SouthTrust
FUNDS
TREASURY OBLIGATIONS
MONEY MARKET FUND
- -----------------
BOND FUND
- ---------
CORE EQUITY FUND
- ----------------
INCOME FUND
- -----------
SEMI-ANNUAL
REPORT
October 31, 1998
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of the SouthTrust Funds,
formerly known as the SouthTrust Vulcan Funds, for the six-month period ended
October 31, 1998. This report begins with a discussion by fund portfolio
managers about the economy, the financial markets, and fund strategies over
the period. Next, you will find a complete list of investments and financial
statements for the funds.
The following highlights summarize the performance of each SouthTrust Fund
over the six-month reporting period.
SOUTHTRUST TREASURY OBLIGATIONS MONEY MARKET FUND
This conservative portfolio of U.S. Treasury money market securities gives
investors a way to keep their ready cash accessible while it pursues daily
income. The fund paid a total of $0.03 per share in dividends over the
reporting period, for a six-month total return of 2.52%. The fund's 7 day net
yield as of October 31, 1998 was 4.71%*. The fund's net assets totaled $612.0
million at the end of the period.**
SOUTHTRUST BOND FUND
This fund's portfolio of corporate and government bonds offers investors an
all-around approach to income. At the end of the period, the fund's portfolio
consisted primarily of corporate bonds (34.8%), U.S. Treasury bonds and notes
(33.5%) and U.S. government agency bonds (28.9%). This mix of income-producing
investments paid dividends totaling $0.29 per share. In addition, the fund's
net asset value increased from $10.40 on the first day of the reporting period
to $10.84 on the last day of the reporting period. The dividends and net asset
value increase combined to produce a total return of 7.07%, based on net asset
value, or 3.30% adjusted for the fund's sales charge.*** Total net assets in
the fund reached $125.1 million at the end of the period.
SOUTHTRUST CORE EQUITY FUND
As we have seen during the six-month reporting period covered by this report,
investors in stocks will experience periods of volatility. In this case,
temporary worries about the impact of Asian economic difficulties on the U.S.
caused stock prices to decline across the board. As a result, the fund
experienced a $3.74 decline in net asset value, which in turn caused the fund
to produce a negative total return of (10.23%), based on net asset value, or
(14.28%) adjusted for the fund's sales charge.*** A positive impact on total
return was the distribution of $0.05 in income and $1.58 in capital gains. Net
assets totaled $352.6 million at the end of the period.
SOUTHTRUST INCOME FUND
This fund's income-focused portfolio consisted primarily of corporate bonds
(39.3%), U.S. Treasury notes (31.1%) and U.S. government agency bonds (26.9%).
This investments paid dividends totaling $0.29 per share, while the fund's net
asset value increased from $9.81 on the first day of the period to $9.98 on
the last day of the period. The dividends and net asset value increase
combined to produce a total return of 4.75%, based on net asset value, or
1.05% adjusted for the fund's sales charge.*** Net assets in the fund totaled
$44.7 million at the end of the period.
Thank you for participating in one or more key financial markets through the
professional management and diversification of the SouthTrust Funds. We look
forward to keeping you up-to-date on your progress.
Sincerely,
Edward C. Gonzales
President
December 15, 1998
*Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Yields quoted for money market funds must
closely reflect the fund's current earnings.
**An investment in the fund is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
***Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate; so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
The last six months have been a nerve-wracking time for the average investor!
Most stocks took a worse beating than in 1987, while U.S. Treasury bonds
mounted one of their biggest rallies in history with yields declining to all-
time record lows. By the end of October, stocks had returned to their upward
path, and bond yields headed back above the 5.00% level.
ECONOMIC PERSPECTIVE
By far the most important event for the U.S. economy during the last six
months was the dramatic reversal in the Federal Reserve Board's (the "Fed")
policy stance. Since the Fed made an unusual one-time increase in the Fed
funds target rate in March 1997, investors have worried that Fed policy, to
protect against potential inflationary pressures, would eventually prove too
restrictive and force the economy into recession. All that changed on
September 29, 1998, when the Fed cut interest rates. Then, the Fed surprised
almost everyone on October 15, 1998, and cut the Fed funds and discount rate
between regularly scheduled Fed meetings.
The shift in monetary policy comes at a time when real money growth is at an
11-year high. Real money growth should receive additional stimulus from the
decline in interest rates. Third quarter real gross domestic product was a
pleasant surprise, with a strong 3.40% growth reported just when almost every
forecaster was sure weakness had set in. Even more favorable was the fact that
the quarter reflected true growth, not inventory accumulation.
With the Fed now having a clear basis toward easing, there is little reason
for investors to think the recession they were dreading is around the corner.
Housing continues to be very strong, defying most forecasts of recent years.
With mortgage applications for purchase and refinancing near record levels
because of attractive mortgage rates, no slowdown is envisioned. Housing
starts and building permits are approaching 20-year highs. The strength in
housing bodes especially well for the additional consumer durable spending it
tends to foster.
The consumer, which has been a major factor in maintaining economic growth,
shows no sign of slowing down. Employment numbers are favorable and personal
income continues to grow. The mid-year decline in stock prices had led to
expectations that the negative wealth impact would slow consumer spending, but
the quick recovery in the market should put an end to those concerns. With
less concern over a recession and lower interest rates, consumer debt appears
manageable and fears of a credit crunch have all but disappeared. Banks still
appear to be willing to make loans. It seems reasonable to conclude that
consumer spending should remain reasonably strong into 1999.
Business capital spending has been expected to slow for several years, but it
seems to be getting better instead. Business equipment spending is at a 14-
year high, with dollars for technology leading the way. Orders for durable
goods show continued strong growth. With Y2K concerns forcing computer
upgrades, spending should remain a positive factor at least through the first
half of 1999. It is hard to envision a significant slowdown in business
spending over the near-term.
Traditional economic theory suggests that continued economic growth will
eventually result in inflation, but it just is not happening in this cycle.
Inflation continues to be subdued, with the consumer price index up just 1.50%
during the twelve months ending in October. Even more favorable is the producer
price index, which has actually declined 0.70% over the past year. Renewed
inflation, which would be viewed negatively by both the bond and stock markets,
shows no sign of being a problem.
Our work suggests that the U.S. economy will slow next year, but not slip into
recession. A slowing economy should help keep inflation low, although we
believe inflation might move modestly higher in the upcoming year. This should
keep the economic environment favorable for investors. Our main concern is
that the slowing economy will put pressure on corporate profits, and with the
current high level of valuations placed on stocks, there is little room for
disappointment.
FIXED INCOME MARKET
Bond investors view the Fed's accomodative monetary policy with mixed
emotions. While lower short-term interest rates are a clear positive, the
expected stimulus to economic growth is perceived far less favorably. Although
Fed easing has a powerful impact on investment markets, it is likely to have
little impact on inflation as the global deflationary pressures prevalent in
recent years appear intact. Bonds currently appear hostage to their own
success and investor focus on the stock market, neither of which is likely to
change until investors find a new reason to worry about stocks.
Long term U.S. Treasury yields were over 6.00% in late-April and had fallen to
around 5.75% when the mid-year pullback in stocks began. Worries about the
stock market resulted in a major shift of investment capital into U.S.
Treasury bonds. The strong demand for U.S. Treasuries drove yields on the 30-
year bond down to an all-time low of 4.75% by late October. While the move in
U.S. Treasury bonds went further than most anyone expected, corporate bonds
did not fare so well. Concerns over a major credit crunch, that resulted from
Russia defaulting on their bonds and the need for the government to arrange
the bailout of a large over-leveraged hedge fund, caused quality spreads to
widen dramatically. Investors in low-quality bonds were especially hurt.
During mid-1998 only U.S. Treasuries provided the protection investors sought
from stock market problems.
By the end of October, long-term treasury yields had moved back above 5.00%
and corporate spreads had begun to narrow but remained high relative to recent
experience. Low inflation bodes well for the bond market and with the return
to investor exuberance for stocks, bonds should continue to play an important
role in all balanced portfolios.
EQUITY REVIEW
Stocks have been on a roller coaster ride in 1998. In April, the broad market
started heading down while large cap growth stocks continued their rally.
Large cap growth stocks accelerated on the upside during June and the first
half of July. In mid-July, the Russian default, and bailout of a large hedge
fund resulted in concerns of a credit crunch that caused the large cap leading
stocks to follow the rest of the market down. While the average NYSE and
NASDAQ stock suffered more damage this year than during the 1987 crash, the
large cap growth stock leaders were left relatively unscathed, with most never
even approaching their early year lows. Fed rate cuts and increased confidence
in the viability of the credit system calmed investor concerns and by early
October stocks resumed their upward ways.
With investor concerns gradually being erased by the strength in stocks, the
mid-year pullback may well best be viewed as a correction in an on-going bull
market. The key question is whether leadership will change to small, mid-cap
and attractively valued stocks. This is especially important due to the vastly
diverging performance of growth stocks versus value stocks and small cap stocks
versus large cap stocks. Based on the Barra Value and Growth* indices for the
first nine months of this year, growth stocks out performed value stocks by an
unprecedented exceptional 16.50%. Even more dramatic was the difference between
large cap and small caps stocks. During the first nine months of the year, the
S&P 500** (large cap stocks) provided a total return of 6.10% compared to
- -16.80% for the Russell 2000+ (small cap stocks), a difference of 22.90%. If
these divergences were not enough, market leadership was exceptionally narrow,
with just 15 stocks contributing over 100% of the total return of the S&P 500
during the first nine months of the year. Most stocks and industries did not
participate in the positive returns the large cap indices produced!
Now, the key challenge facing the market is whether leadership will broaden
out into the underperforming stocks, many of which appear to have excellent
upside potential. If leadership remains in the large cap growth stock momentum
leaders, which are already selling at near historical peak valuations, upside
may be limited to not much more than our highs of earlier this year. A
continuation of a momentum driven market would tend to foster increased
speculation and greatly increase market risk.
Early signs are favorable that market interest may broaden from the narrow
leadership it had during the first ten months of this year. Such a shift is
supported by Fed interest rate cuts which tend to help small companies and
midcap companies the most. Also, seasonal tendencies tend to favor small
companies and underperformers late in the year and early in the following
year. Valuations also tend to be much more attractive for the underperformers
as does earnings momentum for small companies relative to large companies.
With the continuing favorable economic backdrop and major demographic shift to
an older more investment conscious population, stocks may well be able to
continue their upward ways. This is especially true if new stocks can take
over leadership of the market. We are very concerned about many of the
speculative and momentum driven market leaders, but think many value stocks
offer investors excellent risk/reward potential trade offs.
While the middle six months of the year proved very difficult for your
SouthTrust Core Equity Fund, recent performance tends to give reason for
optimism. Our fund, like those of many of the best known and most respected
value funds, had a difficult time during the narrow momentum driven market
surge and mid-year correction. Relative performance turned sharply positive in
mid-October. We remain committed to our philosophy of buying above-average
companies, with strong earnings growth, when they are selling at attractive
valuations. Historically, companies with these characteristics have performed
very well for investors, and we have no doubt they will again as rationality
regains control of the market. Thank you for your continued vote of
confidence.
*S&P 500/Barra Value Index is a market capitalization-weighted index of the
stocks in the Standard & Poor's 500 Index having the highest book to price
ratios. The index consists of approximately half of the S&P 500 on a market
capitalization basis. S&P 500/Barra Growth Index is a capitalization weighted
index of all the stocks in the S&P 500 that have high price-to-book rations.
Indexes are unmanaged and investments cannot be made in an index.
**S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through changes
in the aggregate market value of 500 stock's representing all major
industries. Indexes are unmanaged and investments cannot be made in an index.
+Russell 2000 Small Stock Index is an unmanaged index consisting of
approximately 2000 small capitalization common stocks. Investments cannot be
made in an index. Small cap stocks have historically experienced greater
volatility than average.
SOUTHTRUST TREASURY OBLIGATIONS MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--16.3%
--------------------------------------------------------------
U.S. TREASURY BILLS--12.2%
-------------------------------------------------
$ 25,000,000 11/12/1998 $ 24,960,660
-------------------------------------------------
25,000,000 12/3/1998 24,889,556
-------------------------------------------------
25,000,000 1/7/1999 24,772,944
------------------------------------------------- ------------
Total 74,623,160
------------------------------------------------- ------------
U.S. TREASURY NOTES--4.1%
-------------------------------------------------
25,000,000 5.125%, 12/31/1998 24,992,043
------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 99,615,203
------------------------------------------------- ------------
(A) REPURCHASE AGREEMENTS--84.0%
--------------------------------------------------------------
69,201,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.400%, dated 10/30/1998, due 11/2/1998 69,201,000
-------------------------------------------------
125,000,000 Greenwich Capital Markets, Inc., 5.420%, dated
10/30/1998, due 11/2/1998 125,000,000
-------------------------------------------------
50,000,000 Lehman Brothers, Inc., 5.400%, dated 10/30/1998,
due 11/2/1998 50,000,000
-------------------------------------------------
135,000,000 State Street Corp., 5.350%, dated 10/30/1998, due
11/2/1998 135,000,000
-------------------------------------------------
135,000,000 Warburg Securities, 5.400%, dated 10/30/1998, due
11/2/1998 135,000,000
------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 514,201,000
------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $613,816,203
------------------------------------------------- ------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($611,966,553) as of October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- ------------
<C> <S> <C>
CORPORATE BONDS--34.8%
--------------------------------------------------------------
CHEMICALS--3.2%
---------------------------------------------------
$2,000,000 Praxair, Inc., Note, 6.15%, 4/15/2003 $ 2,021,640
---------------------------------------------------
2,000,000 Solutia, Inc., Note, 6.50%, 10/15/2002 2,016,306
--------------------------------------------------- ------------
Total 4,037,946
--------------------------------------------------- ------------
COMMERCIAL SERVICES--1.6%
---------------------------------------------------
2,000,000 Equifax, Inc., Sr. Note, 6.50%, 6/15/2003 2,064,936
--------------------------------------------------- ------------
CONSUMER NON-DURABLES--2.1%
---------------------------------------------------
Philip Morris Cos., Inc., Unsecd. Note, 7.125%,
1,500,000 10/1/2004 1,605,473
---------------------------------------------------
Philip Morris Cos., Inc., Unsecd. Note, 7.125%,
1,000,000 12/1/1999 1,020,656
--------------------------------------------------- ------------
Total 2,626,129
--------------------------------------------------- ------------
CONSUMER SERVICES--2.5%
---------------------------------------------------
3,000,000 Service Corp. International, Note, 6.30%, 3/15/2003 3,088,233
--------------------------------------------------- ------------
FINANCE--8.1%
---------------------------------------------------
2,000,000 BB&T Corp., Sub. Note, 7.25%, 6/15/2007 2,181,920
---------------------------------------------------
Bank of New York Co., Inc., Sub. Note, 8.50%,
2,500,000 12/15/2004 2,887,612
---------------------------------------------------
Ford Motor Credit Corp., Unsecd. Note, 7.75%,
2,500,000 10/1/1999 2,549,093
---------------------------------------------------
Standard Credit Card Master Trust 1991-6, Class A,
2,500,000 7.875%, 1/7/2000 2,502,888
--------------------------------------------------- ------------
Total 10,121,513
--------------------------------------------------- ------------
PROCESS INDUSTRIES--4.5%
---------------------------------------------------
5,000,000 Archer-Daniels-Midland Co., Deb., 7.125%, 3/1/2013 5,594,760
--------------------------------------------------- ------------
TRANSPORTATION--2.6%
---------------------------------------------------
CSX Transportation, Inc., Equip. Trust, 6.47%,
2,000,000 6/15/2011 2,082,128
---------------------------------------------------
Norfolk Southern Corp., Equip. Trust, Series C,
1,000,000 7.75%, 8/15/2006 1,135,861
--------------------------------------------------- ------------
Total 3,217,989
--------------------------------------------------- ------------
UTILITIES--10.2%
---------------------------------------------------
BellSouth Telecommunications, Inc., Deb., 7.00%,
5,000,000 10/1/2025 5,455,175
---------------------------------------------------
</TABLE>
SOUTHTRUST BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------------
National Rural Utilities Cooperative Finance Corp.,
$2,000,000 Sr. Note, 6.75%, 9/1/2001 $ 2,085,852
----------------------------------------------------
5,000,000 Pacific Bell, Note, 6.125%, 2/15/2008 5,243,300
---------------------------------------------------- ------------
Total 12,784,327
---------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $41,217,185) 43,535,833
---------------------------------------------------- ------------
GOVERNMENT AGENCIES--28.9%
---------------------------------------------------------------
FEDERAL HOME LOAN BANK--4.1%
----------------------------------------------------
5,000,000 5.50%, 7/14/2000 5,061,265
---------------------------------------------------- ------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--3.7%
----------------------------------------------------
3,500,000 6.52%, 1/2/2002 3,673,992
----------------------------------------------------
938,087 9.50%, 2/15/2020 1,005,533
---------------------------------------------------- ------------
Total 4,679,525
---------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--21.1%
----------------------------------------------------
8,500,000 5.10%, Medium Term Note, 9/25/2000 8,558,947
----------------------------------------------------
5,000,000 5.75%, 4/15/2003 5,191,625
----------------------------------------------------
5,000,000 6.00%, 5/15/2008 5,301,395
----------------------------------------------------
5,000,000 6.65%, Medium Term Note, 11/14/2007 5,252,715
----------------------------------------------------
2,000,000 8.50%, 2/1/2005 2,083,528
---------------------------------------------------- ------------
Total 26,388,210
---------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST
$35,789,516) 36,129,000
---------------------------------------------------- ------------
U.S. TREASURY OBLIGATIONS--33.5%
---------------------------------------------------------------
U.S. TREASURY BONDS--13.6%
----------------------------------------------------
3,000,000 5.50%, 8/15/2028 3,159,378
----------------------------------------------------
5,000,000 7.25%, 8/15/2022 6,235,940
----------------------------------------------------
4,000,000 7.50%, 11/15/2016 4,991,252
----------------------------------------------------
1,000,000 7.875%, 2/15/2021 1,319,063
----------------------------------------------------
1,000,000 8.00%, 11/15/2021 1,340,938
---------------------------------------------------- ------------
Total 17,046,571
---------------------------------------------------- ------------
</TABLE>
SOUTHTRUST BOND FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
---------------------------------------------------------------
U.S. TREASURY NOTES--19.9%
----------------------------------------------------
$5,000,000 5.50%, 1/31/2003 $ 5,217,190
----------------------------------------------------
2,000,000 6.25%, 10/31/2001 2,105,626
----------------------------------------------------
2,000,000 6.25%, 2/15/2003 2,145,626
----------------------------------------------------
2,000,000 6.375%, 3/31/2001 2,092,502
----------------------------------------------------
3,000,000 6.50%, 5/15/2005 3,338,439
----------------------------------------------------
1,500,000 6.50%, 8/15/2005 1,673,907
----------------------------------------------------
3,000,000 6.625%, 5/15/2007 3,403,128
----------------------------------------------------
1,125,000 7.25%, 5/15/2004 1,277,227
----------------------------------------------------
1,125,000 7.25%, 8/15/2004 1,281,798
----------------------------------------------------
1,125,000 7.50%, 2/15/2005 1,306,055
----------------------------------------------------
1,000,000 8.00%, 5/15/2001 1,087,188
---------------------------------------------------- ------------
Total 24,928,686
---------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST
$37,937,881) 41,975,257
---------------------------------------------------- ------------
MUTUAL FUND--1.3%
---------------------------------------------------------------
AIM Short-Term Investment Co. Prime Portfolio (AT
1,609,388 NET ASSET VALUE) 1,609,388
---------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $116,553,970)(A) $123,249,478
---------------------------------------------------- ------------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $116,553,970.
The net unrealized appreciation of investments on a federal tax basis
amounts to $6,695,508 which is comprised of $6,812,205 appreciation and
$116,697 depreciation as of October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($125,182,903) as of October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--98.6%
----------------------------------------------
CAPITAL GOODS--12.3%
------------------------------------
190,000 Allied-Signal, Inc. $ 7,398,125
------------------------------------
87,500 Honeywell, Inc. 6,989,063
------------------------------------
220,000 Ingersoll-Rand Co. 11,110,000
------------------------------------
226,000 (a)Jacobs Engineering Group, Inc. 7,373,250
------------------------------------
78,000 United Technologies Corp. 7,429,500
------------------------------------
145,200 (a)Wolverine Tube, Inc. 3,076,425
------------------------------------ ------------
Total 43,376,363
------------------------------------ ------------
CEMENT--1.0%
------------------------------------
105,000 LaFarge Corp. 3,537,188
------------------------------------ ------------
COMMERCIAL SERVICES--1.9%
------------------------------------
255,100 (a)Modis Professional Services, Inc. 4,496,138
------------------------------------
150,000 (a)School Specialty, Inc. 2,362,500
------------------------------------ ------------
Total 6,858,638
------------------------------------ ------------
CONSUMER CYCLICAL--10.0%
------------------------------------
315,000 Deluxe Corp. 10,198,125
------------------------------------
122,500 (a)Federated Department Stores, Inc. 4,708,594
------------------------------------
120,000 Goodyear Tire & Rubber Co. 6,465,000
------------------------------------
290,000 (a)Jones Apparel Group, Inc. 5,002,500
------------------------------------
146,200 (a)Meadowcraft, Inc. 1,059,950
------------------------------------
310,000 (a)Office Depot, Inc. 7,750,000
------------------------------------ ------------
Total 35,184,169
------------------------------------ ------------
CONSUMER STAPLES--7.7%
------------------------------------
355,000 Dial Corp. 9,784,688
------------------------------------
200,000 PepsiCo, Inc. 6,750,000
------------------------------------
210,000 Philip Morris Cos., Inc. 10,736,250
------------------------------------ ------------
Total 27,270,938
------------------------------------ ------------
</TABLE>
SOUTHTRUST CORE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------
ENERGY--9.5%
-------------------------------------
240,000 Coastal Corp. $ 8,460,000
-------------------------------------
225,000 Diamond Offshore Drilling, Inc. 6,904,688
-------------------------------------
50,000 Mobil Corp. 3,784,375
-------------------------------------
190,000 USX Marathon Group 6,210,625
-------------------------------------
300,000 (a)Weatherford International, Inc. 8,156,250
------------------------------------- ------------
Total 33,515,938
------------------------------------- ------------
FINANCE--15.2%
-------------------------------------
167,400 Ace, Ltd., ADR 5,670,675
-------------------------------------
184,400 Bank of New York Co., Inc. 5,820,125
-------------------------------------
107,000 BankAmerica Corp. 6,145,813
-------------------------------------
110,000 Chase Manhattan Corp. 6,249,375
-------------------------------------
170,000 Federal National Mortgage Association 12,038,125
-------------------------------------
222,375 Old Republic International Corp. 4,225,125
-------------------------------------
100,000 SunAmerica, Inc. 7,050,000
-------------------------------------
90,000 SunTrust Banks, Inc. 6,271,875
------------------------------------- ------------
Total 53,471,113
------------------------------------- ------------
HEALTHCARE--11.9%
-------------------------------------
92,000 American Home Products Corp. 4,485,000
-------------------------------------
84,000 Bristol-Myers Squibb Co. 9,287,250
-------------------------------------
425,000 (a)Humana, Inc. 8,048,438
-------------------------------------
90,000 Johnson & Johnson 7,335,000
-------------------------------------
48,000 Merck & Co., Inc. 6,492,000
-------------------------------------
222,240 (a)Tenet Healthcare Corp. 6,208,830
------------------------------------- ------------
Total 41,856,518
------------------------------------- ------------
MISCELLANEOUS--2.3%
-------------------------------------
380,000 (a)U.S. Filter Corp. 8,051,250
------------------------------------- ------------
PAPER--1.6%
-------------------------------------
135,000 Bowater, Inc. 5,509,688
------------------------------------- ------------
</TABLE>
SOUTHTRUST CORE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- --------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------------------
PRODUCER MANUFACTURING--1.3%
---------------------------------------------------
150,000 Diebold, Inc. $ 4,678,125
--------------------------------------------------- ------------
TECHNOLOGY--18.1%
---------------------------------------------------
270,000 (a)Aztec Technology Partners, Inc. 1,468,125
---------------------------------------------------
300,000 Compaq Computer Corp. 9,487,500
---------------------------------------------------
134,000 Electronic Data Systems Corp. 5,452,125
---------------------------------------------------
180,000 First Data Corp. 4,770,000
---------------------------------------------------
163,400 Harris Corp. 5,729,213
---------------------------------------------------
64,000 Hewlett-Packard Co. 3,852,000
---------------------------------------------------
48,000 Intel Corp. 4,281,000
---------------------------------------------------
67,000 International Business Machines Corp. 9,945,313
---------------------------------------------------
254,600 (a)Sun Microsystems, Inc. 14,830,450
---------------------------------------------------
250,000 (a)Symantec Corp. 4,000,000
--------------------------------------------------- ------------
Total 63,815,726
--------------------------------------------------- ------------
TELECOMMUNICATION SERVICES--5.8%
---------------------------------------------------
147,000 Bell Atlantic Corp. 7,809,375
---------------------------------------------------
138,000 GTE Corp. 8,098,870
---------------------------------------------------
59,800 Sprint Corp. 4,589,650
--------------------------------------------------- ------------
Total 20,497,895
--------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $288,020,625) 347,623,549
--------------------------------------------------- ------------
</TABLE>
SOUTHTRUST CORE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------------------------------------------------- ------------
<C> <S> <C>
MUTUAL FUND--1.4%
---------------------------------------------------------------
AIM Short-Term Investment Co. Prime Portfolio (AT NET
4,787,669 ASSET VALUE) $ 4,787,669
----------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $292,808,294)(B) $352,411,218
----------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $292,808,294.
The net unrealized appreciation of investments on a federal tax basis
amounts to $59,602,924 which is comprised of $80,578,762 appreciation and
$20,975,838 depreciation as of October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($352,599,558) as of October 31, 1998.
The following acronym is used throughout this portfolio:
ADR--American Depository Receipt
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST INCOME FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--39.3%
---------------------------------------------------------------
BANKING--2.4%
----------------------------------------------------
$1,000,000 NationsBank Corp., Sub. Note, 6.875%, 2/15/2005 $ 1,058,658
---------------------------------------------------- -----------
CHEMICALS--4.5%
----------------------------------------------------
1,000,000 Praxair, Inc., Note, 6.15%, 4/15/2003 1,010,820
----------------------------------------------------
1,000,000 Solutia, Inc., Note, 6.50%, 10/15/2002 1,008,153
---------------------------------------------------- -----------
Total 2,018,973
---------------------------------------------------- -----------
CONSUMER NON-DURABLES--3.6%
----------------------------------------------------
1,000,000 Philip Morris Cos., Inc., Note, 7.625%, 5/15/2002 1,067,673
----------------------------------------------------
500,000 Procter & Gamble Co., Deb., 8.70%, 8/1/2001 548,345
---------------------------------------------------- -----------
Total 1,616,018
---------------------------------------------------- -----------
CONSUMER SERVICES--4.6%
----------------------------------------------------
1,000,000 Service Corp. International, Note, 6.30%, 3/15/2003 1,029,411
----------------------------------------------------
1,000,000 Service Corp. International, Note, 6.375%, 10/1/2000 1,016,869
---------------------------------------------------- -----------
Total 2,046,280
---------------------------------------------------- -----------
ENERGY--2.4%
----------------------------------------------------
1,000,000 Amoco Corp., Company Guarantee, 6.25%, 10/15/2004 1,056,203
---------------------------------------------------- -----------
FINANCIAL SERVICES--11.6%
----------------------------------------------------
1,000,000 Ford Motor Credit Corp., Note, 6.375%, 10/6/2000 1,020,180
----------------------------------------------------
Ford Motor Credit Corp., Unsecd. Note, 8.20%,
1,000,000 2/15/2002 1,074,017
----------------------------------------------------
General Motors Acceptance Corp., Note, 6.625%,
1,000,000 10/1/2002 1,041,948
----------------------------------------------------
1,000,000 IBM Credit Corp., Note, 6.80%, 5/22/2001 1,007,425
----------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., Note, 8.375%, 2/9/2000 1,037,335
---------------------------------------------------- -----------
Total 5,180,905
---------------------------------------------------- -----------
MANUFACTURING--2.3%
----------------------------------------------------
1,000,000 Sony Corp., Bond, 6.125%, 3/4/2003 1,021,433
---------------------------------------------------- -----------
</TABLE>
SOUTHTRUST INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
----------------------------------------------------------------
RETAIL--1.1%
-----------------------------------------------------
Dillard Department Stores, Inc., Note, 7.375%,
$ 500,000 6/15/1999 $ 505,013
----------------------------------------------------- -----------
UTILITIES--6.8%
-----------------------------------------------------
New England Telephone & Telegraph, Deb., 6.375%,
1,000,000 9/1/2008 1,000,796
-----------------------------------------------------
1,000,000 SBC Communications, Inc., Deb., 6.50%, 7/1/2003 1,001,122
-----------------------------------------------------
U.S. West Communications, Inc., Unsecd. Note, 6.375%,
1,000,000 10/15/2002 1,042,210
----------------------------------------------------- -----------
Total 3,044,128
----------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $17,139,442) 17,547,611
----------------------------------------------------- -----------
GOVERNMENT AGENCIES--26.9%
----------------------------------------------------------------
FEDERAL HOME LOAN BANK--7.0%
-----------------------------------------------------
1,000,000 6.02%, 3/17/2008 1,052,932
-----------------------------------------------------
2,000,000 7.00%, 11/13/2007 2,071,018
----------------------------------------------------- -----------
Total 3,123,950
----------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--19.9%
-----------------------------------------------------
2,000,000 6.44%, Medium Term Note, 6/21/2005 2,142,722
-----------------------------------------------------
1,253,380 6.50%, 8/1/2013 1,273,059
-----------------------------------------------------
1,775,000 6.59%, Medium Term Note, 5/16/2002 1,873,376
-----------------------------------------------------
1,000,000 6.60%, Medium Term Note, 5/1/2008 1,027,450
-----------------------------------------------------
1,000,000 6.65%, Medium Term Note, 11/14/2007 1,050,543
-----------------------------------------------------
1,500,000 7.80%, Medium Term Note, 2/21/2007 1,515,542
----------------------------------------------------- -----------
Total 8,882,692
----------------------------------------------------- -----------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST
$11,716,710) 12,006,642
----------------------------------------------------- -----------
U.S. TREASURY NOTES--31.1%
----------------------------------------------------------------
1,250,000 6.25%, 8/31/2000 1,292,189
-----------------------------------------------------
1,000,000 6.375%, 1/15/2000 1,022,813
-----------------------------------------------------
1,000,000 6.375%, 3/31/2001 1,046,251
-----------------------------------------------------
1,000,000 6.50%, 8/31/2001 1,056,563
-----------------------------------------------------
1,500,000 6.75%, 6/30/1999 1,522,502
-----------------------------------------------------
</TABLE>
SOUTHTRUST INCOME FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY NOTES--CONTINUED
----------------------------------------------------------------
$1,500,000 6.875%, 3/31/2000 $ 1,551,095
-----------------------------------------------------
1,000,000 7.125%, 2/29/2000 1,035,001
-----------------------------------------------------
1,000,000 7.25%, 5/15/2004 1,135,313
-----------------------------------------------------
1,000,000 7.50%, 10/31/1999 1,029,376
-----------------------------------------------------
1,000,000 7.50%, 11/15/2001 1,088,126
-----------------------------------------------------
1,000,000 7.75%, 2/15/2001 1,073,751
-----------------------------------------------------
1,000,000 8.00%, 8/15/1999 1,027,501
----------------------------------------------------- -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST
$13,502,305) 13,880,481
----------------------------------------------------- -----------
MUTUAL FUND--1.1%
----------------------------------------------------------------
AIM Short-Term Investment Co. Prime Portfolio (AT NET
506,563 ASSET VALUE) 506,563
----------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $42,865,020)(A) $43,941,297
----------------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $42,865,020.
The net unrealized appreciation of investments on a federal tax basis
amounts to $1,076,277 which is comprised of $1,104,096 appreciation and
$27,819 depreciation as of October 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($44,666,000) as of October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST FUNDS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
OBLIGATIONS
MONEY BOND CORE EQUITY INCOME
MARKET FUND FUND FUND FUND
- ------------------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
- ------------------------
Investments in $514,201,000 $ -- $ -- $ --
repurchase agreements
- ------------------------
Investments in 99,615,203 123,249,478 352,411,218 43,941,297
securities ------------ ------------ ------------ -----------
- ------------------------
Total investments in
securities, at value $613,816,203 $123,249,478 $352,411,218 $43,941,297
- ------------------------ ------------ ------------ ------------ -----------
Cash -- -- 962 --
- ------------------------
Income receivable 585,750 1,963,441 240,616 732,617
- ------------------------
Receivable for shares -- 566 348 --
sold
- ------------------------
Deferred organizational -- -- -- 7,340
costs ------------ ------------ ------------ -----------
- ------------------------
Total assets 614,401,953 125,213,485 352,653,144 44,681,254
- ------------------------ ------------ ------------ ------------ -----------
LIABILITIES:
- ------------------------
Payable for shares -- 10,000 -- --
redeemed
- ------------------------
Payable to Bank 965 -- -- --
- ------------------------
Income distribution 2,362,334 -- -- --
payable
- ------------------------
Accrued expenses 72,101 20,582 53,586 15,254
- ------------------------ ------------ ------------ ------------ -----------
Total liabilities 2,435,400 30,582 53,586 15,254
- ------------------------ ------------ ------------ ------------ -----------
NET ASSETS CONSIST OF:
- ------------------------
Paid in capital 611,966,553 116,303,990 295,121,541 45,128,804
- ------------------------
Net unrealized -- 6,695,508 59,602,924 1,076,277
appreciation
(depreciation) of
investments
- ------------------------
Accumulated net realized -- 2,076,284 (2,089,435) (1,560,991)
gain (loss) on
investments
- ------------------------
Undistributed net
investment
income/(Accumulated
distributions in excess
of net investment
income) -- 107,121 (35,472) 21,910
- ------------------------ ------------ ------------ ------------ -----------
Total Net Assets $611,966,553 $125,182,903 $352,599,558 $44,666,000
- ------------------------ ------------ ------------ ------------ -----------
Shares Outstanding 611,966,553 11,552,078 23,024,963 4,475,379
- ------------------------ ------------ ------------ ------------ -----------
NET ASSET VALUE PER
SHARE:
(Net Assets / Shares $ 1.00 $ 10.84 $ 15.31 $ 9.98
Outstanding) ------------ ------------ ------------ -----------
- ------------------------
Offering Price Per -- $ 11.23(b) $ 16.03(c) $ 10.34(b)
Share(a) ------------ ------------ ------------ -----------
- ------------------------
Redemption Proceeds Per -- $ 10.73(d) $ 15.16(d) $ 9.88(d)
Share(a) ------------ ------------ ------------ -----------
- ------------------------
Investments, at -- 116,553,970 292,808,294 42,865,020
identified cost ------------ ------------ ------------ -----------
- ------------------------
Investments, at tax cost -- 116,553,970 292,808,294 42,865,020
- ------------------------ ------------ ------------ ------------ -----------
</TABLE>
(a) See "How to Purchase, Exchange and Redeem Shares" in the prospectus.
(b) Computation of offering price: 100/96.5 of net asset value.
(c) Computation of offering price: 100/95.5 of net asset value.
(d) Computation of redemption proceeds: 99/100 of net asset value.
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST FUNDS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
OBLIGATIONS
MONEY MARKET BOND CORE EQUITY INCOME
FUND FUND FUND FUND
- -------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------
Dividends $ -- $ -- $ 2,395,947 $ --
- --------------------------
Interest 16,526,347 3,742,334 218,178 1,381,233
- -------------------------- ----------- ---------- ------------ ----------
Total income 16,526,347 3,742,334 2,614,125 1,381,233
- -------------------------- ----------- ---------- ------------ ----------
EXPENSES:
- --------------------------
Investment advisory fee 1,528,363 365,583 1,403,470 127,501
- --------------------------
Administrative personnel 329,577 65,877 201,841 50,410
and services fee
- --------------------------
Custodian fees 24,616 5,750 17,742 1,864
- --------------------------
Transfer and dividend 18,214 16,043 12,022 14,516
disbursing agent fees and
expenses
- --------------------------
Directors'/Trustees' fees 10,225 2,422 3,799 218
- --------------------------
Auditing fees 6,114 4,171 3,743 5,792
- --------------------------
Legal fees 8,169 2,984 1,928 2,920
- --------------------------
Portfolio accounting fees 45,882 28,194 36,542 26,618
- --------------------------
Share registration costs 27,524 12,481 18,656 10,309
- --------------------------
Printing and postage 7,669 4,171 2,098 3,378
- --------------------------
Insurance premiums 690 609 600 861
- --------------------------
Miscellaneous 3,057 1,203 171 6,234
- -------------------------- ----------- ---------- ------------ ----------
Total expenses 2,010,100 509,488 1,702,612 250,621
- -------------------------- ----------- ---------- ------------ ----------
Waivers--
- --------------------------
Waiver of investment (580,778) -- -- (63,751)
advisory fee
- --------------------------
Waiver of administrative -- -- -- (27,428)
personnel and services fee
- -------------------------- ----------- ---------- ------------ ----------
Total waivers (580,778) -- -- (91,179)
- -------------------------- ----------- ---------- ------------ ----------
Net expenses 1,429,322 509,488 1,702,612 159,442
- -------------------------- ----------- ---------- ------------ ----------
Net investment income 15,097,025 3,232,846 911,513 1,221,791
- -------------------------- ----------- ---------- ------------ ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
- --------------------------
Net realized gain (loss) -- 1,865,154 (1,966,921) 73,523
on investments
- --------------------------
Change in unrealized -- 3,203,594 (43,730,518) 655,246
appreciation
(depreciation) of
investments
- -------------------------- ----------- ---------- ------------ ----------
Net realized and
unrealized gain (loss)
on investments -- 5,068,748 (45,697,439) 728,769
- -------------------------- ----------- ---------- ------------ ----------
Change in net assets
resulting from
operations $15,097,025 $8,301,594 $(44,785,926) $1,950,560
- -------------------------- ----------- ---------- ------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS BOND
MONEY MARKET FUND FUND
------------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
(UNAUDITED) YEAR ENDED (UNAUDITED) YEAR ENDED
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
--------------- -------------- ------------ ------------
1998 1998 1998 1998
- ------------------------ --------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
- ------------------------
OPERATIONS--
- ------------------------
Net investment income $ 15,097,025 $ 25,246,533 $ 3,232,846 $ 5,939,397
- ------------------------
Net realized gain on
investments -- -- 1,865,154 1,212,542
- ------------------------
Net change in unrealized
appreciation of
investments -- -- 3,203,594 2,922,962
- ------------------------ --------------- -------------- ------------ ------------
Change in net assets
resulting from
operations 15,097,025 25,246,533 8,301,594 10,074,901
- ------------------------ --------------- -------------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS--
- ------------------------
Distributions from net
investment income (15,097,025) (25,246,533) (3,261,752) (5,914,468)
- ------------------------ --------------- -------------- ------------ ------------
Change in net assets
from distributions to
shareholders (15,097,025) (25,246,533) (3,261,752) (5,914,468)
- ------------------------ --------------- -------------- ------------ ------------
SHARE TRANSACTIONS--
- ------------------------
Proceeds from sale of
shares 1,418,854,973 1,160,628,263 14,390,939 32,780,331
- ------------------------
Net asset value of
shares issued to
shareholders in payment
of distributions
declared 805,279 1,286,356 13,713 27,482
- ------------------------
Cost of shares redeemed (1,439,562,481) (1,054,507,906) (8,911,904) (13,502,506)
- ------------------------ --------------- -------------- ------------ ------------
Change in net assets
resulting from share
transactions (19,902,229) 107,406,713 5,492,748 19,305,307
- ------------------------ --------------- -------------- ------------ ------------
Change in net assets (19,902,229) 107,406,713 10,532,590 23,465,740
- ------------------------
NET ASSETS:
- ------------------------
Beginning of period 631,868,782 524,462,069 114,650,313 91,184,573
- ------------------------ --------------- -------------- ------------ ------------
End of period $ 611,966,553 $ 631,868,782 $125,182,903 $114,650,313
- ------------------------ --------------- -------------- ------------ ------------
Undistributed net
investment income
included in net assets
at the end of the period $ -- $ -- $ 107,121 $ 136,027
- ------------------------ --------------- -------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORE EQUITY INCOME
FUND FUND
-------------------------- ------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
(UNAUDITED) YEAR ENDED (UNAUDITED) YEAR ENDED
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
------------ ------------ ----------- -----------
1998 1998 1998 1998
- ------------------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
- ------------------------
OPERATIONS--
- ------------------------
Net investment income $ 911,513 $ 2,622,092 $ 1,221,791 $ 2,279,841
- ------------------------
Net realized gain (loss)
on investments (1,966,921) 58,160,304 73,523 151,620
- ------------------------
Net change in unrealized
appreciation
(depreciation)
of investments (43,730,518) 42,808,715 655,246 369,670
- ------------------------ ------------ ------------ ----------- -----------
Change in net assets
resulting from
operations (44,785,926) 103,591,111 1,950,560 2,801,131
- ------------------------ ------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS--
- ------------------------
Distributions from net
investment income (1,004,479) (2,656,592) (1,236,841) (2,286,964)
- ------------------------
Distributions from net
realized gain on
investment transactions (34,486,631) (37,488,088) -- --
- ------------------------ ------------ ------------ ----------- -----------
Change in net assets
from distributions to
shareholders (35,491,110) (40,144,680) (1,236,841) (2,286,964)
- ------------------------ ------------ ------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------
Proceeds from sale of
shares 25,446,360 85,834,433 7,340,948 8,595,541
- ------------------------
Net asset value of
shares issued to
shareholders in payment
of distributions
declared 31,000,977 35,274,684 803 --
- ------------------------
Cost of shares redeemed (36,427,277) (44,363,740) (3,358,426) (7,738,354)
- ------------------------ ------------ ------------ ----------- -----------
Change in net assets
resulting from share
transactions 20,020,060 76,745,377 3,983,325 857,187
- ------------------------ ------------ ------------ ----------- -----------
Change in net assets (60,256,976) 140,191,808 4,697,044 1,371,354
- ------------------------
NET ASSETS:
- ------------------------
Beginning of period 412,856,534 272,664,726 39,968,956 38,597,602
- ------------------------ ------------ ------------ ----------- -----------
End of period $352,599,558 $412,856,534 44,666,000 $39,968,956
- ------------------------ ------------ ------------ ----------- -----------
Undistributed net
investment
income/(Accumulated
distributions
in excess of net
investment income)
included in net assets
at the end of the period $ (35,472) $ 57,494 $ 21,910 $ 36,960
- ------------------------ ------------ ------------ ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SOUTHTRUST FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
NET
REALIZED
AND DISTRIBUTIONS
NET ASSET UNREALIZED DISTRIBUTIONS FROM NET
VALUE, NET GAIN (LOSS) TOTAL FROM FROM NET REALIZED
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT GAIN ON TOTAL
YEAR ENDED APRIL 30, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS DISTRIBUTIONS
- -------------------- --------- ---------- ----------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
TREASURY OBLIGATIONS
MONEY MARKET FUND
1993(a) $ 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1994 $ 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1996 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1998 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1998(b) $ 1.00 0.02 -- 0.02 (0.02) -- (0.02)
BOND FUND
1993(a) $10.00 0.66 0.69 1.35 (0.62) (0.02) (0.64)
1994 $10.71 0.63 (0.58) 0.05 (0.65) (0.07) (0.72)
1995 $10.04 0.61 (0.09) 0.52 (0.61) -- (0.61)
1996 $ 9.95 0.59 0.03 0.62 (0.56) -- (0.56)
1997 $10.01 0.61 (0.03) 0.58 (0.64) -- (0.64)
1998 $ 9.95 0.60 0.45 1.05 (0.60) -- (0.60)
1998(b) $10.40 0.29 0.44 0.73 (0.29) -- (0.29)
CORE EQUITY FUND
1993(a) $10.00 0.19 0.35 0.54 (0.18) -- (0.18)
1994 $10.36 0.19 (0.28) (0.09) (0.19) -- (0.19)
1995 $10.08 0.20 1.43 1.63 (0.20) -- (0.20)
1996 $11.51 0.23 3.33 3.56 (0.23) (0.44) (0.67)
1997 $14.40 0.20 2.59 2.79 (0.21) (1.17) (1.38)
1998 $15.81 0.15 5.26 5.41 (0.15) (2.02) (2.17)
1998(b) $19.05 0.05 (2.16) (2.11) (0.05) (1.58) (1.63)
INCOME FUND
1996(f) $10.00 0.16 (0.25) (0.09) (0.14) -- (0.14)
1997 $ 9.77 0.56 (0.09) 0.47 (0.56) -- (0.56)
1998 $ 9.68 0.58 0.13 0.71 (0.58) -- (0.58)
1998(b) $ 9.81 0.29 0.17 0.46 (0.29) -- (0.29)
</TABLE>
(a) Reflects operations for the period from May 8, 1992 (date of initial public
investment) to April 30, 1993.
(b) Six months ended October 31, 1998 (unaudited).
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Computed on an annualized basis.
(f) Reflects operations for the period from January 10, 1996 (date of initial
public investment) to April 30, 1996.
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
NET ASSET ------------------------------------- NET ASSETS,
VALUE, NET EXPENSE END OF PORTFOLIO
END OF TOTAL INVESTMENT REIMBURSEMENT/ PERIOD TURNOVER
PERIOD RETURN(C) EXPENSES INCOME WAIVER(D) (000 OMITTED) RATE
- --------- --------- -------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 1.00 2.93% 0.39%(e) 2.93%(e) 0.36%(e) $194,771 --
$ 1.00 2.83% 0.40% 2.81% 0.33% $278,924 --
$ 1.00 4.62% 0.43% 4.56% 0.30% $314,200 --
$ 1.00 5.26% 0.48% 5.11% 0.22% $445,729 --
$ 1.00 4.88% 0.51% 4.78% 0.20% $524,462 --
$ 1.00 5.14% 0.48% 5.03% 0.19% $631,869 --
$ 1.00 2.52% 0.47%(e) 4.94%(e) 0.19%(e) $611,967 --
$10.71 13.44% 0.39%(e) 6.53%(e) 0.59%(e) $ 25,989 19%
$10.04 0.33% 0.51% 5.97% 0.58% $ 32,767 6%
$ 9.95 5.41% 0.75% 6.29% 0.28% $ 76,409 48%
$10.01 6.78% 0.87% 6.28% 0.08% $ 83,257 28%
$ 9.95 5.98% 0.86% 6.18% 0.05% $ 91,185 63%
$10.40 10.80% 0.84% 5.88% 0.01% $114,650 107%
$10.84 7.07% 0.84%(e) 5.31%(e) -- $125,183 97%
$10.36 5.54% 0.39%(e) 1.91%(e) 0.74%(e) $ 30,935 34%
$10.08 (0.90%) 0.48% 1.82% 0.69% $ 37,114 46%
$11.51 16.36% 0.74% 1.95% 0.39% $138,281 57%
$14.40 31.51% 0.87% 1.75% 0.11% $204,421 39%
$15.81 19.99% 0.94% 1.33% 0.03% $272,665 27%
$19.05 36.39% 0.94% 0.77% 0.00% $412,857 75%
$15.31 (10.23%) 0.91%(e) 0.49%(e) -- $352,600 27%
$ 9.77 (0.93%) 0.85%(e) 5.30%(e) 0.05%(e) $ 78,147 61%
$ 9.68 4.90% 0.92% 5.59% 0.32% $ 38,598 112%
$ 9.81 7.46% 0.75% 5.86% 0.44% $ 39,969 112%
$ 9.98 4.75% 0.75%(e) 5.75%(e) 0.43%(e) $ 44,666 16%
</TABLE>
SOUTHTRUST FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
SouthTrust Funds (the "Company"), (formerly, SouthTrust Vulcan Funds) is
registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. The Company consists of four
diversified portfolios (individually referred to as the "Fund", or
collectively as the "Funds") which are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SouthTrust Treasury Obligations Money Market Fund To provide as high a level of current interest
("Treasury Obligations") income as is consistent with maintaining liquidity
and stability of principal.
- ---------------------------------------------------------------------------------------------------------
SouthTrust Bond Fund ("Bond") To provide a level of total return consistent with a
portfolio of high-quality debt securities.
- ---------------------------------------------------------------------------------------------------------
SouthTrust Core Equity Fund ("Core Equity"), To provide long-term capital appreciation,
(formerly, Stock Fund) with income a secondary consideration.
- ---------------------------------------------------------------------------------------------------------
SouthTrust Income Fund ("Income") To provide current income.
</TABLE>
The assets of each portfolio are segregated and a shareholder's interest is
limited to the Fund in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Company in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting
principles.
INVESTMENT VALUATIONS--U.S. government securities are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed corporate bonds, other fixed income
and asset-backed securities, and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked
price as furnished by an independent pricing service. Listed equity
securities are valued at the last sale price reported on a national
securities exchange. For Treasury Obligations, the use of the amortized
cost method to value its portfolio securities is in accordance with Rule
2a-7 under the Act. For the other Funds within the Company, short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities purchased with remaining maturities
of sixty days or less may be valued by all of the Funds at amortized cost,
which approximates fair market value. Investments in other open-end
regulated investment companies are valued at net asset value.
REPURCHASE AGREEMENTS--It is the policy of the Company to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Company to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Company will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Company's adviser to be creditworthy pursuant to the guidelines
and/or standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, in the event
of a counterparty's default, the Company could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Company's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At April 30, 1998, the Company, for federal tax purposes, had capital loss
carryforwards, as noted below, which will reduce the Company's taxable
income arising from future net realized gain on investments, if any, to the
extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve
the Company of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR
---------------- TOTAL TAX LOSS
FUND 2005 2006 CARRYFORWARD
------ --------- ------ --------------
<S> <C> <C> <C>
Income 1,561,092 73,422 1,634,514
------
</TABLE>
Additionally, net capital losses of $19,052 attributable to security
transactions incurred after October 31, 1997 are treated as arising on May
1, 1998, the first day of the Fund's next taxable year.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Company may engage in
when-issued or delayed delivery transactions. The Company records when-
issued securities on the trade date and segregates portfolio securities
such that sufficient liquid assets will be available to make payment for
the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Master Trust Agreement permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (par value of $0.001).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS BOND
------------------------------ ----------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
1998 1998 1998 1998
- ---------------------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Shares sold 1,418,854,973 1,160,628,263 1,357,807 3,180,087
- ----------------------
Shares issued to
shareholders in
payment of
distributions declared 805,279 1,286,356 1,294 2,667
- ----------------------
Shares redeemed (1,439,562,481) (1,054,507,906) (834,987) (1,320,806)
- ---------------------- -------------- -------------- --------- ----------
Net change resulting
from share
transactions (19,902,229) 107,406,713 524,114 1,861,948
- ---------------------- -------------- -------------- --------- ----------
<CAPTION>
CORE EQUITY INCOME
------------------------------ ----------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
1998 1998 1998 1998
- ---------------------- -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Shares sold 1,493,988 4,743,525 742,825 876,213
- ----------------------
Shares issued to
shareholders in
payment of
distributions declared 2,225,612 2,137,883 81 --
- ----------------------
Shares redeemed (2,369,271) (2,451,001) (339,813) (789,401)
- ---------------------- -------------- -------------- --------- ----------
Net change resulting
from share
transactions 1,350,329 4,430,407 403,093 86,812
- ---------------------- -------------- -------------- --------- ----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--SouthTrust Bank, N.A., the Company's investment
adviser (the "Adviser"), receives for its services an annual investment
advisory fee equal to a percentage of each Fund's average daily net assets as
shown below. The Adviser may voluntarily choose to waive all or a portion of
its fee. The Adviser can modify or terminate this voluntary waiver at any time
at its sole discretion.
<TABLE>
<CAPTION>
ANNUAL
FUND RATE
<S> <C>
- -------------------- ----
TREASURY OBLIGATIONS 0.50%
- --------------------
BOND 0.60%
- --------------------
CORE EQUITY 0.75%
- --------------------
INCOME 0.60%
- --------------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Company with certain administrative personnel and services. The fee paid to
FAS is based on the level of average aggregate net assets of the Company for
the period. FAS may voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the
Funds. The fee paid to FSSC is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Company's accounting
records for which it receives a fee. The fee is based on the level of each
Fund's average net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers of the Company are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
six months ended October 31, 1998, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------- ------------ ------------
<S> <C> <C>
BOND $122,268,927 $113,142,130
- ----------- ------------ ------------
CORE EQUITY $ 97,955,070 $108,695,747
- ----------- ------------ ------------
INCOME $ 10,904,643 $ 6,610,274
- ----------- ------------ ------------
</TABLE>
(6) YEAR 2000
Similar to other financial organizations, the Funds could be adversely
affected if the computer systems used by the Funds' service providers do not
properly process and calculate date-related information and data from and
after January 1, 2000. The Funds' Adviser and Administrator are taking
measures that they believe are reasonably designed to address the Year 2000
issue with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by each of the Fund's other
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Funds.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
Charles G. Brown, III William O. Vann
Russell W. Chambliss Chairman
Thomas M. Grady Edward C. Gonzales
Billy L. Harbert, Jr. President and Treasurer
William O. Vann Beth S. Broderick
Vice President and Assistant Treasurer
C. Christine Thomson
Vice President and Assistant Treasurer
Peter J. Germain
Secretary
C. Todd Gibson
Assistant Secretary
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. ALTHOUGH MONEY MARKET FUNDS SEEK TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE
THAT THEY WILL BE ABLE TO DO SO.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Company's prospectus, which contains facts
concerning the Funds' objectives and policies, management fees, expenses and
other information.
