------
AUSTRIA (1.9%)
Bank of Austria 2,658 239
Creditanstalt Bankverein 2,035 242
Ea - Generali 343 117
Oest El Wirtsch, Cl A 2,245 264
OMV 1,715 248
Wienerberger Baustoff 401 99
---------
1,209
---------
BELGIUM (2.3%)
Bekaert 30 24
Delhaize Freres 1,000 69
Electrabel 1,000 250
Fortis 700 200
Generale Banque 370 271
Groupe Bruxelles Lambert 450 99
Kredietbank 290 203
Petrofina 440 181
Royale Belge 175 68
Solvay, Cl A 1,250 92
Union Minere 680 46
---------
1,503
---------
DENMARK (1.6%)
Carlsberg, Cl B 1,427 $ 99
D/S 1912, Cl B 25 228
D/S Svendborg, Cl B 10 131
Danisco 1,810 113
Novo Nordisk, Cl B 1,370 216
Ratin, Cl B 251 49
Sophus Berendsen, Cl B 251 10
Tele Danmark, Cl B 1,908 179
---------
1,025
---------
FINLAND (1.2%)
Merita 19,200 121
Nokia Oyj, Cl A 2,000 132
Nokia, Cl K 4,600 301
Outokumpu Oy Akt, Cl A 3,100 44
Rauma 303 6
UPM - Kymmene 6,600 191
---------
795
---------
FRANCE (14.6%)
Accor 847 232
Air Liquide 1,886 372
Alcatel Alsthom 2,238 479
Axa 4,748 540
Banque National Paris, Cl A 3,350 286
Bouygues 950 172
Carrefour 603 368
Cie Bancaire 710 130
Cie de Saint Gobain 2,265 447
Cie Generale des Eaux 2,045 411
Compagnie de Suez 15 --
Elf Aquitaine 3,282 456
Elf Sanofi 2,573 301
Eridania Beghin - Say 983 215
Generale Des Eaux Warrants* 2,045 4
Groupe Danone 1,552 418
Havas 1,300 102
L'Oreal 1,084 538
</TABLE>
59
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND--CONTINUED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FRANCE--CONTINUED
Lafarge Coppee 2,218 $ 225
Legrand 670 185
Louis Vuitton - Moet Hennessy 1,502 315
Lyonnaise des Eaux Dumez 2,480 423
Michelin, Cl B 2,844 176
Paribas 958 98
Pernod - Ricard 2,179 162
Peugeot 1,201 235
Pinault - Printemps Redoute 400 329
Promodes 333 162
Rhone - Poulenc, Cl A 6,900 383
Schneider 3,877 328
Societe Generale 1,830 362
Total Compaigne, Cl B 4,470 555
Unibail 400 55
---------
9,464
---------
GERMANY (18.2%)
Aachener & Munchener Bete 810 93
Allianz 4,380 1,384
BASF 14,200 658
Bayer 11,410 545
Bayerische Hypotheken
und Wechselbank 5,750 362
Bayerische Vereinsbank 2,360 198
Biersdorf 2,640 161
Daimler - Benz 9,230 930
Degussa 2,490 159
Deutsche Bank 8,120 699
Dresdner Bank Frankfurt 4,600 259
Heidelberger Zement 2,024 203
Hochtief 260 12
Karstadt 525 274
Linde 291 215
Lufthansa 11,380 284
Man Muenchen 31 12
Mannesmann 703 688
Metro AG 7,351 468
Muenchener Rueckvers 1,110 504
Preussag 11 4
RWE 6,340 337
SAP 1,400 723
Schering 1,810 212
Siemens 11,790 761
Thyssen 1,001 261
Veba 10,910 717
Viag 533 299
Volkswagen 461 374
---------
11,796
---------
HONG KONG (0.5%)
Cathay Pacific Airways 9,000 6
Cheung Kong Holdings 13,000 70
CLP Holdings 7,500 32
Hang Seng Bank 7,600 57
Hong Kong Telecommunications 27,200 49
Hutchison Whampoa 12,800 67
Sun Hung Kai Properties 6,600 32
Swire Pacific 9,000 33
---------
346
---------
ITALY (13.1%)
Assicurazioni Generali 42,670 1,371
Banca Commerciale Italiana 33,500 198
Benetton Group 9,825 214
Credito Italiano 23,000 128
Edison 28,500 272
ENI 76,000 537
Fiat 131,900 590
Fiat Non-Convertible 46,200 122
Istituto Bancario san
Paolo di Torino 29,591 463
Istituto Nazionale 181,919 566
Italgas 5,000 23
Mediobanca 26,450 356
Montedison 134,680 186
Olivetti 91,200 134
Parmalat Finanziaria 87,800 183
Pirelli 90,000 297
</TABLE>
60
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
ITALY--CONTINUED
RAS 6,635 $ 105
Sirti 19,500 121
Telecom Italia 127,222 961
Telecom Italia Mobile 195,802 1,157
Telecom Italia Mobile di Risp 101,664 369
Telecom Italia Rinascente 26,627 144
---------
8,497
---------
JAPAN (15.5%)
Ajinomoto 15,000 126
Asahi Bank 20,000 75
Asahi Chemical Industries 15,000 52
Asahi Glass 12,000 65
Bank of Tokyo - Mitsubushi 24,000 247
Bank of Yokohama 11,000 27
Bridgestone 9,000 205
Chiba Bank 12,000 43
Chiyoda 5,000 6
Citizen Watch 11,000 84
Cosmo Oil 12,000 20
Dai Nippon Printing 12,000 198
Daiei 11,000 31
Daiwa Kosho Lease 5,000 20
Daiwa Securities 18,000 69
Ebara 8,000 72
Fanuc 900 33
Fuji Bank 24,000 118
Fuji Photo Film 5,000 169
Fujitsu 18,000 207
Furukawa Electric 15,000 48
Hankyu 2,000 8
Hitachi 32,000 211
Honda Motor 5,000 170
Industrial Bank of Japan 20,000 123
Ito Ham Foods 1,000 4
Ito Yokado 4,000 199
Itochu 31,000 70
Japan Air Lines* 16,000 41
Japan Energy 11,000 11
Joyo Bank 14,300 51
Jusco 3,000 52
Kansai Electric Power 9,800 156
Kao 7,000 105
Kawasaki Steel 19,000 30
Kinki Nippon Railway 26,000 125
Kirin Brewery 15,000 140
Komatsu 13,000 54
Kubota 23,000 56
Kyocera 3,000 146
Marui 4,000 61
Matsushita Electric 18,000 282
Mitsubishi 21,000 127
Mitsubishi Chemical 16,000 29
Mitsubishi Electric 23,000 54
Mitsubishi Estate 5,000 44
Mitsubishi Heavy Industries 43,000 150
Mitsubishi Materials 35,000 68
Mitsubishi Trust & Banking 13,000 115
Mitsui 17,000 87
Mitsui Trust & Banking 13,000 31
Mitsukoshi 7,000 18
Murata Manufacturing 1,000 29
NEC 15,000 153
New Oji Paper 9,000 38
Nichido Fire & Marine Insurance 15,000 78
Nippon Express 5,000 27
Nippon Oil 16,000 50
Nippon Paper Industries 1,000 4
Nippon Sharyo 5,000 12
Nippon Steel 39,000 66
Nippon Yusen 27,000 93
Nippondenso 7,000 119
Nissan Motor 32,000 97
NKK 24,000 20
Nomura Securities 19,000 207
Obayashi 13,000 48
</TABLE>
61
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND--CONTINUED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
JAPAN--CONTINUED
Odakyu Electric Railway 24,000 $ 78
Olympus Optical 8,000 75
Osaka Gas 44,000 95
Sakura Bank 25,000 74
Sankyo 7,000 169
Sanyo Electric 4,000 11
Sega Enterprises 1,600 30
Sekisui Chemical 7,000 35
Sekisui House 7,000 52
Sharp 10,000 75
Shimizu 3,000 8
Shin - Etsu Chemical 7,000 130
Shizuoka Bank 9,000 97
Skylark 3,000 28
Sony 3,500 296
Sumitomo Bank 28,000 262
Sumitomo Chemical 20,000 54
Sumitomo Metal 26,000 40
Taisei 35,000 68
Takeda Chemical 15,000 388
Tobu Railway 15,000 43
Tohoku Electric Power 5,300 72
Tokai Bank 20,000 111
Tokio Marine & Fire Insurance 34,000 322
Tokyo Electric Power 15,900 304
Tokyo Gas 26,000 54
Tokyu 10,000 33
Toppan Printing 11,000 120
Toray 24,000 120
Tostem 3,000 38
Toto 7,700 51
Toyo Seikan Kaisha 3,300 39
Toyoda Automatic Loom 4,000 70
Toyota Motor 31,000 768
Yamaichi Securities 15,000 --
Yamanouchi Pharmaceutical 1,000 22
Yasuda Trust & Banking 5,000 6
---------
10,012
---------
NETHERLANDS (3.2%)
ABN Amro Holding 7,740 187
Akzo Nobel 470 98
ING Groep 4,704 323
Koninklijke 2,986 167
Koninklijke Nederlanden
Papierfabriek 960 28
Philips Electronics 1,836 174
Royal Dutch Petroleum 11,520 656
Unilever 3,760 299
Wolters Kluwer 772 108
---------
2,040
---------
NORWAY (0.9%)
Bergesen, Cl A 2,650 53
Hafslund Nycomed, Cl B 2,200 10
Kvaerner 1,400 53
Norsk Hydro 6,525 296
Nycomed Asa, Cl B 2,300 52
Uni Storebrand* 9,987 93
---------
557
---------
SPAIN (5.2%)
Argentaria Bancaria de Espana 2,316 197
Autopistas CESA 6,347 102
Banco Bilbao Vizcaya 11,213 563
Banco Central Hispano 5,430 178
Banco de Santander 5,119 258
Dragados Construccion 2,565 80
Endesa 15,892 381
Fomento de Construcciones
Contratas 1,392 70
Gas Natural 2,512 172
Iberdola 13,406 221
Mapfre 2,036 79
Repsol 6,279 349
Telefonica de Espana 15,076 674
Union Electrica Fenosa 4,929 61
---------
3,385
---------
</TABLE>
62
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
SWEDEN (2.1%)
ABB AB, Cl A 6,300 $ 102
Asticus* 675 8
Astra AB, Cl A 13,266 267
Diligentia 1,350 12
Electrolux, Cl B 800 80
Ericsson, Cl B 14,000 399
Granges 550 10
Skandinaviska Enskilda Banken 7,700 128
Skanska, Cl B 1,800 85
Stora Kopparbergs Bergslags, Cl A 2,500 41
Svenska Cellulosa, Cl B 4,000 110
Swedish Match 4,500 16
Volvo, Cl B 3,950 126
---------
1,384
---------
SWITZERLAND (2.2%)
Nestle 172 368
Novartis 184 311
Roche Holdings, Genusshein 23 237
Roche Holdlings, Bearer 7 116
Schweizerische Bankgesellschaft 120 202
Swiss Bank 575 208
---------
1,442
---------
UNITED KINGDOM (9.4%)
Abbey National 8,291 148
Barclays Bank 14,416 385
Bass 8,451 155
Bass, Cl B* 9,466 13
BAT Industries 22,460 202
BG 18,333 95
BG, Cl B* 20,778 10
Blue Circle Industries 12,797 82
British Petroleum 41,753 613
British Telecommunications 20,475 214
BTR 35,692 118
BTR, Cl B* 43,929 27
Cable & Wireless 22,390 253
Centrica* 20,778 33
Diageo 35,812 405
Diageo, Cl B* 5,637 47
Energy Group 9,677 133
General Electric 21,236 174
Glaxo Wellcome 19,999 538
Great Universal Stores 7,352 104
Hanson 12,096 71
HSBC Holdings 7,895 206
Imperial Chemical 11,454 217
Marks & Spencer 40,514 361
National Power 9,177 85
Reuters Group 11,375 130
RMC Group 2,799 53
RTZ 13,785 172
Sainsbury, J. 11,344 90
Smithkline Beecham 40,668 440
Unilever 24,920 274
Vodafone Group 22,646 249
---------
6,097
---------
Total Foreign Common Stocks
(Cost $43,189) 60,952
---------
FOREIGN PREFERRED STOCKS (1.5%)
GERMANY (1.3%)
RWE 3,730 151
SAP 980 544
Volkswagen 247 149
---------
844
---------
ITALY (0.2%)
Fiat 47,080 126
---------
Total Foreign Preferred Stocks
(Cost $365) 970
---------
</TABLE>
63
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND--CONCLUDED
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENT (0.0%)
Highmark Diversified
Money Market Fund $10,411 $ 10
---------
Total Cash Equivalent
(Cost $10) 10
---------
Total Investments (95.6%)
(Cost $43,564) 61,932
---------
OTHER ASSETS AND LIABILITIES,
NET (4.4%) 2,878
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 4,222,238
outstanding shares of beneficial
interest 37,231
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 540,956
outstanding shares of beneficial
interest 5,453
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 111,603
outstanding shares of beneficial
interest 1,243
Undistributed net investment income 259
Accumulated net realized gain on
investments and foreign
currency transactions 2,261
Net unrealized appreciation
on investments 18,368
Net unrealized depreciation foreign
currency and translation of other
assets and liabilities in foreign
currency investments (5)
---------
Total Net Assets (100.0%) $ 64,810
---------
---------
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C>
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 13.31
---------
---------
Net Asset Value, Offering Price and
Redemption Price Per Share --
Investor Shares $ 13.20
---------
---------
Maximum Offering Price Per Share --
Investor Shares ($13.20 / 96.25%) $ 13.71
---------
---------
Net Asset Value, Offering Price and
Redemption Price Per Share -- Flex Shares (1) $ 13.17
---------
---------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A
DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
64
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCKS (92.5%)
ARGENTINA (0.3%)
YPF ADR, Cl D 69,850 $ 2,170
---------
AUSTRALIA (2.5%)
Australia & New Zealand
Bank Group 1,206,840 8,556
QBE Insurance 2,037,904 8,345
---------
16,901
---------
CANADA (0.5%)
Suncor 97,527 3,448
---------
FINLAND (0.8%)
Sampo Insurance, Cl A 116,000 5,391
---------
FRANCE (10.9%)
Accor 24,300 6,665
AXA 124,000 14,114
Credit Local De France 82,630 11,228
Elf Aquitaine 100,300 13,931
Groupe Danone 24,500 6,597
Moulinex* 105,580 2,991
Suez Lyonnaise des Eaux 52,000 8,874
Technip 60,500 8,676
---------
73,076
---------
GERMANY (9.1%)
Allianz 30,830 9,745
Bayer 133,600 6,387
Bayerische Motoren Werke 5,800 6,137
Bayerische Motoren Werke - New* 1,160 1,222
Buderus 12,440 6,135
Commerzbank 128,000 5,187
Hoechst 166,000 8,280
Man 6,000 2,387
Preussag 22,040 8,041
Veba 105,000 6,897
---------
60,418
----------
GREECE (1.7%)
Greek Telecom 390,243 11,463
---------
HONG KONG (1.5%)
Hutchison Whampoa 1,315,000 6,873
National Mutual Asia 4,286,000 3,015
Sung Hung Kai Properties 5,312 26
---------
9,914
---------
INDONESIA (0.0%)
Modern Photo Film, F 1,440,000 128
---------
ISRAEL (1.3%)
ECI Telecommunications 94,500 3,036
Teva Pharmaceuticals ADR 133,200 5,461
---------
8,497
---------
ITALY (7.3%)
Banca Popolare di Milano 970,000 8,724
ENI 1,318,000 9,314
Istituto Banc San Paolo 531,700 8,387
Montedison 3,175,000 4,386
Saipem 854,000 4,967
Telecom Italia 1,692,630 12,784
---------
48,562
---------
JAPAN (8.9%)
Canon 368,000 8,767
Eisai 408,000 5,414
Fuji Photo Film 182,000 6,162
Honda Motor 216,000 7,360
Sankyo 252,000 6,076
Sony 99,400 8,396
Takefuji 62,000 3,070
TDK 85,000 6,676
Terumo 491,000 7,426
---------
59,347
---------
</TABLE>
65
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND--CONCLUDED
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
NETHERLANDS (7.0%)
Akzo Nobel 38,200 $ 7,980
ING Groep 321,000 22,039
Koninklijke PTT Nederland 91,300 5,102
New Holland 169,300 4,021
Philips Electronics 81,900 7,781
---------
46,923
---------
NEW ZEALAND (0.7%)
Fletcher Challenge
Building Division 2,653,748 4,360
---------
PANAMA (0.8%)
Banco Latinamericano
de Exportaciones 150,400 5,038
---------
NORWAY (2.3%)
Petroleum Geo Services ADR* 127,000 8,319
Sparebanken Nor 232,000 6,928
---------
15,247
---------
PERU (0.8%)
CPT Telefoncia del Peru 164,100 3,549
Credicorp 127,213 2,020
---------
5,569
---------
PHILIPPINES (0.3%)
Benpres Holdings GDR, (B) 590,984 2,185
---------
PORTUGAL (1.8%)
Banco Espirito Santo 144,480 5,087
Bco Espirito Santo Rights 15,049 150
Portugal Telecom ADR 130,000 6,857
---------
12,094
---------
SINGAPORE (0.6%)
Overseas Chinese Bank 1,083,000 4,304
---------
SPAIN (3.4%)
Repsol 166,000 9,226
Telefonica de Espana 296,727 13,260
---------
22,486
---------
SWEDEN (1.1%)
Volvo, Cl B 230,000 7,352
---------
SWITZERLAND (9.1%)
Asea Brown Boveri Group 4,565 7,733
Credit Suisse Group 22,000 4,840
Nestle 7,500 16,061
Novartis, Registered 9,815 16,613
Swiss Bank 42,300 15,273
---------
60,520
---------
UNITED KINGDOM (19.8%)
Allied Domecq 408,800 4,021
Bank of Ireland 788,148 14,808
Bass 580,982 10,669
British Aerospace 1,308,000 11,594
British Petroleum 708,579 10,399
Diageo 718,200 8,119
General Electric 1,072,000 8,785
Ladbroke Group 1,170,000 6,608
Laporte 497,900 6,957
Lucasvarity 2,175,776 9,590
National Westminster Bank 160,000 2,923
Next 1,068,000 9,658
Siebe 500,000 12,529
SmithKline Beecham 600,758 6,507
Storehouse 1,953,695 8,898
---------
132,065
---------
Total Foreign Common Stocks
(Cost $504,598) 617,458
---------
</TABLE>
66
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FOREIGN PREFERRED STOCKS (2.2%)
Gea 18,500 $ 7,154
Man 25,200 7,542
---------
Total Foreign Preferred Stocks
(Cost $11,834) 14,696
---------
TIME DEPOSIT (4.8%)
Cayman Time Deposit
5.125%, 06/01/98 $32,000 32,000
---------
Total Time Deposit
(Cost $32,000) 32,000
---------
Total Investments (99.5%)
(Cost $548,433) 664,154
---------
OTHER ASSETS AND LIABILITIES,
NET (0.5%) 3,423
---------
<CAPTION>
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 41,926,884
outstanding shares of beneficial interest $481,962
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 1,164,900
outstanding shares of beneficial interest 14,451
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 1,441,816
outstanding shares of beneficial interest 19,112
Undistributed net investment income 2,660
Accumulated net realized gain on
investments and foreign
currency transactions 33,758
Net unrealized appreciation on investments 115,721
Net unrealized depreciation foreign
currency and translation of other
assets and liabilities in foreign
currency investments (87)
---------
Total Net Assets (100.0%) $667,577
---------
---------
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 15.00
---------
---------
Net Asset Value, Offering Price and
Redemption Price Per Share --
Investor Shares $ 14.92
---------
---------
Maximum Offering Price Per Share --
Investor Shares ($14.92 / 96.25%) $ 15.50
---------
---------
Net Asset Value, Offering Price and
Redemption Price Per Share -- Flex
Shares (1) $ 14.68
---------
---------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A
DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
67
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
SUNBELT EQUITY FUND
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.7%)
CAPITAL GOODS (12.3%)
American Buildings* 144,152 $ 4,937
American Homestar* 228,868 4,863
Artesyn Technologies* 234,751 3,851
Aviall* 119,542 1,748
Blount International 182,723 5,151
Centex 67,601 2,417
Citation* 90,069 1,723
Kellstrom Industries* 169,004 4,700
Kuhlman 111,238 4,700
Maverick Tube* 214,288 3,241
Miller Industries* 407,070 2,900
Owens & Minor Holding 109,719 1,289
Palm Harbor Homes* 154,596 6,445
Roper Industries 75,829 2,517
Tristar Aerospace* 98,529 1,595
UNIFAB International* 161,289 3,085
Watsco 99,449 2,921
---------
58,083
---------
COMMUNICATION SERVICES (3.1%)
Cellstar* 124,905 3,759
Premiere Technologies* 166,678 3,979
Superior TeleCom* 64,999 2,576
World Access* 134,017 4,205
---------
14,519
---------
CONSUMER CYCLICALS (14.6%)
AHL Services* 70,928 2,296
Apple South 199,235 2,615
Barnett* 228,919 4,149
Books-A-Million* 346,060 1,774
Central Parking 98,229 4,402
Claire's Stores 107,515 2,023
Family Dollar Stores 345,140 5,716
Friedman's, Cl A* 51,506 1,017
Knight-Ridder 84,503 4,822
Lowe's Companies 71,826 5,688
O'Charleys* 141,141 2,937
Pier 1 Imports 84,502 2,033
Play By Play Toys & Novelties* 91,743 1,514
Policy Management Systems* 50,480 4,165
Promus Hotel* 68,911 2,980
Renters Choice* 92,136 2,453
Staffmark* 208,981 7,680
Stein Mart* 349,868 5,510
Suburban Lodges of America* 230,460 3,702
Tractor Supply* 52,876 1,276
---------
68,752
---------
CONSUMER STAPLES (3.7%)
Educational Medical* 147,418 1,483
Food Lion, Cl A 390,782 3,786
Outback Steakhouse* 117,264 4,324
Richfood Holdings 128,298 3,135
Sonic* 221,818 4,589
---------
17,317
---------
ENERGY (17.4%)
Anadarko Petroleum 108,562 7,165
BJ Services* 204,507 6,685
Camco International 112,559 7,851
Core Laboratories N.V.* 224,583 5,937
Diamond Offshore Drilling 103,035 4,926
Ensco International 153,291 3,880
Global Industries* 523,164 11,150
Global Marine* 135,164 3,016
J. Ray McDermott S.A.* 103,606 4,183
Nuevo Energy* 172,828 5,617
Oceaneering International* 95,593 2,055
St. Mary Land & Exploration 74,358 2,026
Stone Energy* 265,790 9,419
Transocean Offshore 84,359 4,160
World Fuel Services 229,589 4,047
---------
82,117
---------
</TABLE>
68
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHARES VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FINANCIALS (17.7%)
AmSouth Bancorp 86,166 $ 3,312
Bank United, Cl A 56,281 2,814
Capital One Financial 29,408 2,935
CCB Financial 49,101 5,377
Compass Bancshares 126,011 5,982
Crestar Financial 89,697 5,152
Cullen/Frost Bankers 21,011 1,139
Equity Inns REIT 206,362 2,954
Fairfield Communities* 619,987 12,671
Hibernia, Cl A 194,050 4,075
Nova* 170,195 5,606
PMT Services* 412,872 8,051
Profit Recovery Group
International* 159,389 3,905
Regions Financial 132,479 5,448
Texas Regional Bancshares, Cl A 61,382 1,964
Triad Guaranty* 217,159 7,166
Union Planters 57,356 3,355
Winston Hotels REIT 108,493 1,302
---------
83,208
---------
HEALTH CARE (3.3%)
Pharmerica* 203,637 2,482
PSS World Medical Inc* 138,327 1,729
Quorum Health Group* 217,034 6,525
Serologicals* 164,406 4,850
---------
15,586
---------
TECHNOLOGY (14.4%)
Acxiom* 225,828 4,884
Benchmark Electronics* 250,023 5,047
Billing Information Concepts* 126,854 2,949
CHS Electronics* 247,862 4,926
Cybex Computer Products* 134,506 3,094
Datastream Systems* 119,543 2,540
Harbinger* 273,798 6,374
HBO 119,541 6,900
Input/Output* 299,044 6,579
<CAPTION>
- -----------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
National Data 83,857 $ 3,145
Nichols Research* 232,020 5,568
SCB Computer Technology* 823,338 9,880
Sterling Commerce* 146,782 5,825
---------
67,711
---------
TRANSPORTATION (5.2%)
Comair 111,571 2,971
Covenant Transportation
Incorporated, Cl A* 205,932 3,372
Hunt J B Transportation
Services 398,433 11,928
Southwest Airlines 108,029 2,883
USA Truck* 210,914 3,164
---------
24,318
---------
Total Common Stocks
(Cost $305,611) 431,611
---------
CONVERTIBLE BONDS (6.3%)
Career Horizons, CV to 88.1057
Shares, Callable 11/01/98
@ 104
7.000%, 11/01/02 $1,904 5,543
Diamond Offshore, CV to 24.6910
Shares, Callable 02/22/01
@ 102.08
3.750%, 02/15/07 3,286 4,223
Pier 1 Imports, CV to 81.1030
Shares, Callable 10/01/99
@ 103
5.750%, 10/01/03 2,388 4,842
Pride International, CV to
81.6330 Shares, Callable
03/01/99 @ 103.125
6.250%, 02/15/06 4,806 8,987
Sci Systems, CV to 41.0172
Shares, Callable 05/01/99
@ 103.5
5.000%, 05/01/06 3,917 5,831
---------
Total Convertible Bonds
(Cost $27,463) 29,426
---------
</TABLE>
69
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
SUNBELT EQUITY FUND--CONCLUDED
- -----------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
REGULATED INVESTMENT COMPANIES
(1.0%)
Dollar General, STRYPES* 126,752 $ 4,912
---------
Total Regulated Investment
Companies
(Cost $4,999) 4,912
---------
REPURCHASE AGREEMENT (1.9%)
Swiss Bank
5.51%, dated 05/29/98,
matures 06/01/98, repurchase
price $9,182,045
(collateralized by U.S.
Treasury Note and US
Treasury Bond: total market
value $9,368,147) (H) $9,178 9,178
---------
Total Repurchase Agreement
(Cost $9,178) 9,178
---------
Total Investments (100.9%)
(Cost $347,251) 475,127
---------
OTHER ASSETS AND LIABILITIES,
NET (-0.9%) (4,276)
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 28,568,437
outstanding shares of
beneficial interest 291,256
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 2,089,279
outstanding shares of
beneficial interest 20,090
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 552,859
outstanding shares of
beneficial interest 7,265
Undistributed net investment
income 40
Accumulated net realized gain on
investments 24,324
Net unrealized appreciation on
investments 127,876
---------
Total Net Assets (100.0%) $ 470,851
---------
---------
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C>
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 15.12
---------
---------
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 14.77
---------
---------
Maximum Offering Price Per Share --
Investor Class ($14.77 / 96.25%) $ 15.35
---------
---------
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 14.60
---------
---------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR
A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO
THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF
ABBREVIATIONS, PLEASE SEE PAGE 95.
70
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (104.9%)
ALABAMA (2.0%)
State Docks Department, Docks
Facility, RB (MBIA)
5.250%, 10/01/99 $1,500 $ 1,525
5.250%, 10/01/00 1,000 1,025
5.250%, 10/01/01 1,000 1,033
---------
3,583
---------
ARIZONA (2.5%)
Maricopa County, University
School District No. 80
(Chandler), GO, Partially
Prerefunded 07/01/01 @ 101
(FGIC) (F)
6.400%, 07/01/10 3,050 3,265
Scottsdale, GO
5.500%, 07/01/14 1,250 1,344
---------
4,609
---------
CALIFORNIA (3.6%)
Metropolitan Water District,
Southern California
Waterworks, RB, Callable
01/01/08 @ 101
5.500%, 07/01/10 2,785 3,007
Orange County, Loma Ridge Data
Center Project, COP, Prefunded
06/01/19 @ 100 (AMBAC) (F)
6.000%, 06/01/21 2,075 2,292
San Bernardino, J.T. Powers
Financing Authority, Central
City Merged Project, Ser A,
Tax Allocation (AMBAC)
5.750%, 07/01/18 1,230 1,351
---------
6,650
---------
DISTRICT OF COLUMBIA (1.1%)
District of Columbia, American
College Obstetricians, RB,
Callable 08/15/01 @ 102
(AMBAC)
6.500%, 08/15/18 1,930 2,088
---------
FLORIDA (12.9%)
Orange County, State Health
Facilities Authority, Orlando
Regional Healthcare, RB
(MBIA)
6.250%, 10/01/13 $1,000 $ 1,158
State, Board of Education,
Capital Outlay, Ser C, GO,
Callable 06/01/03 @ 101
5.700%, 06/01/11 4,000 4,245
State, Finance Department,
Environmental Protection,
Preservation 2000, Ser A,
RB (FSA)
5.500%, 07/01/09 7,500 8,176
State, Finance Department,
Ser A, RB, Prerefunded
07/01/02 @ 100 (MBIA) (G)
6.250%, 07/01/13 2,500 2,724
Tampa, Allegany Health, RB,
Prerefunded 12/01/99
@ 102 (FGIC) (F)
7.375%, 12/01/23 3,500 3,746
Tampa, Occupational License
Tax, Ser A, RB (FGIC) (C)
3.900%, 10/01/18 3,600 3,600
---------
23,649
---------
GEORGIA (4.8%)
Clayton County, Water
Authority, RB
5.000%, 05/01/13 1,050 1,070
5.100%, 05/01/15 2,365 2,413
5.100%, 05/01/16 1,615 1,638
Fulton County, Development
Authority, Special Facilities
Revenue, Delta Airlines
Project, RB, AMT, Callable
05/01/08 @ 101
5.300%, 05/01/13 1,000 997
State, GO
7.250%, 07/01/99 1,305 1,354
</TABLE>
71
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONTINUED
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
GEORGIA--CONTINUED
State, Municipal Electric
Authority, Ser B, RB (FGIC)
6.250%, 01/01/12 $1,150 $ 1,319
---------
8,791
---------
ILLINOIS (11.6%)
State, Financial Authority,
Provena Health, Ser A, RB
(MBIA)
5.500%, 05/15/06 3,260 3,458
State, Financial Authority,
Provena Health, Ser A, RB,
Callable 05/15/08 @ 101
(MBIA)
5.500%, 05/15/11 2,500 2,624
State, GO, Prerefunded
06/01/01 @ 102
6.600%, 06/01/12 2,350 2,562
State, Health Facilities
Authority, Rockford Health
System, RB (AMBAC)
5.500%, 08/15/05 525 557
State, Health Facilities
Authority, Trinity Medical
Center Project, RB, Callable
07/01/02 @ 102 (FSA)
7.000%, 07/01/12 5,000 5,561
State, Regional Transportation
Authority, RB (FGIC)
6.000%, 06/01/15 2,000 2,249
State, Regional Transportation
Authority, Ser A, RB, Callable
06/01/02 @ 102 (AMBAC)
6.500%, 06/01/15 3,830 4,169
---------
21,180
---------
MARYLAND (2.2%)
Baltimore, Metropolitan
District, GO, Callable
07/01/02 @ 102
5.900%, 07/01/04 1,000 1,081
Baltimore, Water Project,
Ser A, RB, Callable 07/01/06
@ 101 (FGIC)
5.800%, 07/01/15 $2,800 $ 3,005
---------
4,086
---------
MASSACHUSETTS (2.6%)
Boston, City Hospital Project,
RB, Prerefunded 08/15/98
@ 100 (FHA) (F)
7.650%, 02/15/10 1,265 1,385
State, Water Reserves
Authority, Ser C, RB
(FGIC-TCRS)
5.250%, 12/01/15 3,250 3,390
---------
4,775
---------
MINNESOTA (0.6%)
Minneapolis, Special School
District No 001, Ser A, COP,
Callable 02/01/06 @ 100
(MBIA)
5.700%, 02/01/09 1,000 1,073
---------
MISSOURI (1.6%)
St. Louis, Water Utility
Improvements, RB, Callable
07/01/04 @ 102 (FGIC)
5.950%, 07/01/06 1,170 1,287
State, Health & Educational
Facilities Authority, Health
Care Projects, Ser B, ETM,
RB, Callable 06/01/00 @ 102
(MBIA) (F)
7.000%, 06/01/05 1,500 1,664
---------
2,951
---------
NEBRASKA (1.2%)
Omaha, Public Power & Electric
Authority, Ser A, RB,
Prerefunded 02/01/02 @
101.5 (F)
6.500%, 02/01/17 2,000 2,189
---------
</TABLE>
72
<PAGE>
- -----------------------------------------------------------
- -----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
NEW JERSEY (0.9%)
State, Health Care Facilities
Financing Authority, Cathedral
Health Services, RB
(MBIA) (FHA)
5.500%, 02/01/11 $1,605 $ 1,708
---------
NEW YORK (14.1%)
New York, Ser F, GO
5.250%, 08/01/04 2,000 2,084
New York, Ser F, GO (FGIC-TCRS)
5.250%, 08/01/05 3,110 3,277
New York, Ser G, GO (FGIC-TCRS)
5.000%, 08/01/05 4,000 4,154
New York, Ser H, GO,
Callable 08/01/08 @ 100
5.500%, 08/01/13 3,000 3,105
Oneida-Herkimer, Solid Waste
Management Authority, RB (FSA)
5.500%, 04/01/14 1,285 1,369
State, Dormitory Authority, RB,
Callable 07/01/14 @ 100 (FSA)
5.750%, 07/01/18 1,800 1,984
State, Dormitory Authority,
Ser A, RB (AMBAC)
6.000%, 07/01/10 1,550 1,751
5.750%, 07/01/13 1,000 1,103
State, Dormitory Authority,
Ser A, RB (FGIC-TCRS)
5.750%, 07/01/07 1,000 1,093
State, Dormitory Authority,
Ser A, RB (MBIA)
5.750%, 07/01/08 2,000 2,199
5.750%, 07/01/13 1,300 1,434
State, Urban Development,
Sr. Lien, RB, Callable
07/01/06 @ 102
5.500%, 07/01/16 2,250 2,344
---------
25,897
---------
NORTH CAROLINA (0.6%)
Onslow County, GO, Callable
03/01/05 @ 101.5 (MBIA)
5.600%, 03/01/08 $1,000 $ 1,079
---------
OHIO (3.3%)
Cleveland, City School District,
Ser A, GO, Callable 12/01/02
@ 102 (FGIC)
5.875%, 12/01/11 1,650 1,774
Hamilton County, Hamilton
County Football Project,
Ser B, RB, Callable 06/01/08
@ 101 (MBIA)
5.375%, 12/01/11 4,000 4,223
---------
5,997
---------
PENNSYLVANIA (6.0%)
Allegheny County, Hospital
Development Authority, Ohio
Valley General, RB, Callable
04/01/03 @ 100 (MBIA)
5.875%, 04/01/11 1,500 1,584
Allegheny County, Pittsburgh
International Airport,
Ser A, RB (MBIA)
5.750%, 01/01/11 2,500 2,703
5.750%, 01/01/13 4,000 4,330
Berks County, GO, Callable
11/15/02 @ 100 (FGIC)
5.750%, 11/15/12 2,255 2,371
---------
10,988
---------
PUERTO RICO (0.7%)
Commonwealth, Electric Power
Authority, Ser T, RB,
Prerefunded 07/01/04 @
102 (F)
6.375%, 07/01/24 1,200 1,358
---------
</TABLE>
73
<PAGE>
STATEMENT OF NET ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONCLUDED
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
SOUTH DAKOTA (1.8%)
State, Health & Educational
Facility Authority, St. Lukes
Midland Regional Medical, RB,
Callable 07/01/01 @ 102 (MBIA)
6.625%, 07/01/11 $3,000 $ 3,241
---------
TENNESSEE (3.5%)
Metropolitan Nashville Airport,
Ser C, RB, Callable 07/01/01
@ 102 (FGIC)
6.600%, 07/01/15 3,900 4,223
Shelby County, GO, Prerefunded
12/01/00 @ 102 (G)
6.250%, 12/01/09 2,000 2,146
---------
6,369
---------
TEXAS (7.4%)
Amarillo, Health Facilities
Corporation, Baptist Saint
Anthonys Hospital, RB (FSA)
5.500%, 01/01/11 1,000 1,063
5.500%, 01/01/13 1,000 1,061
North Central, Health Facility
Development, Health Resources
System, Ser B, RB, Callable
02/15/08 @ 102 (MBIA)
5.750%, 02/15/13 2,120 2,283
Richardson, GO, Callable
02/15/08 @ 100
5.500%, 02/15/09 3,615 3,885
State, Water Development Board,
Revolving Fund, Senior Lien,
RB, Callable 07/15/02 @ 102
6.000%, 07/15/03 2,000 2,169
Travis County, GO, Callable
03/01/08 @ 100
5.000%, 03/01/09 2,055 2,130
University of Texas, Ser B, RB
6.300%, 08/15/99 $1,000 $ 1,030
---------
13,621
---------
UTAH (3.8%)
State, Intermountain Power
Agency, Power Supply, Ser A,
RB (AMBAC)
6.500%, 07/01/11 1,500 1,762
State, Intermountain Power
Agency, Power Supply,
Ser E, RB (FSA)
6.250%, 07/01/08 3,000 3,419
6.250%, 07/01/09 1,545 1,769
---------
6,950
---------
WASHINGTON (11.8%)
King County, Ser C, GO,
Callable 06/01/03 @ 100
4.600%, 06/01/04 5,000 5,087
State, Health Care Facilities,
Swedish Health Systems, RB,
Callable 11/15/08 @ 101
(AMBAC)
5.500%, 11/15/12 2,000 2,103
State, Health Care Facilities,
Virginia Mason Medical
Center Project, Ser B, RB
(MBIA)
4.000%, 02/15/27 8,500 8,500
State, Ser B, GO, Callable
05/01/04 @ 100
5.750%, 05/01/14 5,600 5,871
---------
21,561
---------
</TABLE>
74
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
WEST VIRGINIA (1.2%)
West Virginia University,
University Projects,
Ser A, RB (MBIA)
5.500%, 04/01/13 $1,000 $ 1,072
5.500%, 04/01/14 1,000 1,069
---------
2,141
---------
WISCONSIN (3.1%)
State, Health & Elderly Facility,
Childrens Hospital of
Wisconsin, RB (AMBAC)
5.500%, 02/15/11 1,300 1,378
5.625%, 02/15/13 2,690 2,884
5.625%, 02/15/14 1,250 1,337
---------
5,599
---------
Total Municipal Bonds
(Cost $189,435) 192,133
---------
CASH EQUIVALENTS (6.9%)
AIM Management Institutional
Tax-Free Portfolio (C) 6,992 6,992
SEI Tax-Exempt Trust Institutional
Tax-Free Portfolio (C) 5,656 5,656
---------
Total Cash Equivalents
(Cost $12,648) 12,648
---------
Total Investments (111.8%)
(Cost $202,083) 204,781
---------
OTHER ASSETS AND LIABILITIES (-11.8%)
Securities Purchased Payable (28,219)
Other Assets and Liabilities, Net 6,602
---------
Total Other Assets and Liabilities (21,617)
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 12,864,803
outstanding shares of beneficial interest $ 142,338
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 2,467,705
outstanding shares of beneficial interest 26,273
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 736,855
outstanding shares of beneficial interest 8,349
Undistributed net investment income 4
Accumulated net realized gain on investments 3,502
Net unrealized appreciation on investments 2,698
---------
Total Net Assets (100.0%) $ 183,164
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 11.40
=========
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 11.41
=========
Maximum Offering Price Per Share --
Investor Class ($11.41 / 96.25%) $ 11.85
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 11.40
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
75
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
FLORIDA TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (98.5%)
FLORIDA (91.1%)
Bay County, School District
Sales Tax, RB (FSA)
4.500%, 06/01/06 $1,900 $ 1,923
Brevard County, School Board,
Ser A, COP (AMBAC)
5.400%, 07/01/12 1,500 1,607
Brevard County, State Health
Facilities Authority, Holmes
Medical Center Project, RB,
Callable 10/01/03 @ 102 (MBIA)
5.700%, 10/01/08 3,000 3,233
Brevard County, State Health
Facilities Authority, Wuesthoff
Memorial Hospital
Project, RB (MBIA)
6.250%, 04/01/06 930 1,046
Broward County, Port Facilities,
Ser B, RB, AMT, Callable
@ 101 09/01/08 (MBIA)
5.000%, 09/01/18 2,000 1,953
Broward County, School District,
COP, Callable 07/01/07
@ 101 (AMBAC)
5.100%, 07/01/09 1,465 1,535
Cape Canaveral, Hospital
District, RB, Callable
01/01/2008 @ 101
5.250%, 01/01/18 1,000 978
Citrus County, Pollution Control,
Florida Power, RB
Callable 08/01/02 @ 102
6.350%, 02/01/22 335 363
Dade County, Ser CC,
GO (AMBAC)
7.125%, 10/01/11 1,810 2,249
Dade County, Aviation Revenue,
RB, AMT, Callable 10/01/02
@ 102 (MBIA)
6.600%, 10/01/22 $ 825 $ 902
Dade County, Aviation Revenue,
Ser A, RB, Callable 10/01/05
@ 102 (AMBAC)
6.000%, 10/01/09 500 554
Dade County, School Board, Ser B,
COP (AMBAC)
5.750%, 08/01/03 600 645
Dade County, School District, GO,
Prerefunded 07/01/99 @ 102 (F)
7.375%, 07/01/08 250 264
Dade County, Seaport, RB (MBIA)
6.200%, 10/01/08 750 856
6.500%, 10/01/09 1,000 1,175
6.200%, 10/01/10 1,000 1,152
Dade County, State Educational
Facilities Authority, University
of Miami, RB Callable 04/01/06
@ 102 (MBIA)
5.750%, 04/01/20 2,000 2,115
Dade County, State Educational
Facilities Authority, University
of Miami, Ser A, RB (MBIA)
6.000%, 04/01/08 755 843
Dade County, Water & Sewer
System, RB (FGIC)
6.250%, 10/01/09 750 865
Deerfield Beach, Water & Sewer
Revenue, RB (FGIC)
6.125%, 10/01/06 250 282
Gainesville, Utility Systems,
Ser A, RB
5.750%, 10/01/04 1,300 1,415
5.750%, 10/01/09 500 557
</TABLE>
76
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
Gulf Breeze, Local Government
Lien, Ser B, RB, Mandatory
Tender 12/01/08 (FGIC)
5.650%, 12/01/15 $ 460 $ 502
Gulf Breeze, Local Government
Lien, Ser B, RB, Mandatory
Tender 12/01/09 (FGIC)
5.750%, 12/01/15 410 448
Hillsborough County, Capital
Improvement Program, ETM,
RB (FGIC) (F)
5.900%, 08/01/04 300 328
Hillsborough County, Capital
Improvement Program, County
Center Project, Ser B, RB,
Callable 07/01/06 @ 102 (MBIA)
5.000%, 07/01/08 1,000 1,030
Hillsborough County, School
Board Revenue, COP, Callable
07/01/06 @ 100 (MBIA)
5.875%, 07/01/08 1,000 1,106
Hillsborough County, University
Community Hospital, RB (MBIA)
6.500%, 08/15/19 145 173
Indian Trace Community, Water
Management Split Benefit,
Ser A-1, RB, Callable 05/01/05
@ 102 (MBIA)
5.500%, 05/01/07 455 493
Jacksonville, Excise Tax, Ser B, RB,
AMT, Callable 10/01/03
@ 100 (FGIC)
5.200%, 10/01/04 1,500 1,558
Jacksonville, River City Renaissance
Project, RB (FGIC)
6.000%, 10/01/04 3,430 3,780
Jacksonville, State Health Facilities
Authority, Charity Obligation
Group, Ser A, RB, Callable
08/15/07 @ 101 (MBIA)
5.250%, 08/15/15 $2,000 $ 2,044
Jacksonville, Water & Sewer
Revenue, RB, Callable 10/01/06
@ 102, Prerefunded 09/30/08
@ 101 (MBIA) (G)
5.000%, 10/01/20 610 643
Lakeland, Electric & Water
Revenue, RB
6.650%, 10/01/98 100 101
Lakeland, Electric & Water
Revenue, RB (FGIC)
6.500%, 10/01/05 1,000 1,140
6.000%, 10/01/07 1,000 1,125
Manatee County, Community
Redevelopment Administration,
Center Project, RB, Callable
04/01/00 @ 102 (MBIA)
7.000%, 04/01/08 1,000 1,070
Martin County, State Health
Facilities Authority, Martin
Memorial Medical Center,
Ser B, RB, Callable 11/15/07
@ 102 (MBIA)
5.150%, 11/15/11 1,070 1,110
Miami-Dade County, Special
Obligation, RB, Callable 04/01/08
@ 86.6 (MBIA) (A)
0.000%, 10/01/11 1,635 852
North Broward, Hospital District
Revenue, ETM, RB (MBIA) (G)
5.950%, 01/01/01 1,000 1,047
Orange County, Public Facilities
Revenue, Ser A, RB, Callable
10/01/04 @ 102 (AMBAC)
5.650%, 10/01/07 200 217
</TABLE>
77
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
FLORIDA TAX-EXEMPT BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
Orange County, State Health
Facilities Authority, Orlando
Regional Healthcare, RB (MBIA)
6.250%, 10/01/13 $1,000 $ 1,158
Orange County, State Housing
Finance Authority, Single
Family Mortgage, Ser B, RB,
Callable 09/01/07 @ 102
5.800%, 09/01/17 760 791
Orange County, Tourist
Development, Ser B, RB,
Prerefunded 10/01/02 @
100 (AMBAC)
6.000%, 10/01/21 250 269
Orlando, Community Water &
Electric Revenue, Ser D, RB
6.750%, 10/01/17 2,885 3,526
Osceola County, COP (AMBAC)
6.250%, 06/01/01 1,760 1,873
6.250%, 06/01/04 2,105 2,337
6.250%, 06/01/05 2,240 2,508
Palm Beach, Solid Waste Authority,
Ser A, RB (AMBAC)
6.000%, 10/01/09 2,525 2,856
Palm Beach, State Health Facilities
Authority, JFK Medical Center
Project, RB, Prerefunded 12/01/03
@ 102 (FSA) (F)
5.750%, 12/01/14 165 180
Palm Beach County, Apartment
System, RB, Callable 10/01/01
@ 102 (MBIA)
7.625%, 10/01/04 1,410 1,588
Pinellas County, Morton Plant
Health Systems Project, RB,
Callable 11/15/03 @ 102 (MBIA)
5.500%, 11/15/08 1,500 1,599
Pinellas County, State Housing
Finance Authority, Single Family
Mortgage, Ser C, RB, Callable
03/01/07 @ 102
5.050%, 09/01/07 $ 215 $ 220
5.100%, 09/01/08 230 235
Plant City, Utility System
Revenue, RB (MBIA)
6.000%, 10/01/15 400 453
Reedy Creek, Utility Revenue,
Ser 1991-1, RB, Prerefunded
10/01/01 @ 101 (MBIA) (F)
6.250%, 10/01/11 405 437
South Broward, Hospital
District, RB, Callable 05/01/03
@ 102 (AMBAC)
7.500%, 05/01/08 1,920 2,221
State, Board of Education, Ser B,
GO, Callable 06/01/01 @ 101
6.000%, 06/01/22 500 528
State, Board of Education, Ser C,
GO, Prerefunded 06/01/97
@ 102 (ETM) (F)
7.100%, 06/01/07 190 193
State, Board of Education, Capital
Outlay, Ser B, GO (F)
6.000%, 06/01/02 1,000 1,065
State, Board of Education, Capital
Outlay, Ser B, GO, Callable
06/01/02 @ 101
5.900%, 06/01/12 450 476
6.000%, 06/01/15 170 180
State, Board of Education, Capital
Outlay, Ser C, GO, Callable
06/01/03 @ 101
5.700%, 06/01/11 2,305 2,446
</TABLE>
78
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
State, Department of Transportation,
Right of Way, GO
6.000%, 07/01/06 $1,000 $ 1,115
State, Department of Transportation,
Turnpike Authority,
Ser A, RB (AMBAC)
5.500%, 07/01/03 1,000 1,064
State, Department of Transportation,
Turnpike Authority, Ser A, RB,
Callable 07/01/08 @ 101 (FGIC)
5.000%, 07/01/23 2,500 2,458
State, Finance Department,
Department of Natural Resources,
Preservation 2000, Ser A, RB,
Prerefunded 07/01/01 @ 102
(AMBAC) (F)
6.750%, 07/01/06 80 88
State, Finance Department,
Environmental Protection,
Preservation 2000, Ser A, RB (FSA)
5.500%, 07/01/08 1,000 1,088
5.500%, 07/01/09 3,000 3,271
State, Finance Department,
Environmental Protection,
Preservation 2000,
Ser B, RB (AMBAC)
6.000%, 07/01/09 3,000 3,395
State, Keys, Aqueduct Authority
Revenue, RB, Prerefunded
09/01/01 @ 101 (AMBAC)
6.750%, 09/01/21 170 186
State, Municipal Power Agency,
Saint Lucie Project, ETM, RB,
Callable 12/08/97 @ 100 (F)
5.000%, 10/01/17 500 502
Sunrise, Utility System, RB,
Callable 10/01/2018
@ 100 (AMBAC)
5.200%, 10/01/22 $2,000 $ 2,045
5.000%, 10/01/28 1,500 1,495
Tallahassee, Utility System, Ser B,
RB, Prerefunded
10/01/99 @ 102 (F)
6.900%, 10/01/14 240 254
Tampa, RB, Callable 10/1/01
@ 102 (AMBAC)
7.050%, 10/01/07 1,000 1,107
Tampa, Health System, Catholic
Health, Ser A-1, RB (MBIA)
5.250%, 11/15/04 1,000 1,054
Tampa, Health System, Catholic
Health, Ser A-1, RB, Callable
11/15/08 @ 102 (MBIA)
5.250%, 11/15/11 2,300 2,396
Tampa, Health System, Catholic
Health, Ser A-2, RB, Callable
11/15/08 @ 102 (AMBAC)
5.250%, 11/15/10 2,030 2,096
---------
96,032
---------
PUERTO RICO (7.4%)
Commonwealth, GO (MBIA)
5.750%, 07/01/12 2,000 2,215
5.650%, 07/01/15 1,000 1,091
Commonwealth, Highway &
Transportation Authority,
Ser Z, RB (MBIA)
6.250%, 07/01/14 2,000 2,320
Electric Power Authority,
RB (MBIA)
6.125%, 07/01/09 1,000 1,143
Electric Power Authority, Ser S, RB
5.500%, 07/01/00 200 206
</TABLE>
79
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
FLORIDA TAX-EXEMPT BOND FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
Public Buildings Authority
Revenue, Guaranteed
Government Facilities,
Ser A, RB (AMBAC)
6.250%, 07/01/14 $ 750 $ 870
---------
7,845
---------
Total Municipal Bonds
(Cost $100,743) 103,877
---------
CASH EQUIVALENTS (3.3%)
AIM Management Institutional
Tax-Free Portfolio (C) 2,706 2,706
SEI Tax-Exempt Trust Institutional
Tax-Free Portfolio (C) 794 794
---------
Total Cash Equivalents
(Cost $3,500) 3,500
---------
Total Investments (101.8%)
(Cost $104,243) 107,377
---------
OTHER ASSETS AND LIABILITIES, NET (-1.8%) (1,897)
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 8,764,559
outstanding shares of beneficial interest $ 90,819
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 315,231
outstanding shares of beneficial interest 3,119
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 760,024
outstanding shares of beneficial interest 7,944
Undistributed net investment income 1
Accumulated net realized gain
on investments 463
Net unrealized appreciation on investments 3,134
---------
Total Net Assets (100.0%) $ 105,480
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 10.72
=========
Net Asset Value and Redemption
Price Per Share -- Investor Shares $ 10.72
=========
Maximum Offering Price Per Share --
Investor Class ($10.72 / 96.25%) $ 11.14
=========
Net Asset Value, Offering and
Redemption Price Per Share -- Flex Shares (1) $ 10.74
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
80
<PAGE>
================================================================================
GEORGIA TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (94.3%)
GEORGIA (94.3%)
Albany-Dougherty County, State
Hospital Authority, Ser B,
Anticipation Certificate,
Prerefunded 09/01/00 @ 102
(AMBAC) (F)
7.500%, 09/01/20 $ 255 $ 279
Alpharetta, GO
5.000%, 05/01/07 1,650 1,726
Athens, Water & Sewer Revenue,
ETM, RB (F)
5.700%, 07/01/00 165 171
Atlanta, Airport Facility,
RB (AMBAC)
6.000%, 01/01/03 1,000 1,075
6.000%, 01/01/04 500 544
6.500%, 01/01/06 1,000 1,135
Metro Atlanta, Rapid Tranit
Authority, Ser N, RB
6.000%, 07/01/07 1,000 1,119
Augusta, Water & Sewer Revenue,
RB, Prerefunded 05/01/02 @ 102 (F)
6.200%, 05/01/03 130 142
Bibb County, GO
7.000%, 01/01/04 985 1,118
Burke County, Development
Authority, Pollution Control,
Oglethorpe Power, Ser A, RB,
VRDN (FGIC) (C) (D)
3.900%, 01/01/16 2,500 2,500
Cartersville, Water & Sewer
Revenue, RB, Callable 07/01/08
@102 (FSA)
5.000%, 07/01/12 1,255 1,269
Clayton County, Water & Sewer
Authority, RB (MBIA)
5.000%, 05/01/11 750 769
Clayton County, Water Authority,
RB, Callable 05/01/06 @ 102
(AMBAC)
5.350%, 05/01/09 $1,500 $ 1,599
Cobb County, GO
5.000%, 02/01/03 1,025 1,063
Cobb County, Recreational Facilities
Improvements, GO,
Callable 01/01/07 @ 101
5.125%, 01/01/15 850 863
Cobb County, Water & Sewer
Authority, RB, Callable
07/01/04 @ 102
5.125%, 07/01/05 345 363
Cobb County & Marietta, Coliseum
& Exhibit Hall Authority, RB (MBIA)
5.500%, 10/01/12 940 1,016
Cobb County & Marietta,
Water Authority, RB
5.100%, 11/01/04 1,000 1,051
Columbus, Georgia Water & Sewer,
RB, Callable 11/01/07 @ 102 (FGIC)
5.625%, 05/01/13 1,055 1,131
Dalton, Utilities Revenue RB (MBIA)
6.000%, 01/01/08 2,000 2,240
Dalton-Whitfield County, Hospital
Authority, RB, Prerefunded
07/01/00 @ 102 (F)
7.000%, 07/01/03 355 383
DeKalb County, Development
Authority, Emory University
Project, Ser A, RB
5.375%, 11/01/05 1,650 1,764
DeKalb County, Development
Authority, Emory University
Project, Ser A, RB,
Callable 11/01/05 @ 101
5.200%, 11/01/08 500 528
</TABLE>
81
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
GEORGIA TAX-EXEMPT BOND FUND--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
DeKalb County, School District,
Ser A, GO
6.250%, 07/01/11 $1,500 $ 1,735
Douglas County, School
District, GO (MBIA)
5.650%, 01/01/09 805 868
Douglasville - Douglas County,
Water & Sewer Authority,
RB (AMBAC)
5.625%, 06/01/15 350 380
East Point, Building Authority, RB,
Callable 02/01/06 @ 102 (AMBAC)
4.800%, 02/01/07 535 549
Fayette County, School District, GO
6.250%, 03/01/07 450 510
Fayette County, Water Authority,
ETM, RB (MBIA) (F)
8.550%, 10/01/01 300 341
Forsyth County, School District, GO
6.500%, 07/01/06 1,000 1,144
Forsyth County, School
District, GO (MBIA)
5.350%, 07/01/10 780 822
Fulco, Hospital Authority, Catholic
Health East, Ser A, RB, Anticipation
Certificate, Callable 11/15/2008
@ 102 (MBIA)
5.250%, 11/15/12 1,000 1,037
Fulton County, Hospital Authority,
Northside Hospital Project, Ser B,
RB, Prerefunded 10/01/02
@ 102 (MBIA) (F)
6.600%, 10/01/11 2,000 2,228
Gwinnett County, Recreation
Authority, RB
5.800%, 02/01/06 785 860
5.875%, 02/01/07 1,390 1,538
Gwinnett County, School
District, GO
6.400%, 02/01/06 $ 500 $ 567
Gwinnett County, School
District, Ser B, GO
6.400%, 02/01/07 1,000 1,144
Gwinnett County, Water & Sewer
Authority, RB, Callable
08/01/07 @ 102
5.250%, 08/01/18 780 790
Gwinnett County, Water & Sewer
Authority, RB, Callable
08/01/08 @ 102
5.000%, 08/01/12 500 511
5.000%, 08/01/13 800 814
Hall County, School District,
Ser B, GO
6.300%, 12/01/05 675 760
Henry County, GO
6.300%, 08/01/08 300 344
Henry County, Henry Medical
Center Project, Callable 07/01/07
@ 102 (AMBAC)
5.500%, 07/01/08 2,460 2,664
Henry County, School District,
Ser A, GO
6.150%, 08/01/06 150 168
6.450%, 08/01/11 500 586
Henry County, School District,
Ser B, GO (MBIA)
5.500%, 08/01/01 350 366
Henry County, Water & Sewer
Authority, RB (AMBAC)
6.150%, 02/01/20 1,750 2,024
Medical Center Hospital Authority,
Columbus Regional Healthcare
System, Callable 08/01/05
@ 102, RB (MBIA)
6.000%, 08/01/06 1,000 1,110
</TABLE>
82
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
Meriwether County, School
District, GO (FSA)
7.000%, 02/01/06 $ 740 $ 866
5.500%, 02/01/16 1,000 1,041
Milledgeville, Water & Sewer
Revenue, RB (FSA)
6.000%, 12/01/16 1,000 1,130
6.000%, 12/01/21 1,000 1,142
Paulding County, School District,
Ser A, GO
6.625%, 02/01/07 1,000 1,156
6.625%, 02/01/08 500 585
Private Colleges & Universities
Facilities Authority, Emory
University Project, Ser A, RB,
Callable 11/01/07 @ 100
5.000%, 11/01/10 1,000 1,034
Private Colleges & Universities
Facilities Authority, Emory
University Project, Ser C, RB,
Callable 10/01/02 @ 102
5.900%, 10/01/04 305 331
Private Colleges & Universities
Facilities Authority, Mercer
University Project, RB (MBIA)
6.400%, 11/01/11 500 587
Private Colleges & Universities
Facilities Authority, Spelman
College Project, RB (FGIC)
6.000%, 06/01/09 475 523
Putnam County, School District,
GO, Callable 2/01/08 @ 102
4.500%, 02/01/12 930 901
Richmond County, Water & Sewer
Revenue, Ser A, RB, Callable
10/01/06 @ 102 (FGIC)
5.125%, 10/01/17 1,000 1,002
Rockdale County, School District,
RB, Prerefunded
01/01/99 @ 102 (F)
6.400%, 01/01/05 $ 150 $ 155
Savannah, Water & Sewer
Revenue, ETM, RB (F)
6.450%, 12/01/04 1,000 1,127
Smyrna, Development Authority, RB
5.600%, 02/01/20 735 792
State GO, Ser C
6.500%, 04/01/08 1,000 1,166
6.250%, 08/01/08 1,360 1,564
State Housing & Financial Authority,
Single Family Mortgage, Ser B,
Sub-ser B-1, Callable 06/01/05
@ 102, RB
5.550%, 12/01/07 550 579
State Housing & Financial Authority,
Single Family Mortgage, Ser B,
Sub-ser B-1, Callable 06/01/06
@ 102, RB (FHA)
5.550%, 12/01/10 325 337
5.600%, 12/01/11 450 467
State Housing & Financial Authority,
Single Family Mortgage, Ser C,
Sub-ser C-1, Callable 12/01/07
@ 101.5, RB
5.550%, 12/01/16 500 517
State Municipal Electric Authority,
ETM, RB, Callable
01/12/98 @ 101 (F)
8.000%, 01/01/15 465 616
State, Tollway Authority,
Georgia 400 Project, RB
5.000%, 07/01/09 1,280 1,338
Upper Oconee Basin, Water Authority,
RB, Callable 07/01/08 @ 102 (FGIC)
5.000%, 07/01/12 500 507
</TABLE>
83
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
GEORGIA TAX-EXEMPT BOND FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
Vidalia, Water & Sewer Revenue,
ETM, RB (F)
6.000%, 07/01/07 $ 605 $ 679
Walker County, School District, GO
5.000%, 02/01/03 1,000 1,036
Walker, Dade, and Catoosa Counties,
Hutchinson Medical, Ser A, RB,
Callable 10/01/07 @ 102 (FSA)
5.500%, 10/01/08 1,370 1,474
---------
70,360
---------
Total Municipal Bonds
(Cost $68,096) 70,360
---------
CASH EQUIVALENT (4.2%)
AIM Management Institutional
Tax-Free Portfolio (C) 3,106 3,106
---------
Total Cash Equivalent
(Cost $3,106) 3,106
---------
Total Investments (98.5%)
(Cost $71,202) 73,466
---------
OTHER ASSETS AND LIABILITIES, NET (1.5%) 1,136
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 6,165,879
outstanding shares of beneficial interest $ 60,321
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 392,414
outstanding shares of beneficial interest 3,836
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 816,778
outstanding shares of beneficial interest 8,050
Undistributed net investment income 1
Accumulated net realized gain
on investments 130
Net unrealized appreciation on investments 2,264
---------
Total Net Assets (100.0%) $ 74,602
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 10.11
=========
Net Asset Value and Redemption
Price Per Share -- Investor Shares $ 10.13
=========
Maximum Offering Price Per Share --
Investor Class ($10.13 / 96.25%) $ 10.52
=========
Net Asset Value, Offering and
Redemption Price Per Share -- Flex Shares (1) $ 10.12
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
84
<PAGE>
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (31.7%)
U.S. Treasury Bonds
7.500%, 11/15/16 $60,000 $ 70,855
8.125%, 08/15/19 87,950 111,438
6.000%, 02/15/26 47,875 48,651
U.S. Treasury Notes
5.875%, 11/30/01 5,000 5,045
6.625%, 03/31/02 12,000 12,418
5.875%, 11/15/05 17,500 17,747
---------
Total U.S. Treasury Obligations
(Cost $245,576) 266,154
---------
CORPORATE OBLIGATIONS (55.1%)
FINANCE (39.0%)
Aristar
6.750%, 05/15/99 23,000 23,151
AT&T Capital, MTN
6.410%, 08/13/99 26,000 26,005
Countrywide Home Loan, MTN
6.840%, 10/22/04 5,000 5,144
6.510%, 02/11/05 23,300 23,387
Ford Motor Credit
7.000%, 09/25/01 24,100 24,793
6.500%, 02/28/02 23,500 23,823
General Motors Acceptance
7.125%, 05/01/01 23,500 24,146
General Motors Acceptance, MTN
7.050%, 04/23/02 10,300 10,609
Great Western Financial
8.600%, 02/01/02 9,800 10,510
Homeside Lending, MTN
6.875%, 05/15/00 29,200 29,565
International Lease Finance, MTN
5.957%, 01/15/02 7,150 7,105
Merrill Lynch, MTN
6.060%, 10/15/01 41,500 41,396
Morgan Stanley, MTN,
Callable 03/09/01 @ 100
6.090%, 03/09/11 12,000 12,000
FINANCE--CONTINUED
Salomon
7.300%, 05/15/02 $20,000 $ 20,750
Salomon Smith Barney
6.250%, 01/15/05 20,000 19,775
SunAmerica
6.200%, 10/31/99 25,000 25,058
---------
327,217
---------
INDUSTRIAL (16.1%)
American Home Products
7.700%, 02/15/00 11,750 12,103
7.900%, 02/15/05 21,300 23,217
Bausch & Lomb
6.750%, 12/15/04 11,800 12,021
Ikon Capital, MTN
6.730%, 06/15/01 13,000 13,179
Lockheed Martin
6.550%, 05/15/99 16,000 16,080
Philip Morris
7.250%, 09/15/01 24,500 25,143
7.500%, 04/01/04 14,500 15,243
Praxair
6.900%, 11/01/06 17,725 18,456
---------
135,442
---------
Total Corporate Obligations
(Cost $459,288) 462,659
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%)
FHLMC
8.000%, 06/01/02 4,586 4,669
7.500%, 09/01/03 12,948 13,179
FNMA
7.000%, 10/01/03 41,842 42,431
---------
Total U.S. Government Agency Obligations
(Cost $59,936) 60,279
---------
</TABLE>
85
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
INVESTMENT GRADE BOND FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
BANK NOTE (1.7%)
Capital One
6.530%, 11/26/99 $14,500 $ 14,518
---------
Total Bank Note
(Cost $14,500) 14,518
---------
REPURCHASE AGREEMENTS (3.6%)
Deutsche Bank
5.50%, dated 05/29/98, matures
06/01/98, repurchase price
$21,876,757 (collateralized by
U.S. Treasury Note: total market
value $22,304,576) (H) 21,867 21,867
Swiss Bank
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$8,448,982 (collateralized by
U.S. Treasury Note and U.S.
Treasury Bond: total market
value $8,622,434) (H) 8,445 8,445
---------
Total Repurchase Agreements
(Cost $30,312) 30,312
---------
Total Investments (99.3%)
(Cost $809,612) 833,922
---------
OTHER ASSETS AND LIABILITIES, NET (0.7%) 5,946
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 74,493,579
outstanding shares of beneficial interest $ 771,578
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 3,124,013
outstanding shares of beneficial interest 32,828
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 1,230,012
outstanding shares of beneficial interest 12,857
Overdistributed net investment income (188)
Accumulated net realized loss on investments (1,517)
Net unrealized appreciation on investments 24,310
---------
Total Net Assets (100.0%) $ 839,868
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 10.65
=========
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 10.65
=========
Maximum Offering Price Per Share --
Investor Class ($10.65 / 96.25%) $ 11.06
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 10.66
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
86
<PAGE>
SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (29.1%)
U.S. Treasury Notes
4.750%, 10/31/98 $9,000 $ 8,975
5.500%, 02/28/99 4,750 4,751
5.875%, 07/31/99 5,000 5,017
5.625%, 10/31/99 3,000 3,003
7.500%, 11/15/01 6,500 6,885
5.750%, 08/15/03 1,000 1,008
U.S. Treasury STRIPS
0.000%, 08/15/03 1,250 939
0.000%, 11/15/04 8,000 5,594
---------
Total U.S. Treasury Obligations
(Cost $35,982) 36,172
---------
CORPORATE OBLIGATIONS (48.9%)
FINANCE (21.2%)
American Express
6.750%, 06/23/04 3,000 3,097
American General
5.900%, 01/15/03 2,000 1,977
6.250%, 03/15/03 1,100 1,101
Associates of North America, MTN
5.980%, 12/19/00 1,250 1,248
7.080%, 04/15/03 1,500 1,554
Bankers Trust New York
6.625%, 07/30/99 2,250 2,264
Beneficial, MTN
6.490%, 09/27/00 1,000 1,009
Chrysler Financial
9.500%, 12/15/99 1,000 1,051
Dean Witter Discover, MTN
6.000%, 02/08/01 1,000 1,001
First Chicago NBD, MTN
6.500%, 11/01/01 2,250 2,275
Ford Motor Credit
6.500%, 02/28/02 725 735
6.000%, 01/14/03 2,000 1,990
General Motors Acceptance
6.000%, 02/01/02 750 745
FINANCE --CONTINUED
HFC Limited
6.000%, 06/30/98 $2,000 $ 2,000
Household Finance
9.625%, 07/15/00 1,250 1,337
International Lease Finance, MTN
5.810%, 07/10/00 2,000 1,995
Norwest Financial
7.200%, 04/01/04 1,000 1,054
---------
26,433
---------
INDUSTRIAL (22.7%)
Clark Equipment
9.750%, 03/01/01 1,250 1,350
Computer Associates (B)
6.375%, 04/15/05 2,300 2,297
Dayton Hudson
6.800%, 10/01/01 2,250 2,289
5.950%, 06/15/10 500 500
General Foods
6.000%, 06/15/01 500 498
IBM, MTN
6.037%, 08/07/00 1,250 1,255
Philip Morris
7.500%, 01/15/02 1,250 1,295
RJR Nabisco
6.800%, 09/01/01 1,500 1,526
Sears Roebuck Acceptance, MTN
6.920%, 06/17/04 2,250 2,337
Tenneco
10.075%, 02/01/01 3,000 3,278
TRW, MTN
9.000%, 02/09/01 1,000 1,071
Union Pacific
7.060%, 05/15/03 1,500 1,556
USAA, MTN (B)
8.880%, 09/21/99 2,000 2,071
</TABLE>
87
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
SHORT-TERM BOND FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
INDUSTRIAL--CONTINUED
Wal-Mart, Callable/Putable
02/01/00 @ 100
5.650%, 02/01/10 $3,000 $ 2,985
Walt Disney, MTN
5.600%, 01/13/00 2,500 2,491
Walt Disney Euro, MTN
6.250%, 06/21/99 1,500 1,500
---------
28,299
---------
UTILITIES (5.0%)
Bellsouth Savings
9.125%, 07/01/03 1,767 1,935
Indiana & Michigan Power, MTN
6.400%, 03/01/00 2,250 2,264
NYNEX Credit, MTN
6.900%, 06/15/99 2,000 2,018
---------
6,217
---------
Total Corporate Obligations
(Cost $60,397) 60,949
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.7%)
FFCB, Callable 11/06/98 @ 100
6.330%, 11/06/00 2,500 2,503
FHLB
5.510%, 02/06/01 2,750 2,736
FHLMC, Callable 06/30/98 @ 100 (C)
5.375%, 04/13/00 1,000 982
FNMA, MTN
5.760%, 02/26/01 2,100 2,095
---------
Total U.S. Government Agency Obligations
(Cost $8,257) 8,316
---------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS (2.4%)
FHLMC
8.000%, 01/01/00 540 553
6.500%, 12/01/00 2,014 2,031
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS--CONTINUED
FNMA
8.500%, 11/01/01 $ 354 $ 366
---------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $2,932) 2,950
---------
ASSET-BACKED SECURITIES (8.5%)
Arcadia Auto Receivables Trust,
Ser 1997-B, Cl A3
6.300%, 07/16/01 2,500 2,509
Discover Card Master Trust,
Ser 1997-2, Cl A
6.792%, 04/16/10 3,000 3,018
Iroquois Trust, Ser 1997-3, Cl A (B)
6.680%, 11/10/03 3,000 3,005
Metris Master Trust,
Ser 1997-1, Cl A
6.870%, 10/20/05 2,000 2,066
---------
Total Asset-Backed Securities
(Cost $10,555) 10,598
---------
CASH EQUIVALENT (3.9%)
SEI Daily Income Trust Prime
Obligation Portfolio (C) 4,869 4,869
---------
Total Cash Equivalent
(Cost $4,869) 4,869
---------
Total Investments (99.5%)
(Cost $122,992) 123,854
---------
OTHER ASSETS AND LIABILITIES, NET (0.5%) 627
---------
</TABLE>
88
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE (000)
- -----------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 11,978,220
outstanding shares of beneficial interest $ 119,361
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 193,503
outstanding shares of beneficial interest 1,935
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 209,663
outstanding shares of beneficial interest 2,103
Undistributed net investment income 143
Accumulated net realized gain
on investments 77
Net unrealized appreciation on investments 862
---------
Total Net Assets (100.0%) $ 124,481
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 10.05
=========
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 10.07
=========
Maximum Offering Price Per Share --
Investor Class ($10.07 / 98.00%) $ 10.28
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 10.07
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
89
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
SHORT-TERM U.S. TREASURY SECURITIES FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (96.8%)
U.S. Treasury Notes
5.500%, 11/15/98 $ 1,600 $ 1,600
6.375%, 05/15/99 1,900 1,915
6.875%, 07/31/99 4,250 4,312
6.000%, 08/15/99 2,500 2,513
5.875%, 11/15/99 2,000 2,009
5.625%, 11/30/99 17,000 17,021
5.875%, 02/15/00 2,250 2,262
6.875%, 03/31/00 1,250 1,279
6.125%, 07/31/00 2,250 2,276
5.750%, 10/31/00 2,000 2,009
5.375%, 02/15/01 12,800 12,743
---------
Total U.S. Treasury Obligations
(Cost $49,758) 49,939
---------
CASH EQUIVALENT (1.7%)
SEI Daily Income Trust
Treasury II Portfolio (C) 872 872
---------
Total Cash Equivalent
(Cost $872) 872
---------
Total Investments (98.5%)
(Cost $50,630) 50,811
---------
OTHER ASSETS AND LIABILITIES, NET (1.5%) 799
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 4,708,139
outstanding shares of beneficial interest $ 46,966
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 328,871
outstanding shares of beneficial interest 3,311
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 142,073
outstanding shares of beneficial interest 1,416
Overdistributed net investment income (53)
Accumulated net realized loss
on investments (211)
Net unrealized appreciation on investments 181
---------
Total Net Assets (100.0%) $ 51,610
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 9.97
=========
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 9.96
=========
Maximum Offering Price Per Share --
Investor Class ($9.96 / 99.00%) $ 10.06
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 9.94
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
90
<PAGE>
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (21.1%)
U.S. Treasury Notes
7.875%, 08/15/01 $ 5,750 $ 6,130
6.375%, 09/30/01 8,900 9,106
6.250%, 01/31/02 14,300 14,603
---------
Total U.S. Treasury Obligations
(Cost $29,786) 29,839
---------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (77.0%)
FHLMC
8.000%, 06/01/02 655 667
7.000%, 10/01/02 3,639 3,689
8.000%, 12/01/02 1,998 2,042
7.000%, 03/01/04 11,345 11,519
FHLMC REMIC, Ser 1624-KC
6.000%, 06/15/08 11,084 11,044
FHLMC REMIC, Ser 1666-E
6.000%, 12/15/19 5,000 4,989
FHLMC REMIC, Ser 1614-H
6.000%, 06/15/20 4,550 4,545
FHLMC REMIC, Ser 29-Q
7.500%, 06/25/20 15,000 15,479
FHLMC TBA
6.500%, 02/01/13 10,300 10,355
FNMA
6.140%, 03/24/03 7,100 7,079
7.500%, 07/01/03 5,864 5,962
7.000%, 10/01/03 11,622 11,786
7.000%, 03/01/04 12,463 12,639
8.500%, 04/01/17 863 912
FNMA REMIC, Ser 1993-223PH
6.050%, 10/25/22 5,375 5,327
GNMA
9.000%, 11/15/17 1,090 1,180
---------
Total U.S. Agency Mortgage-Backed Obligations
(Cost $108,381) 109,214
---------
CASH EQUIVALENT (8.8%)
SEI Liquid Asset Trust Prime
Obligation Portfolio (C) $12,436 $ 12,436
---------
Total Cash Equivalent
(Cost $12,436) 12,436
---------
Total Investments (106.9%)
(Cost $150,603) 151,489
---------
OTHER ASSETS AND LIABILITIES (-6.9%)
Securities Purchased Payable (10,355)
Other Assets and Liabilities, Net 602
---------
Total Other Assets and Liabilities (9,753)
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 13,586,482
outstanding shares of beneficial interest 136,353
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 267,580
outstanding shares of beneficial interest 2,694
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 152,467
outstanding shares of beneficial interest 1,543
Overdistributed net investment income (2)
Accumulated net realized gain
on investments 262
Net unrealized appreciation on investments 886
---------
Total Net Assets (100.0%) $ 141,736
=========
</TABLE>
91
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE
- -----------------------------------------------------------
<S> <C>
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 10.12
=========
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 10.11
=========
Maximum Offering Price Per Share --
Investor Class ($10.11 / 97.50%) $ 10.37
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 10.12
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
92
<PAGE>
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (25.2%)
U.S. Treasury Bonds
7.750%, 11/30/99 $ 200 $ 206
7.250%, 05/15/16 1,000 1,153
6.875%, 08/15/25 1,000 1,133
6.000%, 02/15/26 2,000 2,032
U.S. Treasury Notes
8.500%, 11/15/00 1,000 1,067
8.000%, 05/15/01 200 213
7.500%, 11/15/01 200 212
7.500%, 05/15/02 750 800
7.250%, 05/15/04 500 541
7.875%, 11/15/04 275 308
7.500%, 02/15/05 500 552
6.500%, 10/15/06 750 791
6.625%, 05/15/07 1,050 1,120
7.625%, 02/15/25 400 493
---------
Total U.S. Treasury Obligations
(Cost $10,187) 10,621
---------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS (65.1%)
FHLMC
6.000%, 02/01/01 93 93
7.000%, 01/01/09 104 107
7.000%, 04/01/09 287 293
7.000%, 08/01/10 726 741
7.000%, 05/01/12 868 886
6.500%, 12/01/12 1,586 1,596
FHLMC REMIC, Ser 2039, Cl PC
6.000%, 05/15/09 1,000 997
FNMA
6.000%, 11/01/07 874 874
7.500%, 06/01/11 737 760
7.000%, 09/17/11 1,107 1,129
7.000%, 05/01/12 902 920
7.000%, 06/01/12 880 898
7.000%, 07/01/12 872 889
7.000%, 10/01/16 762 773
7.500%, 04/01/27 815 839
6.500%, 03/01/28 998 992
FNMA REMIC, Ser 1997-6, Cl H
7.000%, 08/18/08 $1,058 $ 1,096
FNMA REMIC, Ser G93-40, Cl VC
6.500%, 08/25/10 261 259
FNMA REMIC, Ser 1997-34, Cl VC
7.500%, 05/01/12 1,000 1,029
FNMA REMIC, Ser 1996-9, Cl H
6.500%, 11/25/13 1,337 1,350
FNMA REMIC, Ser 1993-156, Cl B
6.500%, 04/25/18 100 100
FNMA REMIC, Ser 1996-68, Cl C
6.500%, 08/18/18 1,000 1,005
FNMA REMIC, Ser 1990-143, Cl J
8.750%, 12/25/20 111 118
GNMA
7.500%, 10/20/09 56 58
8.250%, 01/15/12 74 78
9.000%, 04/15/17 381 409
8.500%, 05/15/17 703 743
10.000%, 06/15/19 3 4
7.500%, 05/15/22 523 539
7.000%, 11/15/22 419 426
8.000%, 02/15/23 30 32
8.500%, 03/15/23 55 59
7.500%, 04/15/23 125 130
7.500%, 09/15/23 765 789
6.500%, 10/15/23 946 942
7.000%, 01/15/24 136 138
7.500%, 04/15/24 749 772
7.000%, 06/15/24 831 845
8.000%, 08/15/24 67 70
8.000%, 09/15/24 22 24
8.000%, 10/15/24 30 32
8.000%, 11/15/24 27 29
8.500%, 12/15/24 59 63
8.500%, 02/15/25 21 23
7.000%, 12/15/25 463 471
6.500%, 02/15/28 989 984
</TABLE>
93
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
U.S. GOVERNMENT SECURITIES FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
GNMA REMIC, Ser 1995-6A, Cl E
7.500%, 05/20/23 $1,000 $ 1,029
GNMA REMIC, Ser 1998-9, Cl D
6.500%, 08/20/24 1,000 994
---------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $26,868) 27,427
---------
CASH EQUIVALENTS (9.5%)
SEI Daily Income Trust
Government II Portfolio (C) 2,021 2,021
SEI Daily Income Trust
Treasury II Portfolio (C) 2,004 2,004
---------
Total Cash Equivalents
(Cost $4,025) 4,025
---------
Total Investments (99.8%)
(Cost $41,080) 42,073
---------
OTHER ASSETS AND LIABILITIES, NET (0.2%) 73
---------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 3,337,251
outstanding shares of beneficial interest 34,056
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 308,451
outstanding shares of beneficial interest 3,145
Fund shares of the Flex Class
(unlimited authorization -- no
par value) based on 384,656
outstanding shares of beneficial interest 3,958
Accumulated net realized loss
on investments (6)
Net unrealized appreciation on investments 993
---------
Total Net Assets (100.0%) $ 42,146
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $ 10.46
=========
Net Asset Value and Redemption Price
Per Share -- Investor Shares $ 10.45
=========
Maximum Offering Price Per Share --
Investor Class ($10.45 / 96.25%) $ 10.86
=========
Net Asset Value, Offering and Redemption
Price Per Share -- Flex Shares (1) $ 10.46
=========
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95.
94
<PAGE>
================================================================================
KEY TO ABBREVIATIONS USED IN
THE STATEMENT OF NET ASSETS
ADR American Depository Receipt
AMBAC Security insured by the American Municipal
Bond Assurance Corporation
AMT Alternative Minimum Tax
Cl Class
COP Certificate of Participation
CV Convertible Security
ETM Escrowed to Maturity
F Foreign Registry Shares
FFCB Federal Farm Credit Bank
FGIC Security insured by the Financial Guaranty
Insurance Company
FHA Federal Housing Administration
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FSA Security insured by Financial Security
Assurance
GDR Global Depository Receipt
GDS Global Depository Shares
GNMA Government National Mortgage Association
GO General Obligation
MBIA Security Insured by the Municipal Bond
Insurance Association
MTN Medium Term Note
PLC Public Limited Corporation
RB Revenue Bond
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
Ser Series
STRIPS Separately Traded Registered Interest and
Principal Security
STRYPES Structured Yield Product Exchange Securities
TBA To Be Announced (see Notes to
Financial Statements)
TCRS Transferrable Custodial Receipts
TRACES Trust Automatic Common Exchange Securities
VRDN Variable Rate Demand Note
* Non-income producing securities
(A) Zero Coupon Bond
(B) Private Placement Security
(C) Variable rate security. The rate reported on the Statement of Net
Assets is the rate in effect on May 31, 1998.
(D) Put and demand features exist requiring the issuer to repurchase the
instrument prior to maturity.
(E) Securities are held in connection with a letter of credit issued by
a major bank.
(F) Collateralized by U.S. Government Securities
(G) Collateralized by State and Local Government Securities
(H) Tri-Party Repurchase Agreement
95
<PAGE>
STATEMENT OF OPERATIONS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
MID-CAP SMALL-CAP
VALUE INCOME EQUITY EQUITY
STOCK FUND FUND FUND
---------- --------- ---------
06/01/97- 06/01/97- 06/01/97-
05/31/98 05/31/98 05/31/98
---------- --------- ---------
<S> <C> <C> <C>
Income:
Interest Income .................................................................. $ 7,447 $ 1,222 $ 639
Dividend Income .................................................................. 47,287 1,990 6,459
Less: Foreign Taxes Withheld ..................................................... -- -- --
-------- ------- -------
Total Investment Income .......................................................... 54,734 3,212 7,098
-------- ------- -------
Expenses:
Investment Advisory Fees ......................................................... 15,826 4,269 3,579
Less: Investment Advisory Fees Waived ............................................ -- (423) (329)
Administrator Fees ............................................................... 1,428 267 230
Transfer Agent Fees -- Trust Shares .............................................. 17 19 16
Transfer Agent Fees -- Investor Shares ........................................... 52 33 --
Transfer Agent Fees -- Flex Shares ............................................... 118 28 43
Transfer Agent Out of Pocket Fees ................................................ 221 42 41
Printing Expenses ................................................................ 171 44 53
Custody Fees ..................................................................... 86 15 15
Professional Fees ................................................................ 110 26 30
Trustee Fees ..................................................................... 31 6 5
Registration Fees ................................................................ 205 35 102
Distribution Fees -- Investor Shares ............................................. 631 100 --
Less: Distribution Fees Waived -- Investor Shares ................................ -- (29) --
Distribution Fees -- Flex Shares ................................................. 1,241 143 188
Less: Distribution Fees Waived -- Flex Shares .................................... (7) (19) (32)
Insurance and Other Fees ......................................................... 42 8 8
Amortization of Deferred Organization Costs ...................................... 7 -- 22
-------- ------- -------
Total Expenses ................................................................... 20,179 4,564 3,971
-------- ------- -------
Net Investment Income (Loss) ..................................................... 34,555 (1,352) 3,127
-------- ------- -------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain (Loss) on Securities Sold ...................................... 319,982 54,941 32,653
Net Realized Loss on Foreign Currency Transactions ............................... -- -- --
Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and
Translation of Other Assets and Liabilities in Foreign Currency ................ -- -- --
Net Change in Unrealized Appreciation (Depreciation) on Investments .............. 44,518 14,034 16,045
-------- ------- -------
Total Net Realized and Unrealized Gain (Loss)
on Investments ................................................................. 364,500 68,975 48,698
-------- ------- -------
Net Increase (Decrease) in Net Assets from Operations ............................ $399,055 $67,623 $51,825
======== ======= =======
CAPITAL EMERGING
GROWTH BALANCED MARKETS
FUND FUND EQUITY FUND
--------- --------- ---------
06/01/97- 06/01/97- 06/01/97-
05/31/98 05/31/98 05/31/98
--------- --------- ---------
<S> <C> <C> <C>
Income:
Interest Income ................................................................... $ 10,774 $ 5,176 $ 167
Dividend Income ................................................................... 19,143 1,350 1,009
Less: Foreign Taxes Withheld ...................................................... -- -- (69)
-------- ------- -------
Total Investment Income ........................................................... 29,917 6,526 1,107
-------- ------- -------
Expenses:
Investment Advisory Fees .......................................................... 19,426 1,787 533
Less: Investment Advisory Fees Waived ............................................. (1,819) (225) (90)
Administrator Fees ................................................................ 1,218 136 29
Transfer Agent Fees -- Trust Shares ............................................... 19 19 16
Transfer Agent Fees -- Investor Shares ............................................ 161 17 --
Transfer Agent Fees -- Flex Shares ................................................ 69 22 --
Transfer Agent Out of Pocket Fees ................................................. 187 21 4
Printing Expenses ................................................................. 133 10 8
Custody Fees ...................................................................... 74 9 89
Professional Fees ................................................................. 95 11 5
Trustee Fees ...................................................................... 26 3 1
Registration Fees ................................................................. 193 23 6
Distribution Fees -- Investor Shares .............................................. 1,677 19 --
Less: Distribution Fees Waived -- Investor Shares ................................. (235) (14) --
Distribution Fees -- Flex Shares .................................................. 674 138 --
Less: Distribution Fees Waived -- Flex Shares ..................................... 1 (12) --
Insurance and Other Fees .......................................................... 35 4 16
Amortization of Deferred Organization Costs ....................................... -- -- 22
-------- ------- -------
Total Expenses .................................................................... 21,934 1,968 639
-------- ------- -------
Net Investment Income (Loss) ...................................................... 7,983 4,558 468
-------- ------- -------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain (Loss) on Securities Sold ....................................... 261,636 17,885 (875)
Net Realized Loss on Foreign Currency Transactions ................................ -- -- (61)
Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and
Translation of Other Assets and Liabilities in Foreign Currency ................. -- -- (1)
Net Change in Unrealized Appreciation (Depreciation) on Investments ............... 157,396 14,594 (7,440)
-------- ------- -------
Total Net Realized and Unrealized Gain (Loss)
on Investments .................................................................. 419,032 32,479 (8,377)
-------- ------- -------
Net Increase (Decrease) in Net Assets from Operations ............................. $427,015 $37,037 $(7,909)
======== ======= =======
INTERNATIONAL INTERNATIONAL
EQUITY EQUITY SUNBELT
INDEX FUND FUND EQUITY FUND
--------- --------- ---------
06/01/97- 06/01/97- 06/01/97-
05/31/98 05/31/98 05/31/98
--------- --------- ---------
<S> <C> <C> <C>
Income:
Interest Income ................................................................... $ 34 $ 1,352 $ 326
Dividend Income ................................................................... 1,157 11,474 854
Less: Foreign Taxes Withheld ...................................................... (19) (819) --
------- -------- -------
Total Investment Income ........................................................... 1,172 12,007 1,180
------- -------- -------
Expenses:
Investment Advisory Fees .......................................................... 543 7,201 5,288
Less: Investment Advisory Fees Waived ............................................. (77) (70) (516)
Administrator Fees ................................................................ 43 416 330
Transfer Agent Fees -- Trust Shares ................................................ 17 19 20
Transfer Agent Fees -- Investor Shares ............................................. 19 18 48
Transfer Agent Fees -- Flex Shares ................................................. 14 19 21
Transfer Agent Out of Pocket Fees ................................................. 4 35 54
Printing Expenses ................................................................. 3 22 54
Custody Fees ...................................................................... 77 753 22
Professional Fees ................................................................. 2 19 35
Trustee Fees ...................................................................... 2 3 7
Registration Fees ................................................................. 1 44 29
Distribution Fees -- Investor Shares .............................................. 24 46 132
Less: Distribution Fees Waived -- Investor Shares ................................. (16) (12) (40)
Distribution Fees -- Flex Shares .................................................. 10 158 67
Less: Distribution Fees Waived -- Flex Shares ..................................... (8) (9) (17)
Insurance and Other Fees .......................................................... 12 23 10
Amortization of Deferred Organization Costs ....................................... 4 2 --
------- -------- -------
Total Expenses .................................................................... 674 8,687 5,544
------- -------- -------
Net Investment Income (Loss) ...................................................... 498 3,320 (4,364)
------- -------- -------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain (Loss) on Securities Sold ....................................... 3,349 61,173 49,778
Net Realized Loss on Foreign Currency Transactions ................................ (46) (1,410) --
Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and
Translation of Other Assets and Liabilities in Foreign Currency ................. 19 (93) --
Net Change in Unrealized Appreciation (Depreciation) on Investments ............... 9,866 50,891 46,313
------- -------- -------
Total Net Realized and Unrealized Gain (Loss)
on Investments .................................................................. 13,188 110,561 96,091
------- -------- -------
Net Increase (Decrease) in Net Assets from Operations ............................. $13,686 $113,881 $91,727
======= ======== =======
Amounts designated as "--" are either $0 or round to $0.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
96 & 97
<PAGE>
STATEMENT OF OPERATIONS (000) (concluded)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
INVESTMENT GRADE FLORIDA TENNESSEE GEORGIA
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
BOND FUND BOND FUND BOND FUND BOND FUND
--------- --------- --------- ---------
06/01/97- 06/01/97- 06/01/97- 06/01/97-
05/31/98 05/31/98 04/13/98* 05/31/98
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest Income .............................................. $ 8,234 $4,010 $260 $2,881
------- ------ ---- ------
Expenses:
Investment Advisory Fees .................................. 1,327 540 34 394
Less: Investment Advisory Fees Waived ..................... (208) (121) (34) (93)
Less: Contribution from Advisor ........................... -- -- (10) --
Administrator Fees ........................................ 128 61 4 44
Transfer Agent Fees -- Trust Shares ....................... 19 18 16 16
Transfer Agent Fees -- Investor Shares .................... 41 12 12 13
Transfer Agent Fees -- Flex Shares ........................ 14 14 11 15
Transfer Agent Out of Pocket Fees ......................... 23 9 1 7
Printing Expenses ......................................... 20 6 1 5
Custody Fees .............................................. 13 4 -- 3
Professional Fees ......................................... 18 6 -- 4
Trustee Fees .............................................. 6 1 -- 1
Registration Fees ......................................... 12 18 -- 11
Distribution Fees -- Investor Shares ...................... 126 6 2 7
Less: Distribution Fees Waived -- Investor Shares ......... (49) (6) (1) (7)
Distribution Fees -- Flex Shares .......................... 59 61 26 61
Less: Distribution Fees Waived -- Flex Shares ............. (20) (31) (9) (31)
Insurance and Other Fees .................................. 6 2 1 1
Amortization of Deferred Organization Costs ............... -- -- -- --
------- ------ ---- ------
Total Expenses ............................................ 1,535 600 54 451
------- ------ ---- ------
Net Investment Income ........................................ 6,699 3,410 206 2,430
------- ------ ---- ------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain on Securities Sold ...................... 6,478 720 34 195
Net Change in Unrealized Appreciation (Depreciation)
on Investments ......................................... 1,225 2,334 (120) 1,962
------- ------ ---- ------
Total Net Realized and Unrealized Gain
on Investments ......................................... 7,703 3,054 (86) 2,157
------- ------ ---- ------
Net Increase in Net Assets from Operations ................... $14,402 $6,464 $120 $4,587
======= ====== ==== ======
SHORT-TERM
INVESTMENT U.S. TREASURY LIMITED-TERM
GRADE BOND SHORT-TERM SECURITIES FEDERAL MORTGAGE
FUND BOND FUND FUND SECURITIES FUND
--------- --------- --------- ----------------
06/01/97- 06/01/97- 06/01/97- 06/01/97-
05/31/98 05/31/98 05/31/98 05/31/98
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest Income ............................................ $49,084 $6,779 $2,059 $8,865
------- ------ ------ ------
Expenses:
Investment Advisory Fees ................................ 5,647 719 229 899
Less: Investment Advisory Fees Waived ................... (794) (165) (78) (159)
Less: Contribution from Advisor ......................... -- -- -- --
Administrator Fees ...................................... 550 80 26 99
Transfer Agent Fees -- Trust Shares ..................... 16 18 17 20
Transfer Agent Fees -- Investor Shares .................. 31 14 13 13
Transfer Agent Fees -- Flex Shares ...................... 21 15 14 15
Transfer Agent Out of Pocket Fees ....................... 90 13 4 14
Printing Expenses ....................................... 86 12 3 10
Custody Fees ............................................ 36 4 1 6
Professional Fees ....................................... 59 6 2 3
Trustee Fees ............................................ 12 2 1 2
Registration Fees ....................................... 79 16 7 --
Distribution Fees -- Investor Shares .................... 141 5 6 6
Less: Distribution Fees Waived -- Investor Shares ....... (44) (5) (6) (5)
Distribution Fees -- Flex Shares ........................ 87 14 13 15
Less: Distribution Fees Waived -- Flex Shares ........... (31) (13) (13) (15)
Insurance and Other Fees ................................ 16 3 1 3
Amortization of Deferred Organization Costs ............. -- 5 3 3
------- ------ ------ ------
Total Expenses .......................................... 6,002 743 243 929
------- ------ ------ ------
Net Investment Income ...................................... 43,082 6,036 1,816 7,936
------- ------ ------ ------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain on Securities Sold .................... 10,888 502 47 502
Net Change in Unrealized Appreciation (Depreciation)
on Investments ....................................... 24,005 1,163 211 1,031
------- ------ ------ ------
Total Net Realized and Unrealized Gain
on Investments ....................................... 34,893 1,665 258 1,533
------- ------ ------ ------
Net Increase in Net Assets from Operations ................. $77,975 $7,701 $2,074 $9,469
======= ====== ====== ======
U.S.
GOVERNMENT
SECURITIES FUND
---------
06/01/97-
05/31/98
---------
<S> <C>
Interest Income ............................................ $2,183
------
Expenses:
Investment Advisory Fees ................................ 241
Less: Investment Advisory Fees Waived ................... (55)
Less: Contribution from Advisor ......................... --
Administrator Fees ...................................... 24
Transfer Agent Fees -- Trust Shares ..................... 19
Transfer Agent Fees -- Investor Shares .................. 14
Transfer Agent Fees -- Flex Shares ...................... 16
Transfer Agent Out of Pocket Fees ....................... 3
Printing Expenses ....................................... 3
Custody Fees ............................................ 2
Professional Fees ....................................... 1
Trustee Fees ............................................ --
Registration Fees ....................................... 1
Distribution Fees -- Investor Shares .................... 10
Less: Distribution Fees Waived -- Investor Shares ....... (9)
Distribution Fees -- Flex Shares ........................ 33
Less: Distribution Fees Waived -- Flex Shares ........... (16)
Insurance and Other Fees ................................ --
Amortization of Deferred Organization Costs ............. 2
------
Total Expenses .......................................... 289
------
Net Investment Income ...................................... 1,894
------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain on Securities Sold .................... 55
Net Change in Unrealized Appreciation (Depreciation)
on Investments ....................................... 1,207
------
Total Net Realized and Unrealized Gain
on Investments ....................................... 1,262
------
Net Increase in Net Assets from Operations ................. $3,156
======
*Discontinued operations
Amounts designated as "--" are either $0 or round to $0.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
98 & 99
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31,
<TABLE>
<CAPTION>
VALUE INCOME MID-CAP EQUITY SMALL CAP
STOCK FUND FUND EQUITY FUND
------------------- ------------------- --------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 01/31/97*-
05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income (Loss) .............................. $ 34,555 $ 35,049 $ (1,352) $ 513 $ 3,127 $ 521
Net Realized Gain (Loss) on Investments ................... 319,982 243,189 54,941 33,978 32,653 1,757
Net Realized Loss on Foreign Currency
Transactions ............................................ -- -- -- -- -- --
Net Change in Unrealized Appreciation (Depreciation) on
Foreign Currency and Translation of Other Assets and
Liabilities in Foreign Currency ......................... -- -- -- -- -- --
Net Change in Unrealized Appreciation (Depreciation)
on Investments .......................................... 44,518 33,953 14,034 4,912 16,045 7,644
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from Operations ....... 399,055 312,191 67,623 39,403 51,825 9,922
---------- ---------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................................ (30,991) (30,805) -- (962) (2,704) (205)
Investor Shares ......................................... (2,838) (2,820) -- (17) -- --
Flex Shares ............................................. (1,104) (606) -- -- (70) --
Capital Gains:
Trust Shares ............................................ (262,191) (166,191) (44,446) (24,244) (14,480) --
Investor Shares ......................................... (29,671) (18,030) (3,025) (1,770) -- --
Flex Shares ............................................. (19,217) (5,570) (1,899) (676) (897) --
---------- ---------- -------- -------- -------- --------
Total Distributions ....................................... (346,012) (224,022) (49,370) (27,669) (18,151) (205)
---------- ---------- -------- -------- -------- --------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ............................. 381,039 380,339 146,386 113,386 272,776 126,046
Reinvestment of Cash Distributions ...................... 269,446 179,808 41,347 22,790 15,603 137
Cost of Shares Repurchased .............................. (459,701) (392,524) (153,972) (113,291) (61,475) (4,851)
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From Trust Share
Transactions ............................................ 190,784 167,623 33,761 22,885 226,904 121,332
---------- ---------- -------- -------- -------- --------
Investor Shares:
Proceeds from Shares Issued ............................. 35,483 31,242 6,110 5,664 -- --
Reinvestment of Cash Distributions ...................... 32,233 20,626 3,019 1,783 -- --
Cost of Shares Repurchased .............................. (28,503) (24,774) (5,606) (5,934) -- --
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From Investor
Share Transactions ...................................... 39,213 27,094 3,523 1,513 -- --
---------- ---------- -------- -------- -------- --------
Flex Shares:
Proceeds from Shares Issued ............................. 106,762 43,363 10,574 5,680 42,359 --
Reinvestment of Cash Distributions ...................... 20,054 6,080 1,885 666 958 --
Cost of Shares Repurchased .............................. (20,844) (6,096) (3,934) (1,648) (3,490) --
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From
Flex Share Transactions ................................. 105,972 43,347 8,525 4,698 39,827 --
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From Share
Transactions .......................................... 335,969 238,064 45,809 29,096 266,731 121,332
---------- ---------- -------- -------- -------- --------
Total Increase (Decrease) in Net Assets ............... 389,012 326,233 64,062 40,830 300,405 131,049
---------- ---------- -------- -------- -------- --------
Net Assets:
Beginning of Period ....................................... 1,727,527 1,401,294 317,735 276,905 131,049 --
---------- ---------- -------- -------- -------- --------
End of Period ............................................. $2,116,539 $1,727,527 $381,797 $317,735 $431,454 $131,049
========== ========== ======== ======== ======== ========
(1)Shares Issued and Redeemed:
Trust Shares:
Shares Issued ........................................... 26,871 29,343 10,517 9,011 22,065 12,290
Shares Issued in Lieu of Cash Distributions ............. 21,156 14,654 3,378 1,853 1,294 13
Shares Redeemed ......................................... (32,467) (30,076) (11,149) (9,008) (4,840) (466)
---------- ---------- -------- -------- -------- --------
Net Trust Share Transactions .............................. 15,560 13,921 2,746 1,856 18,519 11,837
---------- ---------- -------- -------- -------- --------
Investor Shares:
Shares Issued ........................................... 2,518 2,411 445 455 -- --
Shares Issued in Lieu of Cash Distributions ............. 2,538 1,683 248 145 -- --
Shares Redeemed ......................................... (2,003) (1,906) (407) (472) -- --
---------- ---------- -------- -------- -------- --------
Net Investor Share Transactions ........................... 3,053 2,188 286 128 -- --
---------- ---------- -------- -------- -------- --------
Flex Shares:
Shares Issued ........................................... 7,617 3,360 777 459 3,366 --
Shares Issued in Lieu of Cash Distributions ............. 1,597 500 158 55 80 --
Shares Redeemed ......................................... (1,488) (470) (292) (134) (273) --
---------- ---------- -------- -------- -------- --------
Net Flex Share Transactions ............................... 7,726 3,390 643 380 3,173 --
========== ========== ======== ======== ======== ========
Net Change in Capital Shares .............................. 26,339 19,499 3,675 2,364 21,692 11,837
---------- ---------- -------- -------- -------- --------
</TABLE>
*Commencement of operations.
Amounts designated as "--" are either $0 or round to $0.
100
<PAGE>
<TABLE>
<CAPTION>
EMERGING
CAPITAL GROWTH FUND BALANCED FUND MARKETS EQUITY FUND
------------------- ------------------- --------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 01/31/97*-
05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income (Loss) .............................. $ 7,983 $ 8,603 $ 4,558 $ 3,521 $ 468 $ 144
Net Realized Gain (Loss) on Investments ................... 261,636 221,554 17,885 11,411 (875) 80
Net Realized Loss on Foreign Currency
Transactions ............................................ -- -- -- -- (61) (18)
Net Change in Unrealized Appreciation (Depreciation) on
Foreign Currency and Translation of Other Assets and
Liabilities in Foreign Currency ......................... -- -- -- -- (1) --
Net Change in Unrealized Appreciation (Depreciation)
on Investments .......................................... 157,396 43,851 14,594 5,223 (7,440) 2,108
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Net Assets from Operations ....... 427,015 274,008 37,037 20,155 (7,909) 2,314
---------- ---------- -------- -------- ------- -------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................................ (7,798) (7,993) (4,197) (3,051) (314) --
Investor Shares ......................................... (28) (338) (154) (139) -- --
Flex Shares ............................................. -- -- (204) (77) -- --
Capital Gains:
Trust Shares ............................................ (200,074) (180,731) (12,908) (9,775) (544) --
Investor Shares ......................................... (36,216) (35,976) (536) (505) -- --
Flex Shares ............................................. (9,643) (3,858) (972) (388) -- --
---------- ---------- -------- -------- ------- -------
Total Distributions ....................................... (253,759) (228,896) (18,971) (13,935) (858) --
---------- ---------- -------- -------- ------- -------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ............................. 466,511 295,281 53,532 75,303 23,819 42,043
Reinvestment of Cash Distributions ...................... 197,282 178,092 16,935 12,606 805 --
Cost of Shares Repurchased .............................. (358,832) (406,707) (49,610) (54,011) (20,798) (4,862)
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From Trust Share
Transactions ............................................ 304,961 66,666 20,857 33,898 3,826 37,181
---------- ---------- -------- -------- ------- -------
Investor Shares:
Proceeds from Shares Issued ............................. 29,116 22,778 2,150 1,430 -- --
Reinvestment of Cash Distributions ...................... 35,990 36,046 680 633 -- --
Cost of Shares Repurchased .............................. (37,738) (38,034) (1,166) (1,149) -- --
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From Investor
Share Transactions ...................................... 27,368 20,790 1,664 914 -- --
---------- ---------- -------- -------- ------- -------
Flex Shares:
Proceeds from Shares Issued ............................. 67,377 23,389 21,409 3,065 -- --
Reinvestment of Cash Distributions ...................... 9,528 3,813 1,164 462 -- --
Cost of Shares Repurchased .............................. (12,730) (2,774) (2,194) (787) -- --
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From
Flex Share Transactions ................................. 64,175 24,428 20,379 2,740 -- --
---------- ---------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From Share
Transactions .......................................... 396,504 111,884 42,900 37,552 3,826 37,181
---------- ---------- -------- -------- ------- -------
Total Increase (Decrease) in Net Assets ............... 569,760 156,996 60,966 43,772 (4,941) 39,495
---------- ---------- -------- -------- ------- -------
Net Assets:
Beginning of Period ....................................... 1,340,541 1,183,545 163,437 119,665 39,495 --
---------- ---------- -------- -------- ------- -------
End of Period ............................................. $1,910,301 $1,340,541 $224,403 $163,437 $34,554 $39,495
========== ========== ======== ======== ======= =======
(1)Shares Issued and Redeemed:
Trust Shares:
Shares Issued ........................................... 29,548 20,391 4,245 6,572 2,344 4,128
Shares Issued in Lieu of Cash Distributions ............. 13,725 13,369 1,402 1,122 92 --
Shares Redeemed ......................................... (22,177) (27,687) (3,922) (4,686) (2,199) (468)
---------- ---------- -------- -------- ------- -------
Net Trust Share Transactions .............................. 21,096 6,073 1,725 3,008 237 3,660
---------- ---------- -------- -------- ------- -------
Investor Shares:
Shares Issued ........................................... 1,812 1,573 167 122 -- --
Shares Issued in Lieu of Cash Distributions ............. 2,518 2,717 56 56 -- --
Shares Redeemed ......................................... (2,349) (2,607) (92) (99) -- --
---------- ---------- -------- -------- ------- -------
Net Investor Share Transactions ........................... 1,981 1,683 131 79 -- --
---------- ---------- -------- -------- ------- -------
Flex Shares:
Shares Issued ........................................... 4,242 1,620 1,688 265 -- --
Shares Issued in Lieu of Cash Distributions ............. 674 289 97 41 -- --
Shares Redeemed ......................................... (795) (191) (173) (68) -- --
---------- ---------- -------- -------- ------- -------
Net Flex Share Transactions ............................... 4,121 1,718 1,612 238 -- --
========== ========== ======== ======== ======= =======
Net Change in Capital Shares .............................. 27,198 9,474 3,468 3,325 237 3,660
---------- ---------- -------- -------- ------- -------
INTERNATIONAL INTERNATIONAL
EQUITY EQUITY
INDEX FUND FUND SUNBELT EQUITY FUND
------------------- ------------------- -------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96-
05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income (Loss) .............................. $ 498 $ 482 $ 3,320 $ 1,788 $ (4,364) $ (2,928)
Net Realized Gain (Loss) on Investments ................... 3,349 4,148 61,173 31,885 49,778 24,062
Net Realized Loss on Foreign Currency
Transactions ............................................ (46) (50) (1,410) (949) -- --
Net Change in Unrealized Appreciation (Depreciation) on
Foreign Currency and Translation of Other Assets and
Liabilities in Foreign Currency ......................... 19 (21) (93) 16 -- --
Net Change in Unrealized Appreciation (Depreciation)
on Investments .......................................... 9,866 (466) 50,891 51,213 46,313 (18,818)
------- ------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from Operations ....... 13,686 4,093 113,881 83,953 91,727 2,316
------- ------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................................ (489) (614) (1,649) (638) -- --
Investor Shares ......................................... (34) (35) (5) -- -- --
Flex Shares ............................................. -- -- -- -- -- --
Capital Gains:
Trust Shares ............................................ (2,914) (1,696) (49,334) (9,573) (32,274) (29,932)
Investor Shares ......................................... (343) (154) (1,347) (182) (2,333) (2,119)
Flex Shares ............................................. (54) (27) (1,526) (75) (516) (360)
------- ------- -------- -------- -------- --------
Total Distributions ....................................... (3,834) (2,526) (53,861) (10,468) (35,123) (32,411)
------- ------- -------- -------- -------- --------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ............................. 8,458 21,944 292,707 382,588 207,154 208,763
Reinvestment of Cash Distributions ...................... 3,057 1,958 47,572 9,386 30,202 27,551
Cost of Shares Repurchased .............................. (17,470) (62,693) (258,050) (187,406) (238,878) (239,412)
------- ------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From Trust Share
Transactions ............................................ (5,955) (38,791) 82,229 204,568 (1,522) (3,098)
------- ------- -------- -------- -------- --------
Investor Shares:
Proceeds from Shares Issued ............................. 2,516 2,579 7,487 7,794 5,150 6,043
Reinvestment of Cash Distributions ...................... 375 189 1,351 181 2,323 2,111
Cost of Shares Repurchased .............................. (2,400) (2,981) (3,549) (2,060) (8,619) (7,103)
------- ------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From Investor
Share Transactions ...................................... 491 (213) 5,289 5,915 (1,146) 1,051
------- ------- -------- -------- -------- --------
Flex Shares:
Proceeds from Shares Issued ............................. 788 334 14,405 7,049 3,848 3,978
Reinvestment of Cash Distributions ...................... 53 27 1,507 74 515 354
Cost of Shares Repurchased .............................. (427) (410) (4,407) (424) (2,603) (1,172)
------- ------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From
Flex Share Transactions ................................. 414 (49) 11,505 6,699 1,760 3,160
------- ------- -------- -------- -------- --------
Increase (Decrease) in Net Assets From Share
Transactions .......................................... (5,050) (39,053) 99,023 217,182 (908) 1,113
------- ------- -------- -------- -------- --------
Total Increase (Decrease) in Net Assets ............... 4,802 (37,486) 159,043 290,667 55,696 (29,982)
------- ------- -------- -------- -------- --------
Net Assets:
Beginning of Period ....................................... 60,008 97,494 508,374 217,707 415,155 444,137
------- ------- -------- -------- -------- --------
End of Period ............................................. $64,810 $60,008 $667,577 $508,374 $470,851 $415,155
======= ======= ======== ======== ======== ========
(1)Shares Issued and Redeemed:
Trust Shares:
Shares Issued ........................................... 700 2,030 20,687 31,059 13,707 16,289
Shares Issued in Lieu of Cash Distributions ............. 277 184 3,744 785 2,213 2,176
Shares Redeemed ......................................... (1,473) (5,800) (18,402) (14,649) (16,065) (18,979)
------- ------- -------- -------- -------- --------
Net Trust Share Transactions .............................. (496) (3,586) 6,029 17,195 (145) (514)
------- ------- -------- -------- -------- --------
Investor Shares:
Shares Issued ........................................... 210 241 526 634 353 473
Shares Issued in Lieu of Cash Distributions ............. 34 18 107 15 174 169
Shares Redeemed ......................................... (201) (277) (254) (166) (590) (569)
------- ------- -------- -------- -------- --------
Net Investor Share Transactions ........................... 43 (18) 379 483 (63) 73
------- ------- -------- -------- -------- --------
Flex Shares:
Shares Issued ........................................... 63 31 1,021 566 260 310
Shares Issued in Lieu of Cash Distributions ............. 5 3 121 6 39 29
Shares Redeemed ......................................... (36) (38) (322) (34) (184) (95)
------- ------- -------- -------- -------- --------
Net Flex Share Transactions ............................... 32 (4) 820 538 115 244
======= ======= ======== ======== ======== ========
Net Change in Capital Shares .............................. (421) (3,608) 7,228 18,216 (93) (197)
------- ------- -------- -------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
101
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) (concluded)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31,
<TABLE>
<CAPTION>
FLORIDA TENNESSEE
INVESTMENT GRADE TAX- TAX-EXEMPT TAX-EXEMPT
EXEMPT BOND FUND BOND FUND BOND FUND
-------------------- --------------------- --------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96-
05/31/98 05/31/97 05/31/98 05/31/97 04/13/98* 05/31/97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income ...................... $ 6,699 $ 6,631 $ 3,410 $ 1,999 $ 206 $ 227
Net Realized Gain (Loss) on Investments .... 6,478 2,924 720 (209) 34 (11)
Net Change in Unrealized Appreciation
(Depreciation) on Investments ............ 1,225 2,169 2,334 1,157 (120) 153
-------- -------- -------- ------- ------ ------
Increase in Net Assets from Operations ... 14,402 11,724 6,464 2,947 120 369
-------- -------- -------- ------- ------ ------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................. (5,523) (5,248) (3,070) (1,748) (66) (74)
Investor Shares .......................... (1,002) (1,226) (128) (154) (46) (65)
Flex Shares .............................. (173) (159) (211) (101) (94) (88)
Capital Gains:
Trust Shares ............................. (3,989) (2,384) (42) (126) -- --
Investor Shares .......................... (799) (623) (2) (11) (6) --
Flex Shares .............................. (152) (92) (3) (9) (16) --
-------- -------- -------- ------- ------ ------
Total Distributions ........................ (11,638) (9,732) (3,456) (2,149) (228) (227)
-------- -------- -------- ------- ------ ------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued .............. 39,596 45,948 59,209 27,976 1,692 1,241
Reinvestment of Cash Distributions ....... 4,599 3,196 420 314 11 33
Cost of Shares Repurchased ............... (38,924) (36,027) (18,838) (9,265) (3,616) (1,174)
-------- -------- -------- ------- ------ ------
Increase (Decrease) in Net Assets From
Trust Share Transactions ................. 5,271 13,117 40,791 19,025 (1,913) 100
-------- -------- -------- ------- ------ ------
Investor Shares:
Proceeds from Shares Issued .............. 2,484 2,163 870 923 169 450
Reinvestment of Cash Distributions ....... 1,614 1,619 101 128 43 51
Cost of Shares Repurchased ............... (8,284) (9,763) (955) (1,919) (1,782) (459)
-------- -------- -------- ------- ------ ------
Increase (Decrease) in Net Assets From
Investor Share Transactions .............. (4,186) (5,981) 16 (868) (1,570) 42
-------- -------- -------- ------- ------ ------
Flex Shares:
Proceeds from Shares Issued .............. 6,179 1,973 6,969 1,182 1,061 836
Reinvestment of Cash Distributions ....... 296 222 172 80 82 53
Cost of Shares Repurchased ............... (2,842) (3,111) (2,189) (1,011) (3,632) (456)
-------- -------- -------- ------- ------ ------
Increase (Decrease) in Net Assets From
Flex Share Transactions .................. 3,633 (916) 4,952 251 (2,489) 433
-------- -------- -------- ------- ------ ------
Increase (Decrease) in Net Assets
From Share Transactions ................ 4,718 6,220 45,759 18,408 (5,972) 575
-------- -------- -------- ------- ------ ------
Total Increase (Decrease) in
Net Assets .......................... 7,482 8,212 48,767 19,206 (6,080) 717
-------- -------- -------- ------- ------ ------
Net Assets:
Beginning of Period ........................ 175,682 167,470 56,713 37,507 6,080 5,363
-------- -------- -------- ------- ------ ------
End of Period .............................. $183,164 $175,682 $105,480 $56,713 $ -- $6,080
======== ======== ======== ======= ====== ======
(1)Shares Issued and Redeemed:
Trust Shares:
Shares Issued ............................ 3,486 4,112 5,591 2,728 158 130
Shares Issued in Lieu of Cash
Distributions ......................... 407 286 40 31 1 3
Shares Redeemed .......................... (3,425) (3,216) (1,777) (907) (364) (122)
-------- -------- -------- ------- ------ ------
Net Trust Share Transactions ............... 468 1,182 3,854 1,852 (205) 11
-------- -------- -------- ------- ------ ------
Investor Shares:
Shares Issued ............................ 218 193 82 89 11 47
Shares Issued in Lieu of Cash
Distributions .......................... 142 144 10 13 4 5
Shares Redeemed .......................... (727) (869) (90) (188) (181) (48)
-------- -------- -------- ------- ------ ------
Net Investor Share Transactions ............ (367) (532) 2 (86) (166) 4
-------- -------- -------- ------- ------ ------
Flex Shares:
Shares Issued ............................ 544 176 658 115 100 88
Shares Issued in Lieu of Cash
Distributions .......................... 26 20 16 8 8 6
Shares Redeemed .......................... (250) (277) (205) (99) (368) (48)
-------- -------- -------- ------- ------ ------
Net Flex Share Transactions ................ 320 (81) 469 24 (260) 46
======== ======== ======== ======= ====== ======
Net Change in Capital Shares ............... 421 569 4,325 1,790 (631) 61
-------- -------- -------- ------- ------ ------
</TABLE>
*Discontinued operations
Amounts designated as "--" are either $0 or round to $0.
102
<PAGE>
<TABLE>
<CAPTION>
GEORGIA
TAX-EXEMPT INVESTMENT GRADE SHORT-TERM
BOND FUND BOND FUND BOND FUND
------------------- ------------------- -------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96-
05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income ...................... $ 2,430 $ 1,589 $ 43,082 $ 37,964 $ 6,036 $ 5,152
Net Realized Gain (Loss) on Investments .... 195 7 10,888 (5,113) 502 (321)
Net Change in Unrealized Appreciation
(Depreciation) on Investments ............ 1,962 882 24,005 10,558 1,163 1,027
------- ------- -------- -------- -------- -------
Increase in Net Assets from Operations ... 4,587 2,478 77,975 43,409 7,701 5,858
------- ------- -------- -------- -------- -------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................. (2,075) (1,285) (40,937) (35,713) (5,864) (4,983)
Investor Shares .......................... (147) (139) (1,729) (1,950) (106) (120)
Flex Shares .............................. (207) (165) (416) (270) (67) (51)
Capital Gains:
Trust Shares ............................. (61) (153) -- -- (100) (311)
Investor Shares .......................... (4) (17) -- -- (2) (7)
Flex Shares .............................. (7) (26) -- -- (1) (4)
------- ------- -------- -------- -------- -------
Total Distributions ........................ (2,501) (1,785) (43,082) (37,933) (6,140) (5,476)
------- ------- -------- -------- -------- -------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued .............. 34,479 29,571 258,775 218,768 59,682 43,385
Reinvestment of Cash Distributions ....... 924 761 30,522 27,532 3,238 3,426
Cost of Shares Repurchased ............... (14,516) (14,098) (162,448) (217,253) (33,705) (48,636)
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets From
Trust Share Transactions ................. 20,887 16,234 126,849 29,047 29,215 (1,825)
------- ------- -------- -------- -------- -------
Investor Shares:
Proceeds from Shares Issued .............. 1,508 573 5,860 5,838 190 602
Reinvestment of Cash Distributions ....... 131 137 1,609 1,770 103 111
Cost of Shares Repurchased ............... (1,314) (677) (8,920) (10,944) (560) (1,240)
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets From
Investor Share Transactions .............. 325 33 (1,451) (3,336) (267) (527)
------- ------- -------- -------- -------- -------
Flex Shares:
Proceeds from Shares Issued .............. 4,983 1,697 9,584 3,077 1,392 523
Reinvestment of Cash Distributions ....... 186 172 351 237 65 50
Cost of Shares Repurchased ............... (1,770) (1,499) (2,932) (2,217) (441) (469)
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets From
Flex Share Transactions .................. 3,399 370 7,003 1,097 1,016 104
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets
From Share Transactions ................ 24,611 16,637 132,401 26,808 29,964 (2,248)
------- ------- -------- -------- -------- -------
Total Increase (Decrease) in
Net Assets .......................... 26,697 17,330 167,294 32,284 31,525 (1,866)
------- ------- -------- -------- -------- -------
Net Assets:
Beginning of Period ........................ 47,905 30,575 672,574 640,290 92,956 94,822
------- ------- -------- -------- -------- -------
End of Period .............................. $74,602 $47,905 $839,868 $672,574 $124,481 $92,956
======= ======= ======== ======== ======== =======
(1)Shares Issued and Redeemed:
Trust Shares:
Shares Issued ............................ 3,445 3,062 24,713 21,475 5,955 4,380
Shares Issued in Lieu of Cash
Distributions ......................... 92 78 2,915 2,709 323 345
Shares Redeemed .......................... (1,456) (1,457) (15,497) (21,378) (3,364) (4,902)
------- ------- -------- -------- -------- -------
Net Trust Share Transactions ............... 2,081 1,683 12,131 2,806 2,914 (177)
------- ------- -------- -------- -------- -------
Investor Shares:
Shares Issued ............................ 149 59 557 575 19 61
Shares Issued in Lieu of Cash
Distributions .......................... 13 14 154 174 10 11
Shares Redeemed .......................... (131) (70) (852) (1,076) (56) (125)
------- ------- -------- -------- -------- -------
Net Investor Share Transactions ............ 31 3 (141) (327) (27) (53)
------- ------- -------- -------- -------- -------
Flex Shares:
Shares Issued ............................ 495 175 908 303 139 52
Shares Issued in Lieu of Cash
Distributions .......................... 19 18 33 23 6 5
Shares Redeemed .......................... (176) (154) (278) (218) (44) (47)
------- ------- -------- -------- -------- -------
Net Flex Share Transactions ................ 338 39 663 108 101 10
======= ======= ======== ======== ======== =======
Net Change in Capital Shares ............... 2,450 1,725 12,653 2,587 2,988 (220)
------- ------- -------- -------- -------- -------
SHORT-TERM U.S. TREASURY LIMITED-TERM FEDERAL U. S. GOVERNMENT
SECURITIES FUND MORTGAGE SECURITIES FUND SECURITIES FUND
------------------- ------------------- --------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96-
05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income ...................... $ 1,816 $ 1,238 $ 7,936 $ 6,160 $ 1,894 $ 1,220
Net Realized Gain (Loss) on Investments .... 47 (25) 502 1 55 (17)
Net Change in Unrealized Appreciation
(Depreciation) on Investments ............ 211 88 1,031 303 1,207 214
------- ------- -------- -------- ------- -------
Increase in Net Assets from Operations ... 2,074 1,301 9,469 6,464 3,156 1,417
------- ------- -------- -------- ------- -------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................. (1,575) (934) (7,721) (5,933) (1,585) (916)
Investor Shares .......................... (178) (205) (135) (146) (141) (147)
Flex Shares .............................. (63) (99) (78) (81) (168) (157)
Capital Gains:
Trust Shares ............................. -- -- (194) (159) -- --
Investor Shares .......................... -- -- (3) (4) -- --
Flex Shares .............................. -- -- (2) (3) -- --
------- ------- -------- -------- ------- -------
Total Distributions ........................ (1,816) (1,238) (8,133) (6,326) (1,894) (1,220)
------- ------- -------- -------- ------- -------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued .............. 33,653 17,856 43,610 75,207 20,160 19,904
Reinvestment of Cash Distributions ....... 661 465 5,346 4,139 380 297
Cost of Shares Repurchased ............... (9,594) (6,510) (36,666) (28,939) (6,142) (11,131)
------- ------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From
Trust Share Transactions ................. 24,720 11,811 12,290 50,407 14,398 9,070
------- ------- -------- -------- ------- -------
Investor Shares:
Proceeds from Shares Issued .............. 479 745 1,128 1,381 1,625 1,272
Reinvestment of Cash Distributions ....... 180 204 131 141 134 140
Cost of Shares Repurchased ............... (1,338) (1,238) (1,006) (1,615) (880) (1,599)
------- ------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From
Investor Share Transactions .............. (679) (289) 253 (93) 879 (187)
------- ------- -------- -------- ------- -------
Flex Shares:
Proceeds from Shares Issued .............. 1,012 825 691 500 2,695 764
Reinvestment of Cash Distributions ....... 56 85 75 72 145 130
Cost of Shares Repurchased ............... (757) (2,259) (647) (517) (1,748) (958)
------- ------- -------- -------- ------- -------
Increase (Decrease) in Net Assets From
Flex Share Transactions .................. 311 (1,349) 119 55 1,092 (64)
------- ------- -------- -------- ------- -------
Increase (Decrease) in Net Assets
From Share Transactions ................ 24,352 10,173 12,662 50,369 16,369 8,819
------- ------- -------- -------- ------- -------
Total Increase (Decrease) in
Net Assets .......................... 24,610 10,236 13,998 50,507 17,631 9,016
------- ------- -------- -------- ------- -------
Net Assets:
Beginning of Period ........................ 27,000 16,764 127,738 77,231 24,515 15,499
------- ------- -------- -------- ------- -------
End of Period .............................. $51,610 $27,000 $141,736 $127,738 $42,146 $24,515
======= ======= ======== ======== ======= =======
(1)Shares Issued and Redeemed:
Trust Shares:
Shares Issued ............................ 3,381 1,806 4,313 7,497 1,949 1,986
Shares Issued in Lieu of Cash
Distributions ......................... 66 47 529 413 37 30
Shares Redeemed .......................... (965) (659) (3,626) (2,886) (592) (1,110)
------- ------- -------- -------- ------- -------
Net Trust Share Transactions ............... 2,482 1,194 1,216 5,024 1,394 906
------- ------- -------- -------- ------- -------
Investor Shares:
Shares Issued ............................ 48 75 112 138 157 127
Shares Issued in Lieu of Cash
Distributions .......................... 18 21 13 14 13 14
Shares Redeemed .......................... (134) (125) (100) (161) (85) (159)
------- ------- -------- -------- ------- -------
Net Investor Share Transactions ............ (68) (29) 25 (9) 85 (18)
------- ------- -------- -------- ------- -------
Flex Shares:
Shares Issued ............................ 102 84 68 50 260 77
Shares Issued in Lieu of Cash
Distributions .......................... 6 9 7 7 14 13
Shares Redeemed .......................... (76) (228) (64) (51) (169) (95)
------- ------- -------- -------- ------- -------
Net Flex Share Transactions ................ 32 (135) 11 6 105 (5)
======= ======= ======== ======== ======= =======
Net Change in Capital Shares ............... 2,446 1,030 1,252 5,021 1,584 883
------- ------- -------- -------- ------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
103
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
1998 $13.71 $ 0.26 $ 2.62 $(0.27) $(2.42)
1997 13.15 0.30 2.32 (0.30) (1.76)
1996 11.59 0.35 2.71 (0.34) (1.16)
1995 10.54 0.32 1.56 (0.32) (0.51)
1994 10.23 0.29 0.70 (0.32) (0.36)
Investor Shares
1998 $13.68 $ 0.20 $ 2.62 $(0.21) $(2.42)
1997 13.13 0.25 2.32 (0.26) (1.76)
1996 11.58 0.30 2.71 (0.30) (1.16)
1995 10.52 0.28 1.56 (0.27) (0.51)
1994 10.23 0.26 0.67 (0.27) (0.37)
Flex Shares
1998 $13.61 $ 0.12 $ 2.57 $(0.13) $(2.42)
1997 13.08 0.18 2.29 (0.18) (1.76)
1996(1) 11.59 0.26 2.65 (0.26) (1.16)
MID-CAP EQUITY FUND (B)
Trust Shares
1998 $13.21 $ -- $ 2.54 $ -- $(1.96)
1997 12.76 0.03 1.69 (0.05) (1.22)
1996 11.00 0.08 2.63 (0.08) (0.87)
1995 9.85 0.08 1.15 (0.08) --
1994(2) 10.00 0.02 (0.16) (0.01) --
Investor Shares
1998 $13.17 $(0.03) $ 2.49 $ -- $(1.96)
1997 12.74 (0.03) 1.69 (0.01) (1.22)
1996 10.99 0.03 2.62 (0.03) (0.87)
1995 9.84 0.03 1.15 (0.03) --
1994(3) 10.00 0.01 (0.17) -- --
Flex Shares
1998 $13.04 $(0.04) $ 2.38 $ -- (1.96)
1997 12.69 (0.07) 1.64 -- (1.22)
1996(4) 11.13 -- 2.45 (0.02) (0.87)
SMALL CAP EQUITY FUND
Trust Shares
1998 $11.07 $ 0.14 $ 2.41 $(0.12) $(0.62)
1997(5) 10.00 0.05 1.04 (0.02) --
Flex Shares
1998(6) $11.28 $ 0.03 $ 2.17 $(0.06) $(0.62)
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on June 1, 1995.
(2) Commenced operations on February 2, 1994.
(3) Commenced operations on February 1, 1994.
104
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO
OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
1998 $13.90 23.10% $1,725,418 0.92% 1.85%
1997 13.71 22.18% 1,488,062 0.91% 2.40%
1996 13.15 27.91% 1,244,399 0.92% 2.86%
1995 11.59 19.06% 991,977 0.95% 3.16%
1994 10.54 9.95% 573,082 0.88% 3.21%
Investor Shares
1998 $13.87 22.71% $ 210,591 1.27% 1.47%
1997 13.68 21.69% 165,999 1.30% 2.01%
1996 13.13 27.39% 130,597 1.30% 2.47%
1995 11.58 18.71% 92,256 1.30% 2.80%
1994 10.52 9.27% 60,589 1.25% 2.80%
Flex Shares
1998 $13.75 21.76% $ 180,530 2.01% 0.78%
1997 13.61 20.91% 73,466 2.00% 1.33%
1996(1) 13.08 26.52%* 26,298 2.00%* 1.72%*
MID-CAP EQUITY FUND (B)
Trust Shares
1998 $13.79 21.14% $ 337,825 1.16% (0.29%)
1997 13.21 14.23% 287,370 1.15% 0.23%
1996 12.76 25.54% 253,905 1.15% 0.70%
1995 11.00 12.56% 125,562 1.15% 0.88%
1994(2) 9.85 (1.39%)** 57,036 1.15%* 1.20%*
Investor Shares
1998 $13.67 20.56% $ 24,930 1.61% (0.75%)
1997 13.17 13.76% 20,245 1.60% (0.21%)
1996 12.74 24.93% 17,971 1.60% 0.25%
1995 10.99 11.96% 7,345 1.60% 0.43%
1994(3) 9.84 (1.60%)** 3,004 1.60%* 0.74%*
Flex Shares
1998 $13.42 19.80% $ 19,042 2.21% (1.37%)
1997 13.04 13.06% 10,120 2.20% (0.85%)
1996(4) 12.69 23.00%* 5,029 2.20%* (0.37%)*
SMALL CAP EQUITY FUND
Trust Shares
1998 $12.88 23.59% $ 390,841 1.21% 1.07%
1997(5) 11.07 10.97%** 131,049 1.20%* 1.86%*
Flex Shares
1998(6) $12.80 22.29%** $ 40,613 2.06%* 0.01%*
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME (LOSS) TO
AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
(EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
------------------ ------------------- ---------
<S> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
1998 0.92% 1.85% 99%
1997 0.91% 2.40% 105%
1996 0.92% 2.86% 134%
1995 0.95% 3.16% 126%
1994 0.97% 3.12% 149%
Investor Shares
1998 1.27% 1.47% 99%
1997 1.31% 2.00% 105%
1996 1.37% 2.40% 134%
1995 1.41% 2.69% 126%
1994 1.44% 2.61% 149%
Flex Shares
1998 2.01% 0.78% 99%
1997 2.03% 1.30% 105%
1996(1) 2.15%* 1.57%* 134%
MID-CAP EQUITY FUND (B)
Trust Shares
1998 1.27% (0.40%) 129%
1997 1.26% 0.12% 152%
1996 1.29% 0.56% 116%
1995 1.32% 0.71% 66%
1994(2) 1.68%* 0.67%* 8%
Investor Shares
1998 1.84% (0.98%) 129%
1997 1.85% (0.46%) 152%
1996 1.96% (0.11%) 116%
1995 2.27% (0.24%) 66%
1994(3) 4.60%* (2.26%)* 8%
Flex Shares
1998 2.47% (1.63%) 129%
1997 2.58% (1.23%) 152%
1996(4) 3.04%* (1.21%)* 116%
SMALL CAP EQUITY FUND
Trust Shares
1998 1.31% 0.97% 55%
1997(5) 1.37%* 1.69%* 27%
Flex Shares
1998(6) 2.35%* (0.28%)* 55%
(4) Commenced operations on June 5, 1995.
(5) Commenced operations on January 31, 1997.
(6) Commenced operations on June 5, 1997.
(A) Total return figures do not reflect applicable sales loads.
(B) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund
changed its name to the Mid-Cap Equity Fund.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
105
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH FUND
Trust Shares
1998 $15.09 $ 0.09 $ 3.96 $(0.09) $(2.57)
1997 14.90 0.12 3.13 (0.12) (2.94)
1996 12.18 0.12 3.32 (0.13) (0.59)
1995 11.99 0.16 0.57 (0.14) (0.40)
1994 11.95 0.16 0.31 (0.17) (0.26)
Investor Shares
1998 $15.06 $(0.01) $ 3.95 $ -- $(2.57)
1997 14.89 0.03 3.10 (0.02) (2.94)
1996 12.17 0.03 3.32 (0.04) (0.59)
1995 11.98 0.09 0.57 (0.07) (0.40)
1994 11.93 0.09 0.31 (0.09) (0.26)
Flex Shares
1998 $14.96 $(0.04) $ 3.87 $ -- $(2.57)
1997 14.84 (0.01) 3.07 -- (2.94)
1996(1) 12.20 0.02 3.26 (0.05) (0.59)
BALANCED FUND
Trust Shares
1998 $11.94 $ 0.31 $ 2.19 $(0.32) $(1.03)
1997 11.55 0.33 1.47 (0.32) (1.09)
1996 10.26 0.33 1.41 (0.34) (0.11)
1995 9.76 0.33 0.49 (0.32) --
1994(2) 10.00 0.11 (0.29) (0.06) --
Investor Shares
1998 $11.99 $ 0.28 $ 2.19 $(0.29) $(1.03)
1997 11.60 0.29 1.48 (0.29) (1.09)
1996 10.30 0.30 1.41 (0.30) (0.11)
1995 9.79 0.28 0.51 (0.28) --
1994(3) 10.00 0.03 (0.24) -- --
Flex Shares
1998 $11.90 $ 0.20 $ 2.16 $(0.21) $(1.03)
1997 11.53 0.22 1.45 (0.21) (1.09)
1996(4) 10.36 0.24 1.29 (0.25) (0.11)
EMERGING MARKETS EQUITY FUND
Trust Shares
1998 $10.79 $ 0.16 $(1.86) $(0.08) $(0.14)
1997(5) 10.00 0.04 0.75 -- --
INTERNATIONAL EQUITY INDEX FUND
Trust Shares
1998 $11.34 $ 0.11 $ 2.65 $(0.11) $(0.68)
1997 10.96 0.10 0.69 (0.11) (0.30)
1996 10.24 0.10 0.84 (0.13) (0.09)
1995(6) 10.00 0.08 0.19 (0.02) (0.01)
Investor Shares
1998 $11.26 $ 0.16 $ 2.53 $(0.07) $(0.68)
1997 10.88 0.03 0.72 (0.07) (0.30)
1996 10.20 0.05 0.85 (0.13) (0.09)
1995(6) 10.00 0.05 0.17 (0.01) (0.01)
Flex Shares
1998 $11.24 $ 0.17 $ 2.44 $ -- $(0.68)
1997 10.87 (0.05) 0.72 -- (0.30)
1996(7) 10.24 -- 0.82 (0.10) (0.09)
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on June 1, 1995.
(2) Commenced operations on January 3, 1994.
(3) Commenced operations on January 4, 1994.
(4) Commenced operations on June 14, 1995.
106
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO
OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH FUND
Trust Shares
1998 $16.48 29.51% $1,532,587 1.16% 0.61%
1997 15.09 24.66% 1,085,128 1.15% 0.83%
1996 14.90 28.97% 981,498 1.15% 0.90%
1995 12.18 6.63% 984,205 1.15% 1.38%
1994 11.99 3.87% 891,870 1.15% 1.25%
Investor Shares
1998 $16.43 28.71% $ 271,044 1.81% (0.03%)
1997 15.06 23.74% 218,660 1.80% 0.19%
1996 14.89 28.18% 191,078 1.80% 0.24%
1995 12.17 5.93% 160,875 1.80% 0.73%
1994 11.98 3.26% 170,795 1.80% 0.64%
Flex Shares
1998 $16.22 28.12% $ 106,670 2.26% (0.46%)
1997 14.96 23.24% 36,753 2.27% (0.29%)
1996(1) 14.84 27.48%* 10,969 2.27%* (0.29%)*
BALANCED FUND
Trust Shares
1998 $13.09 22.15% $ 188,465 0.96% 2.51%
1997 11.94 16.66% 151,358 0.95% 2.89%
1996 11.55 17.26% 111,638 0.95% 3.00%
1995 10.26 8.72% 89,051 0.95% 3.44%
1994(2) 9.76 (1.78%)** 90,579 0.95%* 2.76%*
Investor Shares
1998 $13.14 21.72% $ 8,313 1.26% 2.21%
1997 11.99 16.27% 6,012 1.25% 2.58%
1996 11.60 16.88% 4,896 1.25% 2.70%
1995 10.30 8.29% 3,765 1.25% 3.17%
1994(3) 9.79 (2.10%)** 2,311 1.25%* 2.46%*
Flex Shares
1998 $13.02 20.85% $ 27,625 2.02% 1.41%
1997 11.90 15.40% 6,067 2.01% 1.84%
1996(4) 11.53 15.58%* 3,131 2.00%* 1.85%*
EMERGING MARKETS EQUITY FUND
Trust Shares
1998 $ 8.87 (15.74%) $ 34,554 1.56% 1.14%
1997(5) 10.79 7.90%** 39,495 1.55%* 1.37%*
INTERNATIONAL EQUITY INDEX FUND
Trust Shares
1998 $13.31 25.82% $ 56,200 1.06% 0.88%
1997 11.34 7.48% 53,516 1.05% 0.71%
1996 10.96 9.29% 90,980 1.05% 0.84%
1995(6) 10.24 2.69%** 89,446 1.05%* 1.13%*
Investor Shares
1998 $13.20 25.25% $ 7,141 1.46% 0.50%
1997 11.26 7.12% 5,592 1.45% 0.28%
1996 10.88 8.90% 5,597 1.45% 0.48%
1995(6) 10.20 2.18%** 3,960 1.45%* 0.67%*
Flex Shares
1998 $13.17 24.50% $ 1,469 2.11% (0.03%)
1997 11.24 6.41% 900 2.10% (0.39%)
1996(7) 10.87 8.32%** 917 2.10%* (0.24%)*
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME (LOSS) TO
AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
(EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
------------------ ------------------- ---------
<S> <C> <C> <C> <C>
CAPITAL GROWTH FUND
Trust Shares
1998 1.27% 0.50% 194%
1997 1.25% 0.73% 141%
1996 1.27% 0.78% 156%
1995 1.28% 1.25% 128%
1994 1.29% 1.11% 124%
Investor Shares
1998 2.01% (0.23%) 194%
1997 2.02% (0.03%) 141%
1996 2.08% (0.04%) 156%
1995 2.10% 0.43% 128%
1994 2.11% 0.33% 124%
Flex Shares
1998 2.37% (0.57%) 194%
1997 2.43% (0.45%) 141%
1996(1) 2.68%* (0.70%)* 156%
BALANCED FUND
Trust Shares
1998 1.08% 2.39% 154%
1997 1.08% 2.76% 197%
1996 1.09% 2.86% 155%
1995 1.11% 3.28% 157%
1994(2) 1.25%* 2.46%* 106%
Investor Shares
1998 1.59% 1.88% 154%
1997 1.64% 2.19% 197%
1996 1.89% 2.06% 155%
1995 1.80% 2.62% 157%
1994(3) 4.91%* (1.20%)* 106%
Flex Shares
1998 2.23% 1.20% 154%
1997 2.45% 1.40% 197%
1996(4) 2.97%* 0.88%* 155%
EMERGING MARKETS EQUITY FUND
Trust Shares
1998 1.78% 0.92% 74%
1997(5) 2.04%* 0.88%* 24%
INTERNATIONAL EQUITY INDEX FUND
Trust Shares
1998 1.18% 0.76% 1%
1997 1.15% 0.61% 2%
1996 1.19% 0.70% 30%
1995(6) 1.31%* 0.87%* 10%
Investor Shares
1998 1.84% 0.12% 1%
1997 1.88% (0.15%) 2%
1996 2.06% (0.13%) 30%
1995(6) 2.44%* (0.32%)* 10%
Flex Shares
1998 3.52% (1.44%) 1%
1997 3.69% (1.98%) 2%
1996(7) 4.14%* (2.28%)* 30%
(5) Commenced operations on January 31, 1997.
(6) Commenced operations on June 6, 1994.
(7) Commenced operations on June 8, 1995.
(A) Total return figures do not reflect applicable sales loads.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
107
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
Trust Shares
1998 $13.63 $ 0.04 $ 2.69 $(0.04) $(1.32)
1997 11.40 0.03 2.57 (0.02) (0.35)
1996(1) 10.00 0.05 1.35 -- --
Investor Shares
1998 $13.58 $ 0.02 $ 2.64 $ -- $(1.32)
1997 11.38 (0.01) 2.56 -- (0.35)
1996(2) 10.44 0.04 0.90 -- --
Flex Shares
1998 $13.47 $0.07 $ 2.46 $ -- $(1.32)
1997 11.37 (0.04) 2.49 -- (0.35)
1996(2) 10.44 0.02 0.91 -- --
SUNBELT EQUITY FUND
Trust Shares
1998 $13.28 $0.01 $ 3.03 $ -- $(1.20)
1997 14.11 (0.09) 0.25 -- (0.99)
1996 10.03 (0.04) 4.32 -- (0.20)
1995 9.70 (0.01) 0.38 -- (0.04)
1994(3) 10.00 -- (0.30) -- --
Investor Shares
1998 $13.06 $(0.07) $ 2.98 $ -- $(1.20)
1997 13.95 (0.14) 0.24 -- (0.99)
1996 9.96 (0.11) 4.30 -- (0.20)
1995 9.69 (0.05) 0.36 -- (0.04)
1994(4) 10.00 (0.02) (0.29) -- --
Flex Shares
1998 $13.00 $(0.09) $ 2.89 $ -- $(1.20)
1997 13.97 (0.14) 0.16 -- (0.99)
1996(5) 10.20 (0.07) 4.04 -- (0.20)
INVESTMENT GRADE TAX-EXEMPT BOND FUND
Trust Shares
1998 $11.22 $ 0.44 $ 0.50 $(0.44) $(0.32)
1997 11.10 0.44 0.33 (0.44) (0.21)
1996 11.28 0.45 0.19 (0.45) (0.37)
1995 10.68 0.46 0.60 (0.46) --
1994(6) 11.37 0.22 (0.34) (0.22) (0.35)
Investor Shares
1998 $11.24 $ 0.39 $ 0.49 $(0.39) $(0.32)
1997 11.12 0.40 0.33 (0.40) (0.21)
1996 11.30 0.41 0.19 (0.41) (0.37)
1995 10.69 0.42 0.61 (0.42) --
1994 10.79 0.33 0.25 (0.33) (0.35)
Flex Shares
1998 $11.23 $ 0.33 $ 0.49 $(0.33) $(0.32)
1997 11.11 0.35 0.33 (0.35) (0.21)
1996(7) 11.30 0.37 0.18 (0.37) (0.37)
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on December 1, 1995.
(2) Commenced operations on January 2, 1996.
(3) Commenced operations on January 3, 1994.
(4) Commenced operations on January 4, 1994.
108
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF EXPENSES TO
NET ASSET NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS
VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO (EXCLUDING WAIVERS
OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS)
--------- --------- ----------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
Trust Shares
1998 $15.00 21.87% $ 628,870 1.47% 0.61% 1.48%
1997 13.63 23.29% 489,325 1.46% 0.51% 1.51%
1996(1) 11.40 14.00%** 213,306 1.46%* 1.36%* 1.65%*
Investor Shares
1998 $14.92 21.39% $ 17,383 1.82% 0.24% 1.91%
1997 13.58 22.85% 10,674 1.81% 0.18% 2.05%
1996(2) 11.38 9.00%** 3,448 1.81%* 1.73%* 3.14%*
Flex Shares
1998 $14.68 20.54% $ 21,164 2.52% (0.46%) 2.58%
1997 13.47 21.98% 8,375 2.51% (0.27%) 3.03%
1996(2) 11.37 8.91%** 953 2.51%* 1.08%* 5.86%*
SUNBELT EQUITY FUND
Trust Shares
1998 $15.12 23.86% $ 431,921 1.16% (0.90%) 1.27%
1997 13.28 1.48% 381,371 1.15% (0.65%) 1.26%
1996 14.11 43.19% 412,430 1.15% (0.34%) 1.28%
1995 10.03 3.81% 258,908 1.15% (0.12%) 1.30%
1994(3) 9.70 (2.99%)** 128,280 1.15%* (0.19%)* 1.58%*
Investor Shares
1998 $14.77 23.25% $ 30,860 1.61% (1.35%) 1.86%
1997 13.06 1.05% 28,095 1.60% (1.10%) 1.84%
1996 13.95 42.58% 29,002 1.60% (0.79%) 1.93%
1995 9.96 3.20% 22,180 1.60% (0.57%) 1.98%
1994(4) 9.69 (3.10%)** 16,077 1.60%* (0.63%)* 2.04%*
Flex Shares
1998 $14.60 22.48% $ 8,070 2.21% (1.96%) 2.58%
1997 13.00 0.46% 5,689 2.20% (1.72%) 2.69%
1996(5) 13.97 39.86%* 2,705 2.20%* (1.43%)* 3.62%*
INVESTMENT GRADE TAX-EXEMPT BOND FUND
Trust Shares
1998 $11.40 8.57% $ 146,606 0.76% 3.83% 0.88%
1997 11.22 7.13% 139,144 0.75% 3.96% 0.86%
1996 11.10 5.82% 124,507 0.75% 4.01% 0.89%
1995 11.28 10.21% 78,208 0.75% 4.34% 0.91%
1994(6) 10.68 (1.10%)** 44,595 0.75%* 3.46%* 0.95%*
Investor Shares
1998 $11.41 8.05% $ 28,159 1.16% 3.43% 1.43%
1997 11.24 6.69% 31,857 1.15% 3.56% 1.38%
1996 11.12 5.40% 37,427 1.15% 3.61% 1.42%
1995 11.30 9.91% 41,693 1.15% 3.88% 1.43%
1994 10.69 5.37% 46,182 1.14% 2.96% 1.51%
Flex Shares
1998 $11.40 7.50% $ 8,399 1.64% 2.95% 2.10%
1997 11.23 6.19% 4,681 1.63% 3.08% 2.15%
1996(7) 11.11 4.91%* 5,536 1.63%* 3.12%* 2.25%*
RATIO OF
NET INVESTMENT
INCOME (LOSS) TO
AVERAGE NET ASSETS PORTFOLIO
(EXCLUDING WAIVERS TURNOVER
AND REIMBURSEMENTS) RATE
------------------- ---------
<S> <C> <C> <C>
INTERNATIONAL EQUITY FUND
Trust Shares
1998 0.60% 108%
1997 0.46% 139%
1996(1) 1.17%* 113%
Investor Shares
1998 0.15% 108%
1997 (0.06%) 139%
1996(2) 0.40%* 113%
Flex Shares
1998 (0.52%) 108%
1997 (0.79%) 139%
1996(2) (2.27%)* 113%
SUNBELT EQUITY FUND
Trust Shares
1998 (1.01%) 70%
1997 (0.76%) 72%
1996 (0.47%) 106%
1995 (0.27%) 80%
1994(3) (0.62%)* 21%
Investor Shares
1998 (1.60%) 70%
1997 (1.34%) 72%
1996 (1.12%) 106%
1995 (0.95%) 80%
1994(4) (1.07%)* 21%
Flex Shares
1998 (2.33%) 70%
1997 (2.21%) 72%
1996(5) (2.85%)* 106%
INVESTMENT GRADE TAX-EXEMPT
Trust Shares
1998 3.71% 378%
1997 3.85% 489%
1996 3.87% 514%
1995 4.18% 592%
1994(6) 3.26%* 432%
Investor Shares
1998 3.16% 378%
1997 3.33% 489%
1996 3.34% 514%
1995 3.60% 592%
1994 2.59% 432%
Flex Shares
1998 2.49% 378%
1997 2.56% 489%
1996(7) 2.50%* 514%
(6) Commenced operations on October 21, 1993.
(7) Commenced operations on June 1, 1995.
(A) Total return figures do not reflect applicable sales loads.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
109
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA TAX-EXEMPT BOND FUND
Trust Shares
1998 $10.28 $ 0.44 $ 0.45 $(0.44) $(0.01)
1997 10.06 0.46 0.25 (0.46) (0.03)
1996 10.18 0.46 (0.07) (0.46) (0.05)
1995 9.75 0.44 0.43 (0.44) --
1994(1) 10.00 0.13 (0.25) (0.13) --
Investor Shares
1998 $10.29 $ 0.42 $ 0.44 $(0.42) $(0.01)
1997 10.07 0.44 0.25 (0.44) (0.03)
1996 10.18 0.44 (0.06) (0.44) (0.05)
1995 9.75 0.42 0.43 (0.42) --
1994(2) 10.00 0.13 (0.25) (0.13) --
Flex Shares
1998 $10.30 $ 0.37 $ 0.45 $(0.37) $(0.01)
1997 10.08 0.39 0.25 (0.39) (0.03)
1996(3) 10.19 0.39 (0.06) (0.39) (0.05)
TENNESSEE TAX-EXEMPT BOND FUND
Trust Shares
1998(4) $ 9.63 $ 0.36 $ 0.25 $(0.36) $(0.07)
1997 9.40 0.43 0.23 (0.43) --
1996 9.50 0.43 (0.11) (0.42) --
1995 9.22 0.44 0.28 (0.44) --
1994(5) 10.00 0.12 (0.77) (0.13) --
Investor Shares
1998(4) $ 9.65 $ 0.35 $ 0.23 $(0.35) $(0.07)
1997 9.42 0.41 0.23 (0.41) --
1996 9.53 0.41 (0.10) (0.42) --
1995 9.23 0.44 0.29 (0.43) --
1994(6) 10.00 0.13 (0.77) (0.13) --
Flex Shares
1998(4) $ 9.64 $ 0.31 $ 0.24 $(0.31) $(0.07)
1997 9.41 0.37 0.23 (0.37) --
1996(7) 9.59 0.37 (0.18) (0.37) --
GEORGIA TAX-EXEMPT BOND FUND
Trust Shares
1998 $ 9.73 $ 0.41 $ 0.39 $(0.41) $(0.01)
1997 9.56 0.42 0.22 (0.42) (0.05)
1996 9.63 0.43 (0.05) (0.43) (0.02)
1995 9.42 0.42 0.21 (0.42) --
1994 (2) 10.00 0.14 (0.58) (0.14) --
Investor Shares
1998 $ 9.74 $ 0.39 $ 0.40 $(0.39) $(0.01)
1997 9.58 0.40 0.21 (0.40) (0.05)
1996 9.65 0.41 (0.05) (0.41) (0.02)
1995 9.44 0.40 0.21 (0.40) --
1994 (6) 10.00 0.13 (0.56) (0.13) --
Flex Shares
1998 $ 9.73 $ 0.34 $ 0.40 $(0.34) $(0.01)
1997 9.56 0.35 0.22 (0.35) (0.05)
1996(8) 9.72 0.36 (0.14) (0.36) (0.02)
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on January 25, 1994.
(2) Commenced operations on January 18, 1994.
(3) Commenced operations on June 1, 1995.
(4) Discontinued operations on April 13, 1998.
(5) Commenced operations on January 27, 1994.
110
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME TO
OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA TAX-EXEMPT BOND FUND
Trust Shares
1998 $10.72 8.77% $93,939 0.66% 4.16%
1997 10.28 7.22% 50,487 0.65% 4.48%
1996 10.06 3.87% 30,790 0.65% 4.49%
1995 10.18 9.26% 10,118 0.65% 4.63%
1994(1) 9.75 (1.19%)** 3,192 0.65%* 3.86%*
Investor Shares
1998 $10.72 8.46% $ 3,381 0.86% 3.98%
1997 10.29 7.00% 3,226 0.85% 4.28%
1996 10.07 3.76% 4,025 0.85% 4.28%
1995 10.18 9.04% 3,320 0.85% 4.36%
1994(2) 9.75 (1.22%)** 2,280 0.85%* 3.67%*
Flex Shares
1998 $10.74 8.04% $ 8,160 1.36% 3.45%
1997 10.30 6.48% 3,000 1.35% 3.78%
1996(3) 10.08 3.27%* 2,692 1.35%* 3.79%*
TENNESSEE TAX-EXEMPT BOND FUND
Trust Shares
1998(4) $ 9.81 6.47%** $ -- 0.66% 4.67%
1997 9.63 7.16% 1,973 0.65% 4.51%
1996 9.40 3.43% 1,823 0.65% 4.49%
1995 9.50 8.17% 1,664 0.65% 4.90%
1994(5) 9.22 (6.52%)** 594 0.65%* 4.24%*
Investor Shares
1998(4) $ 9.81 6.06%** $ -- 0.86% 4.37%
1997 9.65 6.93% 1,602 0.85% 4.31%
1996 9.42 3.28% 1,523 0.85% 4.29%
1995 9.53 8.24% 1,170 0.85% 4.70%
1994(6) 9.23 (6.39%)** 1,127 0.85%* 3.74%*
Flex Shares
1998(4) $ 9.81 5.75%** $ -- 1.36% 3.39%
1997 9.64 6.42% 2,505 1.35% 3.81%
1996(7) 9.41 1.98%* 2,017 1.34%* 3.80%*
GEORGIA TAX-EXEMPT BOND FUND
Trust Shares
1998 $10.11 8.37% $62,363 0.66% 4.09%
1997 9.73 6.79% 39,732 0.65% 4.31%
1996 9.56 3.89% 22,950 0.65% 4.36%
1995 9.63 6.94% 13,187 0.65% 4.56%
1994 (2) 9.42 (4.43%)** 4,338 0.65%* 4.12%*
Investor Shares
1998 $10.13 8.26% $ 3,975 0.86% 3.89%
1997 9.74 6.47% 3,511 0.85% 4.10%
1996 9.58 3.69% 3,418 0.85% 4.17%
1995 9.65 6.70% 3,268 0.85% 4.31%
1994 (6) 9.44 (4.29%)** 3,300 0.85%* 3.93%*
Flex Shares
1998 $10.12 7.74% $ 8,264 1.36% 3.39%
1997 9.73 6.06% 4,662 1.35% 3.60%
1996(8) 9.56 2.25%* 4,207 1.35%* 3.66%*
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
(EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
------------------ ------------------- ---------
<S> <C> <C> <C> <C>
FLORIDA TAX-EXEMPT BOND FUND
Trust Shares
1998 0.80% 4.02% 69%
1997 0.80% 4.33% 135%
1996 0.88% 4.26% 63%
1995 1.13% 4.15% 105%
1994(1) 1.12%* 3.39%* 53%
Investor Shares
1998 1.34% 3.50% 69%
1997 1.31% 3.82% 135%
1996 1.36% 3.77% 63%
1995 1.50% 3.71% 105%
1994(2) 3.20%* 1.32%* 53%
Flex Shares
1998 2.01% 2.80% 69%
1997 2.28% 2.85% 135%
1996(3) 2.54%* 2.60%* 63%
TENNESSEE TAX-EXEMPT BOND FUND
Trust Shares
1998(4) 1.79% 3.54% 14%
1997 1.72% 3.44% 16%
1996 1.68% 3.46% 41%
1995 2.65% 2.90% 28%
1994(5) 1.43%* 3.46%* 13%
Investor Shares
1998(4) 2.04% 3.19% 14%
1997 1.76% 3.40% 16%
1996 2.08% 3.06% 41%
1995 2.10% 3.45% 28%
1994(6) 6.60%* (2.01%)* 13%
Flex Shares
1998(4) 2.26% 2.49% 14%
1997 2.34% 2.82% 16%
1996(7) 2.74%* 2.40%* 41%
GEORGIA TAX-EXEMPT BOND FUND
Trust Shares
1998 0.81% 3.94% 7%
1997 0.81% 4.15% 15%
1996 0.89% 4.12% 60%
1995 0.98% 4.23% 25%
1994 (2) 1.06%* 3.71%* 26%
Investor Shares
1998 1.30% 3.45% 7%
1997 1.33% 3.62% 15%
1996 1.41% 3.61% 60%
1995 1.43% 3.73% 25%
1994 (6) 2.36%* 2.42%* 26%
Flex Shares
1998 2.02% 2.73% 7%
1997 2.07% 2.88% 15%
1996(8) 2.35%* 2.66%* 60%
(6) Commenced operations on January 19, 1994.
(7) Commenced operations on June 5, 1995.
(8) Commenced operations on June 6, 1995.
(A) Total return figures do not reflect applicable sales loads.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
111
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND FUND
Trust Shares
1998 $10.16 $ 0.60 $ 0.49 $(0.60) $ --
1997 10.07 0.60 0.09 (0.60) --
1996 10.26 0.60 (0.19) (0.60) --
1995 9.89 0.61 0.37 (0.61) --
1994 10.45 0.50 (0.36) (0.50) (0.20)
Investor Shares
1998 $10.16 $ 0.55 $ 0.49 $(0.55) $ --
1997 10.06 0.56 0.10 (0.56) --
1996 10.26 0.56 (0.20) (0.56) --
1995 9.89 0.57 0.38 (0.58) --
1994 10.44 0.46 (0.35) (0.46) (0.20)
Flex Shares
1998 $10.17 $ 0.51 $ 0.49 $(0.51) $ --
1997 10.07 0.51 0.10 (0.51) --
1996(1) 10.33 0.52 (0.26) (0.52) --
SHORT-TERM BOND FUND
Trust Shares
1998 $ 9.90 $ 0.55 $ 0.16 $(0.55) $(0.01)
1997 9.86 0.53 0.07 (0.53) (0.03)
1996 9.98 0.54 (0.10) (0.54) (0.02)
1995 9.79 0.53 0.19 (0.53) --
1994 10.01 0.42 (0.21) (0.42) (0.01)
Investor Shares
1998 $ 9.91 $ 0.53 $ 0.17 $(0.53) $(0.01)
1997 9.88 0.51 0.06 (0.51) (0.03)
1996 10.01 0.52 (0.10) (0.53) (0.02)
1995 9.81 0.51 0.19 (0.50) --
1994 10.03 0.40 (0.21) (0.40) (0.01)
Flex Shares
1998 $ 9.91 $ 0.50 $ 0.17 $(0.50) $(0.01)
1997 9.88 0.48 0.06 (0.48) (0.03)
1996(2) 10.02 0.47 (0.12) (0.47) (0.02)
</TABLE>
* Annualized.
(1) Commenced operations on June 7, 1995.
(2) Commenced operations on June 20, 1995.
(A) Total return figures do not reflect applicable sales loads.
112
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME TO
OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND FUND
Trust Shares
1998 $10.65 10.92% $793,488 0.76% 5.67%
1997 10.16 6.99% 633,646 0.75% 5.89%
1996 10.07 4.02% 599,514 0.75% 5.81%
1995 10.26 10.39% 543,308 0.75% 6.22%
1994 9.89 1.17% 460,538 0.75% 4.77%
Investor Shares
1998 $10.65 10.49% $ 33,269 1.14% 5.29%
1997 10.16 6.66% 33,165 1.15% 5.48%
1996 10.06 3.50% 36,155 1.15% 5.40%
1995 10.26 10.04% 33,772 1.15% 5.79%
1994 9.89 0.86% 35,775 1.14% 4.39%
Flex Shares
1998 $10.66 9.99% $ 13,111 1.65% 4.76%
1997 10.17 6.16% 5,763 1.64% 5.00%
1996(1) 10.07 2.50%* 4,621 1.64%* 4.84%*
SHORT-TERM BOND FUND
Trust Shares
1998 $10.05 7.31% $120,422 0.66% 5.47%
1997 9.90 6.30% 89,701 0.65% 5.37%
1996 9.86 4.45% 91,156 0.65% 5.39%
1995 9.98 7.60% 60,952 0.65% 5.49%
1994 9.79 2.02% 34,772 0.65% 4.15%
Investor Shares
1998 $10.07 7.19% $ 1,949 0.86% 5.27%
1997 9.91 5.97% 2,182 0.85% 5.16%
1996 9.88 4.23% 2,700 0.85% 5.20%
1995 10.01 7.44% 2,609 0.85% 5.24%
1994 9.81 1.81% 2,381 0.85% 3.94%
Flex Shares
1998 $10.07 6.84% $ 2,110 1.21% 4.93%
1997 9.91 5.62% 1,073 1.20% 4.82%
1996(2) 9.88 3.73%* 966 1.20%* 4.77%*
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
(EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
------------------ ------------------- ---------
<S> <C> <C> <C> <C>
INVESTMENT GRADE BOND FUND
Trust Shares
1998 0.86% 5.57% 109%
1997 0.85% 5.79% 298%
1996 0.87% 5.69% 184%
1995 0.88% 6.09% 238%
1994 0.88% 4.64% 259%
Investor Shares
1998 1.38% 5.05% 109%
1997 1.41% 5.22% 298%
1996 1.44% 5.11% 184%
1995 1.49% 5.45% 238%
1994 1.41% 4.12% 259%
Flex Shares
1998 2.11% 4.30% 109%
1997 2.20% 4.44% 298%
1996(1) 2.49%* 3.99%* 184%
SHORT-TERM BOND FUND
Trust Shares
1998 0.79% 5.34% 87%
1997 0.78% 5.24% 118%
1996 0.81% 5.23% 163%
1995 0.85% 5.29% 200%
1994 0.85% 3.95% 75%
Investor Shares
1998 1.71% 4.42% 87%
1997 1.58% 4.43% 118%
1996 1.72% 4.33% 163%
1995 1.56% 4.53% 200%
1994 2.52% 2.27% 75%
Flex Shares
1998 2.85% 3.29% 87%
1997 3.02% 3.00% 118%
1996(2) 4.06%* 1.91%* 163%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
113
<PAGE>
FINANCIAL HIGHLIGHTS (concluded)
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM U.S. TREASURY SECURITIES FUND
Trust Shares
1998 $ 9.88 $ 0.51 $ 0.10 $(0.52) $ --
1997 9.84 0.51 0.04 (0.51) --
1996 9.93 0.55 (0.09) (0.55) --
1995 9.82 0.47 0.11 (0.47) --
1994 9.98 0.33 (0.11) (0.33) (0.05)
Investor Shares
1998 $ 9.88 $ 0.49 $ 0.09 $(0.50) $ --
1997 9.84 0.50 0.04 (0.50) --
1996 9.94 0.54 (0.10) (0.54) --
1995 9.83 0.46 0.11 (0.46) --
1994 9.99 0.32 (0.12) (0.31) (0.05)
Flex Shares
1998 $ 9.85 $ 0.47 $ 0.10 $(0.48) $ --
1997 9.82 0.47 0.03 (0.47) --
1996(1) 9.96 0.48 (0.14) (0.48) --
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Trust Shares
1998 $10.02 $ 0.58 $ 0.11 $(0.58) $(0.01)
1997 9.99 0.58 0.04 (0.58) (0.01)
1996 10.11 0.62 (0.14) (0.60) --
1995(2) 10.00 0.58 0.13 (0.60) --
Investor Shares
1998 $10.00 $ 0.56 $ 0.12 $(0.56) $(0.01)
1997 9.97 0.56 0.04 (0.56) (0.01)
1996 10.11 0.60 (0.14) (0.60) --
1995(3) 9.98 0.58 0.13 (0.58) --
Flex Shares
1998 $10.02 $ 0.52 $ 0.11 $(0.52) $(0.01)
1997 9.99 0.52 0.04 (0.52) (0.01)
1996(4) 10.14 0.55 (0.15) (0.55) --
U.S. GOVERNMENT SECURITIES FUND
Trust Shares
1998 $10.02 $ 0.61 $ 0.44 $(0.61) $ --
1997 9.91 0.62 0.11 (0.62) --
1996 10.27 0.62 (0.33) (0.62) (0.03)
1995(5) 9.98 0.53 0.29 (0.53) --
Investor Shares
1998 $10.02 $ 0.57 $ 0.43 $(0.57) $ --
1997 9.90 0.58 0.12 (0.58) --
1996 10.26 0.59 (0.33) (0.59) (0.03)
1995(6) 10.00 0.56 0.26 (0.56) --
Flex Shares
1998 $10.02 $ 0.52 $ 0.44 $(0.52) $ --
1997 9.91 0.53 0.11 (0.53) --
1996(4) 10.31 0.52 (0.37) (0.52) (0.03)
</TABLE>
* Annualized.
** Return is for the period indicated and has not been annualized.
(1) Commenced operations on June 22, 1995.
(2) Commenced operations on June 7, 1994.
(3) Commenced operations on July 17, 1994.
114
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME TO
OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM U.S. TREASURY SECURITIES FUND
Trust Shares
1998 $ 9.97 6.30% $ 46,920 0.66% 5.19%
1997 9.88 5.76% 21,988 0.65% 5.23%
1996 9.84 4.73% 10,149 0.65% 5.56%
1995 9.93 6.11% 9,599 0.65% 4.91%
1994 9.82 2.17% 12,723 0.65% 3.23%
Investor Shares
1998 $ 9.96 6.04% $ 3,277 0.81% 5.07%
1997 9.88 5.59% 3,921 0.80% 5.05%
1996 9.84 4.52% 4,192 0.80% 5.43%
1995 9.94 6.03% 7,144 0.80% 4.74%
1994 9.83 2.01% 4,841 0.78% 3.11%
Flex Shares
1998 $ 9.94 5.90% $ 1,413 1.06% 4.81%
1997 9.85 5.19% 1,091 1.05% 4.75%
1996(1) 9.82 3.72%* 2,423 1.05%* 5.03%*
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Trust Shares
1998 $10.12 7.12% $137,488 0.66% 5.75%
1997 10.02 6.43% 123,903 0.65% 5.81%
1996 9.99 4.84% 73,370 0.65% 6.04%
1995(2) 10.11 7.50%** 41,823 0.65%* 6.43%*
Investor Shares
1998 $10.11 6.95% $ 2,705 0.91% 5.50%
1997 10.00 6.17% 2,426 0.90% 5.55%
1996 9.97 4.59% 2,512 0.90% 5.75%
1995(3) 10.11 7.45%** 623 0.90%* 6.27%*
Flex Shares
1998 $10.12 6.49% $ 1,543 1.26% 5.16%
1997 10.02 5.80% 1,409 1.25% 5.20%
1996(4) 9.99 4.10%* 1,349 1.25%* 5.38%*
U.S. GOVERNMENT SECURITIES FUND
Trust Shares
1998 $10.46 10.76% $ 34,899 0.76% 5.93%
1997 10.02 7.54% 19,471 0.75% 6.19%
1996 9.91 2.77% 10,277 0.75% 6.05%
1995(5) 10.27 8.64%** 3,291 0.75%* 6.67%*
Investor Shares
1998 $10.45 10.23% $ 3,225 1.16% 5.53%
1997 10.02 7.21% 2,243 1.15% 5.76%
1996 9.90 2.47% 2,396 1.15% 5.68%
1995(6) 10.26 8.61%** 589 1.15%* 6.08%*
Flex Shares
1998 $10.46 9.78% $ 4,022 1.67% 5.02%
1997 10.02 6.57% 2,801 1.66% 5.26%
1996(4) 9.91 1.42%* 2,826 1.66%* 5.18%*
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
(EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
------------------ ------------------- ---------
<S> <C> <C> <C> <C>
SHORT-TERM U.S. TREASURY SECURITIES FUND
Trust Shares
1998 0.84% 5.01% 39%
1997 0.92% 4.96% 93%
1996 1.00% 5.21% 94%
1995 1.08% 4.48% 88%
1994 0.81% 3.07% 117%
Investor Shares
1998 1.33% 4.55% 39%
1997 1.35% 4.50% 93%
1996 1.32% 4.91% 94%
1995 1.33% 4.21% 88%
1994 1.41% 2.48% 117%
Flex Shares
1998 2.87% 3.00% 39%
1997 2.51% 3.29% 93%
1996(1) 2.97%* 3.11%* 94%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Trust Shares
1998 0.77% 5.64% 163%
1997 0.78% 5.68% 133%
1996 0.84% 5.85% 83%
1995(2) 0.93%* 6.15%* 68%
Investor Shares
1998 1.51% 4.90% 163%
1997 1.48% 4.97% 133%
1996 2.25% 4.40% 83%
1995(3) 7.74%* (0.57%)* 68%
Flex Shares
1998 2.72% 3.70% 163%
1997 2.66% 3.79% 133%
1996(4) 3.59%* 3.04%* 83%
U.S. GOVERNMENT SECURITIES FUND
Trust Shares
1998 0.92% 5.77% 14%
1997 1.02% 5.92% 21%
1996 1.25% 5.55% 83%
1995(5) 3.33%* 4.09%* 30%
Investor Shares
1998 1.76% 4.93% 14%
1997 1.79% 5.12% 21%
1996 2.50% 4.33% 83%
1995(6) 6.84%* 0.39%* 30%
Flex Shares
1998 2.32% 4.37% 14%
1997 2.42% 4.50% 21%
1996(4) 2.86%* 3.98%* 83%
(4) Commenced operations on June 7, 1995.
(5) Commenced operations on July 31, 1994.
(6) Commenced operations on June 9, 1994.
(A) Total return figures do not reflect applicable sales loads.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
115
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
1. Organization:
The STI Classic Funds (the "Trust") was organized as a Massachusetts Business
Trust under a Declaration of Trust dated January 15, 1992. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with twenty-two portfolios: the Value Income Stock
Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth
Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International
Equity Index Fund, the International Equity Fund, the Sunbelt Equity Fund, the
Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the
Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term
Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term
Federal Mortgage Securities Fund, and the U.S. Government Securities Fund,
(collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the
U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund,
the Classic Institutional Cash Management Money Market Fund and the Classic
Institutional U.S. Treasury Securities Money Market Fund, (collectively the
"Money Market Funds"). The assets of each portfolio are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. Each
Fund's prospectus provides a description of the Fund's investment objectives,
policies and strategies. The financial statements of the Classic Institutional
Cash Management Money Market Fund, the Classic Institutional U.S. Treasury Money
Market Fund, the Prime Quality Money Market Fund, the U.S. Government Securities
Money Market Fund and the Tax-Exempt Money Market Fund are not presented herein,
but are presented separately.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust.
SECURITY VALUATION -- Investment securities held by the Non-Dollar Funds
that are listed on a securities exchange for which market quotations are
available are valued at the last quoted sales price each business day. If
there is no such reported sale, these securities and unlisted securities
for which market quotations are readily available are valued at the most
recently quoted bid price. Foreign securities in the Emerging Markets
Equity Fund, the International Equity Fund and the International Equity
Index Fund are valued based upon quotations from the primary market in
which they are traded. Debt obligations with sixty days or less remaining
until maturity may be valued at their amortized cost.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a
regulated investment company for Federal income tax purposes and distribute
all of its taxable income and net capital gains. Accordingly, no provisions
for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date and interest income
is recognized on an accrual basis. Costs used in determining net realized
gains and losses on the sales of investment securities are those of the
specific securities sold adjusted for the accretion and amortization of
purchase discounts and premiums during the respective holding period.
Purchase discounts and premiums on securities held by the Non-Dollar Funds
are accreted and amortized to maturity using the scientific interest
method, which approximates the effective interest method.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters into
an
116
<PAGE>
================================================================================
insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated each business day, by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding. The maximum
offering price per share for Investor shares of the Investment Grade Bond,
the Investment Grade Tax-Exempt Bond, the Capital Growth, the Value Income
Stock, the Sunbelt Equity, the Mid-Cap Equity, the Balanced, the Florida
Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the U.S. Government
Securities, the International Equity, and the International Equity Index
Funds is equal to the net asset value per share plus a sales load of 3.75%.
The maximum offering price per share for Investor shares of the Short-Term
U.S. Treasury Securities Fund is equal to the net asset value per share
plus a sales load of 1.00%. The maximum offering price per share for
Investor shares of the Short-Term Bond Fund is equal to the net asset value
per share plus a sales load of 2.00%. The maximum offering price per share
for Investor shares of the Limited-Term Federal Mortgage Securities Fund is
equal to the net asset value per share plus a sales load of 2.50%.
Flex Shares of the Funds may be purchased at their net asset value. Shares
redeemed within the first year after purchase will be subject to a
contingent deferred sales charge ("CDSC") equal to 2.00% of the net asset
value of the shares at the time of redemption. The CDSC will not apply to
shares redeemed after such time.
FOREIGN CURRENCY TRANSLATION -- The books and records of the Emerging
Markets Equity, the International Equity and the International Equity Index
Funds are maintained in U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The Emerging Markets Equity, the International Equity and the International
Equity Index Funds do not isolate that portion of gains and losses on
investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Emerging Markets Equity, the International Equity and the International
Equity Index Funds report certain foreign currency related transactions as
components of realized and unrealized gains and losses for financial
reporting purposes, whereas such components are treated as ordinary income
for Federal income tax purposes.
TBA PURCHASE COMMITMENTS -- The Fixed Income Portfolios may enter into
"TBA" (To Be Announced) purchase commitments to purchase securities for a
fixed price at a future date beyond customary settlement time. TBA purchase
commitments may be considered securities in themselves, and involve a risk
of loss if the value of the security to be purchased declines prior to
settlement date, which risk is in addition to the risk of decline in the
value of the funds' other assets. Unsettled TBA purchase commitments are
valued at the current market value of the underlying securities, generally
according to the procedures described under "Security Valuation."
OTHER -- Expenses that are directly related to a specific Fund are charged
to that Fund. Class specific expenses are borne by that class. Other
117
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
operating expenses of the Trust are pro-rated to the Funds on the basis of
relative net assets. Fund expenses are pro-rated to the respective classes
on the basis of relative net assets.
Distributions from net investment income of the Investment Grade Bond, the
Investment Grade Tax-Exempt Bond, the Short-Term U.S. Treasury Securities, the
Short-Term Bond, the Florida Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the
U.S. Government Securities and the Limited-Term Federal Mortgage Securities
Funds are declared each business day and paid to shareholders on a monthly
basis. Distributions from net investment income are declared and paid each
calendar quarter by the Capital Growth, the Value Income Stock, the Sunbelt
Equity, the Mid-Cap Equity, the Small Cap Equity and the Balanced Funds.
Distributions from net investment income are declared and paid annually by the
Emerging Markets Equity, the International Equity and the International Equity
Index Funds. Any net realized capital gains on sales of securities are
distributed to shareholders at least annually.
RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and
characterization of certain income and capital gains distributions are
determined annually in accordance with federal tax regulations which may
differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions during such period. These book/tax differences may be
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise. Accordingly, the following permanent differences, primarily
attributable to a net operating loss in the Sunbelt Equity and Mid-Cap
Equity Funds and the classification of short-term capital gains and
ordinary income for tax purposes related to the other funds, have been
reclassified to/from the following accounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED
ACCUMULATED NET INVESTMENT
PAID-IN-CAPITAL REALIZED GAIN INCOME
(000) (000) (000)
-------------- ------------- --------------
<S> <C> <C> <C>
Mid-Cap Equity Fund $ -- $(1,361) $1,361
International Equity
Index Fund -- (67) 67
Sunbelt Equity Fund -- (4,365) 4,365
Investment Grade
Bond Fund -- 188 (188)
Short Term U.S. Treasury
Securities Fund 53 -- (53)
</TABLE>
These reclassifications have no effect on net assets or net asset values
per share.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
3. Organization Costs and Transactions with Affiliates:
The Trust incurred organization costs of approximately $808,836 including
approximately $395,594 relating to state registration fees. These costs have
been deferred in the accounts of the Funds and are being amortized on a straight
line basis over a period of sixty months commencing with operations with the
exception of state registration fees, which are being amortized over a period of
twelve months. The costs include legal fees of approximately $60,383 for
organizational work performed by a law firm of which two officers of the Trust
are partners. On March 18, 1992, the Trust sold initial shares of beneficial
interest to SEI Fund Resources (the "Administrator"). In the event any of the
initial shares of the Trust are
118
<PAGE>
================================================================================
redeemed by any holder thereof during the period that the Trust is amortizing
its organizational costs, the redemption proceeds payable to the holder thereof
will be reduced by the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption.
In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting
on the Costs of Start-Up Activities." This SOP provides guidance on the
financial reporting of start-up costs and organization costs and requires costs
of start-up activities and organization costs to be expensed as incurred.
Investment companies that began operations prior to June 30, 1998 can adopt the
SOP prospectively. Therefore, previously capitalized organization costs will
continue to be amortized as discussed above. Any future start-up or organization
costs will be expensed as incurred.
Certain officers of the Trust are also officers of the Administrator and/or SEI
Investments Distribution Co. (the "Distributor"). Such officers are paid no fees
by the Trust for serving as officers of the Trust.
4. Administration, Transfer Agency Servicing and Distribution Agreements:
The Trust and the Administrator are parties to an Administration Agreement dated
May 29, 1995, as amended November 19, 1997 under which the Administrator
provides administrative services for an annual fee (expressed as a percentage of
the combined average daily net assets of the Trust and STI Classic Variable
Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next
$3 billion, .065% on the next $2 billion and .06% for over $10 billion.
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated May 14, 1994 under which Federated Services Company
provides transfer agency services to the Trust.
The Trust and the Distributor are parties to a Distribution Agreement dated May
29, 1995 regarding the Flex Shares and a Distribution Agreement dated November
21, 1995 with respect to the Trust and Investor shares. The Distributor will
receive no fees for its distribution services under this agreement for the Trust
Shares of any Fund. With respect to the Investor Shares and Flex Shares, the
Distributor receives amounts, pursuant to a Distribution Plan and (in the case
of Flex Shares) a Distribution and Service Plan, as outlined in the table in
footnote 5 under the column titled "Distribution Fee".
5. Investment Advisory and Custodian Agreements:
The Trust and STI Capital Management, N.A., ("STI Capital Management, N.A."),
Trusco Capital Management ("Trusco") and the SunTrust Bank, Atlanta have entered
into advisory agreements dated May 29, 1992, June 15, 1993, and December 20,
1993 respectively.
Under terms of the respective agreements, the Funds are charged the following
annual fees based upon average daily net assets:
<TABLE>
<CAPTION>
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
-------- ------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
TRUSCO:
International
Equity Index
Fund* ........... .90% 1.07% .38% 1.47% 1.00% 2.12%
Sunbelt Equity
Fund ............ 1.15% 1.17% .43% 1.62% 1.00% 2.22%
Short-Term Bond
Fund ............ .65% .67% .23% .87% 1.00% 1.22%
Short-Term U.S.
Treasury
Securities
Fund ............ .65% .67% .18% .82% 1.00% 1.07%
U.S. Government
Securities
Fund ............ .74% .77% .38% 1.17% 1.00% 1.68%
</TABLE>
119
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
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
-------- ------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STI CAPITAL MANAGEMENT, N.A.:
Value Income
Stock Fund ..... .80% .97% .33% 1.32% 1.00% 2.02%
Mid-Cap Equity
Fund ........... 1.15% 1.17% .43% 1.62% 1.00% 2.22%
Capital Growth
Fund ........... 1.15% 1.17% .68% 1.82% 1.00% 2.29%
Balanced Fund ... .95% .97% .28% 1.27% 1.00% 2.03%
Small Cap
Equity Fund .... 1.15% 1.22% -- -- 1.00% 2.27%
Investment
Grade
Tax-Exempt
Bond Fund ...... .74% .77% .43% 1.17% 1.00% 1.65%
Florida
Tax-Exempt
Bond Fund ...... .65% .67% .18% .87% 1.00% 1.37%
Investment
Grade Bond
Fund ........... .74% .77% .43% 1.17% 1.00% 1.66%
Limited-Term
Federal Mortgage
Securities
Fund ........... .65% .67% .23% .92% 1.00% 1.27%
International
Equity Fund .... 1.25% 1.48% .33% 1.83% 1.00% 2.53%
Emerging Markets
Equity Fund .... 1.30% 1.57% -- -- -- --
SUNTRUST BANK, ATLANTA:
Georgia
Tax-Exempt
Bond Fund ...... .65% .67% .18% .87% 1.00% 1.37%
</TABLE>
- -----------------
*Trusco and STI Capital Management, N.A. serve as joint advisors to the
International Equity Index Fund.
The Investment Advisors, the Administrator and the Distributor have voluntarily
agreed to waive all or a portion of their fees (and to reimburse Funds'
expenses) in order to limit operating expenses to an amount as outlined in the
table above. Fee waivers and expense reimbursements are voluntary and may be
terminated at any time.
SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for all
the Funds except the Emerging Markets Equity, the International Equity and the
International Equity Index Funds who utilize the Bank of New York as custodian.
Fees of the Custodians are paid on the basis of the net assets of the Funds. The
Custodians play no role in determining the investment policies of the Trust or
which securities are to be purchased or sold in the Funds.
6. Investment Transactions:
The cost of purchases and the proceeds from sales
of securities, excluding short-term investments and U.S. Government Securities,
for the period ended May 31, 1998, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------- ----------
<S> <C> <C>
Value Income Stock Fund ......................... $1,823,064 $1,833,225
Mid-Cap Equity Fund ............................. 462,331 452,146
Small Cap Equity Fund ........................... 395,884 165,654
Capital Growth Fund ............................. 3,011,738 2,973,522
Balanced Fund ................................... 243,053 224,046
Emerging Markets Equity Fund .................... 32,742 28,074
International Equity Index Fund ................. 380 9,635
International Equity Fund ....................... 618,831 592,164
Sunbelt Equity Fund ............................. 315,836 349,887
Investment Grade Tax-Exempt Bond Fund ........... 622,469 612,020
Florida Tax-Exempt Bond Fund .................... 107,098 54,005
Georgia Tax-Exempt Bond Fund .................... 27,063 4,038
Investment Grade Bond Fund ...................... 400,821 403,885
Short-Term Bond Fund ............................ 71,095 49,153
Short-Term U.S. Treasury Securities Fund ........ -- --
Limited-Term Federal Mortgage Securities Fund ... -- --
U.S. Government Securities Fund ................. -- --
</TABLE>
The cost of purchases and proceeds from sales of U.S. Government Securities
were:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------- --------
<S> <C> <C>
Value Income Stock Fund ......................... -- --
Mid-Cap Equity Fund ............................. -- --
Small Cap Equity Fund ........................... -- --
Capital Growth Fund ............................. -- --
Balanced Fund ................................... $ 56,022 $ 42,074
Sunbelt Equity .................................. -- --
Investment Grade Tax-Exempt Bond Fund ........... -- --
Florida Tax-Exempt Bond Fund .................... -- --
Georgia Tax-Exempt Bond Fund .................... -- --
Investment Grade Bond Fund ...................... 523,591 391,661
Short-Term Bond Fund ............................ 41,473 37,414
Short-Term U.S. Treasury Securities Fund ........ 36,733 13,221
Limited-Term Federal Mortgage Securities Fund ... 227,048 214,041
U.S. Government Securities Fund ................. 18,245 4,491
</TABLE>
120
<PAGE>
================================================================================
At May 31, 1998, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Funds
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
VALUE INCOME MID-CAP SMALL CAP CAPITAL
STOCK EQUITY EQUITY GROWTH
FUND FUND FUND FUND
(000) (000) (000) (000)
------------ ------ --------- -------
<S> <C> <C> <C> <C>
Aggregate gross unrealized
appreciation .......... $250,063 $60,515 $47,134 $365,433
Aggregate gross unrealized
depreciation .......... (51,128) (20,646) (23,445) (27,225)
-------- ------- ------- --------
Net unrealized appreciation $198,935 $39,869 $23,689 $338,208
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INTERNATIONAL SUNBELT
BALANCED MARKETS EQUITY EQUITY EQUITY
FUND EQUITY FUND INDEX FUND FUND FUND
(000) (000) (000) (000) (000)
-------- ----------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C>
Aggregate gross
unrealized
appreciation ...... $28,791 $ 3,787 $25,403 $134,163 $141,883
Aggregate gross
unrealized
depreciation ...... (2,291) (9,120) (7,035) (18,442) (14,007)
------- ------- ------- -------- --------
Net unrealized
appreciation/
(depreciation) .... $26,500 $(5,333) $18,368 $115,721 $127,876
======= ======= ======= ======== ========
</TABLE>
<TABLE>
INVESTMENT
GRADE
TAX-EXEMPT FLORIDA
BOND TAX-EXEMPT
FUND BOND FUND
(000) (000)
---------- ----------
<S> <C> <C>
Aggregate gross unrealized appreciation ... $2,731 $3,227
Aggregate gross unrealized depreciation ... (33) (93)
------ ------
Net unrealized appreciation ............... $2,698 $3,134
====== ======
INVESTMENT
GEORGIA GRADE SHORT-
TAX-EXEMPT BOND TERM BOND
FUND FUND FUND
(000) (000) (000)
---------- ---------- ---------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation .. $2,313 $24,778 $934
Aggregate gross unrealized depreciation .. (49) (468) (72)
------ ------- ----
Net unrealized appreciation .............. $2,264 $24,310 $862
====== ======= ====
SHORT- LIMITED-
TERM TERM
U.S. FEDERAL U.S.
TREASURY MORTGAGE GOVERNMENT
SECURITIES SECURITIES SECURITIES
FUND FUND FUND
(000) (000) (000)
---------- ---------- ----------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation $182 $909 $995
Aggregate gross unrealized depreciation (1) (23) (2)
---- ---- ----
Net unrealized appreciation $181 $886 $993
==== ==== ====
</TABLE>
Subsequent to October 31, 1997, the Funds recognized net capital losses for tax
purposes that have been deferred to 1998 and can be used to offset future
capital gains at May 31, 1998. The Funds also had capital loss carryforwards at
May 31, 1998 as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS POST
CARRYOVER EXPIRES EXPIRES EXPIRES 10/31
5/31/98 2003 2004 2005 DEFERRED
FUND (000) (000) (000) (000) LOSS
------------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Emerging Markets
EquityFund $ -- $ -- $-- $-- $1,283
Short-Term U.S. Treasury
Securities Fund 211 182 29 -- --
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
7. Concentration of Credit Risk:
The Investment Grade Bond Fund, the Short-Term Bond Fund and the Balanced Fund
invest primarily in investment grade obligations rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated, are determined by the Advisor
to be of comparable quality. The Investment Grade Tax-Exempt Fund invests
primarily in investment grade municipal securities. Municipal securities must be
rated BBB or better by S&P or Baa or better by Moody's in the case of bonds;
SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2 or P-1, P-2 in the
case of commercial
121
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The
Short-Term U.S. Treasury Securities Fund invests exclusively in obligations
issued by the U.S. Treasury with a maximum remaining maturity of 3 years or
less. The Florida Tax-Exempt Bond Fund and the Georgia Tax-Exempt Bond Fund,
invest primarily in municipal bonds concentrated in each of their respective
states. Municipal securities must be rated BBB or better by S&P or Baa or better
by Moody's in the case of bonds; A-1, A-2 or P-1, P-2 in the case of tax-exempt
commercial paper; and VMIG-1, VMIG-2 in the case of variable rate demand
obligations. The U.S. Government Securities Fund invests primarily in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, including mortgage backed securities. The Limited-Term
Federal Mortgage Securities Fund invests in mortgage related securities issued
or guaranteed by U.S. Government agencies. Up to 35% of the U.S. Government
Securities Fund and the Limited-Term Federal Mortgage Securities Fund may be
invested in corporate, or government bonds that carry a rating of BBB or better
by S&P or Baa or better by Moody's. The ability of the issuers of the securities
held by the Funds to meet their obligations may be affected by economic
developments in a specific industry, state or region, or by changing business
conditions.
122
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
PRIME QUALITY MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (23.2%)
FINANCE (6.1%)
Bank of New York
5.540%, 07/07/98 $20,645 $ 20,531
First Chicago
5.460%, 06/01/98 20,000 20,000
General Electric Capital
5.500%, 09/11/98 8,125 7,998
GMAC
5.500%, 06/12/98 20,000 19,966
KFW International
5.600%, 06/15/98 5,000 4,989
5.580%, 06/19/98 6,250 6,233
Prudential Funding
5.500%, 06/05/98 30,000 29,982
Transamerica
5.530%, 07/14/98 17,500 17,384
UBS Financial
5.700%, 06/01/98 12,495 12,495
----------
139,578
----------
INDUSTRIAL (15.1%)
Allied Signal
5.630%, 06/09/98 21,200 21,173
British Petroleum America
5.650%, 06/01/98 50,000 50,000
Dominion Semiconductor
5.560%, 07/20/98 35,000 34,735
5.570%, 07/23/98 19,000 18,847
5.580%, 07/23/98 20,000 19,839
Eaton
5.500%, 06/17/98 14,000 13,966
5.480%, 07/31/98 25,000 24,772
General Re
5.510%, 06/25/98 40,000 39,853
J.C. Penney
5.500%, 06/25/98 60,000 59,780
RTZ America
5.500%, 06/12/98 15,000 14,975
5.500%, 06/18/98 15,000 14,961
COMMERCIAL PAPER--CONTINUED
U.S. Borax
5.500%, 06/12/98 $16,000 $ 15,973
5.500%, 06/16/98 10,000 9,977
5.500%, 06/22/98 5,000 4,984
5.500%, 07/06/98 2,500 2,487
----------
346,322
----------
UTILITIES (2.0%)
GTE Funding
5.680%, 06/01/98 29,220 29,220
5.550%, 06/18/98 16,000 15,958
----------
45,178
----------
Total Commercial Paper
(Cost $531,078) 531,078
----------
CORPORATE OBLIGATIONS (12.7%)
FINANCE (10.7%)
Associates Corporation
of North America (C)
5.730%, 01/04/99 20,000 19,994
5.640%, 04/23/99 20,000 19,984
Bankers Trust, New York (A) (C)
5.602%, 02/10/99 25,000 24,997
5.679%, 02/19/99 25,000 24,998
Caterpillar Financial Service, MTN
6.960%, 06/01/98 5,000 5,000
6.040%, 03/01/99 3,300 3,306
Caterpillar Financial
Service, MTN (C)
5.755%, 05/09/99 45,000 45,000
Ford Motor Credit, MTN (C)
5.660%, 11/09/98 13,800 13,787
General Electric Capital (C)
5.596%, 11/27/98 50,000 50,000
Household Finance
6.180%, 06/30/98 5,000 5,002
IBM Credit (C)
6.099%, 07/30/98 5,000 5,003
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
PRIME QUALITY MONEY MARKET FUND--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
International Lease Finance, MTN
8.250%, 10/19/98 $1,500 $ 1,513
6.570%, 11/16/98 5,000 5,018
John Deere Capital, MTN (C)
5.678%, 09/14/98 5,000 5,002
John Hancock Capital, MTN
6.260%, 08/13/98 2,000 2,001
Morgan Stanley Group, MTN
6.125%, 01/05/99 1,000 1,002
Morgan Stanley Group, MTN (C)
5.872%, 08/22/98 7,850 7,854
5.758%, 12/28/98 1,500 1,501
Paccar Financial, MTN
5.330%, 11/02/98 1,000 998
Toyota Motor Credit, MTN
6.375%, 08/05/98 3,759 3,760
----------
245,720
----------
INDUSTRIAL (0.5%)
Pet
5.750%, 07/01/98 1,800 1,800
Philip Morris
8.625%, 03/01/99 3,000 3,060
7.750%, 05/01/99 2,000 2,031
Texaco Capital, MTN
8.030%, 10/15/98 1,900 1,917
Walt Disney
15.000%, 12/14/98 2,000 2,095
----------
10,903
----------
UTILITIES (1.5%)
Bell Atlantic, MTN
5.300%, 09/01/98 3,200 3,195
Pacific Gas & Electric
5.375%, 08/01/98 5,290 5,285
Virginia Electric & Power
9.375%, 06/01/98 24,950 24,950
----------
33,430
----------
Total Corporate Obligations
(Cost $290,053) $ 290,053
----------
BANK NOTES (16.1%)
American Express Centurion (C)
5.606%, 03/24/99 $45,000 45,000
Bank One, Dayton (C)
5.780%, 08/21/98 8,000 8,001
Comerica Bank (C)
5.695%, 10/21/98 50,000 49,992
CoreStates Bank (C)
5.602%, 07/30/98 10,000 10,000
Credit Suisse First Boston,
New York (C)
5.725%, 10/27/98 50,000 50,000
FCC National Bank (C)
5.703%, 04/09/99 50,000 49,983
First National Bank, Chicago (C)
5.722%, 04/19/99 62,000 61,973
PNC Bank N.A. (C)
5.660%, 07/01/98 20,000 19,998
Northern Trust (C)
5.715%, 04/09/99 70,000 69,977
Wachovia Bank N.A.
5.810%, 10/08/98 1,000 1,000
5.600%, 03/08/99 3,500 3,498
----------
Total Bank Notes
(Cost $369,422) 369,422
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.6%)
Federal Farm Credit (C)
5.443%, 03/02/99 40,000 39,985
Federal Home Loan Bank
5.745%, 11/12/98 10,000 10,000
FNMA (C) (F)
0.000%, 02/18/99 6,020 5,785
SLMA, Callable 07/06/98 @ 100 (C)
5.365%, 02/08/99 5,000 4,995
SLMA (C)
5.595%, 04/01/99 45,000 44,986
----------
</TABLE>
4
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
Total U.S. Government Agency Obligations
(Cost $105,751) $ 105,751
----------
CERTIFICATES OF DEPOSIT (25.2%)
Bank America
5.625%, 06/18/98 $60,000 60,001
Bank America, Canada
5.570%, 07/28/98 10,000 10,000
Bankers Trust
5.610%, 06/22/98 20,000 20,000
Barclays Bank
5.800%, 04/29/99 50,000 49,974
Bayerische Landesbank (C)
5.666%, 04/21/99 62,000 61,972
Commerzbank (C)
5.720%, 04/14/99 25,000 24,990
5.725%, 04/14/99 40,000 39,986
Credit Suisse First Boston,
New York (C)
5.795%, 04/14/99 25,000 25,000
Deutsche Bank (C)
5.715%, 04/14/99 50,000 49,979
Deutsche Bank AG, New York
5.640%, 03/23/99 18,000 17,986
National Westminster Bank,
New York
5.820%, 05/06/99 59,000 58,969
Rabobank
5.750%, 04/27/99 50,000 49,978
Societe Generale, New York
5.580%, 02/10/99 25,000 24,997
5.800%, 04/01/99 35,000 34,990
Swiss Bank, New York
5.650%, 03/24/99 20,000 19,986
5.810%, 04/29/99 30,000 29,984
----------
Total Certificates of Deposit
(Cost $578,792) 578,792
----------
ASSET-BACKED SECURITIES (6.0%)
Americredit Auto Receivable Trust,
Ser 1997-D, Cl A1
5.800%, 11/05/98 $ 7,718 $ 7,718
Americredit Auto Receivable Trust,
Ser 1998-B, Cl A1
5.629%, 06/12/99 29,500 29,500
Arcadia Auto Receivable Trust,
Ser 1997-D, Cl A1
5.888%, 01/15/99 2,834 2,834
Arcadia Auto Receivable Trust,
Ser 1998-A, Cl A1
5.628%, 03/15/99 19,643 19,643
Chase Manhattan Auto Owner
Trust, Ser 1999-B, Cl A1
5.578%, 05/10/99 23,131 23,131
Key Auto Finance Trust,
Ser 1997-2, Cl A1
5.835%, 01/05/99 12,644 12,644
TMS Auto Grantor Trust,
Ser 1997-4, Cl A1
5.909%, 01/08/99 7,308 7,310
WFS Financial Owner Trust,
Ser 1997-C, Cl A1
5.710%, 09/20/98 4,264 4,264
WFS Financial Owner Trust,
Ser 1997-D, Cl A1
5.910%, 12/20/98 30,793 30,793
----------
Total Asset-Backed Securities
(Cost $137,837) 137,837
----------
REPURCHASE AGREEMENTS (12.1%)
Barclays
5.58%, dated 05/29/98, matures
06/01/98, repurchase price $108,814,139
(collateralized by FHLMC and FNMA
obligations: total market
value $110,938,837) (E) 108,764 108,764
</TABLE>
5
<PAGE>
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
PRIME QUALITY MONEY MARKET FUND--CONCLUDED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--CONTINUED
Deutsche Bank
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$50,707,894 (collateralized by
FNMA obligations: total
market value $51,698,292) (E) $50,684 $ 50,684
Greenwich
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$10,313,338 (collateralized by
FHLMC and FNMA
obligations: total market
value $10,514,868) (E) 10,309 10,309
Salomon Brothers
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$89,995,939 (collateralized by
FHLMC and FNMA
obligations: total market
value $91,754,760) (E) 89,954 89,954
Union Bank of Switzerland
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$17,609,554 (collateralized by
FNMA obligation: market value
$17,956,938) (E) 17,601 17,601
----------
Total Repurchase Agreements
(Cost $277,312) 277,312
----------
Total Investments (99.9%)
(Cost $2,290,245) 2,290,245
----------
OTHER ASSETS AND LIABILITIES, NET (0.1%) 1,805
----------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no par
value) based on 1,880,536,125
outstanding shares of beneficial interest $1,880,536
Fund shares of the Investor Class
(unlimited authorization -- no par
value) based on 411,869,991
outstanding shares of beneficial interest 411,870
Overdistribution of net investment income (27)
Accumulated net realized loss
on investments (329)
----------
Total Net Assets 100.0% $2,292,050
==========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $1.00
==========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Investor Shares $1.00
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 19.
6
<PAGE>
================================================================================
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- -------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (14.2%)
U.S. Treasury Notes
5.500%, 02/28/99 $15,000 $ 14,996
6.375%, 05/15/99 40,000 40,258
----------
Total U.S. Treasury Obligations
(Cost $55,254) 55,254
----------
REPURCHASE AGREEMENTS (85.8%)
Barclays
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$20,823,948 (collateralized by
U.S. Treasury Note: market
value $21,231,348) (E) 20,814 20,814
Deutsche Bank
5.52%, dated 5/29/98, matures
06/01/98, repurchase price
$20,200,660 (collateralized by
U.S. Treasury Note and U.S.
Treasury Bond: total market
value $20,596,215) (E) 20,191 20,191
Greenwich
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$20,582,977 (collateralized by
U.S. Government STRIPS: market
value 20,985,820) (E) 20,574 20,574
Merrill Lynch
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$104,953,255 (collateralized by
various GNMA obligations:
total market value
$107,007,565) (E) 104,905 104,905
Morgan Stanley
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$105,346,846 (collateralized by
various GNMA obligations:
total market value
$107,908,600) (E) $105,298 $105,298
Salomon Brothers
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$20,534,527 (collateralized by
U.S. Government STRIPS: market
value $20,976,498) (E) 20,525 20,525
Swiss Bank
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$20,290,758 (collateralized by
U.S. Treasury Note and U.S.
Treasury Bond: total market
value $20,697,104) (E) 20,282 20,282
Union Bank of Switzerland
5.52%, dated 05/29/98, matures
06/01/98, repurchase price
$20,541,270 (collateralized by
U.S. Treasury Bills: total market
value $20,943,876) (E) 20,532 20,532
----------
Total Repurchase Agreements
(Cost $333,121) 333,121
----------
Total Investments (89.0% of Net Assets)
(Cost $388,375) 388,375
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 19.
7
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
TAX-EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.7%)
ALABAMA (1.7%)
McIntosh, Industrial Development
Board, Pollution Control, Ciba-
Geigy Project, Ser A, RB,
VRDN (B) (C) (D)
3.900%, 06/03/98 $3,500 $ 3,500
McIntosh, Industrial Development
Board, Solid Waste Disposal,
Ciba-Geigy Project, RB, VRDN (B)
3.800%, 06/03/98 5,400 5,400
Special Care Facilities, Montgomery
Hospital, RB, VRDN (FGIC) (C) (D)
3.900%, 06/03/98 1,200 1,200
----------
10,100
----------
ARIZONA (0.3%)
Phoenix, Series 95-2, GO, VRDN (C)
3.950%, 06/01/98 1,400 1,400
----------
ARKANSAS (0.2%)
State, Development Financial Authority,
Potlatch Projects, Ser A, RB, VRDN, AMT (B)
(C) (D)
3.900%, 06/03/98 1,000 1,000
----------
CALIFORNIA (1.3%)
Contra Costa County, Multi-Family
Mortgage, Delta Square Project,
Ser A, RB, VRDN (B) (C) (D)
3.700%, 06/03/98 4,200 4,200
Higher Education Loan Authority,
Student Loan Revenue, RB,
VRDN (B) (C) (D)
4.000%, 07/01/98 2,000 2,000
Higher Education Loan Authority,
Student Loan Revenue, Ser E-5,
RB, VRDN, AMT (B) (C) (D)
3.950%, 06/01/98 1,200 1,200
----------
7,400
----------
COLORADO (0.9%)
North Glen, Industrial Development,
Castle Garden Retirement Center,
VRDN (B) (C) (D)
3.700%, 06/04/98 $1,200 $ 1,200
State, Ser A, RB, TRAN
4.500%, 06/26/98 4,000 4,002
----------
5,202
----------
DELAWARE (2.4%)
State, Economic Development
Authority, Industrial Development,
Delaware Clean Power Project,
Ser A, RB, VRDN, AMT (B) (C) (D)
3.850%, 06/03/98 5,000 5,000
State, Economic Development
Authority, Solid Waste-Sewer
Facilities, Ciba Geigy Project,
Ser A, VRDN (B) (C)
3.950%, 06/01/98 7,100 7,100
State, Educational Development
Authority, VRDN (B) (C) (D)
4.075%, 06/04/98 1,875 1,875
----------
13,975
----------
DISTRICT OF COLUMBIA (1.6%)
District of Columbia,
Ser B, TRAN (B)
4.500%, 09/30/98 7,000 7,014
District of Columbia,
Ser C, TRAN (B)
5.000%, 09/30/98 2,200 2,208
----------
9,222
----------
FLORIDA (2.4%)
Citrus Park, Community
Development, RB,
VRDN (B) (C) (D)
3.900%, 06/03/98 1,500 1,500
</TABLE>
8
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
FLORIDA--CONTINUED
City of Jacksonville, Florida
Pollution Control, Ser 1992, TECP
3.750%, 08/12/98 $ 2,700 $ 2,700
Dade County, Water & Sewer System, Ser 1994,
RB, VRDN (FGIC) (C) (D)
3.900%, 06/03/98 10,000 10,000
----------
14,200
----------
GEORGIA (6.0%)
Cobb-Marietta, Coliseum &
Exhibit Hall Authority,
VRDN (MBIA) (C) (D)
4.020%, 06/04/98 3,145 3,145
Fulton County, Industrial
Development Authority,
American Red Cross Project,
RB, VRDN (B) (C) (D)
3.850%, 06/04/98 1,300 1,300
Gordon County, Development
Authority, Sara Lee Corporation,
VRDN (C) (D)
3.850%, 06/04/98 1,400 1,400
Henry County, Water &
Sewer Authority, VRDN
(AMBAC) (C) (D)
4.020%, 06/04/98 3,710 3,710
Lafayette, Industrial Development
Authority, Blue-Bird Project,
Ser 1991, VRDN (B) (C) (D)
3.850%, 06/04/98 1,000 1,000
Marietta, Housing Finance
Authority, Franklin Walk
Apartments Project, VRDN (B) (C)
3.825%, 06/04/98 1,600 1,600
GEORGIA--CONTINUED
Monroe County, Industrial
Development Authority,
Forsyth Inns Project,
VRDN (B) (C) (D)
3.900%, 06/03/98 $2,525 $ 2,525
Municipal Electric Authority,
TECP (B)
3.750%, 07/09/98 4,500 4,500
Municipal Electric Authority,
VRDN (MBIA) (C)
4.020%, 06/04/98 4,675 4,675
State, GO
6.750%, 09/01/98 2,000 2,016
State, Municipal Electric Authority,
RB, VRDN (B) (C) (D)
3.850%, 06/03/98 4,000 4,000
State, Municipal Electric Authority,
RB, VRDN (FGIC) (C) (D)
4.020%, 06/04/98 3,000 3,000
Summerville, Development
Authority, Ser 1997, RB,
VRDN, AMT (B) (C)
4.000%, 07/02/98 2,000 2,000
----------
34,871
----------
HAWAII (0.7%)
State, GO, VRDN (MBIA) (C)
4.020%, 06/03/98 4,260 4,260
----------
IDAHO (0.5%)
Nez Pierce County, Pollution
Control, Potlatch Project,
RB, VRDN (B) (C) (D)
3.800%, 06/03/98 2,000 2,000
3.800%, 06/04/98 1,000 1,000
----------
3,000
----------
</TABLE>
9
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
ILLINOIS (11.1%)
Bloomington, Airport Authority,
GO, VRDN (B) (C) (D)
3.850%, 06/03/98 $ 1,400 $ 1,400
Chicago, O'Hare International
Airport (AMBAC) (D)
3.800%, 06/01/98 8,890 8,890
Hoffman Estates, Economic
Development Project (AMBAC)
4.500%, 11/15/98 2,145 2,150
Oak Forest, Mode-Homewood
Pool, RB, VRDN (B) (C) (D)
3.800%, 06/03/98 10,000 10,000
Savanna, Industrial Development
Authority, Metform Project, Ser A,
RB, VRDN (B) (C) (D)
3.950%, 06/03/98 500 500
Savanna, Industrial Development
Authority, Metform Project,
Ser B, RB, VRDN (B) (C) (D)
3.950%, 06/03/98 1,400 1,400
State, Development Financial
Authority, Chicago Symphony,
RB, VRDN (B) (C) (D)
3.800%, 06/03/98 5,000 5,000
State, Development Financial
Authority, Museum Contemporary
Art Project, RB, VRDN (C) (D)
3.800%, 06/03/98 4,800 4,800
State, Development Financial
Authority, Pollution Control,
Illinois Power, Ser A, RB,
VRDN (B) (C)
3.900%, 06/03/98 5,000 5,000
State, Development Financial Authority, Derby
Project, RB, VRDN, AMT (B) (C) (D)
3.950%, 06/03/98 1,000 1,000
ILLINOIS--CONTINUED
State, Educational Facilities Authority,
Chicago Childrens Museum,
RB, VRDN (B) (C) (D)
3.800%, 06/03/98 $1,600 $ 1,600
State, Educational Facilities Authority,
Museum of Science and Industry,
RB, VRDN (B) (C)
3.800%, 06/04/98 5,800 5,800
State, Health Facilities Authority,
RB, VRDN (C)
4.020%, 06/04/98 3,000 3,000
State, Health Facilities Authority,
Advocate Health Care, Ser B,
RB, VRDN (C) (D)
4.050%, 06/03/98 2,900 2,900
State, Health Facilities Authority,
Health Care Project-A,RB,
VRDN (B) (C) (D)
3.850%, 08/17/98 3,800 3,800
State, Health Facilities Authority,
Streeterville Corporation,
RB, VRDN (B) (C) (D)
3.800%, 06/03/98 2,000 2,000
State, Health Facilities Authority,
Streeterville Corporation,
Ser A, RB, VRDN (B) (C)
3.800%, 06/03/98 1,500 1,500
State, Health Facilities Authority,
University of Chicago Hospital
Project, Ser C, RB,
VRDN (MBIA) (C) (D)
3.850%, 06/03/98 4,000 4,000
----------
64,740
----------
</TABLE>
10
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
INDIANA (3.9%)
Allen County, Industrial Economic
Development Authority, Mattel
Power Wheels Project, RB,
VRDN, AMT (C) (D)
4.150%, 06/03/98 $1,500 $ 1,500
Fort Wayne, Economic Development
Authority, ND Tech Project,
RB, VRDN, AMT (A) (B) (C) (D)
3.950%, 06/03/98 1,000 1,000
Indianapolis, Industrial Economic
Development Authority, Allied
Signal, RB, VRDN (A) (C) (D)
3.950%, 06/03/98 3,500 3,500
Indianapolis, Multi-Family Housing,
RB, VRDN, AMT (B) (C) (D)
4.050%, 06/03/98 6,200 6,200
Michigan City, Industrial Economic
Development, Performance
Packaging, RB, VRDN,
AMT (A) (B) (C) (D)
3.950%, 06/03/98 900 900
Princeton, Pollution Control,
PSI Energy Project, RB,
VRDN (B) (C)
3.900%, 06/01/98 2,800 2,800
Rockport County, Pollution
Control, Aep Generating
Company Project, Ser B, RB,
VRDN (AMBAC) (C) (D)
4.000%, 06/01/98 700 700
State, Development Financial
Authority, Culver Educational
Facilities, RB, VRDN (B) (C)
3.800%, 06/03/98 2,000 2,000
State, Development Financial
Authority, Dekko International
Project, RB, VRDN (B) (C) (D)
4.000%, 06/04/98 610 610
INDIANA--CONTINUED
State, Development Financial
Authority, Educational Facility,
Indiana Historical Society, RB,
VRDN (B) (C)
3.800%, 06/03/98 $1,200 $ 1,200
State, Health Facility Financing
Authority, Clarian Health Partners,
Ser B, RB, VRDN (C) (D)
4.000%, 06/03/98 2,000 2,000
----------
22,410
----------
IOWA (0.4%)
West Des Moines, Commercial
Development, Greyhound Lines
Project, VRDN (B) (C) (D)
3.850%, 06/03/98 2,500 2,500
----------
KENTUCKY (1.7%)
Jefferson County, Industrial Building,
Fisher-Klosterman Project, RB,
VRDN, AMT (B) (C) (D)
4.000%, 06/04/98 2,335 2,335
Pendleton County, RB,
VRDN (B) (C) (D)
3.950%, 07/01/98 3,400 3,400
State, Asset/Liability Common
General Fund, Ser A, RB, TRAN
4.500%, 06/25/98 2,500 2,501
State, Economic Development,
Hospital Facilities, RB,
VRDN (B) (C) (D)
3.850%, 06/04/98 1,400 1,400
----------
9,636
----------
LOUISIANA (2.2%)
Plaqeumines, Port Facilities,
International Marine Terminal
Project, RB, VRDN (B) (C) (D)
3.750%, 09/15/98 1,000 1,000
</TABLE>
11
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
LOUISIANA--CONTINUED
Saint James Parish, Pollution
Control Revenue, TECP
3.900%, 06/16/98 $5,000 $ 5,000
State, Offshore Terminal Authority,
Deepwater Port, First Stage
A-Loop Project, Ser A, RB,
VRDN (B) (C) (D)
3.800%, 06/03/98 2,000 2,000
State, Port Authority, Occidental
Petroleum Project,
VRDN (B) (C) (D)
3.850%, 06/03/98 4,500 4,500
----------
12,500
----------
MARYLAND (2.4%)
Baltimore County, Allied Signal
Project, VRDN (B) (C) (D)
3.900%, 06/03/98 1,000 1,000
Baltimore County, Gas
& Electric, TECP
3.300%, 06/04/98 4,000 4,000
3.800%, 06/04/98 100 100
State, Health & Higher Education
Authority, Pooled Loan Program,
Ser B, VRDN (B) (C) (D)
3.700%, 06/03/98 5,000 5,000
University of Maryland, Revolving
Equipment Loan Program,
Ser B, RB, VRDN (B) (C)
3.750%, 06/03/98 4,100 4,100
----------
14,200
----------
MICHIGAN (4.2%)
Delta County, Environmental
Improvement Revenue, Escanaba
Paper Project, RB, VRDN,
AMT (B) (C)
4.000%, 06/01/98 2,500 2,500
MICHIGAN--CONTINUED
Oakland County, Economic
Development Authority, Moody
Family Ltd. Project, RB, VRDN,
AMT (A) (B) (C)
3.900%, 06/03/98 $1,000 $ 1,000
State, Ser 1985, TECP
3.750%, 08/11/98 7,100 7,100
State, Housing Development
Authority, RB, VRDN,
AMT (B) (C) (D)
3.900%, 06/03/98 1,000 1,000
State, Housing Development
Authority, Harbortown, RB,
VRDN (B) (C) (D)
3.825%, 06/04/98 3,000 3,000
State, Industrial Development
Authority, RB,
VRDN (A) (B) (C) (D)
3.600%, 06/02/98 3,000 3,000
State, Municipal Bond
Authority, Ser B
4.500%, 07/02/98 4,000 4,002
State, Strategic Fund Pollution
Control, Dow Chemical, TECP
3.850%, 06/03/98 3,000 3,000
----------
24,602
----------
MISSOURI (1.5%)
Carthage, Industrial Development
Authority, Schrieber Project, RB,
VRDN, AMT (B) (C) (D)
3.950%, 06/03/98 3,100 3,100
Saint Charles County, Industrial
Development Authority, Casalon
Apartment Project, Ser 95, RB,
VRDN (B) (C) (D)
3.850%, 06/04/98 3,100 3,100
</TABLE>
12
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
MISSOURI--CONTINUED
State, Custody Receipt, Third Street
Building Project, Ser A,
VRDN (C) (D)
3.900%, 06/03/98 $ 2,000 $ 2,000
State, Environmental Improvement
& Energy Resource Authority,
Utilicorp United Project, RB,
VRDN, AMT (B) (C) (D)
3.950%, 06/03/98 700 700
----------
8,900
----------
NEBRASKA (0.3%)
Investment Finance Authority,
Single Family Mortgage, Ser B,
RB, VRDN (FGIC) (C) (D)
3.700%, 07/15/98 2,000 2,000
----------
NEVADA (2.1%)
Clark County, Airport Improvement
Authority, Ser A-1, RB,
VRDN (B) (C) (D)
3.900%, 06/03/98 4,200 4,200
Clark County, School District,
VRDN (C)
3.920%, 06/04/98 8,000 8,000
----------
12,200
----------
NEW HAMPSHIRE (1.0%)
State, Housing Finance Authority,
Multi-Family Housing, Fairways
Project, RB, VRDN, AMT (B) (C) (D)
4.000%, 06/03/98 5,000 5,000
State, Pollution Control Authority,
RB, VRDN (B) (C) (D)
3.900%, 06/03/98 800 800
----------
5,800
----------
NEW JERSEY (1.7%)
State, TECP
3.900%, 06/15/98 $10,000 $ 10,000
----------
NEW MEXICO (2.0%)
Educational Assistance Foundation,
Student Loan Program, RB,
VRDN (AMBAC) (C)
4.040%, 06/04/98 $2,720 2,720
State, TRAN
4.500%, 06/30/98 3,000 3,002
State, Ser A, TRAN
4.500%, 06/30/98 3,000 3,002
State, Financial Authority,
Ser B, RB
3.400%, 01/01/99 2,840 2,840
----------
11,564
----------
NEW YORK (6.2%)
Long Island, Power Authority,
Ser 3, TECP (B)
3.750%, 08/19/98 2,000 2,000
Long Island, Power Authority,
Ser 4, TECP (B)
3.750%, 08/19/98 3,000 3,000
Nassau County, Ser B, TRAN
4.250%, 08/31/98 5,000 5,007
Nassau County, Ser C, TRAN
4.250%, 12/22/98 4,500 4,513
New York, Ser A, TRAN
4.500%, 06/30/98 4,000 4,003
Southeast Industrial Development,
Unilock Project, RB, VRDN,
AMT (B) (C) (D)
3.950%, 06/03/98 6,200 6,200
State, Urban Development
Corporation, Senior Lien,
VRDN (C)
3.922%, 06/04/98 11,600 11,600
----------
36,323
----------
</TABLE>
13
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA (1.5%)
Mecklenburg County, Industrial
Facilities & Pollution Control,
Sterigenics International Project,
RB, VRDN, AMT (A) (B) (C) (D)
3.950%, 06/03/98 $2,000 $ 2,000
State, Eastern Municipal Power
Authority, TECP (B)
3.850%, 06/11/98 3,950 3,950
State, Educational Facilities,
Guilford College,
VRDN (B) (C) (D)
3.900%, 06/03/98 2,200 2,200
State, Housing Finance Agency,
Ser F, RB, VRDN (B) (C) (D)
3.450%, 09/01/98 485 485
----------
8,635
----------
NORTH DAKOTA (0.3%)
Mercer County, Solid Waste Disposal
Authority, United Power Project,
RB, VRDN (B) (C) (D)
3.800%, 06/01/98 2,000 2,000
----------
OHIO (6.8%)
Cincinnati, Student Loan Funding,
Ser A-1, VRDN
3.950%, 06/03/98 5,000 5,000
Lorraine County, Catholic
Healthcare Partners, TECP
3.400%, 06/10/98 10,000 10,000
State, Air Quality Development
Authority, JMG Limited
Partnership, Ser A, RB, VRDN,
AMT (B) (C) (D)
4.000%, 06/03/98 3,000 3,000
State, Higher Education Authority,
Lake Erie Project,
VRDN (B) (C) (D)
3.900%, 06/04/98 4,945 4,945
OHIO--CONTINUED
State, Pollution Control Authority,
Duquesne Project, RB, VRDN,
AMT (B) (C) (D)
4.000%, 06/03/98 $ 3,000 $ 3,000
State, Solid Waste Disposal, USG
Corporation Project, RB,
VRDN (B) (C) (D)
3.700%, 06/03/98 13,700 13,700
----------
39,645
----------
OKLAHOMA (0.3%)
State, Water Resources, Broad
Street Program, RB,
VRDN (B) (C) (D)
3.550%, 09/01/98 1,400 1,400
----------
OREGON (1.0%)
Metropolitan Service District,
Convention Center, Ser A, GO
5.500%, 07/01/98 1,000 1,001
Port of Saint Helens, Pollution
Control, Portland General
Electric, Ser A, RB,
VRDN (B) (C) (D)
3.900%, 06/01/98 2,400 2,400
State, Housing and Community
Service Department, Single
Family Mortgage Program,
Ser C, RB (D)
3.750%, 05/13/99 2,500 2,500
----------
5,901
----------
PENNSYLVANIA (3.6%)
Beaver County, Industrial
Development Authority,
Duquesne Light Company
Project, Ser B, RB, VRDN (C) (D)
3.850%, 06/03/98 1,000 1,000
</TABLE>
14
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA--CONTINUED
Lackawanna County,
VRDN (AMBAC) (C)
4.020%, 06/04/98 $ 3,585 $ 3,585
Philadelphia, Ser A, TRAN
4.500%, 06/30/98 10,000 10,004
State, Ser A, VRDN (C) (D)
3.920%, 06/04/98 6,500 6,500
----------
21,089
----------
SOUTH CAROLINA (0.9%)
York County, Pollution Control,
Ser N-3, RB, VRDN (C) (D)
3.500%, 09/15/98 5,000 4,999
----------
TENNESSEE (1.9%)
Covington, Industrial Development
Board, Charms Project, RB, VRDN,
AMT (B) (C) (D)
3.950%, 06/03/98 3,000 3,000
Hamilton County, Industrial
Development Board, Lease
Rent, RB (FGIC)
5.100%, 09/01/98 500 501
Hamilton County, Industrial
Development Board, Tennessee
Aquarium Project, RB,
VRDN (B) (C) (D)
3.900%, 06/04/98 3,000 3,000
Memphis-Shelby County, Industrial
Development Board, Ponderosa
Fibres American Project, RB,
VRDN, AMT (A) (B) (C) (D)
4.000%, 06/04/98 1,400 1,400
Nashville & Davidson County,
Industrial Development Authority,
Multi-Family Mortgage,
Chimneytop II Project, RB,
VRDN (B) (C) (D)
3.850%, 06/03/98 1,325 1,325
TENNESSEE--CONTINUED
Nashville & Davidson County,
Vanderbilt University, RB,
VRDN (C) (D)
3.650%, 07/15/98 $ 2,000 $ 2,000
----------
11,226
----------
TEXAS (14.1%)
Brazos River Authority, AMT, TECP
3.850%, 06/03/98 3,950 3,950
Brazas River Authority, AMT, TECP (B)
3.650%, 06/05/98 6,000 6,000
Brazas River Authority, Pollution
Control, AMT, TECP (B)
3.650%, 09/04/98 5,170 5,170
Brazos River Authority, Pollution
Control, Ser 1988, AMT, TECP (B)
3.400%, 06/25/98 2,700 2,700
Brazos River Authority, Pollution
Control, Utilities Electric, Ser C,
RB, VRDN, AMT (AMBAC) (C) (D)
4.150%, 06/01/98 2,000 2,000
Brownsville, Utility Systems,
Ser A, TECP
3.500%, 06/11/98 4,000 4,000
Georgetown, Higher Education
Financing Authority, Southwestern
University Project, Ser 1984, RB,
VRDN (B) (C) (D)
3.900%, 06/03/98 2,000 2,000
Gulf Coast, Industrial Development
Authority, Amoco Oil Project, RB,
VRDN (C) (D)
3.800%, 06/01/98 1,000 1,000
Gulf Coast, Waste Disposal,
Texwater Pollution Control,
Amoco Oil - Amoco Chems,
RB, VRDN (C) (D)
3.750%, 07/15/98 5,000 5,001
</TABLE>
15
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
TEXAS--CONTINUED
Harris County, Health Facilities
Authority, Memorial Hospital
Project, Ser B, RB, VRDN (C) (D)
3.900%, 06/03/98 $ 1,500 $ 1,500
Harris County, Housing Finance
Corporation, Ser 1985, RB,
VRDN (C) (D)
4.075%, 06/04/98 700 700
Harris County, Industrial
Development Authority, Lubrizol
Project, RB, VRDN (C) (D)
3.850%, 06/03/98 1,600 1,600
Lone Star, Airport Improvement
Authority, RB, VRDN (B) (C) (D)
4.000%, 06/01/98 1,700 1,700
Sabine, River Authority, Pollution
Control, RB, VRDN
(MBIA) (C) (D)
3.700%, 06/03/98 8,000 8,000
San Antonio, Gas Ser A, TECP
3.750%, 07/09/98 5,000 5,000
State, RB, VRDN (C) (D)
3.825%, 06/04/98 4,935 4,935
State, Ser A, TRAN
4.750%, 08/31/98 10,000 10,022
State, Higher Education Authority,
RB, VRDN (MBIA) (C) (D)
4.000%, 06/03/98 5,000 5,000
State, Public Finance
Authority, TECP
3.450%, 08/03/98 10,000 10,000
State, Veterans Housing Assistance,
Ser A-1, GO, AMT
3.800%, 06/03/98 2,000 2,000
----------
82,278
----------
UTAH (3.0%)
Carbon County, Pollution Control
Authority, Pacificorp Project, RB,
VRDN (AMBAC) (C) (D)
4.000%, 06/01/98 $ 1,600 $ 1,600
Intermountain Power Agency,
TECP (AMBAC)
3.800%, 06/04/98 5,000 5,000
Intermountain Power Agency,
Power Supply, Ser B, TECP
3.650%, 06/09/98 5,000 5,000
Intermountain Power Agency,
Power Supply, Ser E, RB,
VRDN (B) (C) (D)
3.450%, 09/15/98 1,000 1,000
Intermountain Power Agency,
Power Supply, Ser F, RB,
VRDN (B) (C) (D)
3.800%, 06/15/98 4,000 4,000
State, Water Finance Agency,
Pooled Loan, Ser A, RB (MBIA)
4.050%, 10/01/98 500 500
----------
17,100
----------
VIRGINIA (3.0%)
Alexandria, Redevelopment &
Housing Authority, Multi-Family
First Mortgage, Goodwin Project,
Ser B, RB, VRDN (A) (B) (C) (D)
4.000%, 06/01/98 2,000 2,000
Chesterfield County, Industrial
Development Authority, Allied
Signal Project, RB, VRDN (C)
3.950%, 06/03/98 3,000 3,000
Commonwealth, Ser 1994,
VRDN (C) (D)
4.020%, 06/04/98 4,000 4,000
</TABLE>
16
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
VIRGINIA--CONTINUED
Front Royal & Warren County,
Industrial Development Authority,
Pen Tab Industries Project, RB,
VRDN, AMT (A) (B) (C) (D)
3.900%, 06/04/98 $2,800 $ 2,800
State, Housing Development
Authority, Ser C, RB, VRDN (B) (C)
3.800%, 06/10/98 5,800 5,800
----------
17,600
----------
WASHINGTON (1.9%)
Pierce County, Washington
Economic Development,
Weyerhaeuser Real Estate
Project, RB, VRDN (B) (C) (D)
3.850%, 06/03/98 3,000 3,000
Port of Seattle, VRDN (C) (D)
3.900%, 06/03/98 1,400 1,400
State, Public Power Supply System,
Nuclear Project #1, Ser 1A-3,
RB, VRDN (B) (C) (D)
3.750%, 06/03/98 3,400 3,400
State, Student Loan Finance
Association, VRDN,
AMT (B) (C) (D)
3.750%, 06/04/98 3,000 3,000
----------
10,800
----------
WEST VIRGINIA (0.7%)
Marshall County, Pollution Control
Authority, Allied Signal Project,
RB, VRDN (A) (C) (D)
3.950%, 06/03/98 2,000 2,000
WEST VIRGINIA--CONTINUED
Marshall County, Pollution
Control Authority, PPG
Industries Project, RB,
VRDN (C) (D)
4.000%, 06/04/98 $2,000 $ 2,000
----------
4,000
----------
WISCONSIN (0.9%)
Carlton, Pollution Control, Power
and Light Company, Project B,
RB, VRDN (C) (D)
4.000%, 06/01/98 1,200 1,200
Janesville, School District, TRAN
4.100%, 09/21/98 2,250 2,251
Wisconsin, Health Facilities,
Saint Lukes Medical Center,
RB, VRDN (B) (C) (D)
3.800%, 06/03/98 1,900 1,900
----------
5,351
----------
WYOMING (1.1%)
Sweetwater, VRDN (C)
3.600%, 06/03/98 4,600 4,600
Uinta County, Pollution Control,
Amoco Company, RB,
VRDN (C) (D)
3.850%, 12/01/98 2,000 2,000
----------
6,600
----------
Total Municipal Bonds
(Cost $578,629) 580,629
----------
</TABLE>
17
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
TAX-EXEMPT MONEY MARKET FUND--CONCLUDED
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE AMOUNT
(000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS (0.1%)
AIM Management Institutional
Tax-Free Portfolio (C) $453 $ 454
SEI Tax-Exempt Trust Institutional
Tax-Free Portfolio (C) 123 124
--------
Total Cash Equivalents
(Cost $578) 578
--------
Total Investments (99.8%)
(Cost $581,207) 581,207
--------
OTHER ASSETS AND LIABILITIES, NET (0.2%) 1,354
--------
NET ASSETS:
Fund shares of the Trust Class
(unlimited authorization -- no
par value) based on 448,021,834
outstanding shares of beneficial interest $448,022
Fund shares of the Investor Class
(unlimited authorization -- no
par value) based on 134,543,601
outstanding shares of beneficial interest 134,544
Overdistributed net investment income (1)
Accumulated net realized loss
on investments (4)
--------
Total Net Assets (100.0%) $582,561
========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Investor Shares $1.00
========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 19.
18
<PAGE>
================================================================================
KEY TO ABBREVIATIONS USED IN
THE STATEMENT OF NET ASSETS
AMBAC Security insured by the American Municipal
Bond Assurance Company
AMT Alternative Minimum Tax
Cl Class
FGIC Security insured by the Financial Guaranty
Insurance Corporation
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
GO General Obligation
MBIA Security insured by the Municipal Bond
Investors Assurance
MTN Medium Term Note
RB Revenue Bond
Ser Series
SLMA Student Loan Marketing Association
STRIPS Separately Traded Registered Interest and
Principal Security
TECP Tax Exempt Commercial Paper
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
(A) Private Placement Security
(B) Securities are held in connection with a letter
of credit issued by a major bank.
(C) Variable rate security. The rate reported on the
Statement of Net Assets is the rate in effect on May 31, 1998.
(D) Put and demand features exist requiring the
issuer to repurchase the instrument prior to maturity.
(E) Tri-Party Repurchase Agreement
(F) Zero Coupon Bond
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1998
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES
MONEY MARKET
FUND
---------------
<S> <C>
Assets:
Investments at market value (Cost $388,375) ....................................................... $388,375
Accrued income .................................................................................... 2,030
Receivables for investment securities sold ........................................................ 49,510
Receivables for capital shares sold ............................................................... 2
Other assets ...................................................................................... 67
--------
Total Assets ...................................................................................... 439,984
--------
Liabilities:
Accrued expenses .................................................................................. (378)
Distribution payable .............................................................................. (1,799)
Other liabilities ................................................................................. (1,564)
--------
Total Liabilities ................................................................................. (3,741)
--------
Net Assets:
Fund Shares of the Trust Shares (unlimited authorization -- no par value)
based on 377,407,674 outstanding shares of beneficial interest .................................. 377,408
Fund Shares of the Investor Shares (unlimited authorization -- no par value)
based on 58,751,567 outstanding shares of beneficial interest ................................... 58,751
Accumulated net realized gain on investments ...................................................... 84
--------
Total Net Assets .................................................................................. $436,243
========
Net Asset Value, Offering Price and Redemption Price Per Share -- Trust Shares ..................... $ 1.00
========
Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares .................. $ 1.00
========
</TABLE>
20
<PAGE>
[This Page Left Intentionally Blank]
<PAGE>
STATEMENT OF OPERATIONS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
TAX-EXEMPT
PRIME QUALITY U.S. GOVERNMENT MONEY
MONEY MARKET SECURITIES MONEY MARKET
FUND MARKET FUND FUND
--------- --------- ---------
06/01/97- 06/01/97- 06/01/97-
05/31/98 05/31/98 05/31/98
--------- --------- ---------
<S> <C> <C> <C>
Interest Income .................................................. $106,833 $21,869 $20,595
-------- ------- -------
Expenses:
Investment Advisory Fees ...................................... 12,211 2,564 3,101
Less: Investment Advisory Fees Waived ......................... (2,699) (580) (881)
Administrator Fees ............................................ 1,356 283 408
Less: Administrator Fees Waived ............................... (571) (47) (10)
Transfer Agent Fees -- Trust Shares ........................... 16 19 19
Transfer Agent Fees -- Investor Shares ........................ 28 5 19
Transfer Agent Out of Pocket Fees ............................. 209 47 63
Printing Expenses ............................................. 143 44 47
Custody Fees .................................................. 72 22 24
Professional Fees ............................................. 104 26 31
Trustee Fees .................................................. 29 10 9
Registration Fees ............................................. 322 51 66
Distribution Fees -- Investor Shares .......................... 716 97 190
Less: Distribution Fees Waived -- Investor Shares ............. (251) (27) (64)
Insurance and Other Fees ...................................... 16 13 5
-------- ------- -------
Total Expenses ................................................ 11,701 2,527 3,027
-------- ------- -------
Net Investment Income ......................................... 95,132 19,342 17,568
-------- ------- -------
Net Realized Gain on Securities Sold ............................. 50 146 --
-------- ------- -------
Net Increase in Net Assets from Operations ....................... $ 95,182 $19,488 $17,568
======== ======= =======
Amounts designated as "--" are either $0 or round to $0.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEARS ENDED MAY 31, 1998
<TABLE>
<CAPTION>
PRIME QUALITY U.S. GOVERNMENT SECURITIES TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
--------------------- -------------------------- ---------------------
06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96-
05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97
---------- --------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income .............................. $ 95,132 $ 73,281 $ 19,342 $ 17,800 $ 17,568 $ 12,958
Net Realized Gain (Loss) on Investments ............ 50 (121) 146 (51) -- 10
---------- ---------- -------- --------- ---------- ---------
Increase in Net Assets from Operations ......... 95,182 73,160 19,488 17,749 17,568 12,968
---------- ---------- -------- --------- ---------- ---------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ..................................... (77,500) (60,224) (16,621) (14,924) (13,717) (10,054)
Investor Shares .................................. (17,632) (13,057) (2,723) (2,876) (3,852) (2,904)
Capital Gains:
Trust Shares ..................................... -- -- -- -- -- --
Investor Shares .................................. -- -- -- -- -- --
---------- ---------- -------- --------- ---------- ---------
Total Distributions ............................ (95,132) (73,281) (19,344) (17,800) (17,569) (12,958)
---------- ---------- -------- --------- ---------- ---------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ...................... 3,915,486 2,786,281 776,773 705,839 1,039,352 980,872
Reinvestment of Cash Distributions ............... 3,699 2,069 380 274 -- --
Cost of Shares Redeemed .......................... (3,125,552) (2,752,496) (744,136) (687,215) (924,334) (921,487)
---------- ---------- -------- --------- ---------- ---------
Increase in Net Assets From Trust
Share Transactions .............................. 793,633 35,854 33,017 18,898 115,018 59,385
---------- ---------- -------- --------- ---------- ---------
Investor Shares:
Proceeds from Shares Issued ...................... 806,517 928,946 178,312 182,325 346,323 305,724
Reinvestment of Cash Distributions ............... 15,979 10,375 2,600 2,379 3,314 2,569
Cost of Shares Redeemed .......................... (694,228) (871,451) (185,358) (180,124) (317,112) (301,505)
---------- ---------- -------- --------- ---------- ---------
Increase (Decrease) in Net Assets From Investor
Share Transactions .............................. 128,268 67,870 (4,446) 4,580 32,525 6,788
---------- ---------- -------- --------- ---------- ---------
Increase in Net Assets From Share Transactions ... 921,901 103,724 28,571 23,478 147,543 66,173
---------- ---------- -------- --------- ---------- ---------
Total Increase in Net Assets ................... 921,951 103,603 28,715 23,427 147,542 66,183
---------- ---------- -------- --------- ---------- ---------
Net Assets:
Beginning of Period ................................ 1,370,099 1,266,496 407,528 384,101 435,019 368,836
---------- ---------- -------- --------- ---------- ---------
End of Period ...................................... $2,292,050 $1,370,099 $436,243 $ 407,528 $ 582,561 $ 435,019
========== ========== ======== ========= ========== =========
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued .................................... 3,915,486 2,786,281 776,773 705,839 1,039,352 980,872
Shares Issued in Lieu of Cash Distributions ...... 3,699 2,069 380 274 -- --
Shares Redeemed .................................. (3,125,552) (2,752,496) (744,136) (687,215) (924,334) (921,487)
---------- ---------- -------- --------- ---------- ---------
Net Trust Share Transactions ................... 793,633 35,854 33,017 18,898 115,018 59,385
---------- ---------- -------- --------- ---------- ---------
Investor Shares:
Shares Issued .................................... 806,517 928,946 178,312 182,325 346,323 305,724
Shares Issued in Lieu of Cash Distributions ...... 15,979 10,375 2,600 2,379 3,314 2,569
Shares Redeemed .................................. (694,228) (871,451) (185,358) (180,124) (317,112) (301,505)
---------- ---------- -------- --------- ---------- ---------
Net Investor Share Transactions ................ 128,268 67,870 (4,446) 4,580 32,525 6,788
---------- ---------- -------- --------- ---------- ---------
Amounts designated as "--" are either $0 or round to $0.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET NET REALIZED
NET ASSET VALUE INVESTMENT GAINS (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ---------- -------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
PRIME QUALITY MONEY MARKET FUND
Trust Shares
1998 $1.00 $ 0.05 $ -- $(0.05) $ --
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.05 -- (0.05) --
1994 1.00 0.03 -- (0.03) --
Investor Shares
1998 $1.00 $ 0.05 $ -- $(0.05) $ --
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.05 -- (0.05) --
1994 1.00 0.03 -- (0.03) --
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Trust Shares
1998 $1.00 $ 0.05 $ -- $(0.05) $ --
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.05 -- (0.05) --
1994 1.00 0.03 -- (0.03) --
Investor Shares
1998 $1.00 $ 0.05 $ -- $(0.05) $ --
1997 1.00 0.05 -- (0.05) --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
1998 $1.00 $ 0.03 $ -- $(0.03) $ --
1997 1.00 0.03 -- (0.03) --
1996 1.00 0.03 -- (0.03) --
1995 1.00 0.03 -- (0.03) --
1994 1.00 0.02 -- (0.02) --
Investor Shares
1998 $1.00 $ 0.03 $ -- $(0.03) $ --
1997 1.00 0.03 -- (0.03) --
1996 1.00 0.03 -- (0.03) --
1995 1.00 0.03 -- (0.03) --
1994 1.00 0.02 -- (0.02) --
24
<PAGE>
RATIO OF
RATIO OF EXPENSES TO
NET ASSET NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS
VALUE END TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS
OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS)
--------- ------ ------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PRIME QUALITY MONEY MARKET FUND
Trust Shares
1998 $1.00 5.22% $1,880,229 0.59% 5.10% 0.77%
1997 1.00 5.01% 1,086,555 0.58% 4.90% 0.76%
1996 1.00 5.25% 1,050,800 0.58% 5.11% 0.78%
1995 1.00 4.79% 799,189 0.58% 4.77% 0.79%
1994 1.00 2.88% 583,399 0.58% 2.86% 0.79%
Investor Shares
1998 $1.00 5.04% $ 411,821 0.76% 4.93% 0.98%
1997 1.00 4.84% 283,544 0.75% 4.74% 0.97%
1996 1.00 5.08% 215,696 0.75% 4.94% 1.00%
1995 1.00 4.62% 157,616 0.75% 4.55% 1.01%
1994 1.00 2.71% 129,415 0.75% 2.67% 0.99%
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Trust Shares
1998 $1.00 5.04% $ 377,490 0.62% 4.92% 0.78%
1997 1.00 4.83% 344,350 0.61% 4.73% 0.76%
1996 1.00 5.14% 325,493 0.61% 5.02% 0.78%
1995 1.00 4.67% 434,111 0.61% 4.64% 0.80%
1994 1.00 2.77% 309,228 0.61% 2.69% 0.77%
Investor Shares
1998 $1.00 4.90% $ 58,753 0.76% 4.79% 0.96%
1997 1.00 4.69% 63,178 0.75% 4.59% 0.96%
1996 1.00 4.99% 58,608 0.75% 4.88% 0.99%
1995 1.00 4.51% 46,639 0.75% 4.51% 1.02%
1994 1.00 2.63% 32,395 0.75% 2.54% 0.97%
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
1998 $1.00 3.21% $ 448,023 0.51% 3.14% 0.67%
1997 1.00 3.09% 333,006 0.50% 3.04% 0.66%
1996 1.00 3.28% 273,613 0.50% 3.23% 0.68%
1995 1.00 3.10% 215,413 0.45% 3.12% 0.70%
1994 1.00 2.08% 143,982 0.42% 2.05% 0.71%
Investor Shares
1998 $1.00 3.09% $ 134,538 0.62% 3.04% 0.83%
1997 1.00 2.97% 102,013 0.62% 2.92% 0.83%
1996 1.00 3.16% 95,223 0.62% 3.10% 0.85%
1995 1.00 3.00% 87,647 0.55% 3.00% 0.87%
1994 1.00 1.96% 61,675 0.54% 1.93% 0.88%
RATIO OF
NET INVESTMENT
INCOME TO
AVERAGE NET ASSETS
(EXCLUDING WAIVERS
AND REIMBURSEMENTS)
------------------
<S> <C> <C>
PRIME QUALITY MONEY MARKET FUND
Trust Shares
1998 4.92%
1997 4.72%
1996 4.91%
1995 4.56%
1994 2.65%
Investor Shares
1998 4.71%
1997 4.52%
1996 4.69%
1995 4.29%
1994 2.43%
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Trust Shares
1998 4.76%
1997 4.58%
1996 4.85%
1995 4.45%
1994 2.53%
Investor Shares
1998 4.59%
1997 4.38%
1996 4.64%
1995 4.24%
1994 2.32%
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
1998 2.98%
1997 2.88%
1996 3.05%
1995 2.87%
1994 1.76%
Investor Shares
1998 2.83%
1997 2.71%
1996 2.87%
1995 2.68%
1994 1.59%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
1. Organization:
The STI Classic Funds (the "Trust") was organized as a Massachusetts
Business Trust under a Declaration of Trust dated January 15, 1992. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with twenty-two portfolios: the Value Income Stock
Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth
Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International
Equity Index Fund, the International Equity Fund the Sunbelt Equity Fund, the
Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the
Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term
Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term
Federal Mortgage Securities Fund, and the U.S. Government Securities Fund,
(collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the
U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund,
the Classic Institutional Cash Management Money Market Fund and the Classic
Institutional U.S. Treasury Securities Money Market Fund, (collectively the
"Money Market Funds"). The assets of each portfolio are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. Each
Fund's prospectus provides a description of the Fund's investment objectives,
policies and strategies. The financial statements of the Prime Quality Money
Market Fund, the U.S. Government Securities Money Market Fund, and the
Tax-Exempt Money Market Fund (collectively the "Funds") are included herein. The
financial statements of the remaining Funds are presented separately.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by
the Trust:
SECURITY VALUATION -- Investment securities held by the Funds are stated at
amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a
regulated investment company for Federal income tax purposes and distribute
all of its taxable income and net capital gains. Accordingly, no provisions
for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on an accrual basis. Costs used in
determining net realized gains and losses on the sales of investment
securities are those of the specific securities sold adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding period. Purchase discounts and premiums on securities
held by the Funds are accreted and amortized ratably to maturity and are
included in interest income.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters into
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
26
<PAGE>
================================================================================
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated each business day, by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding.
OTHER -- Expenses that are directly related to a specific Fund are charged
to that Fund. Class specific expenses are borne by that class. Other
operating expenses of the Trust are pro-rated to the Funds on the basis of
relative net assets. Fund expenses are pro-rated to the respective classes
on the basis of relative net assets.
Distributions from net investment income of each of the Funds are declared on
each business day and paid to shareholders on a monthly basis. Any net realized
capital gains on sales of securities are distributed to shareholders at least
annually.
RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and
characterization of certain income and capital gains distributions are
determined annually in accordance with federal tax regulations which may
differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions during such period. These book/tax differences may be
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise. Accordingly, the following permanent difference, primarily
attributable to the classification of short-term capital gains and ordinary
income for tax purposes related to the other funds, has been reclassified
to/from the following accounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED
ACCUMULATED NET INVESTMENT
REALIZED GAIN INCOME
(000) (000)
-------------- --------------
<S> <C> <C>
Prime Quality Money
Market Fund $27 $(27)
</TABLE>
These reclassifications have no effect on net assets or net asset values
per share.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
3. Transactions with Affiliates:
Certain officers of the Trust are also officers of the Administrator and/or SEI
Investments Distribution Co. (the "Distributor"). Such officers are paid no fees
by the Trust for serving as officers of the Trust.
4. Administration and Transfer Agency Servicing Agreements:
The Trust and the Administrator are parties to an Administration Agreement dated
May 29, 1995, as amended November 19, 1997, under which the Administrator
provides administrative services for an annual fee (expressed as a percentage of
the combined average daily net assets of the Trust and STI Classic Variable
Annuity Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on
the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated May 14, 1994 under which Federated Services Company
provides transfer agency services to the Trust.
5. Investment Advisory and Custodian Agreements:
The Trust and Trusco Capital Management have entered into an advisory agreement
dated July 15, 1993.
Under terms of the respective agreements, the Funds are charged the following
annual fees based upon average daily net assets:
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM TRUST INVESTOR INVESTOR
ANNUAL SHARE SHARE SHARE
ADVISORY MAXIMUM DISTRIBUTION MAXIMUM
FEE EXPENSE FEE EXPENSE
-------- ------- ------------ --------
<S> <C> <C> <C> <C>
Prime Quality Money
Market Fund .65% .60% .20% .77%
U.S. Government
Securities Money
Market Fund .65% .63% .17% .77%
U.S. Tax-Exempt Money
Market Fund .55% .62% .15% .74%
</TABLE>
The Investment Advisor and the Administrator have voluntarily agreed to waive
all or a portion of their fees (and to reimburse Funds' expenses) in order to
limit operating expenses to an amount as outlined in the table above. Fee
waivers and expense reimbursements are voluntary and may be terminated at any
time.
SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the
Funds. Fees of the Custodian are paid on the basis of the net assets of the
Funds. The Custodian plays no role in determining the investment policies of the
Trust or which securities are to be purchased or sold in the Funds.
6. Investment Transactions:
The Funds had capital loss carryforwards at May 31, 1998 as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES
5/31/98 2003 2004 2005
FUND (000) (000) (000) (000)
- ---- --------- ------- ------- -------
<S> <C> <C> <C> <C>
Prime Quality
Money Market
Fund $329 $125 $-- $204
Tax-Exempt
Money Market
Fund 4 -- 4 --
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
7. Concentration of Credit Risk:
The Prime Quality Money Market Fund invests primarily in high quality money
market instruments rated in the highest short-term rating category by Standard &
Poor's Ratings Group ("S&P") or Moody's Investors Services, Inc. (Moody's) or,
if not rated, are determined by the Advisor to be of comparable quality. The
U.S. Government Securities Money Market Fund invests exclusively in U.S.
Treasury obligations, U.S. Government subsidiary corporation securities which
are backed by the full faith and credit of the U.S. Government and repurchase
agreements with approved dealers collateralized by U.S. Treasury securities and
U.S. Government subsidiary corporation securities. The Tax-Exempt Money Market
Fund invests in high quality, U.S. dollar denominated municipal securities rated
in one of the two highest short-term rating categories or, if not rated, are
determined by the Advisor to be of comparable quality.
28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
To the Shareholders and Board of Trustees of
STI Classic Funds:
We have audited the accompanying statements of net assets of the Prime Quality
Money Market and Tax-Exempt Money Market Funds, and the statement of assets and
liabilities, including the schedule of investments, of the U.S. Government
Securities Money Market Fund of STI Classic Funds (the "Trust") as of May 31,
1998, and the related statements of operations, changes in net assets, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Quality Money Market, U.S. Government Securities Money Market, and
Tax-Exempt Money Market Funds of STI Classic Funds as of May 31, 1998, the
results of their operations, changes in their net assets, and financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
July 24, 1998
29
<PAGE>
STI CLASSIC FUNDS
INVESTMENT ADVISOR:
TRUSCO CAPITAL MANAGEMENT, INC.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's Classic Institutional
Cash Management and Classic Institutional U.S. Treasury Securities Money Market
Fund prospectus dated October 1, 1998. The prospectus may be obtained through
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
TABLE OF CONTENTS
PAGE
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . .B-2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . .B-8
INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . B-10
THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . B-11
THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . B-12
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . B-16
CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . B-17
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . B-18
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . B-19
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
FUND TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . B-21
TRADING PRACTICES AND BROKERAGE. . . . . . . . . . . . . . . . . . . B-21
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . B-23
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . B-24
LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . B-24
YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
5% AND 25% SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . B-25
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
October 1, 1998
<PAGE>
THE TRUST
STI Classic Funds (the "Trust") is a diversified, open-end management investment
company established under Massachusetts law as a Massachusetts business trust
under a Declaration of Trust dated January 15, 1992. The Declaration of Trust
permits the Trust to offer separate series ("Funds") of units of beneficial
interest ("shares") and different classes of shares of each Fund. This
Statement of Additional Information relates to the Trust's Classic Institutional
Cash Management Money Market Fund and Classic Institutional U.S. Treasury
Securities Money Market Fund (collectively, the "Funds"), each of which
currently offers one class of shares.
DESCRIPTION OF PERMITTED INVESTMENTS
FOREIGN SECURITIES
The Institutional Cash Management Money Market Fund may invest in U.S. dollar
denominated obligations or securities of foreign issuers. Possible investments
include equity securities of foreign entities, obligations of foreign branches
of U.S. banks and of foreign banks, including, without limitation, European
Certificates of Deposit, European Time Deposits, European Bankers' Acceptances,
Canadian Time Deposits and Yankee Certificates of Deposit, and investments in
Canadian Commercial Paper, Europaper and foreign securities. These instruments
may subject the Fund to investment risks that differ in some respects from those
related to investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements than
those applicable to domestic branches of U.S. banks.
INVESTMENT COMPANY SHARES
Investment companies typically incur fees that are separate from those fees
incurred directly by the Funds. A Fund's purchase of such investment company
securities results in the layering of expenses, such that Shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
B-2
<PAGE>
MUNICIPAL SECURITIES
The Funds may invest in municipal securities. The two principal classifications
of municipal securities are "general obligation" and "revenue" issues. General
obligation issues are issues involving the credit of an issuer possessing taxing
power and are payable from the issuer's general unrestricted revenues, although
the characteristics and method of enforcement of general obligation issues may
vary according to the law applicable to the particular issue. Revenue issues
are payable only from the revenues derived from a particular facility or class
of facilities or other specific revenue source. A Fund may also invest in
"moral obligation" issues, which are normally issued by special purpose
authorities. Moral obligation issues are not backed by the full faith and
credit of the state and are generally backed by the agreement of the issuing
authority to request appropriations from the state legislative body. Municipal
securities include debt obligations issued by governmental entities to obtain
funds for various public purposes, such as the construction of a wide range of
public facilities, the refunding of outstanding obligations, the payment of
general operating expenses, and the extension of loans to other public
institutions and facilities. Certain private activity bonds that are issued by
or on behalf of public authorities to finance various privately-owned or
operated facilities are included within the term "Municipal Securities."
Private activity bonds are industrial development bonds are generally revenue
bonds, the credit and quality of which are directly related to the credit of the
private user of the facilities.
Municipal securities may also include general obligation notes, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, project notes,
certificates of indebtedness, demand notes, tax-exempt commercial paper,
construction loan notes and other forms of short-term, tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of fax funds, the proceeds of bond placements or other revenues. Project notes
are issued by a state or local housing agency and are sold by the Department of
Housing and Urban Development. While the issuing agency has the primary
obligation with respect to its project notes, they are also secured by the full
faith and credit of the United States through agreements with the issuing
authority which provide that, if required, the federal government will end the
issuer an amount equal to the principal of and interest on the project notes.
The quality of municipal securities, both within a particular classification and
between classifications, will vary, and the yields on municipal securities
depend upon a variety of factors, including general money market conditions, the
financial condition of the issuer (or other entity whose financial resources are
supporting the securities), general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating(s)
of the issue. In this regard, it should be emphasized that the ratings of any
NRSRO are general and are not absolute standards of quality. Municipal
securities with the same maturity, interest rate and rating(s) may have
different yields, while municipal securities of the same maturity and interest
rate with different rating(s) may have the same yield.
An issuer's obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy
B-3
<PAGE>
Code, and laws, if any, which may be enacted by Congress or state legislatures
extending the time for payment of principal or interest, or both, or imposing
other constraints upon the enforcement of such obligations or upon the ability
of municipalities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest on and principal of its municipal
securities may be materially adversely affected by litigation or other
conditions.
MUNICIPAL NOTE RATINGS: Moody's highest rating for state and municipal and
other short-term notes is MIG-1 and VMIG-1. Short-term municipal securities
rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing or both. Short-term municipal
securities rated MIG-2 and VMIG-2 are of high quality. Margins of protection
are ample although not so large as in the preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a long-term
debt rating. The following criteria will be used in making that assessment.
- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rate symbols are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
SUPRANATIONAL AGENCY OBLIGATIONS
The Institutional Cash Management Money Market Fund may purchase obligations of
supranational agencies. Currently the Fund intends to invest only in
obligations issued or guaranteed by the Asian Development Bank, Inter-American
Development Bank, International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Coal and Steel Community, European
Economic Community, European Investment Bank and the Nordic Investment Bank.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Investments Company ("SEI Investments"), the parent company of
the Administrator and the Distributor. The purchase of shares of the Trust by
such banks or by their customers will not be a consideration in
B-4
<PAGE>
determining which bank obligations the Trust will purchase. However, the Trust
will not purchase obligations issued by the Advisor.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements. Repurchase agreements are
agreements by which a person (E.G., a Fund) obtains a security and
simultaneously commits to return the security to the seller (a primary
securities dealer as recognized by the Federal Reserve Bank of New York or a
national member bank as defined in Section 3(d)(1) of the Federal Deposit
Insurance Act, as amended) at an agreed-upon price (including principal and
interest) on an agreed-upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves
the obligation of the seller to pay the agreed upon price, which obligation is,
in effect, secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisor monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Custodian or its agent must take possession of the underlying
collateral. However, if the seller defaults, a Fund could realize a loss on the
sale of the underlying security to the extent that the proceeds of the sale
including accrued interest are less than the resale price provided in the
agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if a Fund is treated as an unsecured creditor and required to return
the underlying security to the seller's estate.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Permitted investments for the Funds include
restricted securities. Each Fund may invest up to 10% of its net assets in
illiquid securities. Restricted securities, including securities eligible for
re-sale under 1933 Act Rule 144A, that are determined to be liquid are not
subject to this limitation. This determination is to be made by the Fund's
Advisor pursuant to guidelines adopted by the Board of Trustees. Under these
guidelines, the Advisor will consider the frequency of trades and quotes for the
security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. In purchasing such Restricted
Securities, the Advisor intends to purchase securities that are exempt from
registration under Rule 144A under the 1933 Act.
B-5
<PAGE>
SECURITIES LENDING
The Funds may lend securities pursuant to agreements which require that the
loans be continuously secured by collateral at all times equal to 100% of the
market value of the loaned securities which consists of cash, securities of the
U.S. Government or its agencies, or any combination of cash and such securities.
Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for a Fund exceed one-third of the value of the
Fund's total assets taken at fair market value. A Fund will continue to receive
interest on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a
Fund will normally pay lending fees to such broker-dealers and related expenses
from the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Advisor to be of good standing and when, in the judgment of the Advisor, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. Any loan may be terminated by either party upon reasonable
notice to the other party. The Funds may use the Distributor or a broker-dealer
affiliate of the Advisor as a broker in these transactions.
STANDBY COMMITMENTS AND PUTS
The Institutional Cash Management Money Market Fund may purchase securities at a
price which would result in a yield-to-maturity lower than that generally
offered by the seller at the time of purchase when it can simultaneously acquire
the right to sell the securities back to the seller, the issuer, or a third
party (the "writer") at an agreed-upon price at any time during a stated period
or on a certain date. Such a right is generally denoted as a "standby
commitment" or a "put." The purpose of engaging in transactions involving puts
is to maintain flexibility and liquidity to permit the Fund to meet redemptions
and remain as fully invested as possible in municipal securities. The Fund
reserves the right to engage in put transactions. The right to put the
securities depends on the writer's ability to pay for the securities at the time
the put is exercised. The Institutional Cash Management Money Market Fund would
limit its put transactions to institutions which the Advisor believes present
minimal credit risks, and the Advisor would use its best efforts to initially
determine and continue to monitor the financial strength of the sellers of the
options by evaluating their financial statements and such other information as
is available in the marketplace. It may, however be difficult to monitor the
financial strength of the writers because adequate current financial information
may not be available. In the event that any writer is unable to honor a put for
financial reasons, the Fund would be a general creditor (I.E., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular
provisions of the contract between the Fund and the writer may excuse the writer
from repurchasing the securities; for example, a change in the published rating
of the underlying securities or any similar event that has an adverse effect on
the issuer's credit or a provision in the contract that the put will not be
exercised except in certain special cases, for example, to maintain portfolio
liquidity. The Fund could, however, at any time sell the underlying portfolio
security in the open market or wait until the portfolio security matures, at
which time it should realize the full par value of the security.
B-6
<PAGE>
The securities purchased subject to a put may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could, of course, sell the portfolio
security. The maturity of the underlying security will generally be different
from that of the put. There will be no limit to the percentage of portfolio
securities that the Fund may purchase subject to a standby commitment or put,
but the amount paid directly or indirectly for all standby commitments or puts
which are not integral parts of the security as originally issued held in the
Fund will not exceed 1/2 of 1% of the value of its total assets of such Fund
calculated immediately after any such put is acquired.
STRIPS
Each Fund may invest in Separately Traded Interest and Principal Securities
("STRIPS"), which are component parts of U.S. Treasury Securities traded through
the Federal Book-Entry System. The Advisor will only purchase STRIPS that it
determines are liquid or, if illiquid, do not violate each Fund's investment
policy concerning investments in illiquid securities. Consistent with Rule 2a-7
under the Investment Company Act of 1940, as amended, (the "1940 Act"), the
Advisor will only purchase STRIPS for the Funds that have a remaining maturity
of 397 days or less; therefore, the Funds currently may only purchase interest
component parts of U.S. Treasury Securities. While there is no limitation on
the percentage of a Fund's assets that may be comprised of STRIPS, the Advisor
will monitor the level of such holdings to avoid the risk of impairing
Shareholders' redemption rights and of deviations in the value of shares of the
Funds.
U.S. GOVERNMENT AGENCY SECURITIES
Certain investments of the Institutional Cash Management Money Market Fund may
include U.S. Government Agency Securities. Agencies of the United States
Government which issue obligations consist of, among others, the Export Import
Bank of the United States, Farmers Home Administration, Federal Farm Credit
Bank, Federal Housing Administration, Government National Mortgage Association
("GNMA"), Maritime Administration, Small Business Administration, and The
Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued by, among others, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks, Fannie Mae, and the United States Postal Service as
well as government trust certificates. Some of these securities are supported
by the full faith and credit of the United States Treasury, others are supported
by the right of the issuer to borrow from the Treasury and still others are
supported only by the credit of the instrumentality. Guarantees of principal by
agencies or instrumentalities of the U.S. Government may be a guarantee of
payment at the maturity of the obligation so that in the event of a default
prior to maturity there might not be a market and thus no means of realizing the
value of the obligation prior to maturity.
B-7
<PAGE>
VARIABLE RATE MASTER DEMAND NOTES
The Institutional Cash Management Money Market Fund may invest in variable rate
master demand notes which may or may not be backed by bank letters of credit.
These notes permit the investment of fluctuating amounts at varying market rates
of interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. Such notes provide that the interest rate on the amount outstanding
varies on a daily, weekly or monthly basis depending upon a stated short-term
interest rate index. Both the lender and the borrower have the right to reduce
the amount of outstanding indebtedness at any time. There is no secondary
market for the notes and it is not generally contemplated that such instruments
will be traded. The quality of the note or the underlying credit must, in the
opinion of the Advisor, be equivalent to the ratings applicable to permitted
investments for the Fund. The Advisor will monitor on an ongoing basis the
earning power, cash flow and liquidity ratios of the issuers of such instruments
and will similarly monitor the ability of an issuer of a demand instrument to
pay principal and interest on demand.
INVESTMENT LIMITATIONS
The following are fundamental policies of each Fund and cannot be changed with
respect to a Fund without the consent of the holders of a majority of a Fund's
outstanding shares.
The term "a majority of the outstanding shares" of a Fund means the vote of the
lesser of (i) 67% or more of the shares of such Fund present at a meeting, if
the holders of more than 50% of the outstanding shares of such Fund are present
or represented by proxy or (ii) more than 50% of the outstanding shares of such
Fund.
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and, to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter or such longer
period as the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur
and is not for investment purposes. All borrowings in excess of 5% of the
value of a Fund's total assets will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.
B-8
<PAGE>
4. Make loans, except that (a) a Fund may purchase or hold debt instruments in
accordance with its investment objective and policies; (b) a Fund may enter
into repurchase agreements, and (c) a Fund may engage in securities lending
as described in the Prospectus and in this Statement of Additional
Information.
5. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10% of
the Fund's total assets, taken at current value at the time of the
incurrence of such loan, except as permitted with respect to securities
lending.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts and interests in a pool of securities
that are secured by interests in real estate. However, subject to their
permitted investment spectrum, any Fund may invest in companies which
invest in real estate commodities or commodities contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a security.
9. Purchase securities of other investment companies except for money market
funds and CMOs and REMICs deemed to be investment companies and then only
as permitted by the 1940 Act and the rules and regulations thereunder.
Under these rules and regulations, a Fund is prohibited from acquiring the
securities of other investment companies if, as a result of such
acquisition, the Fund owns more than 3% of the total voting stock of the
company; securities issued by any one investment company represent more
than 5% of the total assets of a Fund; or securities (other than treasury
stock) issued by all investment companies represent more than 10% of the
total assets of the Fund.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
NON-FUNDAMENTAL POLICIES
No Fund may purchase or hold illiquid securities, I.E., securities that cannot
be disposed of for their approximate carrying value in seven days or less (which
term includes repurchase agreements and time deposits maturing in more than
seven days) if, in the aggregate, more than 10% of its net assets would be
invested in illiquid securities.
The foregoing percentages, except with respect to holding illiquid securities,
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess occurs or exists immediately after and as a result of
a purchase of such security.
B-9
<PAGE>
INVESTMENT ADVISOR
The Trust and Trusco Capital Management, Inc. (the "Advisor") have entered into
an advisory agreement (the "Advisory Agreement"). The Advisor is an indirect
wholly-owned subsidiary of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a
southeastern regional bank holding company with assets of $ 76 billion as of
June 30, 1998. The Advisory Agreement provides that the Advisor shall not be
protected against any liability to the Trust or its Shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of a Fund (including amounts payable to the Advisor but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by certain states, the Advisor and/or the
Administrator will bear the amount of such excess. The Advisor will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to each
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds, by a majority of the outstanding shares of the Funds, on
not less than 30 days' nor more than 60 days' written notice to the Advisor, or
by the Advisor on 90 days' written notice to the Trust.
For the fiscal years ended May 31, 1998 and 1997, the Funds paid the following
advisory fees:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FEES PAID FEES WAIVED OR
FUND REIMBURSED
1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Classic Institutional Cash $204,194 $0 $403,936 $100,270
Management Money Market Fund
- --------------------------------------------------------------------------------
Classic Institutional U.S.
Treasury Securities Money
Market Fund $ 11,328 $0 $197,908 $ 18,255
- --------------------------------------------------------------------------------
</TABLE>
BANKING LAWS
Current interpretations of federal banking laws and regulations:
B-10
<PAGE>
- - prohibit SunTrust and the Advisor from sponsoring, organizing, controlling,
or distributing the Funds' shares; but
- - do not prohibit SunTrust or the Advisor generally from acting as an
investment advisor, transfer agent, or custodian to the Funds or from
purchasing Fund shares as agent for and upon the order of a customer.
The Advisor believes that it may perform advisory and related services for the
Trust without violating applicable banking laws or regulations. However, the
legal requirements and interpretations about the permissible activities of banks
and their affiliates may change in the future. These changes could prevent the
Advisor from continuing to perform services for the Trust. If this happens, the
Board of Trustees would consider selecting other qualified firms. Shareholders
would approve any new investment advisory agreements would be subject to
Shareholder approval.
If current restrictions on bank activities with mutual funds were relaxed, the
Advisor, or its affiliates, would consider performing additional services for
the Trust. We cannot predict whether these changes will be enacted. We also
cannot predict the terms that the Advisor, or its affiliates, might offer to
provide additional services.
THE ADMINISTRATOR
The Trust and SEI Investment Mutual Funds Services (the "Administrator"), are
parties to an administration agreement (the "Administration Agreement") dated
May 29, 1992. The Administration Agreement provides that the Administrator
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Administrator in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI and its subsidiaries
and affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors and money managers.
The Administrator and its affiliates also serve as administrator or sub-
administrator to the following other mutual funds: The Achievement Funds Trust,
The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop
Street Funds, Boston 1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND,
The Expedition Funds, First American Funds, Inc., First American Investment
Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Monitor Funds,
Morgan Grenfell Investment Trust, The Nevis Funds,Inc., Oak Associates Funds,
The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds,
B-11
<PAGE>
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional International Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Variable Trust, TIP Funds and TIP Institutional Funds.
For the fiscal years ended May 31, 1998 and 1997, the Funds paid the following
administration fees:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FEES PAID FEES WAIVED
FUND
1998 1997 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Classic Institutional Cash $186,749 $32,389 $ 32,097 $0
Management Money Market Fund
- -----------------------------------------------------------------------------
Classic Institutional U.S.
Treasury Securities Money Market $ 61,988 $ 6,047 $ 13,823 $0
Fund
- -----------------------------------------------------------------------------
</TABLE>
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust have entered into a distribution agreement
(the "Distribution Agreement") dated May 29, 1992. The Distributor will receive
no compensation for distribution of Shares.
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees (as defined in the Distribution Agreement),
or by a majority vote of the outstanding securities of the Trust upon not more
than 60 days' written notice by either party.
B-12
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services. The Trustees and Executive Officers of the
Trust, their respective dates of birth, and their principal occupations for
the last five years are set forth below. Each may have held other positions
with the named companies during that period. The business address of each
Trustee and each Executive Officer is SEI Investments Company, Oaks,
Pennsylvania 19456. Certain officers of the Trust also serve as officers of
some or all of the following: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street
Funds, Boston 1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The
Expedition Funds, First American Funds, Inc., First American Investment
Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Monitor
Funds, Morgan Grenfell Investment Trust, The Nevis Funds, Inc., Oak
Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The
Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional International Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax
Exempt Trust, STI Classic Variable Trust, TIP Funds and TIP Institutional
Funds, each of which is an open-end management investment company managed by
SEI Investments Mutual Funds Services or its affiliates and, except for PBHG
Advisor Funds, Inc., distributed by SEI Investments Distribution Co.
DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida,
N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital;
Executive Committee Member and Director, Honda Classic Foundation; Director,
Broward Community College Foundation.
WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company,
1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board,
1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment
Committee and member of Executive Committee, Cotton States Life and Health
Insurance Company; Director and Chairman of Investment Committee and member of
Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust
Company of Georgia Advisory Council.
F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County
Publishing Co., Inc., 1981 - 1997, Publisher of the Paoli News and the Paoli
Republican and Editor of the Paoli Republican, 1981 - 1997, President, H & W
Distribution, Inc., 1984 - 1997. Current Trustee on the Board of Trustees for
the SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President,
Trust Department, Harris Trust and Savings Bank and Chairman of the Board of
Directors of The Harris Trust Company of Arizona before January 1981.
B-13
<PAGE>
T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of
Crawford & Company; held these positions, 1973-1987. Member of the Board of
Directors, 1970-1990, joined company in 1948; spent entire career at Crawford,
currently serves on Boards of Norrell Corporation and Mercy Health Services, the
latter being the holding company of St. Joseph's Hospitals.
DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for
Economic Education, Florida State University, 1991-present. President of
Florida State University, 1976-91; previous four years EVP and Chief Academic
Officer. During educational career, taught at Florida State, Michigan State,
Louisiana State and Southern University. Spent 19 years as faculty member and
administrator at Louisiana State University and served as Head of Economics
Department, member and Chairman of the Graduate Council, Dean of Academic
Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve
Bank of Atlanta, 1983-1988.
JESSE HALL (9/26/29) - Trustee* - Executive Vice President, SunTrust Banks,
Inc., 1985-1994; Director of Crawford & Company since 1979; Member, Atlanta
Estate Planning Council, 1988-1993.
JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD
Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg
Trust.
WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust
Equitable Securities Corporation, January 1998-present. Chairman and CEO,
Equitable Asset Management, Inc., December 1993-present. Chairman and CEO,
Equitable Trust Company, June 1991-present. Chairman, Equitable Securities
Corporation, July 1972-January 1998.
MARK NAGLE (10/20/59) - President and Chief Executive Officer - Vice President
and Controller, Funds Accounting since 1996. Vice President of the Administrator
and Distributor since 1996. Vice President of Fund Accounting - BISYS Fund
Services 1995-1996. Senior Vice President - Fidelity Investments 1981-1995.
TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of the Administrator and the Distributor since 1995.
Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn
(law firm), 1991-1994.
LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock
Exchange, 1989-1998.
B-14
<PAGE>
KATHY HEILIG (12/21/58) - Vice President and Assistant Secretary - Treasurer of
SEI Investments Company since 1997. Assistant Controller of SEI Investments
Company since 1995. Vice President of SEI Investments Company since 1991.
Director of Taxes of SEI Investments Company, 1987-1991. Tax Manager - Arthur
Anderson LLP prior to 1987.
JOSEPH M. O'DONNELL (11/13/54) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997. Staff
Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993.
SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor since
1983.
LYNDA J. STRIEGEL (10/30/48) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998.
Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel,
Riggs Bank, N.A., 1991-1995.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President & General Counsel of SEI Investments, the Administrator and the
Distributor since 1994. Vice President of SEI, the Administrator and the
Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm) prior
to 1992.
KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice
President, Assistant Secretary of SEI Investments, the Administrator and
Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.
CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of SEI
Investments Mutual Funds Services since 1992.
RICHARD W. GRANT (10/25/45) - Secretary - 2000 One Logan Square, Philadelphia,
Pennsylvania 19103.
B-15
<PAGE>
Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust,
Administrator and Distributor, since 1989.
JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 2000 One Logan Square,
Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law
firm) since 1995, counsel to the Trust, Administrator and Distributor.
Associate, Morgan, Lewis & Bockius LLP, 1993-1995. Associate, Ropes & Gray (law
firm), 1988-1993.
- ------------------------------------------
* Messrs. Looney, Goodrum, McNair, Hall and Cammack may be deemed to be an
"interested person" of the Trust as defined in the 1940 Act.
The Trustees and Officers of the Trust own, in the aggregate, less than 1% of
the outstanding shares of the Trust.
For the fiscal year end May 31, 1998, the Trust paid the following amounts to
Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENSION OR
RETIREMENT ESTIMATED TOTAL
AGGREGATE BENEFITS ANNUAL COMPENSATION FROM
COMPENSATION ACCRUED AS BENEFITS FUND AND FUND
NAME OF PERSON, FROM PART OF FUND UPON COMPLEX PAID TO
POSITION FUND EXPENSES RETIREMENT TRUSTEES
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, $15,000 N/A N/A $15,000 for
Trustee service on two
boards
- --------------------------------------------------------------------------------
Wilton Looney, $14,000 N/A N/A $14,000 for
Trustee service on two
boards
- --------------------------------------------------------------------------------
Champney A. McNair, $17,000 N/A N/A $17,000 for
Trustee service on two
boards
- --------------------------------------------------------------------------------
F. Wendell Gooch, $13,000 N/A N/A $13,000 for
Trustee service on two
boards
- --------------------------------------------------------------------------------
T. Gordy Germany, $15,000 N/A N/A $15,000 for
Trustee service on two
boards
- --------------------------------------------------------------------------------
Dr. Bernard F. $15,000 N/A N/A $15,000 for
Sliger, Trustee service on two
boards
- --------------------------------------------------------------------------------
Jesse S. Hall, $14,000 N/A N/A $14,000 for
Trustee service on two
boards
- --------------------------------------------------------------------------------
Jonathan T. Walton, $3,500 N/A N/A $ 3,500 for
Trustee* service on two
boards
- --------------------------------------------------------------------------------
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Pension or
Retirement Estimated Total
Aggregate Benefits Annual Compensation from
Compensation Accrued as Benefits Fund and Fund
Name of Person, From Part of Fund Upon Complex Paid to
Position Fund Expenses Retirement Trustees
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William H. Cammack, N/A N/A N/A $ 0 for service
Trustee on two boards
- --------------------------------------------------------------------------------
</TABLE>
*Messr. Walton's compensation reflects a starting date of June 19, 1998.
PERFORMANCE INFORMATION
From time to time a Fund may advertise its performance. Performance figures are
based on historical earnings and are not intended to indicate future
performance.
PERFORMANCE COMPARISONS
Each Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds, or
to unmanaged indices. These comparisons may assume reinvestment of dividends
but generally do not reflect deductions for administrative and management costs.
COMPUTATION OF YIELD
The current yield of the Funds will be calculated daily based upon the seven
days ending on the date of calculation (the "base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The
effective compound yield of the Funds is determined by computing the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = [Base Period Return + 1) TO THE POWER OF
365/7] - 1. The current and the effective yields reflect the reinvestment of
net income earned daily on portfolio assets.
B-17
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FUND 7-DAY YIELD 7-DAY EFFECTIVE YIELD
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Classic Institutional Cash Management Money Market Fund 5.26% 5.63%
- ----------------------------------------------------------------------------------------
Classic Institutional U.S. Treasury Securities Fund 5.52% 5.46%
- ----------------------------------------------------------------------------------------
</TABLE>
The yield of these Funds fluctuates, and the annualization of a week's dividend
is not a representation by the Trust as to what an investment in the Fund will
actually yield in the future. Actual yields will depend on such variables as
asset quality, average asset maturity, the type of instruments the Fund invests
in, changes in interest rates on money market instruments, changes in the
expenses of the Fund and other factors.
Yields are one basis upon which investors may compare the Funds with other money
market funds; however, yields of other money market funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
CALCULATION OF TOTAL RETURN
From time to time, the Equity Funds may advertise total return. In
particular, total return will be calculated according to the following
formula: P (1 + T) TO THE POWER OF n = ERV, where P = a hypothetical initial
payment of $1,000; T = average annual total return; n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated time period as of the end of such period.
From time to time, the Trust may include the names of clients of the Advisor in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. SunTrust
Bank's investment advisory affiliate, Trusco Capital Management, has been in the
top 1% of the SEI Funds Evaluation database for equity managers over the past
ten years. SEI Investment's database includes research data on over 1,000
investment managers responsible for over $450 billion in assets.
Based on the foregoing, the average annual total returns for the Funds from
inception through May 31, 1998 and for one-year periods ended May 31, 1998 were
as follows:
B-18
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUND AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
ONE-YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Classic Institutional Cash Management Money
Market Fund* 5.56% 5.47%
- --------------------------------------------------------------------------------
Classic Institutional U.S. Treasury Securities
Money Market Fund* 5.44% 5.36%
- --------------------------------------------------------------------------------
</TABLE>
* Commenced operations December 12, 1996
ADVERTISING
From time to time, the Trust may include the names of clients of the Advisor in
advertisements and/or sales literature for the Trust.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is
closed on the days following holidays are observed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
It is currently the Trust's policy to pay for all redemptions in cash. The
Trust retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of readily marketable
securities held by the Funds in lieu of cash. Shareholders may incur brokerage
charges on the sale of any such securities so received in payment of
redemptions. A Shareholder will at all times be entitled to aggregate cash
redemptions from all Funds of the Trust during any 90-day period of up to the
lesser of $250,000 or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the NYSE is restricted, or during the existence of an emergency (as determined
by the Securities and Exchange Commission by rule or regulation) as a result of
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission has by order
permitted. The Trust also reserves the right to suspend sales of shares of a
Fund for any period during which the NYSE, an Advisor, the Administrator and/or
the Custodian are not open for business. Investors will receive written
notification at least thirty days prior to any change in a Fund's investment
objective.
Certain state securities laws may require those financial institutions providing
certain distribution services to the Trust to register as dealers pursuant to
state law.
B-19
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Funds is calculated daily by the
Administrator by adding the value of securities and other assets, subtracting
liabilities and dividing by the number of outstanding shares. Securities will
be valued by the amortized cost method which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price a Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of a
Fund may tend to be higher than a like computation made by a company with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio securities. Thus, if
the use of amortized cost by a Fund resulted in a lower aggregate portfolio
value on a particular day, a prospective investor in a Fund would be able to
obtain a somewhat higher yield than would result from investment in a company
utilizing solely market values, and existing investors in a Fund would
experience a lower yield. The converse would apply in a period of rising
interest rates.
A Fund's use of amortized cost and the maintenance of a Fund's net asset value
at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940
Act, provided that certain conditions are met. The regulations also require the
Trustees to establish procedures which are reasonably designed to stabilize the
net asset value per share at $1.00 for the Funds. Such procedures include the
determination of the extent of deviation, if any, of the Funds current net asset
value per share calculated using available market quotations from the Funds
amortized cost price per share at such intervals as the Trustees deem
appropriate and reasonable in light of market conditions and periodic reviews of
the amount of the deviation and the methods used to calculate such deviation.
In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to
consider promptly what action, if any, should be initiated, and, if the Trustees
believe that the extent of any deviation may result in material dilution or
other unfair results to Shareholders, the Trustees are required to take such
corrective action as they deem appropriate to eliminate or reduce such dilution
or unfair results to the extent reasonably practicable. Such actions may
include the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; or establishing a net asset value per share by using
available market quotations. In addition, if the Funds incur a significant loss
or liability, the Trustees have the authority to reduce pro rata the number of
shares of the Funds in each Shareholder's account and to offset each
Shareholder's pro rata portion of such loss or liability from the Shareholder's
accrued but unpaid dividends or from future dividends while each other Fund must
annually distribute at least 90% of its investment company taxable income.
TAXES
The following is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders that are not described in
the Funds' prospectus. No attempt is made to
B-20
<PAGE>
present a detailed explanation of the Federal tax treatment of the Funds or
their Shareholders, and the discussion here and in the Funds' prospectus is not
intended as a substitute for careful tax planning.
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional Information.
New legislation, as well as administrative changes or court decisions, may
change the conclusions expressed herein, and may have a retroactive effect with
respect to the transactions contemplated herein.
FEDERAL INCOME TAX
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
a Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) at the
close of each quarter of a Fund's taxable year, at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of a Fund's assets and that does not represent more than
10% of the outstanding voting securities of such issuer; and (iii) at the close
of each quarter of a Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RIC's) of any one issuer, or of two or more issuers
engaged in same or similar businesses if the Fund owns at least 20% of the
voting power of such issuers. Requirement (ii) no longer applies for tax years
beginning after August 5, 1997.
In addition, each Fund will distribute by the end of any calendar year 98% of
its ordinary income for that year and 98% of its capital gain net income for the
one-year period ending on October 31 of that calendar year, plus certain other
amounts. Each Fund intends to make sufficient distributions prior to the end of
each calendar year to avoid liability for the federal excise tax applicable to
regulated investment companies.
B-21
<PAGE>
If, at the close of each quarter of its taxable year, at least 50% of the value
of a Fund's total assets consists of obligations the interest on which is
excludable from gross income, a Fund may pay "exempt-interest dividends," as
defined in Section 852(b)(5) of the Code, to its Shareholders.
Any gain or loss recognized on a sale or redemption of Shares of a Fund by a
Shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than
eighteen months, mid-term if the shares have been held for over one year but not
for over eighteen months, and short-term if for a year or less. If shares held
for six months or less are sold or redeemed for a loss, two special rules apply:
First, if shares on which a net capital gain distribution has been received are
subsequently sold or redeemed, and such shares have been held for six months or
less, any loss recognized will be treated as long-term capital loss to the
extent of the long-term capital gain distributions. Second, any loss recognized
by a Shareholder upon the sale or redemption of shares of a tax-exempt fund held
for six months or less will be disallowed to the extent of any exempt-interest
dividends received by the Shareholder with respect to such shares.
The Funds will make annual reports to Shareholders of the Federal income tax
status of all distributions.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisor is responsible for placing the orders
to execute transactions for a Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the Advisor generally seeks reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Advisor
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Trust selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary
B-22
<PAGE>
consideration is to have brokers or dealers provide transactions at best price
and execution for the Trust. Best price and execution includes many factors,
including the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Trust's determination of what are
reasonably competitive rates is based upon the professional knowledge of its
trading department as to rates paid and charged for similar transactions
throughout the securities industry. In some instances, the Trust pays a minimal
share transaction cost when the transaction presents no difficulty. Some trades
are made on a net basis where the Trust either buys securities directly from the
dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by an Advisor, brokerage business to brokers
or dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends, assisting in
determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by an Advisor in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used exclusively with respect to the fund
or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to
broker-dealers who provide such brokerage and research services, the Trust
believes that the commissions paid to such broker-dealers are not, in general,
higher than commissions that would be paid to broker-dealers not providing such
services and that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In addition, portfolio
transactions which generate commissions or their equivalent are directed to
broker-dealers who provide daily portfolio pricing services to the Trust.
Subject to best price and execution, commissions used for pricing may or may not
be generated by the funds receiving the pricing service.
An Advisor may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in
a manner deemed equitable to each account or fund. It is believed that the
ability of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or Fund may obtain, it is the opinion
of each Advisor and the
B-23
<PAGE>
Trust's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Funds, at
the request of the Distributor, give consideration to sales of shares of the
Trust as a factor in the selection of brokers and dealers to execute Trust
portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of an Advisor, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of an Advisor is permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor or an affiliate of an Advisor to receive
and retain such compensation. These rules further require that commissions paid
to the Distributor by the Trust for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other renumeration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." In addition, the Trust may direct commission business to one or more
designated broker-dealers in connection with such broker/dealer's provision of
services to the Trust or payment of certain Trust expenses (e.g., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor, and will review these
procedures periodically.
For the fiscal year ended May 31, 1998, the Funds paid the following brokerage
commissions with respect to portfolio transactions:
B-24
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Portfolio Total $ Total $ % of Total
Amount of Amount of Brokerage
Brokerage Brokerage Commissions
Commissions Commissions Paid to
Paid in FYE Paid to Affiliated
5/31/98 Affiliates in Brokers in
FYE 5/31/98 FYE 5/31/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Classic $ 59,346 $ 59,346 100%
Institutional
Cash
Management
Money
Market Fund
- --------------------------------------------------------------------------------
Classic $ 51,553 $ 51,553 100%
Institutional
U.S.
Treasury
Securities
Money
Market Fund
- --------------------------------------------------------------------------------
</TABLE>
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares and classes of shares of the Funds each of which represents an equal
proportionate interest in that Fund with each other share.
B-25
<PAGE>
Shares are entitled upon liquidation to a PRO RATA share in the net assets of
the Funds. Shareholders have no preemptive rights. The Declaration of Trust
provides that the Trustees of the Trust may create additional series of shares
or classes of series. All consideration received by the Trust for shares of any
additional series and all assets in which such consideration is invested would
belong to that series and would be subject to the liabilities related thereto.
Share certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held personally liable for the
obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisors, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
YEAR 2000
The Trust depends on the smooth functioning of computer systems in almost
every aspect of its business. Like other mutual funds, businesses and
individuals around the world, the Trust could be adversely affected if the
computer systems used by its service providers do not properly process dates
on and after January 1, 2000 and distinguish between the year 2000 and the
year 1900. The Trust has asked its service providers whether they expect to
have their computer systems adjusted for the year 2000 transition, and is
seeking assurances from each service provider that its system it expects to
accommodate the year 2000 without material adverse consequences to the Trust.
While it is likely that such assurances will be obtained, the Trust and its
shareholders may experience losses if these assurances prove to be incorrect
or as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or third parties, such as custodians, banks,
broker-dealers or others with which the Trust does business.
B-26
<PAGE>
5% AND 25% SHAREHOLDERS
As of September __, 1998, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% and
25% or more of the shares of the Funds. Persons who owned of record or
beneficially more than 25% of a Fund's outstanding shares may be deemed to
control the Fund within the meaning of the Act. The Trust believes that most of
the shares of the Trust Class of the Funds were held for the record owner's
fiduciary, agency or custodial customers.
SunTrust Capital Markets ACH
Attn: Anita Woods Center 3910
303 Peachtree Street, 24th Floor
Atlanta, GA 30308-3201
SunTrust Banks
Attn: Susan Grider
Mail Center 3133
P.O Box 105504
Atlanta, GA 30308
EXPERTS
The financial statements as of May 31, 1998 have been audited by Arthur Andersen
LLP, Independent Public Accountants, as indicated in their report dated July 24,
1998 with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
B-27
<PAGE>
- -------------COMPARISON OF FOOTERS-------------
B-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
To the Shareholders and Board of Trustees of
STI Classic Funds:
We have audited the accompanying statements of net assets of the Classic
Institutional Cash Management Money Market Fund and the statement of assets and
liabilities, including the schedule of investments, of the Classic Institutional
U.S. Treasury Securities Money Market Fund of STI Classic Funds (the "Trust") as
of May 31, 1998, and the related statements of operations, changes in net
assets, and financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Classic Institutional Cash Management Money Market and Classic Institutional
U.S. Treasury Securities Money Market Funds of STI Classic Funds as of May 31,
1998, the results of their operations, changes in their net assets, and
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
July 24, 1998
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (25.4%)
FINANCE (5.5%)
Banc One
5.570%, 06/09/98 $1,729 $ 1,727
Banc One Funding
5.520%, 06/01/98 1,078 1,078
5.570%, 06/12/98 1,000 998
Caterpiller Finance
5.470%, 07/21/98 1,300 1,290
Credit Suisse First Boston
5.500%, 06/09/98 5,000 4,994
General Electric Capital
5.450%, 06/01/98 500 500
5.520%, 08/17/98 500 494
GMAC
5.550%, 07/10/98 2,250 2,237
John Hancock
5.530%, 07/02/98 3,706 3,688
Xerox Credit
5.650%, 06/01/98 3,512 3,512
----------
20,518
----------
INDUSTRIAL (19.2%)
British Petroleum America
5.650%, 06/01/98 10,844 10,844
Dominion Semiconductor
5.560%, 07/20/98 4,000 3,970
5.570%, 07/23/98 7,000 6,944
Eaton
5.500%, 06/03/98 937 937
5.480%, 07/31/98 6,575 6,515
Fortune Brands
5.520%, 07/28/98 6,500 6,443
General Re
5.510%, 06/26/98 11,000 10,957
J.C. Penney
5.500%, 06/10/98 1,300 1,298
5.500%, 06/25/98 10,000 9,963
INDUSTRIAL--CONTINUED
Procter & Gamble
5.580%, 06/19/98 $1,350 $ 1,346
RTZ America
5.500%, 06/18/98 4,200 4,189
Sherwin Williams
5.500%, 06/01/98 2,000 2,000
5.500%, 06/09/98 3,625 3,621
Wal-Mart Stores
5.782%, 06/01/98 1,400 1,400
Walt Disney
5.550%, 12/04/98 515 500
Xerox
5.650%, 06/01/98 932 932
----------
71,859
----------
UTILITIES (0.7%)
South Carolina Fuel
5.520%, 06/25/98 2,580 2,571
----------
Total Commercial Paper
(Cost $94,950) 94,948
----------
CORPORATE OBLIGATIONS (12.4%)
FINANCE (8.4%)
Associates Corporation of
North America, MTN
8.780%, 06/10/98 1,000 1,001
Associates Corporation of
North America
6.375%, 08/15/98 100 100
Bankers Trust, New York (A) (B)
5.679%, 02/19/99 7,000 7,000
Beneficial, MTN
8.270%, 11/30/98 1,000 1,012
British Telecom Finance
9.375%, 02/15/99 1,000 1,024
Caterpillar Financial Service,
MTN (A)
5.755%, 05/09/99 5,000 5,000
1
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONTINUED
<TABLE>
<CAPTION>
- -----------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
Ford Motor Credit
8.000%, 01/15/99 $ 1,000 $ 1,013
General Electric Capital (A)
5.596%, 11/27/98 10,000 10,000
GMAC, MTN
7.150%, 04/30/99 1,000 1,011
International Lease
5.750%, 01/15/99 752 752
Nationsbank
8.500%, 03/01/99 1,000 1,020
Norwest
6.230%, 09/01/98 150 150
Transamerica, MTN (A)
5.719%, 02/18/99 1,500 1,501
Xerox Credit
10.000%, 04/01/99 780 806
----------
31,390
----------
INDUSTRIAL (0.7%)
Fortune Brands
7.500%, 05/15/99 1,025 1,041
Fortune Brands, MTN
8.750%, 08/10/98 1,000 1,006
J.C. Penney
5.375%, 11/15/98 500 499
----------
2,546
----------
UTILITIES (3.3%)
Baltimore Gas & Electric, MTN
8.930%, 07/16/98 1,750 1,756
Bell Atlantic, MTN
5.440%, 07/15/98 250 250
Carolina Power & Light, MTN
5.375%, 07/01/98 250 250
Duke Energy, MTN
5.170%, 09/01/98 500 499
GTE Northwest
6.125%, 02/15/99 650 651
UTILITIES--CONTINUED
Pacific Gas & Electric,
Callable on 07/09/98 @ 100.00
5.750%, 12/01/98 $ 1,000 $ 1,000
Southern California Edison
5.450%, 06/15/98 1,000 1,000
7.500%, 04/15/99 505 512
Virginia Electric Power
9.375%, 06/01/98 4,980 4,980
Virginia Electric Power, MTN
6.250%, 08/01/98 500 500
9.650%, 01/25/99 990 1,013
----------
12,411
----------
Total Corporate Obligations
(Cost $46,347) 46,347
----------
BANK NOTES (11.7%)
American Express Centurion (A)
5.606%, 03/24/99 5,000 5,000
Comerica Bank (A)
5.695%, 10/21/98 4,000 3,999
Deutsche Bank NY (A)
5.715%, 04/14/99 5,000 4,998
FCC National Bank (A)
5.715%, 04/09/99 5,000 4,998
First National Bank, Chicago (A)
5.722%, 04/19/99 10,000 9,996
Northern Trust (A)
5.715%, 04/09/99 10,000 9,997
PNC Bank N.A. (A)
5.660%, 07/01/98 5,000 5,000
----------
Total Bank Notes
(Cost $43,988) 43,988
----------
U.S. GOVERNMENT AGENCY OBLIGATION (4.0%)
Federal Farm Credit, MTN (A)
5.443%, 03/02/99 10,000 9,996
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATION--CONTINUED
SLMA, MTN (A)
5.628%, 04/01/99 $ 5,000 $ 4,998
----------
Total U.S. Government Agency Obligation
(Cost $14,994) 14,994
----------
CERTIFICATES OF DEPOSIT (18.1%)
Commerzbank (A)
5.725%, 04/14/99 10,000 9,997
Bank America, Canada
5.570%, 07/28/98 10,000 10,000
Bayerische Landesbank,
New York (A)
5.666%, 04/21/99 10,000 9,995
Credit Suisse First Boston,
New York (A)
5.725%, 10/27/98 5,000 5,000
Deutsche Bank, New York
5.640%, 03/23/99 4,000 3,997
Rabobank
5.750%, 04/27/99 8,000 7,997
Societe Generale, New York
5.580%, 02/10/99 2,000 2,000
5.800%, 04/28/99 9,000 8,992
Swiss Bank Corporation, New York
5.650%, 03/24/99 5,000 4,996
5.810%, 04/29/99 5,000 4,997
----------
Total Certificates Of Deposit
(Cost $67,971) 67,971
----------
ASSET-BACKED SECURITIES (5.6%)
Americredit Auto Receivable Trust,
Ser 1997-D, Cl A1
5.800%, 11/05/98 858 858
Americredit Auto Receivable Trust,
Ser 1998-B, Cl A1
5.629%, 06/12/99 4,000 4,000
ASSET-BACKED SECURITIES--CONTINUED
Arcadia Auto Receivable Trust,
Ser 1998-A, Cl A1
5.628%, 03/15/99 $ 4,506 $ 4,507
Chase Manhattan Auto Owner
Trust, Ser 1999-B, Cl A1
5.578%, 05/10/99 5,782 5,783
Key Auto Finance Trust,
Ser 1997-2, Cl A1
5.835%, 01/05/99 1,264 1,264
WFS Financial Owner Trust,
Ser 1997-D, Cl A1
5.910%, 12/20/98 4,652 4,652
----------
Total Asset-Backed Securities
(Cost $21,064) 21,064
----------
REPURCHASE AGREEMENTS (22.8%)
Barclays
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$17,613,558 (collateralized
by FNMA and FHLMC obligations:
total market value
$17,957,479) (C) 17,605 17,605
Deutsche Bank
5.58%, dated 05/29/98, matures
06/01/98 repurchase price
$45,688,671 (collateralized
by FNMA and FHLMC obligations:
total market value
$46,580,828) (C) 45,668 45,668
Salomon Brothers
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$4,113,374 (collateralized
by FNMA and FHLMC
obligations: total market
value $4,195,308) (C) 4,112 4,112
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONCLUDED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--CONTINUED
Union Bank of Switzerland
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$18,026,805 (collateralized
by FNMA obligation: market
value $18,380,052) (C) $18,018 $ 18,018
----------
Total Repurchase Agreements
(Cost $85,403) 85,403
----------
Total Investments (100.0%)
(Cost $374,715) 374,715
----------
OTHER ASSETS AND LIABILITIES, NET (0.0%) 87
----------
NET ASSETS:
Fund shares of the Institutional Shares
(unlimited authorization -- no par value)
based on 374,801,521 outstanding
shares of beneficial interest 374,802
----------
Total Net Assets (100.0%) $ 374,802
==========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Shares $ 1.00
==========
</TABLE>
Cl Class
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
Ser Series
(A) Variable rate security. The rate reported on the
Statement of Net Assets is the rate in effect on
May 31, 1998.
(B) Private Placement Security
(C) Tri-Party Repurchase Agreement
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
================================================================================
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
<S> <C> <C>
TREASURY NOTES (9.2%)
U.S. Treasury Notes
5.625%, 11/30/98 $ 600 $ 600
6.375%, 05/15/99 10,000 10,065
----------
Total Treasury Notes
(Cost $10,665) 10,665
----------
REPURCHASE AGREEMENTS (90.8%)
Barclays
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,254,982 (collateralized by
U.S. Treasury Note: market
value $6,377,082) (A) 6,251 6,251
Deutsche Bank
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,276,517 (collateralized by
U.S. Treasury Bond: market
value $6,399,356) (A) 6,274 6,274
Greenwich
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$34,006,313 (collateralized by
U.S. Treasury Notes: total
market value $34,672,999) (A) 33,991 33,991
Merrill Lynch
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,205,190 (collateralized by
U.S. Government STRIPS: total
market value $6,329,772) (A) 6,202 6,202
Morgan Stanley
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,305,510 (collateralized by
U.S. Treasury Bond: market
value $6,452,812) (A) 6,303 6,303
Salomon Brothers
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,205,541 (collateralized by
U.S. Treasury Note: market
value $6,331,636) (A) $ 6,203 $ 6,203
Swiss Bank
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,263,560 (collateralized by
U.S. Treasury Note and U.S.
Treasury Bond: total market
value $6,397,913) (A) 6,261 6,261
Union Bank of Switzerland
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$34,006,826 (collateralized by
U.S. Treasury Bills: total
market value $34,675,013) (A) 33,990 33,990
----------
Total Repurchase Agreements
(Cost $105,475) 105,475
----------
Total Investments (82.8% of Net Assets)
(Cost $116,140) $ 116,140
==========
</TABLE>
STRIPS -- Separately Traded Registered Interest and
Principal Security
(A) Tri-Party Repurchase Agreement
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
CLASSIC INSTITUTIONAL
U.S. TREASURY SECURITIES
MONEY MARKET
FUND
------------------------
Assets:
<S> <C>
Investments at market value (Cost $116,140) .............................................. $116,140
Accrued income ........................................................................... 615
Receivables for investment securities sold ............................................... 24,755
--------
Total Assets ............................................................................. 141,510
--------
Liabilities:
Accrued expenses ......................................................................... (23)
Distribution payable ..................................................................... (623)
Other liabilities ........................................................................ (530)
--------
Total Liabilities ........................................................................ (1,176)
--------
Net Assets:
Fund Shares of the Institutional Shares (unlimited authorization -- no par value)
based on 140,331,464 outstanding shares of beneficial interest ......................... 140,331
Accumulated net realized gain on investments ............................................. 3
--------
Total Net Assets ......................................................................... $140,334
========
Net Asset Value, Offering Price and Redemption Price Per Share -- Institutional Shares .... $ 1.00
========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<PAGE>
This page is left intentionally blank.
<PAGE>
STATEMENT OF OPERATIONS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
CLASSIC CLASSIC
INSTITUTIONAL INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY
MONEY MARKET SECURITIES MONEY
FUND MARKET FUND
--------------- ----------------
06/01/97- 06/01/97-
05/31/98 05/31/98
---------- ---------
<S> <C> <C>
Income:
Interest Income .............................................................. $17,193 $5,786
------- ------
Expenses:
Investment Advisory Fees ..................................................... 608 209
Investment Advisory Fees Waived .............................................. (403) (198)
Administrator Fees ........................................................... 219 76
Administrator Fees Waived .................................................... (32) (13)
Transfer Agent Fees .......................................................... 16 16
Transfer Agent Out of Pocket ................................................. 23 11
Printing Fees ................................................................ 24 14
Custody Fees ................................................................. 13 6
Professional Fees ............................................................ -- 8
Trustee Fees ................................................................. -- 2
Registration Fees ............................................................ 14 28
Other Fees ................................................................... -- 20
Amortization of Deferred Organizational Costs ................................ 11 11
------- ------
Total Expenses ............................................................. 493 190
------- ------
Net Investment Income ...................................................... 16,700 5,596
------- ------
Net Realized Gain on Securities Sold ............................................ -- 4
------- ------
Increase in Net Assets Resulting from Operations ................................ $16,700 $5,600
======= ======
Amounts designated as "--" are either $0 or round to $0.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
CLASSIC CLASSIC
INSTITUTIONAL INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY
MONEY MARKET SECURITIES MONEY
FUND MARKET FUND
---------------------- ---------------------
06/01/97- 12/12/96*- 06/01/97- 12/12/96*-
05/31/98 05/31/97 05/31/98 05/31/97
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Operations:
Net Investment Income ............................................ $ 16,700 $ 2,755 $ 5,596 $ 483
Net Realized Gain (Loss) on Investments .......................... -- -- 4 (1)
--------- --------- --------- --------
Increase in Net Assets Resulting from Operations ............... 16,700 2,755 5,600 482
--------- --------- --------- --------
Distributions to Shareholders:
Net Investment Income ............................................ (16,700) (2,755) (5,596) (483)
--------- --------- --------- --------
Total Distributions ........................................... (16,700) (2,755) (5,596) (483)
--------- --------- --------- --------
Share Transactions:
Proceeds from Shares Issued .................................... 1,549,940 578,520 991,131 143,133
Reinvestments of Cash Distributions ............................ 11,287 -- 4,231 --
Cost of Shares Redeemed ........................................ (1,582,098) (182,847) (875,270) (122,894)
--------- --------- --------- --------
Increase (Decrease) in Net Assets from Share Transactions .... (20,871) 395,673 120,092 20,239
--------- --------- --------- --------
Total Increase (Decrease) in Net Assets ..................... (20,871) 395,673 120,096 20,238
--------- --------- --------- --------
Net Assets:
Beginning of Period .............................................. 395,673 -- 20,238 --
--------- --------- --------- --------
End of Period .................................................... $ 374,802 $ 395,673 $ 140,334 $ 20,238
========= ========= ========= ========
Shares Issued and Redeemed:
Shares Issued .................................................. 1,549,940 578,520 991,131 143,133
Shares Issued in Lieu of Cash Distributions .................... 11,287 -- 4,231 --
Shares Redeemed ................................................ (1,582,098) (182,847) (875,270) (122,894)
--------- --------- --------- --------
Net Share Transactions ........................................... (20,871) 395,673 120,092 20,239
========= ========= ========= ========
</TABLE>
*Commencement of Operations.
Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED
NET ASSET VALUE INVESTMENT GAINS (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ---------- -------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1997(A) 1.00 0.02 -- (0.02) --
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1997(A) 1.00 0.02 -- (0.02) --
</TABLE>
(A) Commenced operations on December 12, 1996.
* Total return is for the period indicated and has not been annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME TO
OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- ------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 5.63% $ 374,802 0.16% 5.49%
1997(A) 1.00 2.51* 395,673 0.06 5.49
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 5.50% $ 140,334 0.18% 5.34%
1997(A) 1.00 2.46* 20,238 0.09 5.27
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS
(EXCLUDING WAIVERS (EXCLUDING WAIVERS
AND REIMBURSEMENTS) AND REIMBURSEMENTS)
------------------ ------------------
<S> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional Shares
1998 0.30% 5.35%
1997(A) 0.52 5.03
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional Shares
1998 0.38% 5.14%
1997(A) 0.51 4.85
</TABLE>
(A) Commenced operations on December 12, 1996.
* Total return is for the period indicated and has not been annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
1. Organization:
The STI Classic Funds (the "Trust") was organized as a Massachusetts Business
Trust under a Declaration of Trust dated January 15, 1992. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with twenty-two portfolios: the Value Income Stock
Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth
Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International
Equity Index Fund, the International Equity Fund the Sunbelt Equity Fund, the
Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the
Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term
Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term
Federal Mortgage Securities Fund, and the U.S. Government Securities Fund,
(collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the
U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund,
the Classic Institutional Cash Management Money Market Fund and the Classic
Institutional U.S. Treasury Securities Money Market Fund, (collectively the
"Money Market Funds"). The assets of each portfolio are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. Each
Fund's prospectus provides a description of the Fund's investment objectives,
policies and strategies. The financial statements of the Classic Institutional
Cash Management Money Market Fund and the Classic Institutional U.S. Treasury
Securities Fund (collectively the "Funds") are included herein. The financial
statements of the remaining Funds are presented separately.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust:
SECURITY VALUATION -- Investment securities held by the Funds are stated at
amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a
regulated investment company for Federal income tax purposes and distribute
all of its taxable income and net capital gains. Accordingly, no provisions
for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on an accrual basis. Costs used in
determining net realized gains and losses on the sales of investment
securities are those of the specific securities sold adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding period. Purchase discounts and premiums on securities
held by the Funds are accreted and amortized ratably to maturity and are
included in interest income.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters into
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
12
<PAGE>
================================================================================
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated each business day, by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding.
OTHER -- Expenses that are directly related to a specific Fund are charged
to that Fund. Class specific expenses are borne by that class. Other
operating expenses of the Trust are pro-rated to the Funds on the basis of
relative net assets. Fund expenses are pro-rated to the respective classes
on the basis of relative net assets.
Distributions from net investment income of each of the Funds are declared on
each business day and paid to shareholders on a monthly basis. Any net realized
capital gains on sales of securities are distributed to shareholders at least
annually.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
3. Organization Costs and Transactions with Affiliates:
The Trust incurred organization costs of approximately $808,836 including
approximately $395,594 relating to state registration fees. These costs have
been deferred in the accounts of the Funds and are being amortized on a straight
line basis over a period of sixty months commencing with operations with the
exception of state registration fees, which are being amortized over a period of
twelve months. The costs include legal fees of approximately $60,383 for
organizational work performed by a law firm of which two officers of the Trust
are partners. On March 18, 1992, the Trust sold initial shares of beneficial
interest to SEI Fund Resources (the "Administrator"). In the event any of the
initial shares of the Trust are redeemed by any holder thereof during the period
that the Trust is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof will be reduced by the unamortized organizational
costs in the same ratio as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting
on the Costs of Start-Up Activities." This SOP provides guidance on the
financial reporting of start-up costs and organization costs and requires costs
of start-up activities and organization costs to be expensed as incurred.
Investment companies that began operations prior to June 30, 1998 can adopt the
SOP prospectively. Therefore, previously capitalized organization costs will
continue to be amortized as discussed above. Any future start-up or organization
costs will be expensed as incurred.
Certain officers of the Trust are also officers of the Administrator and/or SEI
Investments Distribution Co. (the "Distributor"). Such officers are paid no fees
by the Trust for serving as officers of the Trust.
4. Administration and Transfer Agency Servicing Agreements:
The Trust and the Administrator are parties to an Administration Agreement dated
May 29, 1995, as amended November 19, 1997, under which the Administrator
provides administrative services for an annual fee (expressed as a percentage of
the combined average daily net assets of the Trust and
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
STI Classic Variable Annuity Trust) of: .12% up to $1 billion, .09% on the next
$4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06%
for over $10 billion.
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated May 14, 1994 under which Federated Services Company
provides transfer agency services to the Trust.
5. Investment Advisory and Custodian Agreements:
The Trust and Trusco Capital Management have entered into an advisory agreement
dated July 15, 1993.
Under terms of the respective agreements, the Funds are charged the following
annual fees based upon average daily net assets:
<TABLE>
<CAPTION>
MAXIMUM INSTITUTIONAL
ANNUAL SHARE
ADVISORY MAXIMUM
FEE EXPENSE
---------- -------------
<S> <C> <C>
Classic Institutional
Cash Management
Money Market Fund .20% .20%
Classic Institutional
U.S. Treasury
Money Market Fund .20% .20%
</TABLE>
The Investment Advisor and the Administrator have voluntarily agreed to waive
all or a portion of their fees (and to reimburse Funds' expenses) in order to
limit operating expenses to an amount as outlined in the table above. Fee
waivers and expense reimbursements are voluntary and may be terminated at any
time.
SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the
Funds. Fees of the Custodian are paid on the basis of the net assets of the
Funds. The Custodian plays no role in determining the investment policies of the
Trust or which securities are to be purchased or sold in the Funds.
6. Concentration of Credit Risk:
The Classic Institutional Cash Management Money Market Fund invests in high
quality money market instruments issued by corporations and the U.S. Government
and rated by one or more nationally recognized statistical rating organizations,
or, if not rated determined by the Advisor to be of comparable quality. The
Classic U.S. Treasury Securities Money Market Fund invests in U.S. Treasury
Obligations, which are backed by the full faith and credit of the U.S.
Government and repurchase agreements with approved dealers collateralized by
U.S. Treasury securities.
14
