<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 2000
FILE NO. 33-45671
FILE NO. 811-6557
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 34 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 36 /X/
STI CLASSIC FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (800) 342-5734
MARK NAGLE
C/O SEI INVESTMENTS COMPANY
ONE FREEDOM VALLEY DRIVE
OAKS, PENNSYLVANIA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
RICHARD W. GRANT, ESQ. W. JOHN MCGUIRE, ESQ.
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET 1800 M STREET, N.W.
PHILADELPHIA, PA 19103 WASHINGTON, D.C. 20036
Title of Securities Being Registered Units of Beneficial Interest
It is proposed that this filing will become effective (check appropriate box)
Immediately upon filing pursuant to paragraph (b), or
------
On ____________ pursuant to paragraph (b), or
------
60 days after filing pursuant to paragraph (a) or
------
X 75 days after filing pursuant to paragraph (a) or
------
On ____________ pursuant to paragraph (a) of Rule 485.
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<PAGE>
STI CLASSIC FUNDS
FOR PARTICIPANTS OF SUNTRUST BANKS
SPONSORED RETIREMENT PLANS
PROSPECTUS
_______________, 2000
LIFE VISION CONSERVATIVE FUND
INVESTMENT ADVISER
TO THE FUND:
TRUSCO CAPITAL MANAGEMENT, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 15
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HOW TO READ THIS PROSPECTUS
The STI Classic Funds is a mutual fund family that offers shares in separate
investment funds (Funds). The Funds have individual investment goals and
strategies. The STI Classic Life Vision Funds offer asset allocation strategies
that are implemented through investment in a mix of other STI Classic Funds that
invest directly in stocks, bonds and other securities according to their own
objectives and policies. This prospectus gives you important information about
the Trust Shares of the Life Vision Conservative Fund that you should know
before investing. Please read this prospectus and keep it for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED INFORMATION
ABOUT THE FUND, PLEASE SEE:
PAGE
PRINCIPAL INVESTMENT STRATEGIES AND RISKS.............................XXX
PERFORMANCE INFORMATION AND EXPENSES..................................XXX
MORE INFORMATION ABOUT FUND INVESTMENTS...............................XXX
INFORMATION ABOUT THE UNDERLYING STI CLASSIC FUNDS....................XXX
RISKS OF INVESTING IN THE UNDERLYING STI CLASSIC FUNDS................XXX
THE INVESTMENT ADVISER................................................XXX
PURCHASING AND SELLING FUND SHARES....................................XXX
DIVIDENDS AND DISTRIBUTIONS...........................................XXX
TAXES.................................................................XXX
HOW TO OBTAIN MORE INFORMATION ABOUT THE
STI CLASSIC FUNDS.................................................XXX
[INSERT ICONS HERE]
Page 2 of 15
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RISK/RETURN INFORMATION
The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
The Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help the
Fund achieve its goal. Still, investing in the Fund involves risk and there is
no guarantee that the Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in the
Fund, just as you could with other investments. A Fund share is not a bank
deposit and it is not insured or guaranteed by the FDIC or any government
agency.
The value of your investment in the Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities the Fund owns and the markets in which they trade. The
effect on the Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
The assets of the Fund will be allocated among underlying Funds in accordance
with its investment objective, the Adviser's outlook for the economy, the
financial markets and the relative market valuations of the securities in the
underlying Funds. The Fund has the ability to invest its assets allocated to a
particular asset class in one or more of the underlying Funds, which have
different investment objectives, policies and risk characteristics. Although the
Fund currently expects to invest in the underlying Funds discussed in this
Prospectus, the Adviser has the discretion to change the particular underlying
Funds used as investments by the Fund. If determined to be in the best interest
of the Fund, the Adviser reserves the right to substitute or include other
underlying Funds, including underlying Funds that do not currently exist, if it
determines that doing so is in the best interest of the Fund. The Fund's goal
may be changed without shareholder approval. Before investing, make sure that
the Fund's goal matches your own.
Page 3 of 15
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LIFE VISION CONSERVATIVE FUND
FUND SUMMARY
INVESTMENT GOAL
PRIMARY High current income
SECONDARY Capital appreciation
INVESTMENT FOCUS Bond and equity funds
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing pursuant to an asset
allocation strategy in a combination of
STI Classic Bond Funds, and to a lesser
extent, Equity Funds
INVESTOR PROFILE Investors who want income from their
investment, as well as an increase in
its value, but want to reduce risk by
limiting exposure to equity securities
INVESTMENT STRATEGY
The Life Vision Conservative Fund principally invests in STI Classic Funds that
invest primarily in fixed income securities, but may invest up to 35% of the
Fund's total assets in STI Classic Funds that invest primarily in equity
securities. The Fund's remaining assets may be invested in shares of underlying
STI Classic Funds that are money market funds, securities issued by the U.S.
Government, its agencies or instrumentalities, repurchase agreements and
short-term paper. In selecting a diversified portfolio of underlying STI Classic
Funds, the Adviser analyzes many factors, including the underlying STI Classic
Funds' investment objectives, total return, volatility and expenses.
THE FUND CURRENTLY PLANS TO INVEST IN SHARES OF THE FOLLOWING UNDERLYING STI
CLASSIC FUNDS WITHIN THE PERCENTAGE RANGES INDICATED:
INVESTMENT RANGE
(PERCENTAGE OF THE
LIFE VISION
CONSERVATIVE FUND'S
ASSET CLASS ASSETS)
- --------------------------------------------------------------------------------
BOND FUNDS 65-100%
SHORT-TERM BOND FUND
INVESTMENT GRADE BOND FUND
U.S. GOVERNMENT SECURITIES FUND
EQUITY FUNDS 0-35%
GROWTH AND INCOME FUND
CAPITAL APPRECIATION FUND
SMALL CAP EQUITY FUND
SMALL CAP GROWTH STOCK FUND
MONEY MARKET FUNDS 0-20%
PRIME QUALITY MONEY MARKET FUND
Other STI Classic Funds may be utilized in the future.
Page 4 of 15
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Due to its investment strategy, the Fund holds STI Classic Funds that buy and
sell securities frequently. This may result in higher transaction costs and
additional capital gains taxes.
WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
The value of an investment in the Fund is based primarily on the performance of
the underlying Funds and the allocation of the Fund's assets among them. The
prices of an underlying Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, an underlying Fund's fixed income securities will decrease in value
if interest rates rise and vice versa, and the volatility of lower rated
securities is even greater than that of higher rated securities. Also,
longer-term securities are generally more volatile, so the average maturity or
duration of these securities affects risk.
Since the Fund may also purchase Equity Funds, the Fund is subject to the risk
that stock prices will fall over short or extended periods of time.
Historically, the equity markets have moved in cycles, and the value of an
underlying Fund's securities may fluctuate drastically from day-to-day.
Individual companies may report poor results or be negatively affected by
industry and/or economic trends and developments. The prices of securities
issued by such companies may suffer a decline in response. These factors
contribute to price volatility, which is the principal risk of investing in the
Fund.
The Fund is also subject to the risk that the Adviser's asset allocation
decisions will not anticipate market trends successfully. For example, weighting
Equity Funds too heavily during a stock market decline may result in a failure
to preserve capital. Conversely, investing too heavily in Bond Funds during a
period of stock market appreciation may result in lower total return. The risks
associated with investing in the Fund will vary depending upon how the assets
are allocated among the underlying STI Classic Funds.
PERFORMANCE INFORMATION
As of January 1, 2000, the Life Vision Conservative Fund had not commenced
operations and therefore does not have a performance history.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY
AND HOLD FUND SHARES. THE TABLE DOES NOT REFLECT ANY OF THE OPERATING COSTS AND
INVESTMENT ADVISORY FEES OF THE UNDERLYING STI CLASSIC FUNDS. THE FUND AND ITS
SHAREHOLDERS WILL INDIRECTLY BEAR A PRO RATA SHARE OF THE EXPENSES OF THE
UNDERLYING STI CLASSIC FUNDS.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
TRUST SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.25%
Other Expenses* 0.25%
-----
Total Annual Fund Operating Expenses 0.50%
</TABLE>
* Other Expenses are based on estimated amounts for the current year.
Page 5 of 15
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EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C>
$139 $434
</TABLE>
FUND EXPENSES
Every mutual fund has operating expenses to pay for professional advisory,
shareholder, distribution, administration and custody services. The Fund's
estimated expenses in the table above are shown as a percentage of the Fund's
net assets. These expenses are deducted from Fund assets. The table shows the
highest estimated expenses that could be currently charged to the Fund. Actual
expenses are expected to be lower because the Adviser is voluntarily waiving a
portion of its fees. ESTIMATED ACTUAL INVESTMENT ADVISORY FEES AND TOTAL
OPERATING EXPENSES ARE 0.00% AND 0.25%, RESPECTIVELY. The Adviser could
discontinue this voluntary waiver at any time. For more information about these
fees, see "Investment Adviser."
Page 6 of 15
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MORE INFORMATION ABOUT FUND INVESTMENTS
This prospectus describes the Fund's primary strategies, and the Fund will
normally invest in the underlying STI Classic Funds within the percentage ranges
set forth for each asset class. However, the Fund also may use other strategies
and engage in other investment practices, which are described in detail in the
Statement of Additional Information (SAI).
The investments and strategies described in this prospectus are those that the
Fund uses under normal conditions. During unusual economic or market conditions,
or for temporary defensive or liquidity purposes, the Fund may invest up to 100%
of its assets in cash, money market instruments, repurchase agreements and
short-term obligations that would not ordinarily be consistent with a Fund's
objectives. The Fund will do so only if the Adviser believes that the risk of
loss outweighs the opportunity for capital gains or higher income. Of course,
the Fund cannot guarantee that it will achieve its investment goal.
INFORMATION ABOUT THE UNDERLYING STI CLASSIC FUNDS
The Fund expects to invest in the following underlying STI Classic Funds.
However, the Adviser may, in accordance with the Fund's investment objectives
and policies, substitute or select additional underlying STI Classic Funds for
investment.
UNDERLYING STI CLASSIC BOND FUNDS
SHORT-TERM BOND FUND - The Short-Term Bond Fund seeks high current income, while
preserving capital by investing in investment grade U.S. government and
corporate debt securities. The Fund's adviser attempts to identify securities
that offer a comparably better return than similar securities for a given level
of credit risk.
INVESTMENT GRADE BOND FUND - The Investment Grade Bond Fund seeks high total
return through current income and capital appreciation, while preserving the
principal amount invested by investing in investment grade U.S. government and
corporate debt securities. The Fund's adviser attempts to identify relatively
inexpensive securities in a selected market index.
U.S. GOVERNMENT SECURITIES FUND - The U.S. Government Securities Fund seeks high
current income, while preserving capital by investing in mortgage-backed
securities and U.S. Treasury obligations. The Fund's adviser attempts to
increase income without adding undue risk.
UNDERLYING STI CLASSIC EQUITY FUNDS
GROWTH AND INCOME FUND - The Growth and Income Fund seeks primarily long-term
capital appreciation and, secondarily, current income by investing equity
securities. The Fund's adviser attempts to identify securities of companies with
market capitalizations of at least $1 billion with attractive valuation and/or
above average momentum relative either to their sectors or the market as a
whole.
CAPITAL APPRECIATION FUND - The Capital Appreciation Fund seeks capital
appreciation by investing in U.S. common stocks. The Fund's adviser attempts to
identify companies with above average growth potential.
Page 7 of 15
<PAGE>
SMALL CAP EQUITY FUND - The Small Cap Equity Fund seeks primarily capital
appreciation and, secondarily, current income by investing in U.S. small cap
common stocks. The Fund's adviser attempts to identify undervalued small cap
stocks.
SMALL CAP GROWTH STOCK FUND - The Small Cap Growth Stock Fund seeks long-term
capital appreciation by investing in U.S. small cap common stocks of growth
companies. The Fund's adviser attempts to identify small cap companies with
above average growth potential.
UNDERLYING STI CLASSIC MONEY MARKET FUND
PRIME QUALITY MONEY MARKET FUND - The Prime Quality Money Market Fund seeks high
current income, while preserving capital and liquidity by investing in money
market instruments. The Fund's adviser attempts to identify money market
instruments with the most attractive risk/return trade-off.
RISKS OF INVESTING IN THE UNDERLYING STI CLASSIC FUNDS
The following sections describe some of the risks associated with certain
underlying STI Classic Funds.
FIXED INCOME RISK
The market value of fixed income investments changes in response to interest
rate changes and other factors. During periods of falling interest rates, the
values of outstanding fixed income securities generally rise. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates. In addition to these fundamental risks,
different types of fixed income securities may be subject to the following
additional risk:
CREDIT RISK
The possibility that an issuer will be unable to make timely payments of
either principal or interest.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the portfolio of
mortgage-backed securities and, therefore, to assess the volatility risk of that
portfolio.
Page 8 of 15
<PAGE>
EQUITY RISK
Equity securities include public and privately issued equity securities, common
and preferred stocks, warrants, rights to subscribe to common stock and
convertible securities, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual fund invests
will cause a fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
INTERNATIONAL INVESTING RISK
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are likely to
occur in these countries.
SMALL CAPITALIZATION RISK
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies.
These securities may be traded over-the-counter or listed on an exchange and may
or may not pay dividends.
INVESTMENT ADVISER
The Investment Adviser makes investment decisions for the Fund and continuously
reviews, supervises and administers the Fund's respective investment program.
The Board of Trustees supervises the Adviser and establishes policies that the
Adviser must follow in its management activities.
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Adviser to the Fund. As of ________, 2000, Trusco
had approximately $____ billion in assets under management.
Page 9 of 15
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INVESTMENT TEAM
The Life Vision Conservative Fund is managed by a team of investment
professionals. No one person is primarily responsible for making investment
recommendations to the team.
PURCHASING AND SELLING FUND SHARES
This section tells you how to purchase and sell (sometimes called "redeem")
Trust Shares of the Fund.
HOW TO PURCHASE FUND SHARES
The Fund offers Trust Shares only to financial institutions or intermediaries,
including subsidiaries of SunTrust Banks, Inc. (SunTrust), for its own or its
customers' accounts for which it acts as fiduciary, agent, investment adviser,
or custodian. As a result, you, as a customer of a financial institution may
purchase Trust Shares through accounts made with financial institutions and
potentially through the Preferred Portfolio Account (an asset allocation account
available through SunTrust Securities, Inc.). Trust Shares will be held of
record by (in the name of) your financial institution. Depending upon the terms
of your account, however, you may have, or be given, the right to vote your
Trust Shares. The Fund may reject any purchase order if it is determined that
accepting the order would not be in the best interests of the STI Classic Funds
or its shareholders. If you are no longer eligible to participate in a 401(k)
plan that holds Trust Shares of the Fund on your behalf, you may exchange those
shares for Investor Shares of the underlying Funds held by the Fund. There is no
sales charge for such an exchange.
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day).
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order. The Fund
calculates its NAV once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time). So, for you to receive the current Business Day's NAV for the Fund,
generally the Fund must receive your purchase order before 4:00 p.m. Eastern
time.
FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS
YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER
FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME
EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR
REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET
THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE
OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS
INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION
DIRECTLY.
Page 10 of 15
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HOW THE FUNDS CALCULATE NAV
In calculating NAV, the Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Fund thinks that the market price
is unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of the net assets of
the Fund.
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting SunTrust or your financial institution. SunTrust or your financial
institution will give you information about how to sell your shares including
any specific cut-off times required.
Holders of Trust Shares may sell shares by following the procedures established
when they opened their account or accounts with the Fund or with its financial
institution or intermediary. The sale price of each share will be the next NAV
determined after the Fund receives your request.
RECEIVING YOUR MONEY
Normally, the Fund will send your sale proceeds within five Business Days after
the Adviser receives your request, but it may take up to seven days.
REDEMPTIONS IN KIND
The Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders) the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). It is highly unlikely that your shares
would ever be redeemed in kind, but if they were you would probably have to pay
transaction costs to sell the securities distributed to you, as well as taxes on
any capital gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the New York Stock
Exchange restricts trading, the SEC declares an emergency or for other reasons.
More information about this is in the SAI.
Page 11 of 15
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TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although the Fund has certain safeguards and procedures to
confirm the identity of callers and the authenticity of instructions, the Fund
is not responsible for any losses or costs incurred by following telephone
instructions the Fund reasonably believes to be genuine. If you or your
financial institution transact with the Fund over the telephone, you will
generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes its income quarterly. The Fund makes distributions of
capital gains, if any, at least annually. If you own Fund shares on the Fund's
record date, you will be entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
Page 12 of 15
<PAGE>
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax
issues that affect the Fund and its shareholders. This summary is based on
current tax laws, which may change.
The Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Fund may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. EACH SALE OF FUND SHARES IS A TAXABLE EVENT.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
Page 13 of 15
<PAGE>
STI CLASSIC FUNDS
INVESTMENT ADVISER
Trusco Capital Management, Inc.
50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated _________, 2000, includes detailed information about the STI
Classic Funds. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Fund's holdings and contain information from the Fund
managers about strategies, and recent market conditions and trends and their
impact on Fund performance. The reports also contain detailed financial
information about the Fund.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE: Call 1-800-874-4770
BY MAIL: Write to the Funds
c/o SEI Investments Distribution Co.
Oaks, PA 19456
Page 14 of 15
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the STI Classic Funds, from the EDGAR
Database on the SEC's website ("http://www.sec.gov"). You may review and copy
documents at the SEC Public Reference Room in Washington, DC (for information on
the operation of the Public Reference Room call 1-202-942-8090). You may request
documents by mail from the SEC, upon payment of a duplicating fee, by writing
to: Securities and Exchange Commission, Public Reference Section, Washington, DC
20549-0102. You may also obtain this information upon payment of a duplicating
fee by e-mailing the SEC at the following address: [email protected]. The STI
Classic Funds' Investment Company Act registration number is 811-06557.
Page 15 of 15
<PAGE>
STI CLASSIC FUNDS
LIFE VISION CONSERVATIVE FUND
INVESTMENT ADVISER:
TRUSCO CAPITAL MANAGEMENT, INC.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Life Vision Conservative Fund of the STI Classic Funds (the "Trust") and should
be read in conjunction with the Trust's prospectus dated ________, 2000.
Prospectuses may be obtained through the Distributor, SEI Investments
Distribution Co., One Freedom Valley Drive, Oaks, Pennsylvania 19456.
TABLE OF CONTENTS
PAGE
THE TRUST....................................................................B-2
ADDITIONAL INFORMATION ABOUT CERTAIN UNDERLYING FUNDS........................B-4
DESCRIPTION OF THE UNDERLYING FUNDS' PERMITTED INVESTMENTS...................B-7
INVESTMENT LIMITATIONS......................................................B-23
INVESTMENT ADVISERS.........................................................B-26
THE ADMINISTRATOR...........................................................B-27
THE DISTRIBUTOR.............................................................B-28
THE TRANSFER AGENT..........................................................B-28
INDEPENDENT PUBLIC ACCOUNTANTS..............................................B-28
LEGAL COUNSEL...............................................................B-29
TRUSTEES AND OFFICERS OF THE TRUST..........................................B-29
PERFORMANCE INFORMATION.....................................................B-31
CALCULATION OF TOTAL RETURN.................................................B-32
PURCHASING SHARES...........................................................B-32
REDEEMING SHARES............................................................B-32
VALUATION OF SECURITIES.....................................................B-32
DETERMINATION OF NET ASSET VALUE............................................B-33
TAXES.......................................................................B-34
FUND TRANSACTIONS...........................................................B-34
TRADING PRACTICES AND BROKERAGE.............................................B-35
DESCRIPTION OF SHARES.......................................................B-36
SHAREHOLDER LIABILITY.......................................................B-36
LIMITATION OF TRUSTEES' LIABILITY...........................................B-37
______________, 2000
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THE TRUST
STI Classic Funds (the "Trust") is a diversified, open-end management investment
company established under Massachusetts law as a Massachusetts business trust
under a Declaration of Trust dated January 15, 1992. The Declaration of Trust
permits the Trust to offer separate series ("Funds") of units of beneficial
interest ("shares") and different classes of shares of each Fund. Shareholders
at present may purchase shares of the Funds through one, two or three separate
classes (Trust Shares, Investor Shares and Flex Shares), which provide for
variations in sales charges, distribution costs, transfer agent fees, voting
rights and dividends. Except for these differences, each share of each Fund
represents an equal proportionate interest in that portfolio. See "Description
of Shares." This Statement of Additional Information relates to the Trust Shares
of the Life Vision Conservative Fund (the "Fund").
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.
STI CLASSIC LIFE VISION FUNDS (THE "LIFE VISION FUNDS")
The Life Vision Funds provide investors with the opportunity to pursue four
distinct asset allocation strategies implemented through investments in shares
of selected STI Classic Funds. By investing in the Life Vision Funds, investors
have the opportunity to diversify and allocate their assets among the broad
range of STI Classic Funds. The Adviser simplifies the diversification and asset
allocation process by reviewing, analyzing, selecting, monitoring, reallocating
and rebalancing each Life Vision Fund's holdings of STI Classic Funds for
investors.
The assets of each Life Vision Fund will be allocated among underlying STI
Classic Funds in accordance with its investment objective, the Adviser's outlook
for the economy, the financial markets and the relative market valuations of the
underlying STI Classic Funds. Each Life Vision Fund has the ability to invest
its assets allocated to a particular asset class in one or more of the
underlying STI Classic Funds, which have differing investment objectives,
policies and risk characteristics. The risks associated with investing in a Life
Vision Fund will vary depending upon how the assets within its asset classes are
allocated from time to time among the underlying STI Classic Funds. Although the
Life Vision Funds currently expect to invest in a number of the underlying STI
Classic Funds identified below, the Adviser has the discretion to change the
particular STI Classic Funds used as underlying investments for the Life Vision
Funds. If the Adviser determines in the future that it is in a Life Vision
Fund's best interest, the Adviser may substitute or include other underlying STI
Classic Funds, including STI Classic Funds that do not currently exist.
PRIME QUALITY MONEY MARKET FUND
SHORT-TERM BOND FUND
INVESTMENT GRADE BOND FUND
U.S. GOVERNMENT SECURITIES FUND
CAPITAL APPRECIATION FUND
SMALL CAP GROWTH STOCK FUND
SMALL CAP EQUITY FUND
GROWTH AND INCOME FUND
The investment objective of the Fund is set forth below. The Fund's objective,
the asset allocation percentage ranges described below, the list of underlying
STI Classic Funds described above, and those policies identified as
non-fundamental may be changed by the Trust's Board of Trustees without
shareholder approval. The Fund's investment policies identified as fundamental
may not be changed except by approval of the majority of the
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outstanding shares of the Fund. The Adviser will manage the Fund consistent with
that Fund's investment objective and policies. There is no assurance that the
Fund will achieve its investment objective.
LIFE VISION CONSERVATIVE FUND
The Fund seeks both capital appreciation and current income. Under normal market
conditions, the Fund will invest primarily in shares of underlying STI Classic
Funds that invest primarily in fixed-income securities, but may invest up to 35%
of its total assets in shares of underlying STI Classic Funds that invest
primarily in equity securities. The Fund's remaining assets may be invested in
shares of underlying STI Classic Funds that are money market funds, securities
issued by the U.S. Government, its agencies or instrumentalities, repurchase
agreements and short-term paper.
GENERAL INVESTMENT POLICIES OF THE FUND
To achieve the Fund's investment objective, the Adviser will attempt to identify
and select a diversified portfolio of underlying STI Classic Funds. In the
selection process, the Adviser analyzes many factors, including the underlying
STI Classic Funds' investment objectives, total return, volatility and expenses.
The Fund invests a percentage of its assets, within percentage ranges the
Adviser believes appropriate, in select underlying STI Classic Funds, which are
separately-managed series of the Trust. The percentages will reflect the extent
to which the Fund invests in the particular market segment represented by each
underlying fund in STI Classic Funds, and the varying degrees of potential
investment risk and reward represented by each Fund's investments in those
corresponding underlying funds. These percentage ranges may change when it is
appropriate in light of the Fund's investment objective. The Fund may invest up
to 100% of its assets in shares of the underlying STI Classic Funds. In
addition, when the Adviser deems it appropriate, for temporary defensive
purposes, the Fund may invest 100% of its assets directly in securities issued
by the U.S. Government or its agencies or instrumentalities, repurchase
agreements, short-term paper and shares of underlying STI Classic Funds that are
money market funds (and shares of unaffiliated money market funds, as permitted
by the SEC). To the extent that the Fund is engaged in temporary defensive
investing, it will not be pursuing its investment objective. When the Adviser
deems it appropriate, in order to meet liquidity needs, the Fund may invest its
assets directly in securities issued by the U.S. Government or its agencies or
instrumentalities, repurchase agreements, short-term paper and shares of
underlying STI Classic Funds that are money market funds (and shares of
unaffiliated money market funds, as permitted by the SEC). The following risk
factors are associated with the Fund's investments in underlying STI Classic
Funds:
- - When the Fund invests in underlying STI Classic Funds, shareholders
will be exposed to the risks associated with investing in those
underlying STI Classic Funds. Those risks include risks associated with
investing in foreign securities, asset-backed securities, delayed
delivery transactions, ADRs, mortgage-backed securities, repurchase
agreements and reverse repurchase agreements.
- - The Fund and the underlying STI Classic Funds have the same officers,
Trustees and often the same investment adviser, which may give rise to
certain conflicts of interest.
- - The Funds' investment performance is substantially related to the
investment performance of the underlying STI Classic Funds.
- - Investing in the underlying STI Classic Funds involves certain
additional expenses that would not be present in a direct investment in
the underlying STI Classic Funds. When the Fund invests in underlying
STI Classic Funds, shareholders bear not only the Fund's expenses, but
also the expenses of the underlying STI Classic Funds.
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ADDITIONAL INFORMATION ABOUT CERTAIN UNDERLYING FUNDS
EQUITY FUNDS
CAPITAL APPRECIATION FUND
The Capital Appreciation Fund invests primarily in a diversified portfolio of
common stocks, warrants, and securities convertible into common stocks which, in
the Fund's Adviser's opinion, are undervalued in the marketplace at the time of
purchase. In selecting securities for the Fund, its Adviser will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. Dividend and interest income should be
considered incidental to the growth of capital. The Fund's Adviser will rotate
the Capital Appreciation Fund's holdings between various market sectors based on
economic analysis of the overall business cycle. Under normal conditions, at
least 65% of the total assets of the Capital Appreciation Fund will be invested
in common stocks.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Capital Appreciation Fund not invested in the securities described above may be
invested in U.S. dollar denominated equity securities of foreign issuers
(including sponsored American Depositary Receipts ("ADRs") that are traded on
exchanges or listed on National Association of Securities Dealers Automated
Quotations ("NASDAQ"); securities issued by money market mutual funds;
pay-in-kind securities; and bonds. The bonds that the Capital Appreciation Fund
may purchase may be rated in any rating category or may be unrated, provided
that no more than 10% of the Fund's total assets will be invested in bonds rated
below BBB by Standard & Poor's Corporation ("S&P"), rated below Baa by Moody's
Investors Services, Inc. ("Moody's"), or of comparable quality not rated by S&P
or Moody's. In addition, the Fund may invest up to 10% of its assets in
restricted securities.
BOND FUNDS
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund will invest only in those obligations deemed
investment grade obligations rated BBB or better by S&P or Baa or better by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Adviser, including corporate debt
obligations; mortgage-backed securities, collateralized mortgage obligations
("CMOs") and asset-backed securities; obligations issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; obligations or supranational
entities and sponsored ADRs that are traded on exchanges or listed on NASDAQ.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in corporate and government bonds and debentures. No more than 25% of
the Fund's assets will be invested in securities rated BBB by S&P or Baa by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Adviser.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies or
instrumentalities or, subject to a limit of 35% of the Fund's assets,
mortgage-backed securities issued by private issuers. These mortgage-backed
securities may be backed or collateralized by fixed, adjustable or floating rate
mortgages. The Fund may also invest in asset-backed securities which consist of
securities backed by company receivables, truck and auto loans, leases, credit
card receivables and home equity loans.
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In order to reduce interest rate risk, and subject to a general limit of 25% of
the Fund's assets, the Fund may purchase floating or variable rate securities.
Some floating or variable rate securities will be subject to interest rate
"caps" or "floors." It may also buy securities on a when-issued basis, putable
securities, medium term notes, and zero coupon securities. The Fund may also
invest up to 10% of its assets in restricted securities. The Fund may also
engage in futures and options.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. In the case of mortgage related
securities and asset-backed securities, maturity will be determined based on the
expected average life of the security. The Fund may shorten its average weighted
maturity to as little as 90 days if deemed appropriate for temporary defensive
purposes. By so limiting the maturity of its investments, the Fund expects that
its net asset value will experience less price movement in response to changes
in interest rates than the net asset values of mutual funds investing in similar
credit quality securities with longer maturities.
SHORT-TERM BOND FUND
Under normal circumstances, the Short-Term Bond Fund will invest solely in
investment grade obligations rated BBB or better by S&P or Baa or better by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Adviser consisting of debt obligations of
U.S. and foreign corporations; mortgage-backed securities; CMOs; asset-backed
securities; obligations (including mortgage-backed securities) issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; and custodial receipts involving U.S. Treasury obligations;
(including Separately Traded Registered interest and Principal Securities
("STRIPS") and Coupon Under Book Entry System ("CUBES")). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
corporate and government bonds and debentures. No more than 25% of the Fund's
assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if
not rated by S&P or Moody's, of comparable quality at the time of purchase by
the Fund's Adviser.
The Fund may purchase, without limitation, mortgage-backed securities issued or
guaranteed as to the payment of principal and interest by the U.S. Government,
its agencies or instrumentalities and, subject to a limit of 25% of the Fund's
assets, mortgage-backed securities issued by private issuers. These
mortgage-backed securities may be backed or collateralized by fixed, adjustable
or floating rate mortgages. The Fund may also invest in asset-backed securities,
which consist of securities backed by company receivables, truck and auto loans;
leases; credit card receivables; and home equity loans. The Fund will purchase
mortgage-backed and asset-backed securities only if they are rated at least AA
by S&P or Aa by Moody's or, if unrated, determined to be of comparable quality
at the time of purchase by the Fund's Adviser.
The Fund may purchase securities on a when-issued basis and may acquire floating
or variable rate securities, medium term notes, putable securities, and zero
coupon securities. The Fund may also purchase securities issued by foreign
governments and supranational agencies. The Fund may also invest in municipal
securities when the Fund's Adviser feels it is consistent with the Fund's
investment objective. The Fund will not invest in municipal securities unless
the Fund's Adviser believes that the yield will be higher than the yield for
comparable taxable investments in which the Fund is permitted to invest. The
following quality criteria apply to the Fund's investments in municipal
securities. The Fund's investments in municipal notes will be limited to those
obligations (i) where both principal and interest are backed by the full faith
and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or better
at the time of investment by Moody's, (iii) which are rated SP-2 or better at
the time of investment by S&P, or (iv) which, if not rated, are of equivalent
quality to MIG-2, V-MIG-2, or SP-2 or better in the Adviser's judgment. The
Fund's investment in municipal bonds will be limited to bonds rated BBB or
better by S&P or Baa or better by Moody's, or, if not rated by S&P or Moody's,
deemed by the Fund's Adviser to be of comparable quality. For the Fund's
investments in other types of tax-exempt municipal
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investments, such as participation interests in municipal lease/purchase
agreements, the quality of the underlying credit or of the bank providing a
credit support arrangement must, in the Fund's Adviser's opinion, be equivalent
to the municipal note or bond ratings stated above. The Fund is also authorized
to invest up to 10% of its assets in restricted securities, including Rule 144A
securities, that the Fund's Adviser determines are liquid under guidelines
adopted by the Trust's Board of Trustees. The Fund may also enter into bond
futures contracts and options on bond futures contracts and engage in securities
lending.
The Fund intends to maintain a dollar-weighted average maturity of 4 years or
less, and the maximum remaining maturity for any security held by the Fund is
seven and one-half years. Under normal market conditions it is anticipated that
the Fund's dollar-weighted average maturity will range from 2 to 4 years. In the
case of mortgage-related securities and asset-backed securities, maturity will
be determined based on the expected average life of the security. The Fund may
shorten its average weighted maturity to as little as 90 days if deemed
appropriate for temporary defensive purposes. By so limiting the maturity of its
investments, the Fund expects that its net asset value will experience less
price movement in response to changes in interest rates than the net asset
values of mutual funds investing in similar credit quality securities with
longer maturities.
U.S. GOVERNMENT SECURITIES FUND
Under normal market conditions, the Fund will invest at least 65% of its assets
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including mortgage-backed securities issued or guaranteed by
U.S. Government agencies such as the GNMA, the FNMA or the FHLMC. Mortgage-
backed securities consisting of CMOs and REMICs purchased by the Fund will be
issued or guaranteed as to payment of principal and interest by the U.S.
Government, its agencies or instrumentalities or, if issued by private issuers,
rated in one of the two highest rating categories by a NRSRO.
The principal governmental issuers or guarantors of mortgage-backed securities
are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and
credit of the U.S. Government while obligations of FNMA and FHLMC are supported
by the respective agency only. The Fund may purchase mortgage-backed securities
that are backed or collateralized by fixed, adjustable or floating rate
mortgages.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of a governmental entity and thus may bear a risk of nonpayment.
The timely payment of principal and interest normally is supported, at least
partially, by various forms of insurance or guarantees. There can be no
assurance, however, that such credit enhancement will support full payment of
the principal and interest on such obligations. The average maturity of the
Fund's investment portfolio will typically range from 7 to 14 years.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P, or that are deemed by the Fund's Adviser to be of
comparable quality; commercial paper rated at the time of purchase within the
two highest ratings categories of an NRSRO; bankers' acceptances; certificates
of deposit and time deposits; and U.S. Treasury obligations, which include
custodial receipts and repurchase agreements involving securities that
constitute permissible investments for the Fund. The Fund intends to invest in
privately issued, mortgage-backed securities only if they are rated in one of
the two highest rating categories by an NRSRO.
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The Fund may purchase floating
or variable rate securities, and may engage in dollar rolls.
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MONEY MARKET FUNDS
PRIME QUALITY MONEY MARKET FUND
The Prime Quality Money Market Fund will invest in money market instruments
denominated in U.S. dollars consisting of (i) U.S. Treasury obligation; (ii)
custodial receipts representing interests in component parts of U.S. Treasury
obligations; (iii) obligations issued or guaranteed as to principal and interest
by agencies and instrumentalities of the U.S. Government; (iv) commercial paper
issued by domestic and foreign issuers rated in the highest short-term rating
category by one or more NRSROs or, if not rated, determined by the Fund's
Adviser to be of comparable quality; (v) high quality obligations (including
certificates of deposit, time deposits, bankers' acceptances, Eurodollar and
Yankee bank obligations) of U.S. commercial banks (including foreign branches of
such banks), and U.S. and London branches of foreign banks or savings and loan
and thrift institutions that are members of the Federal Reserve System, the
Federal Deposit Insurance Corporation, or the Federal Savings and Loan Insurance
Corporation; (vi) high quality short-term corporate obligations issued by
companies with commercial paper meeting the ratings indicated in (iv), above,
or, if not rated, determined by the Fund's Adviser to be of comparable quality;
(vii) repurchase agreements involving such obligations; (viii) high quality
obligations of supranational entities satisfying the credit ratings described in
(iv), above, or, if not rated, determined by the Fund's Adviser to be of
comparable quality; and (ix) medium term notes. The Fund may not invest more
than 25% of its total assets in obligations issued by foreign branches of U.S.
Banks and London branches of foreign banks. The Fund may purchase securities
subject to standby commitments. As a money market fund, the Fund is subject to
limitations on the percentage of its assets that may be invested in any one
issuer and on the percentage that may be invested in securities carrying the
second highest rating assigned by the requisite NRSROs.
DESCRIPTION OF THE UNDERLYING FUNDS' 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.
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Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and, for a certain
period, by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities.
Asset-backed securities entail prepayment risk, which may vary depending on the
type of asset, but is generally less than the prepayment risk associated with
mortgage-backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
BANKERS' ACCEPTANCES
Bankers' acceptances are bills of exchange or time drafts drawn on and accepted
by a commercial bank. Bankers' acceptances are used by corporations to finance
the shipment and storage of goods. Maturities are generally six months or less.
BANK OBLIGATIONS
Bank obligations are short-term obligations issued by U.S. and foreign banks,
including bankers' acceptances, certificates of deposit, custodial receipts, and
time deposits. Eurodollar and Yankee Bank Obligations are U.S.dollar-
denominated certificates of deposit or time deposits issued outside the U.S. by
foreign branches of U.S.banks or by foreign banks.
CERTIFICATES OF DEPOSIT
Certificates of deposit are interest bearing instruments with a specific
maturity. They are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties for early withdrawal
will be considered illiquid.
COMMERCIAL PAPER
Commercial paper is a term used to describe unsecured short-term promissory
notes issued by banks, municipalities, corporations and other entities.
Maturities on these issues vary from a few to 270 days.
COMMON AND PREFERRED STOCKS
Common and preferred stocks represent units of ownership in a corporation.
Owners of common stock typically are entitled to vote on important matters.
Owners of preferred stock ordinarily do not have voting rights, but are entitled
to dividends at a specified rate. Preferred stock has a prior claim to common
stockholders with respect to dividends.
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CONVERTIBLE SECURITIES
Convertible securities are securities issued by corporations that are
exchangeable for a set number of another security at a prestated price. The
market value of a convertible security tends to move with the market value of
the underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call option
provisions.
CUSTODIAL RECEIPTS
The custodian arranges for the issuance of the certificates or receipts
evidencing ownership and maintains the register. Receipts include Treasury
Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and
Certificates of Accrual on Treasury Securities ("CATS"). TRs, TIGRs and CATS are
sold as zero coupon securities.
DEBT SECURITIES
Debt securities represent money borrowed that obligates the issuer (E.G., a
corporation, municipality, government, government agency) to repay the borrowed
amount at maturity (when the obligation is due and payable) and usually to pay
the holder interest at specific times (E.G., bonds, notes, debentures).
DOLLAR ROLLS
Dollar rolls are transactions in which securities are sold for delivery in the
current month and the seller contracts to repurchase substantially similar
securities on a specified future date. Any difference between the sale price and
the purchase price (plus interest earned on the cash proceeds of the sale) is
applied against the past interest income on the securities sold to arrive at an
implied borrowing rate.
Dollar rolls may be renewed prior to cash settlement and initially may involve
only a firm commitment agreement by the Fund to buy a security.
If the broker-dealer to whom the Fund sells the security becomes insolvent, the
Fund's right to repurchase the security may be restricted. Other risks involved
in entering into dollar rolls include the risk that the value of the security
may change adversely over the term of the dollar roll and that the security the
Fund is required to repurchase may be worth less than the security that the Fund
originally held. To avoid any leveraging concerns, the Fund will place U.S.
Government or other liquid, high grade assets in a segregated account in an
amount sufficient to cover its repurchase obligation.
THE EURO
On January 1, 1999, the European Economic and Monetary Union (EMU) implemented a
new currency unit, the Euro, which is expected to reshape financial markets,
banking systems and monetary policies in Europe and other parts of the world.
The countries that converted or tied their currencies to the Euro include
Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland,
Finland, Italy, Portugal, and Spain. Financial transactions and market
information, including share quotations and company accounts, in participating
countries are denominated in Euros, although the bank notes used by
participating countries remain legal tender. Approximately 46% of the stock
exchange capitalization of the total European market may now be reflected in
Euros, and participating governments will issue their bonds in Euros. Monetary
policy for participating countries will be uniformly managed by a new central
bank, the European Central Bank (ECB).
Although it is not possible to predict the impact of the Euro implementation
plan on the Funds, the transition to
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the Euro may change the economic environment and behavior of investors,
particularly in European markets. For example, investors may begin to view those
countries participating in the EMU as a single entity, and the Advisers may need
to adapt investment strategies accordingly. The process of implementing the Euro
also may adversely affect financial markets world wide and may result in changes
in the relative strength and value of the U.S. dollar or other major currencies,
as well as possible adverse tax consequences. The transition to the Euro is
likely to have a significant impact on fiscal and monetary policy in the
participating countries and may produce unpredictable effects on trade and
commerce generally. These resulting uncertainties could create increased
volatility in financial markets world-wide.
EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS
Eurodollar bank obligations are U.S. dollar denominated certificates of deposit
or time deposits issued outside the United States by foreign branches of U.S.
banks or by foreign banks. Yankee dollar obligations are U.S.dollar denominated
obligations issued in the United States by foreign banks.
FOREIGN SECURITIES
Foreign securities include equity securities of foreign entities, obligations of
foreign branches of U.S. banks and of foreign banks, including, without
limitation, European Certificates of Deposit, European Time Deposits, European
Bankers' Acceptances, Canadian Time Deposits, Europaper and Yankee Certificates
of Deposit, and investments in Canadian Commercial Paper and foreign securities.
These instruments have investment risks that differ in some respects from those
related to investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
In making investment decisions for the Fund, the Adviser evaluates the risks
associated with investing Fund assets in a particular country, including risks
stemming from a country's financial infrastructure and settlement practices; the
likelihood of expropriation, nationalization or confiscation of invested assets;
prevailing or developing custodial practices in the country; the country's laws
and regulations regarding the safekeeping, maintenance and recovery of invested
assets, the likelihood of government-imposed exchange control restrictions which
could impair the liquidity of Fund assets maintained with custodians in that
country, as well as risks from political acts of foreign governments ("country
risks"). Of course, the Adviser cannot assure that the Fund will not suffer
losses resulting from investing in foreign countries.
Holding Fund assets in foreign countries through specific foreign custodians
presents additional risks, including but not limited to the risks that a
particular foreign custodian or depository will not exercise proper care with
respect to Fund assets or will not have the financial strength or adequate
practices and procedures to properly safeguard Fund assets.
By investing in foreign securities, the Funds attempt to take advantage of
differences between both economic trends and the performance of securities
markets in the various countries, regions and geographic areas as prescribed by
each Fund's investment objective and policies. During certain periods the
investment return on securities in some or all countries may exceed the return
on similar investments in the United States, while at
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other times the investment return may be less than that on similar U.S.
securities. Shares of the Emerging Markets, International Equity Index and
International Equity Funds, when included in appropriate amounts in a portfolio
otherwise consisting of domestic securities, may provide a source of increased
diversification. The Emerging Markets Equity, International Equity Index and
International Equity Funds seek increased diversification by combining
securities from various countries and geographic areas that offer different
investment opportunities and are affected by different economic trends. The
international investments of the Emerging Markets, International Equity Index
and International Equity Funds may reduce the effect that events in any one
country or geographic area will have on its investment holdings. Of course,
negative movement by a Fund's investments in one foreign market represented in
its portfolio may offset potential gains from the Fund's investments in another
country's markets.
Emerging countries are all countries that are considered to be developing or
emerging countries by the World Bank or the International Finance Corporation,
as well as countries classified by the United Nations or otherwise regarded by
the international financial community as developing. Currently, the countries
excluded from this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan, and
Switzerland.
FORWARD FOREIGN CURRENCY CONTRACTS
Forward foreign currency contracts involve obligations to purchase or sell a
specific currency amount at a future date, agreed upon by the parties, at a
price set at the time of the contract. A Fund may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in the foreign currency. A Fund may realize a gain or
loss from currency transactions.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchase the right, in exchange for a premium, to assume a position in a futures
contract at a specified exercise price during the term of the option.
A Fund may use futures contracts, and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired. They may also be used to minimize fluctuations in foreign currencies
or to gain exposure to a particular market or instrument. A Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific index at the
close of the last trading day of the contract and the price at which the
agreement is made.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract which has
previously been "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
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Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, a Fund would continue
to be required to make daily cash payments to maintain its required margin. In
such situations, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Funds may be required to make
delivery of the instruments underlying the futures contracts they hold. The
inability to close options and futures positions also could have an adverse
impact on the ability to effectively hedge the underlying securities.
The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in a
futures contract may result in immediate and substantial loss (or gain) to a
Fund. For example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit if
the contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the contract. However,
because the Funds will be engaged in futures transactions only for hedging
purposes, the Advisers do not believe that the Funds will generally be subject
to the risks of loss frequently associated with futures transactions. The Funds
presumably would have sustained comparable losses if, instead of the futures
contract, they had invested in the underlying financial instrument and sold it
after the decline. The risk of loss from the purchase of options is less as
compared with the purchase or sale of futures contracts because the maximum
amount at risk is the premium paid for the option.
Utilization of futures transactions by the Funds does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the fund securities being hedged. It is also
possible that the Funds could both lose money on futures contracts and
experience a decline in value of its fund securities. There is also the risk of
loss by the Funds of margin deposits in the event of the bankruptcy of a broker
with whom the Funds have an open position in a futures contract or related
option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
GICS
A GIC is a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the general
assets of the issuer, and the contract is paid at maturity from the general
assets of the issuer. Generally, GICs are not assignable or transferable without
the permission of the issuing insurance company. For this reason, an active
secondary market in GICs does not currently exist and GICs are considered to be
illiquid investments.
HIGH YIELD SECURITIES
High yield securities, commonly referred to as junk bonds, are debt obligations
rated below investment grade,
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I.E., below BBB by S&P or Baa by Moody's, or their unrated equivalents. The
risks associated with investing in high yield securities include:
(1) High yield, lower rated bonds involve greater risk of default or
price declines than investments in investment grade securities (E.G.,
securities rated BBB or higher by S&P or Baa or higher by Moody's) due
to changes in the issuer's creditworthiness.
(2) The market for high risk, high yield securities may be thinner and
less active, causing market price volatility and limited liquidity in
the secondary market. This may limit the ability of a Fund to sell
these securities at their fair market values either to meet redemption
requests, or in response to changes in the economy or the financial
markets.
(3) Market prices for high risk, high yield securities may also be
affected by investors' perception of the issuer's credit quality and
the outlook for economic growth. Thus, prices for high risk, high yield
securities may move independently of interest rates and the overall
bond market.
(4) The market for high risk, high yield securities may be adversely
affected by legislative and regulatory developments.
HEDGING TECHNIQUES
Hedging in an investment strategy designed to offset investment risks. Hedging
activities include, among other things, the use of options and futures. There
are risks associated with hedging activities, including: (1) the success of a
hedging strategy may depend on an ability to predict movements in the prices of
individual securities, fluctuations in markets, and movements in interest rates;
(2) there may be an imperfect or no correlation between the changes in market
value of the securities held by a Fund and the prices of futures and option on
futures; (3) there may not be a liquid secondary market for a futures contract
or option; and (4) trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in futures contracts
and options.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed of within seven days
at approximately the price at which they are being carried on a Fund's books.
INVESTMENT COMPANY SHARES
The Funds may purchase shares of other mutual funds to the extent consistent
with applicable law. Investment companies typically incur fees that are separate
from those fees incurred directly by the Funds. A Fund's purchase of such
investment company securities results in the layering of expenses, such that you
would indirectly bear a proportionate share of investment company operating
expenses, such as advisory fees.
INVESTMENT GRADE OBLIGATIONS
Investment grade obligations are debt obligations rated BBB by S&P or Baa by
Moody's, or their unrated equivalents. These securities are deemed to have
speculative characteristics.
LOAN PARTICIPATIONS
Loan participations are interest in loans to U.S. corporations which are
administered by the lending bank or agent for a syndicate of lending banks. In a
loan participation, the borrower corporation is the issuer of the participation
interest except to the extent the Fund derives its rights from the intermediary
bank. Because the intermediary bank does not guarantee a loan participation, a
loan participation is subject to the credit risks
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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-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
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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 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
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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 Advisers believe that the estimated average
life is the most appropriate measure of the maturity of a
mortgage-backed security. Accordingly, in order to determine whether
such security is a permissible investment for a Fund, it will be deemed
to have a remaining maturity equal to its average life as estimated by
that Fund's Adviser. An average life estimate is a function of an
assumption regarding anticipated prepayment patterns. The assumption is
based upon current interest rates, current conditions in the relevant
housing markets and other factors. The assumption is necessarily
subjective, and thus different market participants could produce
somewhat different average life estimates with regard to the same
security. There can be no assurance that the average life as estimated
by an Adviser will be the actual average life.
MUNICIPAL FORWARDS
Municipal forwards are forward commitments for the purchase of tax-exempt bonds
with a specified coupon to be delivered by an issuer at a future date, typically
exceeding 45 days but normally less than one year after the commitment date.
Municipal forwards are normally used as a refunding mechanism for bonds that may
only be redeemed on a designated future date (see "When-Issued Securities and
Municipal Forwards" for more information).
MUNICIPAL LEASE OBLIGATIONS
Municipal lease obligations are securities issued by state and local governments
and authorities to finance the acquisition of equipment and facilities. They
make take the form of a lease, an installment purchase contract, an conditional
sales contract, or a participation interest in any of the above.
MUNICIPAL SECURITIES
MUNICIPAL BONDS include general obligation bonds, revenue or special
obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds. General obligation bonds
are backed by the taxing power of the issuing municipality. Revenue
bonds are backed by the revenues of a project or facility (for example,
tolls from a bridge). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an
obligation issued in connection with a leasing arrangement. The payment
of principal and interest on private activity and industrial
development bonds generally is totally dependent on the ability of a
facility's user to meet its financial obligations and the pledge, if
any, of real and personal property as security for the payment.
MUNICIPAL NOTES consist of general obligation notes, tax anticipation
notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation
notes (notes sold to provide needed cash prior to receipt of expected
non-tax revenues from a specific source), bond anticipation notes,
certificates of indebtedness, demand notes and construction
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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 Adviser's
judgement, of at least comparable quality to MIG-2, VMIG-2 or SP-2.
Municipal bonds must be rated at least BBB or better by S&P or at least
Baa or better by Moody's at the time of purchase for the Tax-Exempt
Bond Funds or in one of the two highest short-term rating categories by
S&P or Moody's for the Tax-Exempt Money Market Fund or, if not rated by
S&P or Moody's, must be deemed by the Adviser to have essentially the
same characteristics and quality as bonds having the above ratings. A
Fund may purchase industrial development and pollution control bonds if
the interest paid is exempt from Federal income tax. These bonds are
issued by or on behalf of public authorities to raise money to finance
various privately-operated facilities for business and manufacturing,
housing, sports and pollution control. These bonds are also used to
finance public facilities such as airports, mass transit systems, ports
and parking. The payment of the principal and interest on such bonds is
dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment.
OTHER TYPES OF TAX-EXEMPT INSTRUMENTS which are permissible investments
include floating rate notes. Investments in such floating rate
instruments will normally involve industrial development or revenue
bonds which provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate) at a
major commercial bank, and that the Fund can demand payment of the
obligation at all times or at stipulated dates on short notice (not to
exceed 30 days) at par plus accrued interest. Such obligations are
frequently secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying credit or
of the bank, as the case may be, must, in the Adviser's opinion be
equivalent to the long-term bond or commercial paper ratings stated
above. The Adviser will monitor the earning power, cash flow and
liquidity ratios of the issuers of such instruments and the ability of
an issuer of a demand instrument to pay principal and interest on
demand. The Funds may also purchase participation interests in
municipal securities (such as industrial development bonds and
municipal lease/purchase agreements). A participation interest gives a
Fund an undivided interest in the underlying municipal security. If it
is unrated, the participation interest will be backed by an irrevocable
letter of credit or guarantee of a credit-worthy financial institution
or the payment obligations otherwise will be collateralized by U.S.
Government securities. Participation interests may have fixed, variable
or floating rates of interest and may include a demand feature. A
participation interest without a demand feature or with a demand
feature exceeding seven days may be deemed to be an illiquid security
subject to the Funds' investment limitations restricting their
purchases of illiquid securities. A Fund may purchase other types of
tax-exempt instruments as long as they are of a quality equivalent to
the bond or commercial paper ratings stated above.
Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax are rendered by
bond counsel to the respective issuers at the time of issuance. Neither
the Funds nor an Adviser will review the proceedings relating to the
issuance of municipal securities or the basis for such opinions.
OPTIONS
A Fund may write call options on a covered basis only, and will not engage in
option writing strategies for speculative purposes. A call option gives the
purchaser of such option the right to buy, and the writer, in this case the
Fund, the obligation to sell the underlying security at the exercise price
during the option period. The advantage to the Funds of writing covered calls is
that the Funds receive a premium which is additional income.
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However, if the security rises in value, the Funds may not fully participate in
the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term capital
gain in the amount of the premium on the option, less the commission paid. Such
a gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, a
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security, and the proceeds
of the sale of the security plus the amount of the premium on the option, less
the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security, and the time remaining until the expiration date.
The Funds will write call options only on a covered basis, which means that a
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Fund would be required to continue to hold a security which it might otherwise
wish to sell, or deliver a security it would want to hold. Options written by
the Funds will normally have expiration dates between one and nine months from
the date written. The exercise price of a call option may be below, equal to, or
above the current market value of the underlying security at the time the option
is written.
OTHER INVESTMENTS
The Funds are not prohibited from investing in bank obligations issued by
clients of SEI Investments Company ("SEI Investments"), the parent company of
the Administrator and the Distributor. The purchase of Fund shares by these
banks or their customers will not be a consideration in deciding which bank
obligations the Funds will purchase. The Funds will not purchase obligations
issued by the Advisers.
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.
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REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a
security and simultaneously commits to return the security to the seller (a
primary securities dealer as recognized by the Federal Reserve Bank of New York
or a national member bank as defined in Section 3(d)(1) of the Federal Deposit
Insurance Act, as amended) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is, in
effect, secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisers monitor
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the appropriate Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
the sale including accrued interest are less than the resale price provided in
the agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and required to return
the underlying security to the seller's estate.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS
Investments by a money market fund are subject to limitations imposed under
regulations adopted by the SEC. Under these regulations, money market funds may
acquire only obligations that present minimal credit risk and that are "eligible
securities," which means they are (i) rated, at the time of investment, by at
least two NRSROs (one if it is the only organization rating such obligation) in
the highest rating category or, if unrated, determined to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest rating category or, if unrated, determined to be
of comparable quality ("second tier security"). In the case of taxable money
market funds, investments in second tier securities are subject to further
constraints in that (i) no more than 5% of a money market fund's assets may be
invested in second tier securities and (ii) any investment in securities of any
one such issuer is limited to the greater of 1% of the money market fund's total
assets or $1 million. A taxable money market fund may not purchase securities of
any issuer (except securities issued or guaranteed by the U.S. Government, its
agencies of instrumentalities) if, as a result, more than 5% of the total assets
of the Fund would be invested the securities of one issuer. A taxable money
market fund may also hold more than 5% of its assets in first tier securities of
a single issuer for three "business days" (that is, any day other than a
Saturday, Sunday or customary business holiday).
RESTRICTED SECURITIES
Restricted securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") or an exemption
from registration. Permitted investments for the Funds include restricted
securities, and each such Fund may invest up to 15% of its net assets (10% for
the Money Market Funds) in illiquid securities, subject to each Fund's
investment limitations on the purchase of illiquid securities. Restricted
securities, including securities eligible for re-sale under 1933 Act Rule 144A,
that are determined to be liquid are not subject to this limitation. This
determination is to be made by a Fund's Adviser pursuant to guidelines adopted
by the Board of Trustees. Under these guidelines, the particular Adviser will
consider the frequency of trades and quotes for the security, the number of
dealers in, and potential purchasers for, the
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securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. In purchasing such Restricted
Securities, each Adviser intends to purchase securities that are exempt from
registration under Rule 144A under the 1933 Act.
SECURITIES LENDING
Each Fund may lend securities pursuant to agreements which require that the
loans be continuously secured by collateral at all times equal to 100% of the
market value of the loaned securities which consists of: cash, securities of the
U.S. Government or its agencies, or any combination of cash and such securities.
Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for a Fund exceed one-third of the value of the
Fund's total assets taken at fair market value. A Fund will continue to receive
interest on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a Fund
will normally pay lending fees to such broker-dealers and related expenses from
the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
appropriate Adviser to be of good standing and when, in the judgment of that
Adviser, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Funds may use the Distributor or
a broker-dealer affiliate of an Adviser as a broker in these transactions.
SHORT-TERM OBLIGATIONS
Short-term obligations are debt obligations maturing (becoming payable) in 397
days or less, including commercial paper and short-term corporate obligations.
Short-term corporate obligations are short-term obligations issued by
corporations.
STANDBY COMMITMENTS AND PUTS
The Funds may purchase securities at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
when they can simultaneously acquire the right to sell the securities back to
the seller, the issuer or a third party (the "writer") at an agreed-upon price
at any time during a stated period or on a certain date. Such a right is
generally denoted as a "standby commitment" or a "put." The purpose of engaging
in transactions involving puts is to maintain flexibility and liquidity to
permit the Funds to meet redemptions and remain as fully invested as possible in
municipal securities. The Funds reserve the right to engage in put transactions.
The right to put the securities depends on the writer's ability to pay for the
securities at the time the put is exercised. A Fund would limit its put
transactions to institutions which the Adviser believes present minimal credit
risks, and the Adviser would use its best efforts to initially determine and
continue to monitor the financial strength of the sellers of the options by
evaluating their financial statements and such other information as is available
in the marketplace. It may, however be difficult to monitor the financial
strength of the writers because adequate current financial information may not
be available. In the event that any writer is unable to honor a put for
financial reasons, a Fund would be a general creditor (I.E., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular provisions
of the contract between the Fund and the writer may excuse the writer from
repurchasing the securities; for example, a change in the published rating of
the underlying securities or any similar event that has an adverse effect on the
issuer's credit or a provision in the contract that the put will not be
exercised except in certain special cases, for example, to maintain portfolio
liquidity. The Fund could, however, at any time sell the underlying portfolio
security in the open market or wait until the portfolio security matures, at
which time it should realize the full par value of the security.
The securities purchased subject to a put may be sold to third persons at any
time, even though the put is
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outstanding, but the put itself, unless it is an integral part of the security
as originally issued, may not be marketable or otherwise assignable. Therefore,
the put would have value only to the Fund. Sale of the securities to third
parties or lapse of time with the put unexercised may terminate the right to put
the securities. Prior to the expiration of any put option, the Fund could seek
to negotiate terms for the extension of such an option. If such a renewal cannot
be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell
the portfolio security. The maturity of the underlying security will generally
be different from that of the put. There will be no limit to the percentage of
portfolio securities that the Fund may purchase subject to a standby commitment
or put, but the amount paid directly or indirectly for all standby commitments
or puts which are not integral parts of the security as originally issued held
in the Fund will not exceed 1/2 of 1% of the value of the total assets of such
Fund calculated immediately after any such put is acquired.
STRIPS
Separately Traded Interest and Principal Securities ("STRIPS") are component
parts of U.S. Treasury Securities traded through the Federal Book-Entry System.
An Adviser will only purchase STRIPS that it determines are liquid or, if
illiquid, do not violate the affected Fund's investment policy concerning
investments in illiquid securities. Consistent with Rule 2a-7 under the
Investment Company Act of 1940, as amended, (the "1940 Act"), the Money Market
Funds' Adviser will only purchase STRIPS for Money Market Funds that have a
remaining maturity of 397 days or less; therefore, the Money Market Funds
currently may only purchase interest component parts of U.S. Treasury
securities. While there is no limitation on the percentage of a Fund's assets
that may be comprised of STRIPS, the Money Market Funds' Adviser will monitor
the level of such holdings to avoid the risk of impairing shareholders'
redemption rights and of deviations in the value of shares of the Money Market
Funds.
SUPRANATIONAL AGENCY OBLIGATIONS
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
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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).
VARIABLE AND FLOATING RATE SECURITIES
Variable and floating rate instruments involve certain obligations that may
carry variable or floating rates of interest, and may involve a conditional or
unconditional demand feature. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly, or
some other reset period, and may have a set floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
VARIABLE RATE MASTER DEMAND NOTES
Variable rate master demand notes permit the investment of fluctuating amounts
at varying market rates of interest pursuant to direct arrangements between a
Fund, as lender, and a borrower. Such notes provide that the interest rate on
the amount outstanding varies on a daily, weekly or monthly basis depending upon
a stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There is
no secondary market for the notes and it is not generally contemplated that such
instruments will be traded. The quality of the note or the underlying credit
must, in the opinion of the appropriate Adviser, be equivalent to the ratings
applicable to permitted investments for the particular Fund. The appropriate
Adviser will monitor on an ongoing basis the earning power, cash flow and
liquidity ratios of the issuers of such instruments and will similarly monitor
the ability of an issuer of a demand instrument to pay principal and interest on
demand. Variable rate master demand notes may or may not be backed by bank
letters of credit.
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WARRANTS
Warrants give holders the right, but not the obligation, to buy shares of a
company at a given price, usually higher than the market price, during a
specified period.
WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS
When-issued securities are securities that are delivered and paid for normally
within 45 days after the date of commitment to purchase. Municipal forwards call
for delivery of the underlying municipal security normally after 45 days but
before one year after the commitment date.
Although a Fund will only make commitments to purchase when-issued securities
and municipal forwards with the intention of actually acquiring the securities,
a Fund may sell them before the settlement date. When-issued securities are
subject to market fluctuation, and accrue no interest to the purchaser during
this pre-settlement period. The payment obligation and the interest rate that
will be received on the securities are each fixed at the time the purchaser
enters into the commitment. Purchasing municipal forwards and when-issued
securities entails leveraging and can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction itself. In that case, there could be an unrealized
loss at the time of delivery.
Segregated accounts will be established with the appropriate custodian, and a
Fund will maintain high quality, liquid assets in an amount at least equal in
value to its commitments to purchase when-issued securities and municipal
forwards. If the value of these assets declines, the Fund will place additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments.
ZERO COUPON OBLIGATIONS
Zero coupon obligations are debt obligations that do not bear any interest, but
instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
Such obligations will not result in the payment of interest until maturity, and
will have greater price volatility than similar securities that are issued at
face value or par and pay interest periodically.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective. The phrase "principally invests" as
used in the prospectus means that the Fund invests at least 65% of its assets in
the securities as described in the sentence. Each tax-exempt fund invests at
least 80% of its total assets in securities with income exempt from federal
income and alternative minimum taxes.
INVESTMENT LIMITATIONS
The following are fundamental policies of the Fund and the underlying Funds, 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.
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STI CLASSIC LIFE VISION CONSERVATIVE FUND
The Fund may not:
1. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities or securities issued by investment companies) if, as
a result, more than 5% of the total assets of the Fund would be
invested in the securities of such issuer; provided, however, that the
Fund may invest more than 25% of its assets without regard to this
restrictions permitted by applicable law.
2. Borrow money, except that the Fund (a) may borrow money for temporary
or emergency purposes in an amount not exceeding 5% of the Fund's total
assets determined at the time of the borrowing and (b) may borrow money
from banks or by engaging in reverse repurchase agreements. Asset
coverage of at least 300% is required for all borrowings, except where
the Fund has borrowed money for temporary purposes in amounts not
exceeding 5% of its total assets;
3. Underwrite securities issued by others, except to the extent that the
Fund may be considered an underwriter within the meaning of the 1933
Act in the disposition of restricted securities;
4. Issue senior securities (as defined in the 1940 Act), except as
permitted by rule, regulation or order of the Securities and Exchange
Commission (the "SEC");
5. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities or securities issued by investment companies) if, as
a result, more than 25% of the Fund's total assets would be invested in
the securities of companies whose principal business activities are in
the same industry. In addition, the Fund may not invest more than 25%
of its assets in underlying STI Classic Funds that, as a matter of
policy, concentrate their assets in any one industry. However, the Fund
may indirectly invest more than 25% of its total assets in one industry
through its investments in the underlying STI Classic Funds. The Fund
may invest up to 100% of its assets in securities issued by investment
companies;
6. Purchase or sell real estate, unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments either issued by
companies that invest in real estate, backed by real estate or
securities of companies engaged in the real estate business);
7. Purchase or sell physical commodities, unless acquired as a result of
ownership of securities or other instruments; and
8. Lend any security or make any other loan, except as permitted by the
1940 Act.
ALL UNDERLYING FUNDS 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.
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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, U.S. Government Securities Fund, Small Cap Equity Fund and Value
Income Stock Fund, and may engage in securities lending as described in
the Prospectuses and in this Statement of Additional Information.
5. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed
10% of the Fund's total assets, taken at current value at the time of
the incurrence of such loan, except as permitted with respect to
securities lending.
6. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts (except for financial
futures contracts) and interests in a pool of securities that are
secured by interests in real estate (except that each Bond Fund may
purchase mortgage-backed and other mortgage-related securities,
including collateralized mortgage obligations and REMICs). However,
subject to their permitted investment spectrum, any Fund may invest in
companies which invest in real estate, commodities or commodities
contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term
credits as necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a security.
9. Purchase securities of other investment companies except for money
market funds and CMOs and REMICs deemed to be investment companies and
then only as permitted by the 1940 Act and the rules and regulations
thereunder, except that the U.S. Government Securities and Small Cap
Equity Funds' purchases of investment company shares are not limited to
money market funds. Under these rules and regulations, a Fund is
prohibited from acquiring the securities of other investment companies
if, as a result of such acquisition, the Fund owns more than 3% of the
total voting stock of the company; securities issued by any one
investment company represent more than 5% of the total assets of a
Fund; or securities (other than treasury stock) issued by all
investment companies represent more than 10% of the total assets of the
Fund.
10. Issue senior securities (as defined in the 1940 Act) except in
connection with permitted borrowings as described above or as permitted
by rule, regulation or order of the SEC.
11. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities and
repurchase agreements involving such securities) if as a result more
than 5% of the total assets of a Fund would be invested in the
securities of such issuer; provided, however, that a Fund may invest up
to 25% of its total assets without regard to this restriction as
permitted by applicable law.
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12. Purchase any securities which would cause more than 25% of the total
assets of a Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry, provided that this limitation does not apply to investments
in obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities, repurchase agreements involving such
securities or tax-exempt securities issued by governments or political
subdivisions of governments and, with respect to only the Money Market
Funds, obligations issued by domestic branches of U.S. banks or U.S.
branches of foreign banks subject to the same regulations as U.S.banks.
For purposes of this limitation, (i) utility companies will be divided
to according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry;
(ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate
industry; and (iii) supranational entities will be considered to be a
separate industry.
NON-FUNDAMENTAL POLICIES
Neither the Fund nor the Underlying Funds 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 Fund) would
be invested in illiquid securities.
The Fund does not currently intend to purchase securities on margin, except that
a Fund may obtain such short-term credits as are necessary for the clearance of
transactions.
The Fund does not currently intend to sell securities short.
The Fund does not currently intend to purchase or sell futures contracts or put
or call options.
The Fund may not invest in shares of unaffiliated money market funds, except as
permitted by the SEC.
With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
INVESTMENT ADVISERS
The Trust and STI Capital Management, N.A. and Trusco Capital Management, Inc.
(the "Advisers") have entered into advisory agreements with the Trust (the
"Advisory Agreements"). The Advisers are indirect wholly-owned subsidiaries of
SunTrust Banks, Inc. ("SunTrust"). SunTrust is a southeastern regional bank
holding company with assets of $90.7 billion as of July 1, 1999. The Advisory
Agreements provide that each Adviser shall not be protected against any
liability to the Trust or its Shareholders by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations or duties thereunder.
Each Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to an Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by certain states, the Adviser and/or the
Administrator will bear the amount of such excess. The Adviser will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
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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 Adviser, or
by the Adviser on 90 days' written notice to the Trust.
For its advisory services, STI Capital Management is entitled to a fee, which is
calculated daily and paid monthly, at the annual rate of: 1.15% of the average
daily net assets of the Capital Appreciation Fund and Small Cap Equity Fund, and
.74% of the average daily net assets of the Investment Grade Bond Fund.
For its advisory services, Trusco Capital Management is entitled to a fee, which
is calculated daily and paid monthly, at the annual rate of: .90% of the average
daily net assets of the Growth and Income Fund, .65% of the average daily net
assets of the, Prime Quality Money Market Fund, Short-Term Bond Fund, 1.15% of
the average daily net assets of the Small Cap Growth Stock Fund, .74% of the
average daily net assets of the U.S. Government Securities Fund, and .25% of the
average daily net assets of the Life Vision Conservative Fund.
Each Adviser has agreed to waive its fees or reimburse expenses in order to
limit the underlying Fund's and Fund expenses.
BANKING LAWS
Current interpretations of federal banking laws and regulations:
- - prohibit SunTrust and the Advisers from sponsoring, organizing,
controlling, or distributing the Funds' shares; but
- - do not prohibit SunTrust or the Advisers generally from acting as an
investment Adviser, transfer agent, or custodian to the Funds or from
purchasing Fund shares as agent for and upon the order of a customer.
The Advisers believe that they may perform advisory and related services for the
Trust without violating applicable banking laws or regulations. However, the
legal requirements and interpretations about the permissible activities of banks
and their affiliates may change in the future. These changes could prevent the
Advisers from continuing to perform services for the Trust. If this happens, the
Board of Trustees would consider selecting other qualified firms. Shareholders
would approve any new investment advisory agreements would be subject to
Shareholder approval.
If current restrictions on bank activities with mutual funds were relaxed, the
Advisers, or their affiliates, would consider performing additional services for
the Trust. We cannot predict whether these changes will be enacted. We also
cannot predict the terms that the Advisers, or their affiliates, might offer to
provide additional services.
THE ADMINISTRATOR
The Trust and SEI Investments Mutual Funds Services (the "Administrator") are
parties to the Administration Agreement. The Administration Agreement provides
that the Administrator shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Administration Agreement shall remain in effect for
a period of five years after the date of the Agreement and shall continue in
effect for successive periods of two years subject to review at least annually
by the Trustees of the Trust unless terminated by either party on not less than
ninety days' written
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notice to the other party.
The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), is the owner of all beneficial interest in the Administrator.
SEI Investments and its subsidiaries and affiliates, including the
Administrator, are leading providers of funds evaluation services, trust
accounting systems, and brokerage and information services to financial
institutions, institutional investors, and money managers. The Administrator
and its affiliates also serve as administrator or sub-administrator to the
following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada
Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CNI
Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc.,
First American Investment Funds, Inc., First American Strategy Funds, Inc.,
Friends Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Fund, The
Nevis Fund, Inc., Oak Associates Funds, The Parkstone Advantage Fund, The
Parkstone Group of 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 International Investments Trust, SEI Institutional Managed
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable
Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. II and UAM Funds, Inc.
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.
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.
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.
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 eligible underlying Funds.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Trust.
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LEGAL COUNSEL
Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services. The Trustees and Executive Officers of the
Trust, their respective dates of birth, and their principal occupations for
the last five years are set forth below. Each may have held other positions
with the named companies during that period. The business address of each
Trustee and each Executive Officer is SEI Investments Company, Oaks,
Pennsylvania 19456. Certain officers of the Trust also serve as officers of
some or all of the following: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street
Funds, Boston 1784 Funds-Registered Trademark-, CNI Charter Funds, CUFUND,
The Expedition Funds, First American Funds, Inc., First American Investment
Funds, Inc., First American Strategy Funds, Inc., Friends Ivory Funds,
HighMark Funds, Huntington Funds, Huntington VA Fund, The Nevis Fund, Inc.,
Oak Associates Funds, The Parkstone Advantage Fund, The Parkstone Group of
Funds, The Pillar Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds,
SEI Institutional International Trust, SEI Institutional Investments Trust,
SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, STI Classic Variable Trust, and TIP Funds, each of which is an
open-end management investment company managed by SEI Investments Mutual
Funds Services or its affiliates and distributed by SEI Investments
Distribution Co.
DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida,
N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital;
Executive Committee Member and Director, Honda Classic Foundation; Director,
Broward Community College Foundation.
WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company,
1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board,
1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment
Committee and member of Executive Committee, Cotton States Life and Health
Insurance Company; Director and Chairman of Investment Committee and member of
Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust
Company of Georgia Advisory Council.
F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County
Publishing Co., Inc., 1981- 1997, publisher of the Paoli News and the Paoli
Republican and Editor of the Paoli Republican, 1981-1997, President, H & W
Distribution, Inc., 1984-1997. Current Trustee on the Board of Trustees for the
SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President,
Trust Department, Harris Trust and Savings Bank and Chairman of the Board of
Directors of The Harris Trust Company of Arizona before January 1981.
T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of
Crawford & Company; held these positions, 1973-1987. Member of the Board of
Directors, 1970-1990, joined company in 1948; spent entire career at Crawford,
currently serves on Boards of Norrell Corporation and Mercy Health Services, the
latter being the holding company of St. Joseph's Hospitals.
DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for
Economic Education, Florida State University, 1991-present. President of
Florida State University, 1976-91; previous four years EVP and Chief Academic
Officer. During educational career, taught at Florida State, Michigan State,
Louisiana State and Southern University. Spent 19 years as faculty member and
administrator at Louisiana State University and
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<PAGE>
served as Head of Economics Department, member and Chairman of the Graduate
Council, Dean of Academic Affairs and Vice Chancellor. Member of Board of
Directors of Federal Reserve Bank of Atlanta, 1983-1988.
JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD
Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg
Trust.
WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust
Equitable Securities Corporation, January, 1998-present. Chairman and CEO,
Equitable Asset Management, Inc., December 1993-present. Chairman & CEO,
Equitable Trust Company, June 1991-present. Chairman, Equitable Securities
Corporation, July 1972 - January 1998.
MARK NAGLE (10/20/59) - President, Controller, Treasurer and Chief Financial
Officer - President of the Administrator and Senior Vice President of SEI
Investments Mutual Funds Services Operations Group since 1998. Vice President of
the Administrator and Vice President of Fund Accounting and Administration of
SEI Investments Mutual Funds Services, 1996-1998. Vice President of the
Distributor since December 1997. Senior Vice President, Fund Administration,
BISYS Fund Services, September 1995-November 1996. Senior Vice President and
Site Manager, Fidelity Investments 1981- September 1995.
JAMES R. FOGGO (DOB 02/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI Investments since 1998. Vice President
and Assistant Secretary of the Administrator and the Distributor since May 1999.
Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate,
Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P.
(law firm), 1993-1995.
LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock
Exchange, 1989-1998.
EDWARD T. SEARLE (4/03/54) - Vice President and Assistant Secretary of the
Administrator and Distributor since August 1999. Associate, Drinker Biddle &
Reath LLP (law firm), June 1998 to August 1999. Associate, Ballard Spahr Andrews
& Ingersoll LLP (law firm), September 1995 to June 1998.
TIMOTHY D. BARTO (3/28/68)- Vice President and Assistant Secretary. Associate,
Dechert Price & Rhoads (law firm), 1997 to 1999. Associate at Richter, Miller &
Finn (law firm), 1994 to 1997.
TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary -
General Counsel of SEI Investments since 2000. Vice President and Assistant
Secretary of SEI Investments, the Administrator and the Distributor since
1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston &
Strawn (law firm), 1991-1994.
LYNDA J. STRIEGEL (10/30/48) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998. Partner,
Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel, Riggs
Bank, N.A., 1991-1995.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President & General Counsel of SEI Investments, the Administrator and the
Distributor since 1994. Vice President of SEI, the Administrator and the
Distributor, 1992-1994.
RICHARD W. GRANT (10/25/45) - Secretary - 1701 Market Street, Philadelphia,
Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to
the Trust, Administrator and Distributor, since 1989.
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<PAGE>
JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary -1701 Market Street,
Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP
(law firm), counsel to the Trust, Administrator and Distributor, since 1993.
- ----------------------
* Messrs. Looney, Goodrum, McNair, and Cammack may be deemed to be
"interested persons" of the Trust as defined in the 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, 1999, 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 $ N/A N/A $ for service on two
boards
Wilton Looney, Trustee $ N/A N/A $ for service on two
boards
Champney A. McNair, $ N/A N/A $ for service on two
Trustee boards
F. Wendell Gooch, Trustee $ N/A N/A $ for service on two
boards
T. Gordy Germany, $ N/A N/A $ for service on two
Trustee boards
Dr. Bernard F. Sliger, Trustee $ N/A N/A $ for service on two
boards
Jonathan T. Walton, Trustee $ N/A N/A $ for service on two
boards
William H. Cammack, N/A N/A N/A $ for service on two
Trustee* boards
================================= =================== ========================= ================== ==============================
* Mr. Cammack is an "interested person" of the Trust as defined in the 1940 Act.
</TABLE>
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
The 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.
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<PAGE>
CALCULATION OF TOTAL RETURN
From time to time, the Conservative Fund may advertise total return. In
particular, total return will be calculated according to the following
formula: P (1 + T)TO THE POWER OF n = ERV, where P = a hypothetical initial
payment of $1,000; T = average annual total return; n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated time period as of the end of such period.
From time to time, the Trust may include the names of clients of the Advisers in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. 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.
PURCHASING SHARES
Purchases and redemptions of shares of the Fund 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
the Fund 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 the Conservative Fund's securities is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
has by order permitted. The Trust also reserves the right to suspend sales of
shares of a Fund for any period during which the NYSE, an Adviser, the
Administrator and/or, the Custodian are not open for business.
A number of Fund shareholders may be 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").
VALUATION OF SECURITIES
The assets of the Fund consist primarily of shares of the underlying Funds,
which are valued at their respective net asset values. The net asset value
("NAV") per share of each of the underlying Funds is determined by dividing the
total market value of such Fund's investments and other assets, less any
liabilities, by the total number of outstanding shares of that Fund.
Excluding shares of the underlying Funds, Fund securities are valued at the last
quoted sales price for such
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<PAGE>
securities, or, if there is no such reported sales price on the valuation date,
at the most recent quoted bid price. Securities and other assets available, or
at their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
A pricing service may be used to obtain last sale prices of each security held.
Valuations of Fund securities furnished by the pricing service employed by the
Fund are based upon a computerized matrix system and/or appraisals by the
pricing service, in each case in reliance upon information concerning market
transactions and quotations from recognized securities dealers. The methods used
by the pricing service and the quality of valuations so established are reviewed
by officers of the Trust and its pricing agent under general supervision of the
Board of Trustees. There are a number of pricing services available, and the
Board of Trustees, on the basis of ongoing evaluation of these services, may
obtain quotes directly from broker-dealers or market makers, may use other
pricing services or discontinue the use of any pricing service in whole or in
part.
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 NAV 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.
The securities of the Bond 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
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<PAGE>
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.
TAXES
The following is a summary of certain Federal income tax considerations
generally affecting the Fund and its shareholders that are not described in the
Fund's 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 Fund's 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"), the 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
the 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 the 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 the 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 the 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, the 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. The 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 the Fund's total assets consists of obligations the interest on which is
excludable from gross income, the Fund may pay "exempt-interest dividends," as
defined in Section 852(b)(5) of the Code, to its shareholders.
The Fund 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, an Adviser is responsible for placing the
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<PAGE>
orders to execute transactions for a Fund. In placing orders, it is the policy
of the Trust to seek to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While an Adviser generally seeks reasonably competitive spreads or
commissions, the Trust will not necessarily be paying the lowest spread or
commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, an Adviser
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Trust selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers provide transactions at best price and execution for the Trust. Best
price and execution includes many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Trust either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by an Adviser, brokerage business to brokers
or dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends, assisting in
determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by an Adviser in connection with its investment
decision-making process with respect to one or more funds and accounts managed
by it, and may not be used exclusively with respect to the fund or account
generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker-dealers are not, in general, higher than
commissions that would be paid to broker-dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Trust. Subject to best price and
execution, commissions used for pricing may or
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<PAGE>
may not be generated by the funds receiving the pricing service.
An Adviser may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. It is believed that the ability
of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or Fund may obtain, it is the opinion
of each Adviser and the Trust's Board of Trustees that the advantages of
combined orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Funds, at
the request of the Distributor, give consideration to sales of shares of the
Trust as a factor in the selection of brokers and dealers to execute Trust
portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of an Adviser, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of an Adviser is permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor or an affiliate of an Adviser to receive
and retain such compensation. These rules further require that commissions paid
to the Distributor by the Trust for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration 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.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares and classes of shares of the Funds each of which represents an equal
proportionate interest in that Fund with each other share. Shares are entitled
upon liquidation to a PRO RATA share in the net assets of the Funds.
Shareholders have no preemptive rights. The Declaration of Trust provides that
the Trustees of the Trust may create additional series of shares or classes of
series. All consideration received by the Trust for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held
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<PAGE>
personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
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<PAGE>
STI CLASSIC FUNDS
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 34
Item 23. Exhibits:
(a) Declaration of Trust -- originally filed with Registrant's
Registration Statement on Form N-1A filed February 12, 1992 and
incorporated by reference to Exhibit 1 of Post-Effective Amendment
No. 15 to the Registrant's Registration Statement filed with the SEC
via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996.
(b)(1) By-Laws -- originally filed with Registrant's Pre-Effective Amendment
No. 1 filed April 23, 1992 and incorporated by reference to Exhibit 2
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
(b)(2) Amended By-Laws -- incorporated by reference to Exhibit (b)(2) of
Post-Effective Amendment No. 23 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession
No. 0001047469-98-027407 on July 15, 1998.
(c) Not applicable.
(d)(1) Revised Investment Advisory Agreement with Trusco Capital Management,
Inc. -- as originally filed with Registrant's Post-Effective Amendment
No. 5 filed August 2, 1993 and incorporated by reference to Exhibit
5(c) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
(d)(2) Investment Advisory Agreement with American National Bank and Trust
Company -- as originally filed with Registrant's Post-Effective
Amendment No. 6 filed October 22, 1993 and as Exhibit 5(d) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
(d)(3) Investment Advisory Agreement with Sun Bank Capital Management,
National Association (now STI Capital Management, N.A.) -- as
originally filed with Registrant's Post-Effective Amendment No. 6
filed October 22, 1993 and incorporated by reference to Exhibit 5(e)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
(d)(4) Investment Advisory Agreement with Trust Company Bank (now SunTrust
Bank, Atlanta) -- as originally filed with Registrant's Post-Effective
Amendment No. 6 filed October 22, 1993 and incorporated by reference
to Exhibit D(4) of Post-Effective Amendment No. 24 to the Registrant's
Statement filed with the SEC via EDGAR Accession
No. 0001047469-98-028802 on July 30, 1998.
(d)(5) Revised Schedule A to theRevised Investment Advisory Agreement with
Trusco Capital Management, Inc.dated May 24, 1999 - incorporated by
reference to the Registrant's Post-Effective Amendment No. 32 to
the Registrant's Registration Statement filed the SEC via EDGAR
Accession No. 0001047469-99-037088 on September 28, 1999.
(d)(6) Revised Schedule A to the Revised Investment Advisory Agreement with
Trusco Capital Management, Inc. dated October 1, 1999 - incorporated
by reference to the Registrant's Post-Effective Amendment No. 33 to
the Registrant's Registration Statement filed the SEC via EDGAR
Accession No. 0001 0000912057-99-007899 on December 1, 1999.
C-1
<PAGE>
(e) Distribution Agreement -- incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 16 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
(f) Not applicable.
(g)(1) Custodian Agreement with Trust Company Bank dated February 1, 1994 --
originally filed with Registrant's Post-Effective Amendment No. 13
filed September 28, 1995 and incorporated by reference to Exhibit 8(b)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(g)(2) Custodian Agreement with the Bank of California -- incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
(g)(3) Fourth Amendment to Custodian Agreement by and between STI Trust &
Investment Operations, Inc. and The Bank of New York dated May 6, 1997
-- incorporated by reference to Exhibit 8(d) of Post-Effective
Amendment No. 21 to the Registrant's Registration Statement filed with
the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30,
1997.
(h)(1) Transfer Agent Agreement with Federated Services Company dated May 14,
1994 -- originally filed with Post-Effective Amendment No. 9 filed
September 22, 1994 and incorporated by reference to Exhibit 8(c) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(h)(2) Administration Agreement with SEI Financial Management Corporation
dated May 29, 1995 -- incorporated by reference to the Registrant's
Post-Effective Amendment No. 32 to the Registrant's Registration
Statement filed the SEC via EDGAR Accession No. 0001047469-99-037088
on September 28, 1999.
(h)(3) Consent to Assignment and Assumption of the Administration Agreement
between STI Classic Funds and SEI Financial Management Corporation --
incorporated by reference to Exhibit 9(b) of Post-Effective Amendment
No. 21 to the Registrant's Registration Statement filed with the SEC
via EDGAR Assession No. 0000912057-97-032207 on September 30, 1997.
(i) Opinion and Consent of Counsel -- incorporated by reference to the
Registrant's Post-Effective Amendment No. 32 to the Registrant's
Registration Statement filed the SEC via EDGAR Accession No.
0001047469-99-037088 on September 28, 1999.
(j) Not applicable.
(k) Not applicable.
(l) Not applicable.
(m)(1) Distribution Plan - Investor Class -- incorporated by reference to
Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
(m)(2) Distribution and Service Agreement relating to Flex Shares dated May
29, 1995 -- originally filed with Post-Effective Amendment No. 12
filed August 17, 1995 and incorporated by reference to Exhibit 15(a)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(n) Not applicable.
(o) Rule 18f-3 Plan -- incorporated by reference to Exhibit (o) of
Post-Effective Amendment No. 23 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0001047469-98-027407 on July 15, 1998.
(o)(1) Certificate of Class Designation -- incorporated by reference to
Exhibit (o)(1) of Post-Effective Amendment No. 27 to the Registrant's
Statement filed with the SEC via EDGAR Accession No.
0001047469-99-009731 on April 15, 1999.
(p) Powers of Attorney -- incorporated by reference to the Registrant's
Post-Effective Amendment No. 32 to the Registrant's Registration
Statement filed the SEC via EDGAR Accession No. 0001047469-99-037088
on September 28, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant:
C-2
<PAGE>
See the Prospectuses and Statement of Additional Information regarding the
Trust's control relationships. The Administrator is a subsidiary of SEI
Investments which also controls the distributor of the Registrant, SEI
Investments Distribution Co., and other corporations engaged in providing
various financial and record keeping services, primarily to bank trust
departments, pension plan sponsors, and investment managers.
Item 25. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit (a) to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 26. Business and Other Connections of Investment Advisors:
Other business, profession, vocation, or employment of a substantial nature in
which each director or principal officer of each Advisor is or has been, at any
time during the last two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee are as follows:
<TABLE>
<CAPTION>
Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
STI CAPITAL MANAGEMENT, N.A.
E. Jenner Wood III SunTrust Banks, Inc. --
Director
Hunting F. Deutsch SunTrust Bank, Orlando --
Director
Anthony R. Gray -- --
Chairman & Chief Investment Officer
James R. Wood -- --
President
Elliott A. Perny -- --
Executive Vice President
Stuart F. Van Arsdale -- --
Senior Vice President
Jonathan D. Rich -- --
Director
Larry M. Cole -- --
C-3
<PAGE>
<CAPTION>
Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
Senior Vice President
L. Earl Denney -- --
Executive Vice President
Ronald Schwartz -- --
Senior Vice President
Andre B.Prawato -- --
Senior Vice President
Edward J. Dau -- --
Senior Vice President
James K. Wood -- --
Senior Vice President
Mills A. Riddick -- --
Senior Vice President
Christopher A. Jones -- --
Senior Vice President
David E. West -- --
Vice President
Brett L. Barner -- --
Senior Vice President
TRUSCO CAPITAL MANAGEMENT, INC.
Douglas S. Phillips -- --
President
Paul L. Robertson, III -- --
Secretary/Treasurer
E. Jenner Wood SunTrust Banks, Inc. Director
Director
Donald W. Thurmond SunTrust Bank, Atlanta Director
Director
Bob M. Farmer -- --
Vice President
M. Elizabeth (Beth) Wines -- --
Vice President
Charles Arnold, Jr. -- --
Senior Vice President
C-4
<PAGE>
<CAPTION>
Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
James R. Dillon, Jr. -- --
First Vice President
James P. Foster -- --
Vice President
Mark D. Garfinkel -- --
Vice President
Robert (Bob) G. Goggin -- --
Vice President
Joe E. Ransom -- --
Vice President
George D. Smith, Jr. -- --
Vice President
Jonathan Mote -- --
Vice President
Charles B. Leonard -- --
First Vice President
Mary F. Cernilli -- --
Vice President
Garrett P. Smith -- --
Vice President
Gregory L. Watkins -- --
Vice President
David S. Yealy -- --
Vice President
Robert J. Rhoades -- --
Senior Vice President
Kar Ming Leong -- --
Vice President
Stephen M. Yarbrough -- --
Vice President
Celia S. Stanley -- --
Vice President
Rebekah R. Alley -- --
Vice President
C-5
<PAGE>
<CAPTION>
Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
SUNTRUST BANK, ATLANTA
Robert R. Long SunTrust Banks of Chairman of the Board
Chairman of the Board and Georgia, Inc.
President
Ronald S. Crowding -- Executive Vice President
Executive Vice President
Charles B. Ginden -- --
Executive Vice President
William H. Rogers, Jr. -- --
Executive Vice President
Donald Wayne Thurmond -- --
Executive Vice President
Dr. William M. Chase Emory University President
Director
Gaylord O. Coan Gold Kist, Inc. CEO
Director .
A.D. Correll Georgia-Pacific Corporation Chairman & CEO
Director
R.W. Courts, II Atlantic Realty Company President
Director
A.W. Dahlberg The Southern Company President, Chairman &
Director CEO
L. Phillip Humann SunTrust Banks, Inc. President, Chairman & CEO
Director Services Corporation
William B. Johnson The Ritz Carlton Hotel Chairman of the Board
Director
J. Hicks Lanier Oxford Industries, Inc. Chairman of the Board
Director Director & President
Pinehill Development Co. 30% owner
Joseph L. Lanier, Jr. Dan River, Inc. Chairman of the Board
Director Chairman
Larry L. Prince Genuine Parts Company Chairman of the Board
Director
R. Randall Rollins Rollins, Inc. Chairman of the Board
C-6
<PAGE>
Caption>
Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
Director Lor, Inc. Director
Maran, Inc. Director
Gutterworld, Inc. Director
Dabora, Inc. Director & Secretary
Simpson, Nance & Graham Director
Auto Parts Wholesale, Inc. Director
Global Expanded Metal, Inc. Director
Rollins Holding Co. Director
Rol, Ltd. Partner
Rollins Investment Fund Partner
Energy Partners Partner
Petro Partnership Partner
The Piedmont Investment Group Director
WRG, Ltd. Partner
Rollins, Inc. Chairman
RPC Energy Services, Inc. Chairman
The Mul Company Partner
Bugvac, Inc. Director
Omnitron Int'l, Inc. Director
MRG, Ltd. Partner
Gerald T. Adams -- --
Senior Vice President
James R. Albach -- --
Group Vice President
Gay Cash -- --
Vice President
Joseph B. Foley, Jr. -- --
Group Vice President
Thomas R. Frisbie -- --
Group Vice President
Mark Stancil -- --
Group Vice President
David E. Thompson -- --
Vice President
Charles C. Watson -- --
Group Vice President
Dr. Mary B. Bullock Agnes Scott College President
Director
C-7
<PAGE>
<CAPTION>
Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
Larry L. Gellerstedt, III Beers Construction Co. Chairman
Director
John T. Glover Post Properties, Inc. President
Director
M. Douglas Ivester The Coca-Cola Company Chairman of the Board & CEO
Director
Dennis M. Love Printpack, Inc. President & CEO
Director
Charles H. McTier Robert Woodruff Foundation President
Director
</TABLE>
Item 27. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds(7) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
C-8
<PAGE>
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Parkstone Advantage Fund May 1, 1999
Amerindo Funds, Inc. July 13, 1999
Huntington VA Fund October 15, 1999
Friends Ivory Funds December 16, 1999
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution,
clearing and settlement of securities transactions ("MarketLink").
C-9
<PAGE>
(b) Furnish the Information required by the following table with respect to each
director, officer or partner of each principal underwriter named in the answer
to Item 21 of Part B. Unless otherwise noted, the business address of each
director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President Vice President and
Assistant Secretary
Kevin P. Robins Senior Vice President & General Counsel --
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant
Secretary
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President Vice President & Assistant
Secretary
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President President, Controller,
Treasurer & Chief Financial
Officer
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Assistant Secretary --
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
C-10
<PAGE>
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant
Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
Item 28. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained at the
offices of Registrant's Custodians:
Trust Company Bank
Park Place
P.O. Box 105504
Atlanta, Georgia 30348
Bank of New York
One Wall Street
New York, New York
(International Equity Index Fund, International Equity Fund, Emerging
Markets Equity Fund)
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's Administrator:
SEI Investments Mutual Funds Services
One Freedom Valley Road
Oaks, Pennsylvania 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Advisors:
STI Capital Management, N.A.
P.O. Box 3808
Orlando, Florida 32802
Trusco Capital Management
50 Hurt Plaza, Suite 1400
Atlanta, Georgia 30303
SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Item 29. Management Services: None.
Item 30. Undertakings: None.
C-11
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for STI Classic Funds is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this Registration Statement has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustees as
trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the
"Securities Act") and the Investment Company Act of 1940, as amended, the
Registrant certifies that it has duly caused this Post-Effective Amendment No.
34 to Registration Statement No. 33-45671 to be signed on its behalf by the
undersigned, duly authorized, in the City of Oaks, Commonwealth of Pennsylvania
on the 2nd day of February, 2000.
By: /s/ Mark Nagle
------------------------------------
Mark Nagle, President, Chief Financial
Officer, and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacity on the
dates indicated.
<TABLE>
<S> <C> <C>
* Trustee February 2, 2000
- ---------------------------------------------
F. Wendell Gooch
* Trustee February 2, 2000
- ---------------------------------------------
Daniel S. Goodrum
* Trustee February 2, 2000
- ---------------------------------------------
Wilton Looney
* Trustee February 2, 2000
- ---------------------------------------------
Champney A. McNair
* Trustee February 2, 2000
- ---------------------------------------------
T. Gordy Germany
* Trustee February 2, 2000
- ---------------------------------------------
Bernard F. Sliger
* Trustee February 2, 2000
- ---------------------------------------------
Jonathan T. Walton
* Trustee February 2, 2000
- ---------------------------------------------
William H. Cammack
/s/ Mark Nagle President, February 2, 2000
- --------------------------------------------- Chief Financial Officer
Mark Nagle & Chief Executive Officer
* By: /s/ Kevin P. Robins
------------------------------------------
Kevin P. Robins, With Power of Attorney
</TABLE>
C-13
<PAGE>
EXHIBIT INDEX
NUMBER EXHIBIT
EX-99.A Declaration of Trust -- originally filed with Registrant's
Registration Statement on Form N-1A filed February 12, 1992
and incorporated by reference to Exhibit 1 of Post-Effective
Amendment No. 15 to the Registrant's Registration Statement
filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
EX-99.B1 By-Laws -- originally filed with Registrant's Pre-Effective
Amendment No. 1 filed April 23, 1992 and incorporated by
reference to Exhibit 2 of Post-Effective Amendment No. 15 to
the Registrant's Registration Statement filed with the SEC
via EDGAR Accession No. 0000912057-96-015938 on July 31,
1996.
EX-99.B2 Amended By-Laws -- incorporated by reference to Exhibit
(b)(2) of Post-Effective Amendment No. 23 to the
Registrant's Registration Statement filed with the SEC via
EDGAR Accession No. 0001047469-98-027407 on July 15, 1998.
EX-99.C Not applicable.
EX-99.D1 Revised Investment Advisory Agreement with Trusco Capital
Management, Inc. -- as originally filed with Registrant's
Post-Effective Amendment No. 5 filed August 2, 1993 and
incorporated by reference to Exhibit 5(c) of Post-Effective
Amendment No. 15 to the Registrant's Registration Statement
filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
EX-99.D2 Investment Advisory Agreement with American National Bank
and Trust Company -- as originally filed with Registrant's
Post-Effective Amendment No. 6 filed October 22, 1993 and as
Exhibit 5(d) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the SEC via
EDGAR Accession No. 0000912057-96-015938 on July 31, 1996.
EX-99.D3 Investment Advisory Agreement with Sun Bank Capital
Management, National Association (now STI Capital
Management, N.A. -- as originally filed with Registrant's
Post-Effective Amendment No. 6 filed October 22, 1993 and
incorporated by reference to Exhibit 5(e) of Post-Effective
Amendment No. 15 to the Registrant's Registration Statement
filed with the SEC via EDGAR Accession
No. 0000912057-96-015938 on July 31, 1996.
EX-99.D4 Investment Advisory Agreement with Trust Company Bank (now
SunTrust Bank, Atlanta) -- as originally filed with
Registrant's Post-Effective Amendment No. 6 filed October
22, 1993 and filed herewith.
EX-99.D5 Revised Schedule A to the Revised Investment Advisory
Agreement with Trusco Capital Management, Inc. dated May 24,
1999 - incorporated by reference to the Registrant's Post-
Effective Amendment No. 32 to the Registrant's Registration
Statement filed the SEC via EDGAR Accession
No. 0001047469-99-037088 on September 28, 1999.
EX-99.D6 Revised Schedule A to the Revised Investment Advisory
Agreement with Trusco Capital Management, Inc. dated October
1, 1999 -- incorporated by reference to the Registrant's
Post- Effective Amendment No. 32 to the Registrant's
Registration Statement filed the SEC via EDGAR Accession
No. 0001047469-99-037088 on September 28, 1999.
EX-99.E Distribution Agreement -- incorporated by reference to
Exhibit 6 of Post-Effective Amendment No. 16 to the
Registrant's Registration Statement filed with the SEC via
EDGAR Accession No. 0000912057-96-021336 on September 27,
1996.
EX-99.F Not applicable.
EX-99.G1 Custodian Agreement with Trust Company Bank dated February
1, 1994 -- originally filed with Registrant's Post-Effective
Amendment No. 13 filed September 28, 1995 and incorporated
by reference to Exhibit 8(b) of Post-Effective Amendment
No. 15 to the Registrant's Registration Statement filed with
the SEC via EDGAR Accession No. 0000912057-96-015938 on
July 31, 1996.
EX-99.G2 Custodian Agreement with the Bank of California --
incorporated by reference to Exhibit 8(a) of Post-Effective
Amendment No. 15 to the Registrant's Registration Statement
filed with the SEC via EDGAR Accession No.
C-14
<PAGE>
0000912057-96-015938 on July 31, 1996.
EX-99.G3 Fourth Amendment to Custodian Agreement by and between STI
Trust & Investment Operations, Inc. and The Bank of New York
dated May 6, 1997 -- incorporated by reference to
Exhibit 8(d) of Post-Effective Amendment No. 21 to the
Registrant's Registration Statement filed with the SEC via
EDGAR Accession No. 0000912057-97-032207 on
September 30, 1997.
EX-99.H1 Transfer Agent Agreement with Federated Services Company
dated May 14, 1994 -- originally filed with Post-Effective
Amendment No. 9 filed September 22, 1994 and incorporated by
reference to Exhibit 8(c) of Post-Effective Amendment No. 15
to the Registrant's Registration Statement filed with the
SEC via EDGAR Accession No. 0000912057-96-015938 on July 31,
1996.
EX-99.H2 Administration Agreement with SEI Financial Management
Corporation dated May 29, 1995 -- incorporated by reference
to the Registrant's Post-Effective Amendment No. 32 to the
Registrant's Registration Statement filed the SEC via EDGAR
Accession No. 0001047469-99-037088 on September 28, 1999.
EX-99.H3 Consent to Assignment and Assumption of the Administration
Agreement between STI Classic Funds and SEI Financial
Management Corporation -- incorporated by reference to
Exhibit 9(b) of Post-Effective Amendment No. 21 to the
Registrant's Registration Statement filed with the SEC via
EDGAR Assession No. 0000912057-97-032207 on September 30,
1997.
EX-99.I Opinion and Consent of Counsel - incorporated by reference
to the Registrant's Post-Effective Amendment No. 32 to the
Registrant's Registration Statement filed the SEC via EDGAR
Accession No. 0001047469-99-037088 on September 28, 1999.
EX-99.J Not applicable.
EX-99.K Not applicable.
EX-99.L Not applicable.
EX-99.M1 Distribution Plan - Investor Class -- incorporated by
reference to Exhibit 15 of Post-Effective Amendment No. 16
to the Registrant's Registration Statement filed with the
SEC via EDGAR Accession No. 0000912057-96-021336 on
September 27, 1996.
EX-99.M2 Distribution and Service Agreement relating to Flex Shares
dated May 29, 1995 -- originally filed with Post-Effective
Amendment No. 12 filed August 17, 1995 and incorporated by
reference to Exhibit 15(a) of Post-Effective Amendment No.
15 to the Registrant's Registration Statement filed with the
SEC via EDGAR Accession No. 0000912057-96-015938 on July 31,
1996.
EX-99.N Not applicable.
EX-99.O Rule 18f-3 Plan -- incorporated by reference to Exhibit (i)
of Post-Effective Amendment No. 23 to the Registrant's
Registration Statement filed with the SEC via EDGAR
Accession No. 0001047469-98-027407 on July 15, 1998.
EX-99.O1 Certificate of Class Designation - incorporated by reference
to Exhibit (o)(1) of Post- Effective Amendment No. 27 to the
Registrant's Statement filed with the SEC via EDGAR
Accession No. 0001047469-99-009731 on April 15, 1999.
EX-99.P Powers of Attorney -- incorporated by reference to the
Registrant's Post-Effective Amendment No. 32 to the
Registrant's Registration Statement filed the SEC via EDGAR
Accession No. 0001047469-99-037088 on September 28, 1999.
C-15
