<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2000
File No. 33-91476
File No. 811-09032
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 9
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 10
STI CLASSIC VARIABLE TRUST
(Exact Name of Registrant as Specified in Charter)
c/o The CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 676-1000
MARK NAGLE
C/O SEI INVESTMENTS COMPANY
OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
Copies to:
RICHARD W. GRANT, ESQ. W. JOHN MCQUIRE, ESQ.
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET 1800 M STREET, N.W.
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, DC 19103
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
X on April 25, 2000 pursuant to paragraph (b)
- ---
___ 60 days after filing pursuant to paragraph (a)
___ on [date] pursuant to paragraph (a); or
___ 75 days after filing pursuant to paragraph (a) of Rule 485
<PAGE>
PROSPECTUS
STI CLASSIC VARIABLE TRUST
CAPITAL APPRECIATION FUND (FORMERLY CAPITAL GROWTH FUND)
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
INVESTMENT GRADE BOND FUND
MID-CAP EQUITY FUND
QUALITY GROWTH STOCK FUND
SMALL CAP VALUE EQUITY FUND (FORMERLY SMALL CAP EQUITY FUND)
VALUE INCOME STOCK FUND
MAY 1, 2000
INVESTMENT ADVISERS TO THE FUND:
SUNTRUST BANK
TRUSCO CAPITAL MANAGEMENT, INC.
[STI CLASSIC LOGO OMITTED]
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>
PROSPECTUS
ABOUT THIS PROSPECTUS
The STI Classic Variable Trust is a mutual fund family that offers shares
in a number of separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. The Funds are available to the public only
through the purchase of certain variable annuity and variable life insurance
contracts (Contracts) issued by various life insurance companies (Insurers).
This prospectus gives you important information about the Capital Appreciation,
Growth and Income, International Equity, Investment Grade Bond, Mid-Cap Equity,
Quality Growth Stock, Small Cap Value Equity and Value Income Stock Funds that
you should know before investing. Please read this prospectus in conjunction
with your Contract 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 THAT IS COMMON TO EACH OF THE
FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
2 CAPITAL APPRECIATION FUND 18 MORE INFORMATION ABOUT RISK
4 GROWTH AND INCOME FUND 19 EACH FUND'S OTHER INVESTMENTS
6 INTERNATIONAL EQUITY FUND 20 INVESTMENT ADVISERS
8 INVESTMENT GRADE BOND FUND 21 PORTFOLIO MANAGERS
10 MID-CAP EQUITY FUND 22 PURCHASING AND SELLING FUND SHARES
12 QUALITY GROWTH STOCK FUND 22 DIVIDENDS AND DISTRIBUTIONS
14 SMALL CAP VALUE EQUITY FUND 22 TAXES
16 VALUE INCOME STOCK FUND 23 FINANCIAL HIGHLIGHTS
24 HOW TO OBTAIN MORE INFORMATION ABOUT THE
STI CLASSIC VARIABLE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[SUITCASE ART OMITTED] FUND SUMMARY [CHART ART OMITTED] WHAT IS AN INDEX?
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY [COINS ART OMITTED] FUND FEES AND EXPENSES
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING? [MAGNIFER ART OMITTED] INVESTMENT ADVISERS
[TARGET ART OMITTED] PERFORMANCE INFORMATION [HANDSHAKE ART OMITTED] PURCHASING FUND SHARES
</TABLE>
MAY 1, 2000
<PAGE>
PROSPECTUS 1
RISK/RETURN INFORMATION COMMON TO THE FUNDS
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities. Before you invest,
you should know a few things about investing in mutual funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect 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 a Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
Each Fund has its own investment goal and strategies for reaching that goal. The
Advisers invest Fund assets in a way that the Advisers believe will help a Fund
achieve its goal. Still, investing in the Funds involves risks, and there is no
guarantee that a Fund will achieve its goal. The Advisers' 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 the Advisers do,
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.
<PAGE>
2 PROSPECTUS
CAPITAL APPRECIATION FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL Capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above growth
potential
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want the value of their investment
to grow, but do not need to receive income on
their investment
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Capital Appreciation Fund invests primarily in U.S. common stocks and
other equity securities that the Adviser believes are undervalued by the stock
market. In selecting investments for the Fund, the Adviser chooses companies
that it believes have above average growth potential. The Adviser rotates the
Fund's investments among various market sectors based on the Adviser's research
of business cycles. The Adviser's strategy focuses on large-cap stocks with a
strong growth history. Due to its investment strategy, the Fund may buy and sell
securities frequently. This may result in higher transaction costs.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM
YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT
EXPENSES, FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE
LESS THAN SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1996 23.75%
1997 36.54%
1998 28.97%
1999 8.73%
BEST QUARTER WORST QUARTER
22.64% -11.91%
(12/31/98) (9/30/98)
<PAGE>
PROSPECTUS 3
CAPITAL APPRECIATION FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500 INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND 8.73% 24.54%*
- --------------------------------------------------------------------------------
S&P 500 INDEX 21.04% 27.09%**
- --------------------------------------------------------------------------------
* SINCE 10/2/95
** SINCE 10/31/95
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.15%
Other Expenses 0.21%
-----
Total Annual Fund Operating Expenses 1.36%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT
ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE
AS FOLLOWS:
CAPITAL APPRECIATION FUND 1.15%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$138 $431 $745 $1,635
<PAGE>
4 PROSPECTUS
GROWTH AND INCOME FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOALS
PRIMARY Long-term capital appreciation
SECONDARY Current income
- --------------------------------------------------------------------------------
INVESTMENT FOCUS Equity securities
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of
companies with market capitalizations
of at least $1 billion with attractive
valuation and/or above average earnings
momentum relative either to their
sectors or the market as a whole
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who are looking
for capital appreciation potential
and income with less volatility than
the equity markets as a whole
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Growth and Income Fund invests primarily in equity securities,
including common stock and listed American Depositary Receipts (ADRs), of
domestic and foreign companies with market capitalizations of at least $1
billion. However, the average market capitalization can vary throughout a full
market cycle and will be flexible to allow the Adviser to capture market
opportunities. The Adviser uses a quantitative screening process to identify
companies with attractive fundamental profiles. The portfolio management team
selects stocks of companies with strong financial quality and above average
earnings momentum to secure the best relative values in each economic sector.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The Growth and Income Fund commenced operations on December 30, 1999, and
therefore does not have a performance history for a full calendar year.
<PAGE>
PROSPECTUS 5
GROWTH AND INCOME FUND
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.90%
Other Expenses* 0.30%
-----
Total Annual Fund Operating Expenses 1.20%
- --------------------------------------------------------------------------------
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS
$122 $381
<PAGE>
6 PROSPECTUS
INTERNATIONAL EQUITY FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL Long-term capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS Foreign common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY High
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued
companies with good fundamentals
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want an increase in
the value of their investment
without regard to income, are
willing to accept the increased
risks of international investing for
the possibility of higher returns,
and want exposure to a diversified
portfolio of international stocks
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The International Equity Fund invests primarily in common stocks and other
equity securities of foreign companies. The Adviser's "bottom-up" approach to
stock selection focuses on individual stocks and fundamental characteristics of
companies. The Adviser's goal is to find companies with top management, quality
products and sound financial positions that are trading at a discount. In
selecting investments for the Fund, the Adviser diversifies the Fund's
investments among at least three foreign countries. The Fund invests primarily
in developed countries, but may invest in countries with emerging markets. Due
to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is also subject to the risk that foreign common stocks may underperform
other segments of the equity market or the equity markets as a whole.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are more likely
to occur in these countries.
Emerging market countries are countries that the World Bank or the United
Nations considers to be emerging or developing. Emerging markets may be more
likely to experience political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition, the financial stability
of issuers (including governments) in emerging market countries may be more
precarious than in other countries. As a result, there will tend to be an
increased risk of price volatility associated with the Fund's investments in
emerging market countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM
YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT
EXPENSES, FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE
LESS THAN SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1997 16.84%
1998 10.80%
1999 8.81%
BEST QUARTER WORST QUARTER
16.62% -17.68%
(12/31/98) (9/30/98)
<PAGE>
PROSPECTUS 7
INTERNATIONAL EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND 8.81% 12.10%*
- --------------------------------------------------------------------------------
MSCI EAFE INDEX 26.96% 14.81%**
- --------------------------------------------------------------------------------
* SINCE 11/7/96
** SINCE 11/30/96
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The MSCI EAFE Index is a widely recognized,
capitalization-weighted (companies with larger market capitalizations have more
influence than those with smaller market capitalizations) index of over 900
securities listed on the stock exchanges of developed countries outside of North
America.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.25%
Other Expenses 0.74%
-----
Total Annual Fund Operating Expenses 1.99%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT
ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE
EXPECTED TO BE AS FOLLOWS:
INTERNATIONAL EQUITY FUND 1.60%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$202 $624 $1,073 $2,317
<PAGE>
8 PROSPECTUS
INVESTMENT GRADE BOND FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL High total return through current income
and capital appreciation, while preserving
the principal amount invested
- --------------------------------------------------------------------------------
INVESTMENT FOCUS Investment grade U.S. government and
corporate debt securities
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively
inexpensive securities in a selected
market index
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want to receive income
from their investment, as well as
an increase in the value of the investment
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Investment Grade Bond Fund invests primarily in investment grade
corporate debt securities, U.S. Treasury obligations, and mortgage-backed
securities. In selecting investments for the Fund, the Adviser tries to minimize
risk while attempting to outperform selected market indices. Currently, the
Adviser's selected index is the Lehman Brothers Government/Corporate Bond Index,
a widely recognized, unmanaged index of investment grade government and
corporate debt securities. The Adviser seeks to invest more in portions of the
index that seem relatively inexpensive, and less in those that seem expensive.
The Adviser allocates the Fund's investments among various market sectors based
on the Adviser's analysis of historical data, yield information, and credit
ratings. The Adviser anticipates that the Fund's average weighted maturity will
range from 4 to 10 years. Due to its investment strategy, the Fund may buy and
sell securities frequently. This may result in higher transaction costs.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk. Mortgage-backed securities are fixed income securities
representing an interest in a pool of underlying mortgage loans.
Mortgage-backed securities 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 Fund of mortgage-backed securities and,
therefore, to assess the volatility risk of the Fund.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM YEAR
TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT EXPENSES,
FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN
SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1996 2.29%
1997 8.84%
1998 9.38%
1999 -1.67%
BEST QUARTER WORST QUARTER
5.32% -2.02%
(9/30/98) (3/31/96)
<PAGE>
PROSPECTUS 9
INVESTMENT GRADE BOND FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND -1.67% 5.24%
- --------------------------------------------------------------------------------
LEHMAN BROTHERS GOVERNMENT
CORPORATE BOND INDEX -2.15% 5.46%
- --------------------------------------------------------------------------------
* SINCE 10/2/95
** SINCE 10/31/95
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Lehman Brothers Government/Corporate Bond Index
is a widely-recognized, market value-weighted (higher market value bonds have
more influence than lower market value bonds) index of U.S. Treasury securities,
U.S. government agency obligations, corporate debt backed by the U.S.
government, fixed-rate nonconvertible corporate debt securities, Yankee bonds,
and nonconvertible debt securities issued by or guaranteed by foreign
governments and agencies. All securities in the Index are rated investment grade
(BBB) or higher, with maturities of at least 1 year.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.74%
Other Expenses 0.45%
-----
Total Annual Fund Operating Expenses 1.19%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT
ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE
EXPECTED TO BE AS FOLLOWS:
INVESTMENT GRADE BOND FUND 0.75%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$121 $378 $654 $1,443
<PAGE>
10 PROSPECTUS
MID-CAP EQUITY FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL Capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. mid-cap common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate to high
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with
above average growth potential at
an attractive price
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want the value
of their investment to grow and who
are willing to accept more
volatility for the possibility of
higher returns
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Mid-Cap Equity Fund invests primarily in a diversified portfolio of
common stocks and other equity securities of U.S. companies. In selecting
investments for the Fund, the Adviser chooses companies that have small- to
mid-sized market capitalizations (i.e., companies with market capitalizations of
$500 million to $10 billion and companies in the S&P Mid Cap 400 Index) and that
offer above average growth potential at attractive prices. The Adviser evaluates
companies based on their industry sectors and the market in general. The Fund
maintains large holdings in the industries that appear to perform best during a
given business cycle. The Adviser analyzes companies that are in favored
industries based on their fundamental characteristics, such as growth rates and
earnings. The Adviser does not consider current income in selecting investments
for the Fund. Due to its investment strategy, the Fund may buy and sell
securities frequently. This may result in higher transaction costs.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund. The Fund is also subject to the risk
that mid-cap common stocks may underperform other segments of the equity market
or the equity markets as a whole. The small-to mid-sized capitalization
companies the Fund invests in may be more vulnerable to adverse business or
economic events than larger, more established companies. In particular, these
small companies may have limited product lines, markets and financial resources,
and may depend upon a relatively small management group. Therefore, small-cap
and mid-cap stocks may be more volatile than those of larger companies. These
securities may be traded over the counter or listed on an exchange.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM
YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT
EXPENSES, FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD
BE LESS THAN SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1996 16.05%
1997 22.23%
1998 7.16%
1999 14.00%
BEST QUARTER WORST QUARTER
24.40% -19.56%
(12/31/98) (9/30/98)
<PAGE>
PROSPECTUS 11
MID-CAP EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P MID CAP 400 INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND 14.00% 14.70%*
- --------------------------------------------------------------------------------
S&PMID CAP 400 INDEX 14.72% 21.39%**
* SINCE 10/2/95
** SINCE 10/31/95
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P Mid Cap 400 Index is a widely recognized,
capitalization-weighted (companies with larger market capitalizations have more
influence than those with smaller market capitalizations) index of 400 domestic
mid-cap stocks chosen for market size, liquidity, and industry group
representation.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.15%
Other Expenses 0.35%
-----
Total Annual Fund Operating Expenses 1.50%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT
ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE
EXPECTED TO BE AS FOLLOWS:
MID-CAP EQUITY FUND 1.15%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$153 $474 $818 $1,791
<PAGE>
12 PROSPECTUS
QUALITY GROWTH STOCK FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL Long-term capital appreciation with nominal
dividend income
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. common stocks of growth companies
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have
above-average growth potential and uses a low
portfolio turnover strategy
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want to increase the value of
their investment
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Quality Growth Stock Fund invests primarily in a diversified portfolio
of common stocks of large, mid- and small cap U.S. growth companies. In
selecting investments for the Fund, the Adviser focuses on high quality,
financially strong companies as demonstrated by their balance sheets, earnings,
management and products. Many of these companies have a history of stable or
rising dividend payout policies. The Adviser seeks to maximize long-term capital
appreciation by using a low turnover rate (generally 50% or less) strategy.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases common stocks, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
stock markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund. The Fund may use hedging techniques
such as the purchase of put options, short sales `against the box,' the sale of
stock index futures contracts and equity swaps. By using these techniques, the
Fund will attempt to reduce its exposure to price declines without realizing
substantial capital gains. Although the Fund may utilize such strategies in lieu
of selling appreciated securities, the Fund's exposure to losses during stock
market declines may be higher than that of other funds that do not follow a
general policy of avoiding sales of highly appreciated securities.
The Fund is also subject to the risk that common stocks of U.S. growth companies
may underperform other segments of the equity market or the equity markets as a
whole.
The small to mid-sized capitalization companies the Fund invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these small companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, small cap and mid-cap stocks may be more volatile
than those of larger companies. These securities may be traded over the counter
or listed on an exchange.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The Quality Growth Stock Fund commenced operations on December 30, 1999,
and therefore does not have a performance history for a full calendar year.
<PAGE>
PROSPECTUS 13
QUALITY GROWTH STOCK FUND
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.00%
Other Expenses* 0.30%
-----
Total Annual Fund Operating Expenses 1.30%
- --------------------------------------------------------------------------------
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS
$132 $412
<PAGE>
14 PROSPECTUS
SMALL CAP VALUE EQUITY FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOALS
PRIMARY Capital appreciation
SECONDARY Current income
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. small-cap common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued
small-cap stocks
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who primarily want the value of
their investment to grow, but want to
receive some income from their investment
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Small Cap Value Equity Fund primarily invests in common stocks of U.S.
companies. In selecting investments for the Fund, the Adviser chooses common
stocks of small-sized companies (i.e., companies with market capitalizations
under $1 billion) that it believes are undervalued in the market.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is also subject to the risk that small capitalization common stocks may
underperform other segments of the equity market or the equity markets as a
whole.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small-cap stocks may be more volatile than those of larger companies.
These securities may be traded over the counter or listed on an exchange.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM
YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT
EXPENSES, FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE
LESS THAN SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1998 -12.18%
1999 -4.78%
BEST QUARTER WORST QUARTER
19.34% -20.97%
(6/30/99) (9/30/98)
<PAGE>
PROSPECTUS 15
SMALL CAP VALUE EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE FRANK RUSSELL 2000 VALUE INDEX.
PREVIOUSLY THE FUND'S RETURNS HAD BEEN COMPARED TO THE FRANK RUSSELL 2000 INDEX,
BUT THE ADVISER BELIEVES THAT THE FRANK RUSSELL 2000 VALUE INDEX, BECAUSE OF ITS
GREATER EMPHASIS ON COMPANIES WITH LOWER GROWTH RATES AND PRICE-TO-BOOK RATIOS,
MORE ACCURATELY REFLECTS THE TYPES OF SECURITIES IN WHICH THE FUND INVESTS.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY
FUND -4.78% -8.69%*
- --------------------------------------------------------------------------------
FRANK RUSSELL 2000 VALUE
INDEX -1.49% -1.71%**
- --------------------------------------------------------------------------------
FRANK RUSSELL 2000 INDEX 21.26% 8.55%**
- --------------------------------------------------------------------------------
** SINCE 10/22/97
** SINCE 10/31/97
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The previous index, the Frank Russell 2000 Index, is
a widely-recognized, capitalization-weighted (companies with larger market
capitalizations have more influence than those with smaller market
capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000
largest companies. The Frank Russell 2000 Value Index is a widely-recognized
index of the companies in the Frank Russell 2000 Index with lower growth rates
and price-to-book ratios.
[COIN ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.15%
Other Expenses 0.68%
-----
Total Annual Fund Operating Expenses 1.83%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT
ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE
EXPECTED TO BE AS FOLLOWS:
SMALL CAP VALUE EQUITY FUND 1.20%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$186 $576 $990 $2,148
<PAGE>
16 PROSPECTUS
VALUE INCOME STOCK FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOALS
PRIMARY Current income
SECONDARY Capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend-paying,
undervalued stocks
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who are looking for current
income and capital appreciation with less
volatility than the average stock fund
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Value Income Stock Fund invests primarily in common stocks and other
equity securities of U.S. companies. In selecting investments for the Fund, the
Adviser primarily chooses companies that have a market capitalization of at
least $500 million and that have a history of paying regular dividends. The
Adviser focuses on high dividend-paying stocks that trade below their historical
value. The Adviser's "bottom-up" approach to stock selection emphasizes
individual stocks over economic trends.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM YEAR
TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT EXPENSES,
FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN
SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1996 18.64%
1997 26.82%
1997 9.69%
1999 -3.00%
BEST QUARTER WORST QUARTER
14.48% -11.90%
(6/30/99) (9/30/99)
<PAGE>
PROSPECTUS 17
VALUE INCOME STOCK FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500/BARRA VALUE INDEX AND THE LIPPER
EQUITY INCOME FUND INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
VALUE INCOME STOCK FUND -3.00% 13.62%*
- --------------------------------------------------------------------------------
S&P 500/BARRA VALUE INDEX 12.72% 21.05%**
- --------------------------------------------------------------------------------
LIPPER EQUITY INCOME FUND
INDEX 4.19% 16.13%**
- --------------------------------------------------------------------------------
** SINCE 10/2/95
** SINCE 10/31/95
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500/Barra Value Index is a widely recognized
index of the stocks in the S&P 500 Index that have lower price-to-book ratios.
The Lipper Equity Income Fund Index is an equally weighted index of typically
the 30 largest funds that seek relatively high current income and growth of
income by investing 60% or more of their portfolios in equities.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.80%
Other Expenses 0.16%
-----
Total Annual Fund Operating Expenses 0.96%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT
ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE
EXPECTED TO BE AS FOLLOWS:
VALUE INCOME STOCK FUND 0.95%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$98 $306 $531 $1,178
<PAGE>
18 PROSPECTUS
MORE INFORMATION ABOUT RISK
[LIFESAVER ART OMITTED] MORE INFORMATION
ABOUT RISK
EQUITY RISK
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
MID-CAP EQUITY FUND
QUALITY GROWTH STOCK FUND
SMALL CAP VALUE EQUITY FUND
VALUE INCOME STOCK FUND
Equity securities include public and privately issued equity securities, common
and preferred stocks, warrants, rights to subscribe to common stock and
convertible securities, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual fund invests
will cause a fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
FIXED INCOME RISK
INVESTMENT GRADE BOND FUND
The market value of fixed income investments change in response to interest rate
changes and other factors. During periods of falling interest rates, the values
of outstanding fixed income securities generally rise. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates. In addition to these fundamental risks,
different types of fixed income securities may be subject to the following
additional risk:
CREDIT RISK
The possibility that an issuer will be unable to make timely payments of
either principal or interest.
FOREIGN SECURITY RISKS
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
Investments in securities of foreign companies or governments can be more
volatile than investments in U.S. companies or governments. Diplomatic,
political, or economic developments, including nationalization or appropriation,
could affect investments in foreign countries. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets. In
addition, the value of securities denominated in foreign currencies, and of
dividends from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign companies or
governments generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to domestic U.S.
companies or governments. Transaction costs are generally higher than those in
the U.S. and expenses for custodial arrangements of foreign securities may be
somewhat greater than typical expenses for custodial arrangements of similar
U.S. securities. Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes are recoverable, the non-recovered portion will reduce the income received
from the securities comprising the portfolio.
<PAGE>
PROSPECTUS 19
EACH FUND'S OTHER INVESTMENTS AND THE INVESTMENT ADVISERS
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. The investment objective of each Fund is nonfundamental
and may be changed without shareholder approval.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Fund may invest up to 100%
of its assets in cash, money market instruments, repurchase agreements, and
short-term obligations that would not ordinarily be consistent with a Fund's
objectives. A Fund will do so only if the Adviser believes that the risk of loss
outweighs the opportunity for capital gains or higher income. Of course, the
Fund cannot guarantee that any Fund will achieve its investment goal.
[MAGNIFER ART OMITTED] INVESTMENT ADVISERS
The Investment Advisers make investment decisions for the Funds and continuously
review, supervise and administer each Fund's respective investment program. The
Board of Trustees supervises the Advisers and establishes policies that the
Advisers must follow in its management activities.
Effective January 1, 2000, SunTrust Bank, P.O. Box 3808, Orlando, Florida 32802,
as the successor to STI Capital Management, N.A., (STI) serves as the Adviser to
the Capital Appreciation, International Equity, Investment Grade Bond, Mid-Cap
Equity, Small Cap Value Equity and Value Income Stock Funds. As of December 31,
1999, SunTrust Bank had approximately $136.8 billion in assets under management.
For the period ended December 31, 1999, STI received advisory fees as a
percentage of average daily net assets of:
CAPITAL APPRECIATION FUND 0.94%
INTERNATIONAL EQUITY FUND 0.86%
INVESTMENT GRADE BOND FUND 0.30%
MID-CAP EQUITY FUND 0.80%
SMALL CAP VALUE EQUITY FUND 0.52%
VALUE INCOME STOCK FUND 0.79%
Trusco Capital Management, Inc., (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Adviser to the Growth and Income and Quality Growth
Stock Funds. As of December 31, 1999, Trusco had approximately $30.7 billion in
assets under management.
The Growth and Income and Quality Growth Stock Funds did not pay advisory fees
for the period ended December 31, 1999.
The Advisers may use their affiliates as brokers for Fund transactions.
<PAGE>
20 PROSPECTUS
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS
Mr. Anthony R. Gray served as Chairman and Chief Investment Officer of STI since
1979. In January 2000 he was named Managing Director of SunTrust Bank. He has
managed the Capital Appreciation Fund since it began operating in October 1995.
He has more than 32 years of investment experience.
Mr. Jeffrey E. Markunas, CFA, has served as lead portfolio manager of the Growth
and Income Fund since it began operating in January 2000. Since 1992, he has
served as Senior Vice President and Director of Equity Management for Crestar
Asset Management Company. Additionally, he was named Senior Vice President of
Trusco in January 1999. Mr. Markunas has more than 18 years of investment
experience.
Mr. L. Earl Denney, CFA served as Managing Director of STI since 1983. In
January 2000 he was named Managing Director of SunTrust Bank. He has managed the
Investment Grade Bond Fund since it began operating in October 1995. He has more
than 22 years of investment experience in fixed income investment management.
Mr. Ned Dau served as Managing Director of STI since 1997. In January 2000 he
was named Managing Director of SunTrust Bank. He has managed the International
Equity Fund since May 1997. Prior to joining STI, he served as senior
international equity analyst for American Express Financial Advisers from 1996
to 1997 and for the Principal Financial Group from 1992 to 1995. He has more
than 8 years of investment experience.
Mr. John Hamlin served as portfolio manager of STI since March 1999. In January
2000 he was named portfolio manager of SunTrust Bank. He has managed the Mid-Cap
Equity Fund since April 1999. Prior to joining SunTrust Bank, Mr. Hamlin served
as Portfolio Manager at Phoenix Investment Council, Inc. from 1992 to 1999. He
has more than 11 years of investment experience.
Mr. Jonathan Mote, CFA, CFP, has served as a Portfolio Manager of Trusco since
August 1998. He has managed the Quality Growth Stock Fund since it began
operating in January 2000. Prior to joining Trusco, Mr. Mote served as a
portfolio manager with SunTrust Bank. He has more than 15 years of investment
experience.
Mr. Brett Barner, CFA, served as a Managing Director of STI since 1994. In
January 2000 he was named Managing Director of SunTrust Bank. He has managed the
Small Cap Value Equity Fund since it began operating in October 1997. He has
more than 16 years of investment experience.
The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan
Lewis. Mr. Riddick served as a Managing Director of STI since 1994. In January
2000 he was named Managing Director of SunTrust Bank. He has managed the Value
Income Stock Fund since it began operating in October 1995. He has more than 18
years of investment experience. Mr. Lewis served as a portfolio manager of STI
since 1993. In January 2000 he was named portfolio manager of SunTrust Bank. He
has been an analyst of the Value Income Stock Fund since 1995. He has more than
8 years of investment experience.
<PAGE>
PROSPECTUS 21
PURCHASING AND SELLING FUND SHARES
[HANDSHAKE ART OMITTED] HOW TO PURCHASE FUND SHARES
Generally, you may not purchase Fund shares directly. Rather, Fund shares are
sold to insurance companies for their separate accounts. Separate accounts are
used by insurance companies to fund variable annuity and variable life insurance
contracts. As a result, you as a customer of an insurance company may purchase
Fund shares through these Contracts. An insurance company purchases and redeems
shares of each Fund based on, among other things, the amount of net Contract
premiums or purchase payments transferred to the separate accounts, transfers to
or from a separate account investment division, policy loans, repayments and
benefit payments to the terms of the Contract at the Fund's net asset value per
share calculated as of that same day. Please refer to the Contract prospectus
for information on how to make investments and redemptions.
WHEN CAN YOU PURCHASE SHARES?
Shares are offered continuously and may be purchased on any day that the New
York Stock Exchange is open for business (a Business Day).
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Funds receive your purchase order. Each Fund
calculates its NAV once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time). So, for you to receive the current Business Day's NAV for each Fund,
generally each Fund must receive your purchase order (from your insurance
company) before 4:00 p.m. Eastern time.
HOW THE FUNDS CALCULATE NAV
NAV for one Fund share is the value of that share's portion of the net assets in
the Fund. In calculating NAV for the Fund, each Fund generally values its
investment portfolio at market price. If market prices are unavailable or we
think that they are unreliable, fair value prices may be determined in good
faith using methods approved by the Board of Trustees. Some Funds hold portfolio
securities that are listed on foreign exchanges. These securities may trade on
weekends or other days when the Funds do not calculate NAV. As a result, the NAV
of these Funds' investments may change on days when you cannot purchase or sell
Fund shares.
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting your insurance company. All redemption requests will be processed and
payments will be made within seven days after tender. Your insurance company
will give you information about how to sell your shares. The sale price of each
share will be the next NAV determined after the Funds receive your request from
your insurance company. Your insurance company or retirement plan sponsor may
have different cutoff times for determining NAV. Please refer to the Contract
prospectus for information on how to make investments and redemptions.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Trust may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the SAI.
<PAGE>
22 PROSPECTUS
DIVIDENDS AND DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income as follows:
QUARTERLY
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
MID-CAP EQUITY FUND
QUALITY GROWTH STOCK FUND
SMALL CAP VALUE EQUITY FUND
VALUE INCOME STOCK FUND
ANNUALLY
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
The Investment Grade Bond Fund declares dividends daily and pays dividends
monthly.
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution. Dividends are paid in the form of additional shares.
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax
issues that affect the Funds and their insurance company shareholders. This
summary is based on current tax laws, which may change. For more information
about the tax consequences of an investment in an insurance contract, see the
attached Contract prospectus.
The Funds expect that they will not have to pay income taxes if they distribute
all of their income gains. Net income and realized capital gains that the Funds
distribute are not currently taxable when left to accumulate within a variable
annuity or variable life insurance contract. For information on federal income
taxation of a life insurance company with respect to its receipt of
distributions from the Funds and federal income taxation of owners of variable
annuity or variable life insurance contracts, refer to the Contract prospectus.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
<PAGE>
PROSPECTUS 23
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about some of the Funds.
This information is intended to help you understand each Fund's financial
performance for the past five years, or, if shorter, the period of the Fund's
operations. Some of this information reflects financial information for a single
Fund share. The total returns in the table represent the rate that you would
have earned (or lost) on an investment in a Fund, assuming you reinvested all of
your dividends and distributions. This information has been audited by Arthur
Andersen LLP, independent public accountants. Their report, along with each
Fund's financial statements, appears in the annual report and is attached to the
SAI. You can obtain the annual report, which contains more performance
information, at no charge by calling 1-800-428-6970.
For a Share Outstanding Throughout the Years Ended December 31,
(unless otherwise indicated)
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS NET
NET ASSET NET AND DISTRIBUTIONS FROM ASSETS RATIO OF
VALUE INVESTMENT UNREALIZED FROM NET REALIZED NET ASSET END OF EXPENSES TO
BEGINNING INCOME GAINS (LOSSES) INVESTMENT CAPITAL VALUE END TOTAL PERIOD AVERAGE
OF PERIOD (LOSS) ON INVESTMENTS INCOME GAINS OF PERIOD RETURN+ (000) NET ASSETS
--------- ---------- -------------- ------------- ------------- --------- ------- ------ -----------
- -----------------------------
CAPITAL APPRECIATION FUND (A)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999........ $20.04 $ 0.04 $1.65 $(0.04) $(1.42) $20.27 8.73% $134,072 1.15%
1998........ 17.27 0.07 4.54 (0.08) (1.76) 20.04 28.97 105,560 1.15
1997........ 13.06 0.10 4.63 (0.10) (0.42) 17.27 36.54 61,877 1.15
1996........ 10.66 0.12 2.40 (0.12) -- 13.06 23.75 25,189 1.15
1995 (1).... 10.00 0.04 0.66 (0.04) -- 10.66 6.96 3,778 1.15
- ----------------------
GROWTH AND INCOME FUND
- ----------------------
1999 (2).... $10.00 $ -- $ -- $ -- $ -- $10.00 -- $ 10 1.20%
- -------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
1999........ $13.05 $ 0.03 $ 1.11 $(0.07) $(0.19) $13.93 8.81% $ 18,268 1.60%
1998........ 11.87 0.10 1.17 (0.01) (0.08) 13.05 10.80 18,926 1.60
1997........ 10.16 0.03 1.68 -- -- 11.87 16.84 13,847 1.60
1996 (3).... 10.00 0.01 0.16 (0.01) -- 10.16 1.70 995 1.60
- --------------------------
INVESTMENT GRADE BOND FUND
- --------------------------
1999........ $10.58 $ 0.56 $(0.73) $(0.56) $(0.12) $ 9.73 (1.67)% $ 21,733 0.75%
1998........ 10.19 0.54 0.39 (0.54) -- 10.58 9.38 19,236 0.75
1997...... 9.92 0.58 0.27 (0.58) -- 10.19 8.84 9,902 0.75
1996........ 10.25 0.54 (0.33) (0.54) -- 9.92 2.29 8,039 0.75
1995 (1).... 10.00 0.13 0.25 (0.13) -- 10.25 3.68 3,115 0.75
- -----------------------
MID-CAP EQUITY FUND (B)
- -----------------------
1999........ $13.56 $(0.03) $ 1.90 $ -- $(0.23) $15.20 14.00% $ 30,744 1.15%
1998........ 13.97 -- 0.70 -- (1.11) 13.56 7.16 31,075 1.15
1997........ 11.86 (0.01) 2.64 (0.01) (0.51) 13.97 22.23 23,913 1.15
1996........ 10.27 0.06 1.59 (0.06) -- 11.86 16.05 14,294 1.15
1995 (1).... 10.00 0.05 0.27 (0.05) -- 10.27 3.19 3,409 1.15
- -------------------------
QUALITY GROWTH STOCK FUND
- -------------------------
1999 (2).... $10.00 $ -- $ -- $ -- $ -- $10.00 -- $ 10 1.30%
- -------------------------------
SMALL CAP VALUE EQUITY FUND (C)
- -------------------------------
1999........ $ 8.48 $ 0.10 $(0.51) $(0.10) $ -- $ 7.97 (4.78)% $ 11,047 1.20%
1998........ 9.77 0.12 (1.30) (0.11) -- 8.48 (12.18) 13,145 1.20
1997 (4).... 10.00 0.03 (0.23) (0.03) -- 9.77 (2.05) 7,563 1.20
- -----------------------
VALUE INCOME STOCK FUND
- -----------------------
1999........ $15.08 $ 0.29 $(0.63) $(0.29) $(1.22) $13.23 (3.00)% $101,741 0.95%
1998........ 15.21 0.27 1.02 (0.28) (1.14) 15.08 9.69 98,759 0.95
1997........ 12.41 0.28 3.02 (0.28) (0.22) 15.21 26.82 72,747 0.95
1996........ 10.67 0.23 1.74 (0.23) -- 12.41 18.64 31,216 0.95
1995 (1).... 10.00 0.06 0.67 (0.06) -- 10.67 7.31 4,015 0.95
<FN>
(A) DURING THE FISCAL YEAR ENDED DECEMBER 31, 1999, THE CAPITAL GROWTH FUND
CHANGED ITS NAME TO THE CAPITAL APPRECIATION FUND.
(B) DURING THE FISCAL YEAR ENDED DECEMBER 31, 1996, THE AGGRESSIVE GROWTH FUND
CHANGED ITS NAME TO THE MID-CAP EQUITY FUND.
(C) FORMERLY THE SMALL CAP EQUITY FUND.
(1) COMMENCED OPERATIONS ON OCTOBER 2, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
(2) COMMENCED OPERATIONS ON DECEMBER 31, 1999. ALL RATIOS FOR THE PERIOD HAVE
BEEN ANNUALIZED.
(3) COMMENCED OPERATIONS ON NOVEMBER 7, 1996. ALL RATIOS FOR THE PERIOD HAVE
BEEN ANNUALIZED.
(4) COMMENCED OPERATIONS ON OCTOBER 22, 1997. ALL RATIOS FOR THE PERIOD HAVE
BEEN ANNUALIZED.
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
</FN>
</TABLE>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR ROUNDED TO $0.
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
NET RATIO OF INVESTMENT INCOME
INVESTMENT EXPENSES TO (LOSS) TO
INCOME AVERAGE NET AVERAGE NET
(LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ----------------- ----------------- ---------
- -----------------------------
CAPITAL APPRECIATION FUND (A)
- -----------------------------
<S> <C> <C> <C> <C>
1999........ 0.20% 1.36% (0.01)% 168.04%
1998........ 0.43 1.41 0.17 219.17
1997........ 0.70 1.60 0.25 195.86
1996........ 1.15 2.43 (0.13) 148.48
1995 (1).... 1.69 6.18 (3.34) 8.05
- ----------------------
GROWTH AND INCOME FUND
- ----------------------
1999 (2).... -- 1.20% -- --
- -------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
1999........ 0.42% 1.99% 0.03% 207.32%
1998........ 0.63 2.07 0.16 128.93
1997........ 0.41 2.93 (0.92) 99.14
1996 (3).... 1.83 31.39 (27.96) --
- --------------------------
INVESTMENT GRADE BOND FUND
- --------------------------
1999........ 5.56% 1.19% 5.12% 243.18%
1998........ 5.19 1.34 4.60 183.13
1997...... 5.81 1.58 4.98 219.22
1996........ 5.54 2.78 3.51 303.30
1995 (1).... 5.04 6.05 (0.26) 108.55
- -----------------------
MID-CAP EQUITY FUND (B)
- -----------------------
1999........ (0.20)% 1.50% (0.55)% 122.22%
1998........ (0.29) 1.53 (0.67) 92.27
1997........ (0.07) 1.77 (0.69) 138.98
1996........ 0.58 2.79 (1.06) 139.60
1995 (1).... 2.22 6.34 (2.97) 13.29
- -------------------------
QUALITY GROWTH STOCK FUND
- -------------------------
1999 (2).... -- 1.30% -- --
- ---------------------------
SMALL CAP VALUE EQUITY FUND
- ---------------------------
1999........ 1.23% 1.83% 0.60% 63.13%
1998........ 1.23 1.89 0.54 49.10
1997 (4).... 1.62 2.66 0.16 4.11
- -----------------------
VALUE INCOME STOCK FUND
- -----------------------
1999........ 1.95% 0.96% 1.94% 80.30%
1998........ 1.90 1.11 1.74 76.36
1997........ 2.09 1.23 1.81 104.84
1996........ 2.45 1.95 1.45 79.80
1995 (1).... 2.98 5.72 (1.79) 7.17
</TABLE>
<PAGE>
24 PROSPECTUS
HOW TO OBTAIN MORE INFORMATION
STI CLASSIC VARIABLE TRUST
INVESTMENT ADVISERS
SunTrust Bank
Trusco Capital Management, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated May 1, 2000, includes detailed information about the STI Classic
Variable Trust. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Fund's
managers about strategies and recent market conditions and trends and their
impact on Fund performance. The reports also contain detailed financial
information about the Funds.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE:
Call 1-800-428-6970
BY MAIL:
Write to the Funds
c/o SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
FROM THE SEC: You can also obtain documents, and other information about the STI
Classic Variable Trust, 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 Funds' Investment Company Act
registration number is 811-09032.
<PAGE>
PROSPECTUS
STI CLASSIC VARIABLE TRUST
CAPITAL APPRECIATION FUND (FORMERLY CAPITAL GROWTH FUND)
INTERNATIONAL EQUITY FUND
VALUE INCOME STOCK FUND
MAY 1, 2000
INVESTMENT ADVISER TO THE FUND:
SUNTRUST BANK
[STI CLASSIC LOGO OMITTED]
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>
PROSPECTUS
ABOUT THIS PROSPECTUS
The STI Classic Variable Trust is a mutual fund family that offers shares in a
number of separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. The Funds are available to the public only
through the purchase of certain variable annuity and variable life insurance
contracts (Contracts) issued by various life insurance companies (Insurers).
This prospectus gives you important information about the Capital Appreciation,
International Equity, and Value Income Stock Funds that you should know before
investing. Please read this prospectus in conjunction with your Contract
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 THAT IS COMMON TO EACH OF THE
FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE:
2 CAPITAL APPRECIATION FUND 9 PORTFOLIO MANAGERS
4 INTERNATIONAL EQUITY FUND 10 PURCHASING AND SELLING FUND SHARES
6 VALUE INCOME STOCK FUND 11 PURCHASING AND SELLING FUND SHARES
8 MORE INFORMATION ABOUT RISK 11 TAXES
8 EACH FUND'S OTHER INVESTMENTS 12 FINANCIAL HIGHLIGHTS
9 INVESTMENT ADVISER 14 HOW TO OBTAIN MORE INFORMATION ABOUT
THE STI CLASSIC VARIABLE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[SUITCASE ART OMITTED] FUND SUMMARY [CHART ART OMITTED] WHAT IS AN INDEX?
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY [COINS ART OMITTED] FUND FEES AND EXPENSES
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING? [MAGNIFER ART OMITTED] INVESTMENT ADVISERS
[TARGET ART OMITTED] PERFORMANCE INFORMATION [HANDSHAKE ART OMITTED] PURCHASING FUND SHARES
</TABLE>
- --------------------------------------------------------------------------------
MAY 1, 2000
<PAGE>
PROSPECTUS 1
RISK/RETURN INFORMATION COMMON TO THE FUNDS
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities. Before you invest,
you should know a few things about investing in mutual funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect 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 a Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
Each Fund has its own investment goal and strategies for reaching that goal. The
Adviser invests Fund assets in a way that the Adviser believes will help a Fund
achieve its goal. Still, investing in the Funds involves risks, and there is no
guarantee that a Fund will achieve its goal. The Adviser'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 the Adviser 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.
<PAGE>
2 PROSPECTUS
CAPITAL APPRECIATION
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL Capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above
growth potential
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want the value of their
investment to grow, but do not need
to receive income on their investment
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Capital Appreciation Fund invests primarily in U.S. common stocks and
other equity securities that the Adviser believes are undervalued by the stock
market. In selecting investments for the Fund, the Adviser chooses companies
that it believes have above average growth potential. The Adviser rotates the
Fund's investments among various market sectors based on the Adviser's research
of business cycles. The Adviser's strategy focuses on large-cap stocks with a
strong growth history. Due to its investment strategy, the Fund may buy and sell
securities frequently. This may result in higher transaction costs.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM YEAR
TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT EXPENSES,
FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN
SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1996 23.75%
1997 36.54%
1998 28.97%
1999 8.73%
BEST QUARTER WORST QUARTER
22.64% -11.91%
(12/31/98) (9/30/98)
<PAGE>
PROSPECTUS 3
CAPITAL APPRECIATION FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500 INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND 8.73% 24.54%*
- --------------------------------------------------------------------------------
S&P 500 INDEX 21.04% 27.09%**
- --------------------------------------------------------------------------------
* SINCE 10/2/95
** SINCE 10/31/95
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500 Index is a widely-recognized, market
value-weighted (higher market value stocks have more influence than lower market
value stocks) index of 500 stocks designed to mimic the overall equity market's
industry weightings.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.15%
Other Expenses 0.21%
-----
Total Annual Fund Operating Expenses 1.36%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
CAPITAL APPRECIATION FUND 1.15%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$138 $431 $745 $1,635
<PAGE>
4 PROSPECTUS
INTERNATIONAL EQUITY FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOAL Long-term capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS Foreign common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY High
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued companies
with good fundamentals
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who want an increase in the value
of their investment without regard to income,
are willing to accept the increased risks of
international investing for the possibility
of higher returns, and want exposure to a
diversified portfolio of international stocks
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The International Equity Fund invests primarily in common stocks and other
equity securities of foreign companies. The Adviser's "bottom-up" approach to
stock selection focuses on individual stocks and fundamental characteristics of
companies. The Adviser's goal is to find companies with top management, quality
products and sound financial positions that are trading at a discount. In
selecting investments for the Fund, the Adviser diversifies the Fund's
investments among at least three foreign countries. The Fund invests primarily
in developed countries, but may invest in countries with emerging markets. Due
to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is also subject to the risk that foreign common stocks may underperform
other segments of the equity market or the equity markets as a whole.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are more likely
to occur in these countries.
Emerging market countries are countries that the World Bank or the United
Nations considers to be emerging or developing. Emerging markets may be more
likely to experience political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition, the financial stability
of issuers (including governments) in emerging market countries may be more
precarious than in other countries. As a result, there will tend to be an
increased risk of price volatility associated with the Fund's investments in
emerging market countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM YEAR
TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT EXPENSES,
FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN
SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1997 16.84%
1998 10.80%
1999 8.81%
BEST QUARTER WORST QUARTER
16.62% -17.68%
(12/31/98) (9/30/98)
<PAGE>
PROSPECTUS 5
INTERNATIONAL EQUITY FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND 8.81% 12.10%*
- --------------------------------------------------------------------------------
MSCI EAFE INDEX 26.96% 14.81%**
- --------------------------------------------------------------------------------
* SINCE 11/7/96
** SINCE 11/30/96
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The MSCI EAFE Index is a widely recognized,
capitalization-weighted (companies with larger market capitalizations have more
influence than those with smaller market capitalizations) index of over 900
securities listed on the stock exchanges of developed countries outside of North
America.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.25%
Other Expenses 0.74%
-----
Total Annual Fund Operating Expenses 1.99%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE EXPECTED TO BE
AS FOLLOWS:
INTERNATIONAL EQUITY FUND 1.60%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$202 $624 $1,073 $2,317
<PAGE>
6 PROSPECTUS
VALUE INCOME STOCK FUND
[SUITCASE ART OMITTED] FUND SUMMARY
INVESTMENT GOALS
PRIMARY Current income
SECONDARY Capital appreciation
- --------------------------------------------------------------------------------
INVESTMENT FOCUS U.S. common stocks
- --------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Moderate
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend-paying,
undervalued stocks
- --------------------------------------------------------------------------------
INVESTOR PROFILE Investors who are looking for current
income and capital appreciation with less
volatility than the average stock fund
- --------------------------------------------------------------------------------
[TELESCOPE ART OMITTED] INVESTMENT STRATEGY
The Value Income Stock Fund invests primarily in common stocks and other
equity securities of U.S. companies. In selecting investments for the Fund, the
Adviser primarily chooses companies that have a market capitalization of at
least $500 million and that have a history of paying regular dividends. The
Adviser focuses on high dividend-paying stocks that trade below their historical
value. The Adviser's "bottom-up" approach to stock selection emphasizes
individual stocks over economic trends.
[LIFESAVER ART OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
Since it purchases equity securities, the Fund is subject to the risk that
stock prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
[TARGET ART OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S SHARES FROM YEAR
TO YEAR. THE BAR CHART DOES NOT REFLECT THE IMPACT OF ANY CONTRACT EXPENSES,
FEES OR CHARGES. IF THESE CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN
SHOWN.
[BAR CHART OMITTED]
PLOT POINTS FOLLOWS:
1996 18.64%
1997 26.82%
1998 9.69%
1999 -3.00%
BEST QUARTER WORST QUARTER
14.48% -11.90%
(6/30/99) (9/30/99)
<PAGE>
PROSPECTUS 7
VALUE INCOME STOCK FUND
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1999 TO THOSE OF THE S&P 500/BARRA VALUE INDEX AND THE LIPPER
EQUITY INCOME FUND INDEX.
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
VALUE INCOME STOCK FUND -3.00% 13.62%*
- --------------------------------------------------------------------------------
S&P 500/BARRA VALUE INDEX 12.72% 21.05%**
- --------------------------------------------------------------------------------
LIPPER EQUITY INCOME FUND
INDEX 4.19% 16.13%**
- --------------------------------------------------------------------------------
* SINCE 10/2/95
** SINCE 10/31/95
[CHART ART OMITTED] WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The S&P 500/Barra Value Index is a widely recognized
index of the stocks in the S&P 500 Index that have lower price-to-book ratios.
The Lipper Equity Income Fund Index is an equally weighted index of typically
the 30 largest funds that seek relatively high current income and growth of
income by investing 60% or more of their portfolios in equities.
[COINS ART OMITTED] FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD FUND SHARES. THIS TABLE DOES NOT, HOWEVER, INCLUDE ANY SEPARATE ACCOUNT OR
CONTRACT EXPENSES, FEES OR CHARGES.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.80%
Other Expenses 0.16%
-----
Total Annual Fund Operating Expenses 0.96%
- --------------------------------------------------------------------------------
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE EXPECTED TO BE
AS FOLLOWS:
VALUE INCOME STOCK FUND 0.95%
FOR MORE INFORMATION ABOUT THESE FEES, SEE "INVESTMENT ADVISERS."
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$98 $306 $531 $1,178
<PAGE>
8 PROSPECTUS
MORE INFORMATION ABOUT RISK AND EACH FUND'S OTHER INVESTMENTS
[LIFESAVER ART OMITTED] MORE INFORMATION
ABOUT RISK
EQUITY RISK
CAPITAL APPRECIATION FUND
INTERNATIONAL EQUITY FUND
VALUE INCOME STOCK FUND
Equity securities include public and privately issued equity securities, common
and preferred stocks, warrants, rights to subscribe to common stock and
convertible securities, as well as instruments that attempt to track the price
movement of equity indices. Investments in equity securities and equity
derivatives in general are subject to market risks that may cause their prices
to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual fund invests
will cause a fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
FOREIGN SECURITY RISKS
INTERNATIONAL EQUITY FUND
Investments in securities of foreign companies or governments can be more
volatile than investments in U.S. companies or governments. Diplomatic,
political, or economic developments, including nationalization or appropriation,
could affect investments in foreign countries. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets. In
addition, the value of securities denominated in foreign currencies, and of
dividends from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign companies or
governments generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to domestic U.S.
companies or governments. Transaction costs are generally higher than those in
the U.S. and expenses for custodial arrangements of foreign securities may be
somewhat greater than typical expenses for custodial arrangements of similar
U.S. securities. Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes are recoverable, the non-recovered portion will reduce the income received
from the securities comprising the portfolio.
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. The investment objective of each Fund is nonfundamental
and may be changed without shareholder approval.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Fund may invest up to 100%
of its assets in cash, money market instruments, repurchase agreements, and
short-term obligations that would not ordinarily be consistent with a Fund's
objectives. A Fund will do so only if the Adviser believes that the risk of loss
outweighs the opportunity for capital gains or higher income. Of course, the
Fund cannot guarantee that any Fund will achieve its investment goal.
<PAGE>
PROSPECTUS 9
THE INVESTMENT ADVISER AND PORTFOLIO MANAGERS
[IMAGNIFER ART OMITTED] INVESTMENT ADVISER
The Investment Adviser makes investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's respective
investment program. The Board of Trustees supervises the Adviser and establishes
policies that the Adviser must follow in its management activities.
Effective January 1, 2000, SunTrust Bank, P.O. Box 3808, Orlando, Florida 32802,
as the successor to STI Capital Management, N.A., (STI) serves as the Adviser to
the Capital Appreciation, International Equity, and Value Income Stock Funds. As
of December 31, 1999, SunTrust Bank had approximately $136.8 billion in assets
under management. For the period ended December 31, 1999, STI received advisory
fees as a percentage of average daily net assets of:
CAPITAL APPRECIATION FUND 0.94%
INTERNATIONAL EQUITY FUND 0.86%
VALUE INCOME STOCK FUND 0.79%
The Adviser may use its affiliates as brokers for Fund transactions.
PORTFOLIO MANAGERS
Mr. Anthony R. Gray served as Chairman and Chief Investment Officer of STI since
1979. In January 2000 he was named Managing Director of SunTrust Bank. He has
managed the Capital Appreciation Fund since it began operating in October 1995.
He has more than 32 years of investment experience.
Mr. Ned Dau served as Managing Director of STI since 1997. In January 2000 he
was named Managing Director of SunTrust Bank. He has managed the International
Equity Fund since May 1997. Prior to joining STI, he served as senior
international equity analyst for American Express Financial Advisers from 1996
to 1997 and for the Principal Financial Group from 1992 to 1995. He has more
than 8 years of investment experience.
The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and
Mr. Dan Lewis. Mr. Riddick served as a Managing Director of STI since 1994. In
January 2000 he was named Managing Director of SunTrust Bank. He has managed the
Value Income Stock Fund since it began operating in October 1995. He has more
than 18 years of investment experience. Mr. Lewis served as a portfolio manager
of STI since 1993. In January 2000 he was named portfolio manager of SunTrust
Bank. He has been an analyst of the Value Income Stock Fund since 1995. He has
more than 8 years of investment experience.
<PAGE>
10 PROSPECTUS
PURCHASING AND SELLING FUND SHARES
[HANDSHAKE ART OMITTED] HOW TO PURCHASE FUND SHARES
Generally, you may not purchase Fund shares directly. Rather, Fund shares
are sold to insurance companies for their separate accounts. Separate accounts
are used by insurance companies to fund variable annuity and variable life
insurance contracts. As a result, you as a customer of an insurance company may
purchase Fund shares through these Contracts. An insurance company purchases and
redeems shares of each Fund based on, among other things, the amount of net
Contract premiums or purchase payments transferred to the separate accounts,
transfers to or from a separate account investment division, policy loans,
repayments and benefit payments to the terms of the Contract at the Fund's net
asset value per share calculated as of that same day. Please refer to the
Contract prospectus for information on how to make investments and redemptions.
WHEN CAN YOU PURCHASE SHARES?
Shares are offered continuously and may be purchased on any day that the New
York Stock Exchange is open for business (a Business Day).
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Funds receive your purchase order. Each Fund
calculates its NAV once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time). So, for you to receive the current Business Day's NAV for each Fund,
generally each Fund must receive your purchase order (from your insurance
company) before 4:00 p.m. Eastern time.
HOW THE FUNDS CALCULATE NAV
NAV for one Fund share is the value of that share's portion of the net assets in
the Fund. In calculating NAV for the Fund, each Fund generally values its
investment portfolio at market price. If market prices are unavailable or we
think that they are unreliable, fair value prices may be determined in good
faith using methods approved by the Board of Trustees. Some Funds hold portfolio
securities that are listed on foreign exchanges. These securities may trade on
weekends or other days when the Funds do not calculate NAV. As a result, the NAV
of these Funds' investments may change on days when you cannot purchase or sell
Fund shares.
HOW TO SELL YOUR FUND SHARES
You may sell (sometimes called "redeem") your shares on any Business Day by
contacting your insurance company. All redemption requests will be processed and
payments will be made within seven days after tender. Your insurance company
will give you information about how to sell your shares. The sale price of each
share will be the next NAV determined after the Funds receive your request from
your insurance company. Your insurance company or retirement plan sponsor may
have different cutoff times for determining NAV. Please refer to the Contract
prospectus for information on how to make investments and redemptions.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Trust may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the SAI.
<PAGE>
PROSPECTUS 11
DIVIDENDS AND DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income as follows:
QUARTERLY
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
VALUE INCOME STOCK FUND
ANNUALLY
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution. Dividends are paid in the form of additional shares.
TAXES
PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax
issues that affect the Funds and their insurance company shareholders. This
summary is based on current tax laws, which may change. For more information
about the tax consequences of an investment in an insurance contract, see the
attached Contract prospectus.
The Funds expect that they will not have to pay income taxes if they distribute
all of their income gains. Net income and realized capital gains that the
Funds distribute are not currently taxable when left to accumulate within a
variable annuity or variable life insurance contract. For information on federal
income taxation of a life insurance company with respect to its receipt of
distributions from the Funds and federal income taxation of owners of variable
annuity or variable life insurance contracts, refer to the Contract prospectus.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
<PAGE>
12 PROSPECTUS
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about some of the Funds.
This information is intended to help you understand each Fund's financial
performance for the past five years, or, if shorter, the period of the Fund's
operations. Some of this information reflects financial information for a single
Fund share. The total returns in the table represent the rate that you would
have earned (or lost) on an investment in a Fund, assuming you reinvested all of
your dividends and distributions. This information has been audited by Arthur
Andersen LLP, independent public accountants. Their report, along with each
Fund's financial statements, appears in the annual report and is attached to the
SAI. You can obtain the annual report, which contains more performance
information, at no charge by calling 1-800-428-6970.
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended December 31, (unless otherwise indicated)
NET REALIZED
NET ASSET NET AND DISTRIBUTIONS
VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL END OF
OF PERIOD (LOSS) ON INVESTMENT INCOME CAPITAL GAINS OF PERIOD RETURN+ PERIOD (000)
--------- ---------- -------------- ------------- ------------- --------- ------- ------------
- -----------------------------
CAPITAL APPRECIATION FUND (A)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999........ $20.04 $ 0.04 $1.65 $(0.04) $(1.42) $20.27 8.73% $134,072
1998........ 17.27 0.07 4.54 (0.08) (1.76) 20.04 28.97 105,560
1997........ 13.06 0.10 4.63 (0.10) (0.42) 17.27 36.54 61,877
1996........ 10.66 0.12 2.40 (0.12) -- 13.06 23.75 25,189
1995 (1).... 10.00 0.04 0.66 (0.04) -- 10.66 6.96 3,778
- -------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
1999........ $13.05 $ 0.03 $ 1.11 $(0.07) $(0.19) $13.93 8.81% $ 18,268
1998........ 11.87 0.10 1.17 (0.01) (0.08) 13.05 10.80 18,926
1997........ 10.16 0.03 1.68 -- -- 11.87 16.84 13,847
1996 (2).... 10.00 0.01 0.16 (0.01) -- 10.16 1.70 995
- -----------------------
VALUE INCOME STOCK FUND
- -----------------------
1999........ $15.08 $ 0.29 $(0.63) $(0.29) $(1.22) $13.23 (3.00)% $101,741
1998........ 15.21 0.27 1.02 (0.28) (1.14) 15.08 9.69 98,759
1997........ 12.41 0.28 3.02 (0.28) (0.22) 15.21 26.82 72,747
1996........ 10.67 0.23 1.74 (0.23) -- 12.41 18.64 31,216
1995 (1).... 10.00 0.06 0.67 (0.06) -- 10.67 7.31 4,015
<FN>
(A) DURING THE FISCAL YEAR ENDED DECEMBER 31, 1999, THE CAPITAL GROWTH FUND CHANGED ITS NAME TO THE CAPITAL APPRECIATION FUND.
(1) COMMENCED OPERATIONS ON OCTOBER 2, 1995. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
(2) COMMENCED OPERATIONS ON NOVEMBER 7, 1996. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR ROUNDED TO $0.
</FN>
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENTS
NET EXPENSES TO INCOME (LOSS) TO
RATIO OF INVESTMENT AVERAGE NET AVERAGE NET
EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO
AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
----------- ------------- ----------------- ----------------- ---------
- ----------------------------
CAPITAL APPRECIATION FUND(A)
- ----------------------------
<S> <C> <C> <C> <C> <C>
1999........ 1.15% 0.20% 1.36% (0.01)% 168.04%
1998........ 1.15 0.43 1.41 0.17 219.17
1997........ 1.15 0.70 1.60 0.25 195.86
1996........ 1.15 1.15 2.43 (0.13) 148.48
1995 (1).... 1.15 1.69 6.18 (3.34) 8.05
- -------------------------
INTERNATIONAL EQUITY FUND
- -------------------------
1999........ 1.60% 0.42% 1.99% 0.03% 207.32%
1998........ 1.60 0.63 2.07 0.16 128.93
1997........ 1.60 0.41 2.93 (0.92) 99.14
1996 (2).... 1.60 1.83 31.39 (27.96) --
- -----------------------
VALUE INCOME STOCK FUND
- -----------------------
1999........ 0.95% 1.95% 0.96% 1.94% 80.30%
1998........ 0.95 1.90 1.11 1.74 76.36
1997........ 0.95 2.09 1.23 1.81 104.84
1996........ 0.95 2.45 1.95 1.45 79.80
1995 (1).... 0.95 2.98 5.72 (1.79) 7.17
</TABLE>
<PAGE>
NOTES
<PAGE>
14 PROSPECTUS
HOW TO OBTAIN MORE INFORMATION
STI CLASSIC VARIABLE TRUST
INVESTMENT ADVISER
SunTrust Bank
DISTRIBUTOR
SEI Investments Distribution Co.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated May 1, 2000, includes detailed information about the STI Classic
Variable Trust. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Fund's
managers about strategies and recent market conditions and trends and their
impact on Fund performance. The reports also contain detailed financial
information about the Funds.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE:
Call 1-800-428-6970
BY MAIL:
Write to the Funds
c/o SEI Investments Distribution Co.
Oaks, Pennsylvania 19456
FROM THE SEC: You can also obtain documents, and other information about the STI
Classic Variable Trust, 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 Funds' Investment Company Act
registration number is 811-09032.
<PAGE>
STI CLASSIC VARIABLE TRUST
Investment Advisers:
SunTrust Bank
Trusco Capital Management, Inc.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's prospectus dated May 1,
2000. Prospectuses may be obtained through the Distributor, SEI Investments
Distribution Co., Oaks, Pennsylvania 19456.
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
THE TRUST.................................................................................................... B-3
ADDITIONAL INFORMATION ABOUT CERTAIN FUNDS................................................................... B-3
DESCRIPTION OF PERMITTED INVESTMENTS......................................................................... B-6
INVESTMENT LIMITATIONS....................................................................................... B-20
THE INVESTMENT ADVISERS...................................................................................... B-22
THE ADMINISTRATOR............................................................................................ B-23
THE DISTRIBUTOR.............................................................................................. B-24
THE TRANSFER AGENT........................................................................................... B-25
THE CUSTODIAN................................................................................................ B-25
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................... B-25
LEGAL COUNSEL................................................................................................ B-25
TRUSTEES AND OFFICERS OF THE TRUST........................................................................... B-25
COMPUTATION OF YIELD......................................................................................... B-28
CALCULATION OF TOTAL RETURN.................................................................................. B-29
PURCHASE AND REDEMPTION OF SHARES............................................................................ B-30
NET ASSET VALUE--PRICING OF PORTFOLIO SECURITIES............................................................. B-31
TAXES........................................................................................................ B-31
FUND TRANSACTIONS............................................................................................ B-33
TRADING PRACTICES AND BROKERAGE.............................................................................. B-33
DESCRIPTION OF SHARES........................................................................................ B-38
SHAREHOLDER LIABILITY........................................................................................ B-37
5% SHAREHOLDERS.............................................................................................. B-38
LIMITATION OF TRUSTEES' LIABILITY............................................................................ B-39
APPENDIX..................................................................................................... A-1
FINANCIAL STATEMENTS......................................................................................... F-1
</TABLE>
<PAGE>
May 1, 2000
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THE TRUST
STI Classic Variable Trust (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 April 18, 1995. The
Declaration of Trust permits the Trust to offer separate series ("Funds") of
units of beneficial interest ("shares"). Each share of each Fund represents an
equal proportionate interest in that portfolio. Shares of the Trust are issued
and redeemed only in connection with investments in and payments under variable
annuity contracts and variable life insurance policies of various life insurance
companies. This Statement of Additional Information relates to the Capital
Appreciation Fund (formerly Capital Growth Fund), Growth and Income Fund,
International Equity Fund, Investment Grade Bond Fund, Mid-Cap Equity Fund,
Quality Growth Stock Fund, Small Cap Value Equity Fund (formerly Small Cap
Equity Fund), and Value Income Stock Fund. These various series are
collectively referred to herein as the "Funds."
ADDITIONAL INFORMATION ABOUT CERTAIN FUNDS
Equity Funds
- ------------
Capital Appreciation Fund
The Capital Appreciation Fund invests primarily in a diversified portfolio of
common stocks, warrants, and securities convertible into common stocks which, in
the Fund's Adviser's opinion, are undervalued in the marketplace at the time of
purchase. In selecting securities for the Fund, its Adviser will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. Dividend and interest income should be
considered incidental to the growth of capital. The Fund's Adviser will rotate
the Capital Appreciation Fund's holdings between various market sectors based on
economic analysis of the overall business cycle. Under normal conditions, at
least 65% of the total assets of the Capital Appreciation Fund will be invested
in common stocks.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Capital Appreciation Fund not invested in the securities described above may be
invested in U.S. dollar denominated equity securities of foreign issuers
(including sponsored American Depositary Receipts ("ADRs") that are traded on
exchanges or listed on National 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.
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International Equity Fund
The International Equity Fund, under normal market conditions, will invest at
least 65% of its assets in equity securities of foreign issuers consisting of:
common and preferred stocks, warrants, options and securities convertible into
common stock.
Securities of foreign issuers purchased by the Fund may be purchased in foreign
markets, on United States registered exchanges, the over-the-counter market or
in the form of sponsored or unsponsored ADRs traded on registered exchanges or
NASDAQ, or sponsored or unsponsored European Depositary Receipts ("EDRs").
The Fund may enter into forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. A forward foreign currency
contract is a commitment to purchase or sell a specified currency, at a
specified future date, at a specified price. The Fund may enter into forward
foreign currency contracts to hedge a specific security transaction or to hedge
a portfolio position. The Fund also may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter
markets) to manage the portfolios exposure to changes in dollar exchange rates.
The Fund expects to be fully invested in the investments described above, but
may invest up to 35% of its total assets in bonds and debentures issued by non-
U.S. or U.S. companies, securities issued or guaranteed by foreign or U.S.
governments and foreign and U.S. commercial paper. The Fund may invest in
futures contracts, including stock index futures contracts, and options on
futures contracts. The bonds that the Fund may purchase may be rated in any
rating category or may be unrated provided that no more than 10% of the Fund's
total assets will be invested in bonds rated below BBB by S&P, rated below Baa
by Moody's, or of comparable quality not rated by S&P or Moody's. When
investing in bonds, the Fund may seek capital gains by taking advantage of price
appreciation caused by interest rate and credit quality changes. The Fund may
also purchase shares of closed-end investment companies that invest in the
securities of issuers in a single country or region. The Fund is also permitted
to acquire floating and variable rate securities, purchase securities on a when-
issued basis and purchase illiquid securities.
The Fund will invest in the foreign issues of at least three different countries
outside the United States. A foreign issue is one the issuer of which (1) is
organized under the laws of a specific country, or for which the principal
securities trading market is in a specific country or (2) derives a significant
proportion (at least 50 percent) of its revenues or profits from goods produced
or sold, investments made, or services performed in a specific country or which
have at least 50 percent of its assets situated in that country. The Fund will
invest primarily in developed countries (for example Japan, Canada and the
United Kingdom). In addition, the Fund may invest in securities of issuers
whose principal activities are in countries with emerging markets. The Fund
defines an emerging market country as any country the economy and market of
which the World Bank or the United Nations considers to be emerging or
developing.
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Mid-Cap Equity Fund
The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common
stocks, preferred stocks, and securities convertible into common stocks of small
to mid-size companies, (i.e., $500 million to $10 billion, respectively, as
measured by their market capitalization), with above-average growth of earnings.
Under normal conditions, at least 80% of the total assets of the Fund will be
invested in equity securities, and as a matter of non-fundamental policy, the
Fund will invest at least 65% of its assets in mid-size companies. Current
income will not be an important criterion of investment selection and any such
income should be considered incidental. In selecting securities for the Fund,
the Fund's Adviser will evaluate factors such as the issuer's background,
industry position, historical returns on equity, and experience and
qualifications of the management team.
Most of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Fund not invested in the securities described above may be invested in U.S.
dollar denominated equity securities of foreign issuers (including sponsored
ADRs that are traded on exchanges or listed on NASDAQ); securities issued by
mutual funds; repurchase agreements; and bonds. The bonds that the Fund may
purchase, including nay variable or floating rate instruments, must be rated B
or better by S&P or Moody's, provided that this requirement shall not apply to
the Fund's purchase of bonds issued by the government of Canada or by various
supranational entities, and provided further that no more than 10% of the Fund's
total assets will be invested in bonds rated below BBB by S&P, rated below Baa
by Moody's, or of comparable quality not rated by S&P or Moody's. The Fund may
invest up to 10% of its assets in restricted securities.
Small Cap Value Equity Fund
The Small Cap Value Equity Fund invests substantially all, and under normal
market conditions at least 65%, of its assets in the equity securities of
smaller companies (i.e., companies with market capitalizations of less than $1
billion) which, in the Adviser's opinion, are undervalued for above-average
capital growth. Any remaining assets may be invested in the equity securities
of companies with larger market capitalizations which the Adviser believes are
also undervalued. The Fund may also invest in U.S. dollar denominated equity
securities of foreign issuers (including ADRs). Equity securities include
common stock, preferred stock, warrants and rights to subscribe to common stock
and, in general, any security that is convertible into or exchangeable for
common stock.
In order to meet liquidity needs, or for temporary defensive purposes, the Fund
may invest all or a portion of its assets in common stocks of larger, more
established companies, fixed income securities, repurchase agreements, cash or
money market securities. Fixed income securities will only be purchased if they
are rated investment grade or better by one or more NRSROs. Investment grade
bonds include securities rated at least BBB by S&P or Baa by Moody's. Money
market securities will only be purchased if they have been given one of the two
top ratings by two or more NRSROs, or if not rated, determined to be of
comparable quality by the Fund's Adviser. To the extent the Fund is engaged in
temporary defensive investing, the Fund may not be pursuing its investment
objective.
The Fund may engage in options transactions for hedging purposes only. The Fund
will not invest more than 20% of its total assets in unsponsored ADR facilities.
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<PAGE>
Value Income Stock Fund
The Value Income Stock Fund seeks to provide current income by structuring its
investments in an attempt to maintain the Fund's yield at a level above the
average dividend yield of the securities comprising the S&P 500 Stock Index.
Achieving such a yield will be the Fund's primary consideration when purchasing
securities. A secondary consideration of the Fund will be capital appreciation.
The Fund will invest at least 80% of its total assets in equity securities.
Investments will consist primarily of common stocks, and, under normal market
conditions, at least 65% of the Fund's assets will be invested in common stocks
issued by corporations which have a history of paying regular dividends,
although there can be no assurance that such corporations will continue to pay
dividends. Other equity securities in which the Fund may invest are convertible
debt securities; preferred stocks and warrants which are convertible into or
exchangeable for common stocks; and U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ). All of the common stocks in which the Fund invests are traded on
registered exchanges such as the New York or American Stock Exchange or on the
over-the-counter market in the United States (i.e., NASDAQ). The Fund may also
purchase debt securities (corporate debt obligations and U.S. Treasury
obligations) which may be rated in any rating category or may be unrated,
provided that no more than 10% of the Fund's total assets will be invested in
bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable
quality not rated by S&P or Moody's. The Fund may also invest in futures and
options.
The Fund will invest primarily in stocks of companies operating in all aspects
of the U.S. and world economies that have a market capitalization of at least
$500 million, and that the Fund's Adviser believes possess fundamentally
favorable long-term characteristics. However, stocks of companies with smaller
market capitalizations and stocks that are out of favor in the financial
community and in which little opportunity for price appreciation is recognized
by the financial community may also be purchased if the Fund's Adviser believes
they are undervalued.
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
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<PAGE>
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.
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.
DESCRIPTION OF PERMITTED INVESTMENTS
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and
Global Depository Receipts (GDRs)
ADRs, EDRs, and GDRs are securities, typically issued by a U.S. financial
institution or a non-U.S. financial institution in the case of an EDR or GDR (a
"depositary"). The institution has ownership interests in a security, or a pool
of securities, issued by a foreign issuer and deposited with the depositary.
ADRs, EDRs and GDRs may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary. An unsponsored facility may
be established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.
Asset-Backed Securities
Asset-backed securities include company receivables, truck and auto loans,
leases, and credit card receivables. These issues may be traded over-the-
counter and typically have a short-intermediate
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<PAGE>
maturity structure depending on the paydown characteristics of the underlying
financial assets which are passed through to the security holder.
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.
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.
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<PAGE>
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.
Foreign Investments
Foreign investments include equity securities of foreign entities, obligations
of foreign branches of U.S. banks and of foreign banks, including, without
limitation, European Certificates of Deposit, European Time Deposits, European
Bankers' Acceptances, Canadian Time Deposits and Yankee Certificates of Deposit,
and investments in Canadian Commercial Paper, foreign securities, and ADRs.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting
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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.
By investing in foreign securities, a Fund attempts 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
the Fund's investment objective and policies. During certain periods the
investment return on securities in some or all countries may exceed the return
on similar investments in the United States, while at other times the investment
return may be less than that on similar U.S. securities. Shares of a Fund that
invests in foreign securities, when included in appropriate amounts in a
portfolio otherwise consisting of domestic securities, may provide a source of
increased diversification. Each Fund seeks 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 Fund 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 a Fund's
investments in another country's markets.
Futures Contracts and Options on Futures
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 previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Deposit requirements on futures
contracts customarily range upward from less than 5% of the value of the
contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy the required margin, payment of additional
"variation" margin will be required. Conversely, changes in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Funds expect to earn
interest income on their margin deposits.
Traders in futures contracts and related options may be broadly classified as
either "hedgers" or "speculators." Hedgers use the futures markets primarily to
offset unfavorable changes in the value of securities otherwise held or expected
to be acquired for investment purposes. Speculators are less
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<PAGE>
inclined to own the securities underlying the futures contracts which they
trade, and use futures contracts with the expectation of realizing profits from
fluctuations in the prices of underlying securities. The Funds intend to use
futures contracts and related options only for bona fide hedging purposes.
Regulations of the Commodity Futures Trading Commission applicable to the Funds
require that the futures transactions and related options constitute bona fide
hedging transactions, except that the International Equity Fund may enter into
such transactions for other than bona fide hedging purposes if the aggregate
initial margin and premiums required to establish such positions do not exceed
five percent of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any such contracts it has
entered into. The Funds will only sell futures contracts to protect securities
they own against price declines or purchase contracts to protect against an
increase in the price of securities they intend to purchase. As evidence of
this hedging interest, each Fund expects that approximately 75% of its futures
contract purchases will be "completed," that is, equivalent amounts of related
securities will have been purchased or are being purchased by the Fund upon sale
of open futures contracts.
Although techniques other than the sale and purchase of futures contracts and
options on futures contracts could be used to control the Funds' exposure to
market fluctuations, the use of futures contracts may be a more effective means
of hedging this exposure. While the Funds will incur commission expenses in
both opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.
Risk Factors in Futures Transactions
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no
assurance that a liquid 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 futures contracts they hold. The
inability to close options and futures positions also could have an adverse
impact on the ability to effectively hedge it.
The Funds will minimize the risk that they will be unable to close out a futures
contract by entering into futures contracts only if they are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
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
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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.
Hedging Techniques
Hedging in an investment strategy designed to offset investment risks. Hedging
activities include, among other things, the use of options and futures. There
are risks associated with hedging activities, including: (1) the success of a
hedging strategy may depend on an ability to predict movements in the prices of
individual securities, fluctuations in markets, and movements in interest rates;
(2) there may be an imperfect or no correlation between the changes in market
value of the securities held by a Fund and the prices of futures and option on
futures; (3) there may not be a liquid secondary market for a futures contract
or option; and (4) trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in futures contracts
and options.
Illiquid Securities
Illiquid securities are securities that cannot be disposed of within seven days
at approximately the price at which they are being carried on a Fund's books.
B-12
<PAGE>
Investment Grade Obligations
Investment grade obligations are debt obligations rated BBB by S&P or Baa by
Moody's, or their unrated equivalents. These securities are deemed to have
speculative characteristics.
Loan Participations
Loan participations are interest in loans to U.S. corporations which are
administered by the lending bank or agent for a syndicate of lending banks. In
a loan participation, the borrower corporation is the issuer of the
participation interest except to the extent the Fund derives its rights from the
intermediary bank. Because the intermediary bank does not guarantee a loan
participation, a loan participation is subject to the credit risks associated
with the underlying corporate borrower.
In the event of bankruptcy or insolvency of the corporate borrower, a loan
participation may be subject to certain defenses that can be asserted by the
borrower as a result of improper conduct by the intermediary bank. In addition,
in the event the underlying corporate borrower fails to pay principal and
interest when due, the Fund may be subject to delays, expenses, and risks that
are greater than those that would have been involved if the Fund had purchased a
direct obligation of the borrower. Under the terms of a Loan Participation, the
Fund may be regarded as a creditor of the intermediary bank (rather than of the
underlying corporate borrower), so that the Fund may also be subject to the risk
that the intermediary bank may become insolvent.
The secondary market for loan participations is limited and any such
participation purchased by the Fund may be regarded as illiquid.
Investment Company Shares
Investment companies typically incur fees that are separate from those fees
incurred directly by a Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that Investors would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
Mortgage-Backed Securities
Mortgage-backed securities are securities issued or guaranteed by U.S.
Government agencies or instrumentalities such as GNMA, Fannie Mae, and FHLMC.
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
B-13
<PAGE>
security. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. Government
mortgage-backed securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. As a result, there will be monthly scheduled payments of principal and
interest. In addition, there may be unscheduled principal payments representing
prepayments on the underlying mortgages. Although these securities may offer
yields higher than those available from other types of U.S. Government
securities, mortgage-backed securities may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of
these securities likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price of
a mortgage-backed security originally purchased at a premium to decline in price
to its par value, which may result in a loss.
The Investment Grade Bond Fund may also invest in privately issued mortgage-
backed securities. Two principal types of mortgage-backed securities are CMOs
and real estate mortgage investment conduits ("REMICs"), which are rated in one
of the two highest categories by S&P or Moody's. 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). 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, which were authorized under the Tax Reform Act of 1986, 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.
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 believes 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 the Funds, it
will be deemed to have a remaining maturity equal to its average life as
estimated by the Advisers. 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
B-14
<PAGE>
life estimates with regard to the same security. There can be no assurance that
the average life as estimated by the Advisers will be the actual average life.
Obligations of Supranational Agencies
Obligations of supranational agencies include those issued or guaranteed by the
Asian Development Bank, Inter-American Development Bank, International Bank for
Reconstruction and Development (World Bank), African Development Bank, European
Coal and Steel Community, European Economic Community, European Investment Bank
and Nordic Investment Bank.
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 a Fund of writing covered calls is
that the Fund receives a premium which is additional income. However, if the
security rises in value, the Fund 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 a 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. Conversely, a gain resulting from a
decline 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
B-15
<PAGE>
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 a
Fund 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 Trust is not prohibited from investing in obligations of banks which are
clients of SEI Investments Company ("SEI Investments"), the parent company of
the Administrator and the Distributor. However, the purchase of shares of the
Trust by such banks or by their customers will not be a consideration in
determining which bank obligations the Trust will purchase. The Trust will not
purchase obligations issued by the Advisers.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective.
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 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.
B-16
<PAGE>
In addition, even though the Bankruptcy Code provides protection for most
repurchase agreements, if the seller should be involved in bankruptcy or
insolvency proceedings, a Fund may incur delay and costs in selling the
underlying security or may suffer a loss of principal and interest if a Fund is
treated as an unsecured creditor and required to return the underlying security
to the seller's estate.
Restricted Securities
Restricted Securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Permitted investments for the Fund include
Restricted Securities, and the Fund may invest up to 15% of its net assets in
illiquid securities, subject to the Fund's investment limitations on the
purchase of illiquid securities. Restricted Securities, including securities
eligible for re-sale under Rule 144A of the 1933 Act, that are determined to be
liquid are not subject to this limitation. This determination is to be made by
the Fund's Advisers pursuant to guidelines adopted by the Board of Trustees.
Under these guidelines, the Advisers will consider the frequency of trades and
quotes for the security, the number of dealers in, and potential purchasers for,
the securities, dealer undertakings to make a market in the security, and the
nature of the security and of the marketplace trades. In purchasing such
Restricted Securities, the Advisers intend to purchase securities that are
exempt from registration under Rule 144A of 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
Advisers to be of good standing and when, in the judgment of the Advisers, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. Any loan may be terminated by either party upon reasonable
notice to the other party. The Funds may use the Distributor or a broker-
dealer affiliate of the Advisers as a broker in these transactions.
Short-Term Obligations
Short-term obligations are debt obligations maturing (becoming payable) in 397
days or less, including commercial paper and short-term corporate obligations.
Short-term corporate obligations are short-term obligations issued by
corporations.
B-17
<PAGE>
Standby Commitments and Puts
The purpose of engaging in transactions involving puts is to maintain
flexibility and liquidity to permit a Fund to meet redemptions and remain as
fully invested as possible in debt securities. The right to put securities
depends on the writer's ability to pay for the securities at the time the put is
exercised. Put transactions by the Funds are generally limited to institutions
which the Advisers believe present minimal credit risks, and the Advisers would
use their 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 a 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. A Fund
could, however, at any time sell the underlying portfolio security in the open
market or wait until the portfolio security matures, at which time it should
realize the full par value of the security.
The securities purchased subject to a put, may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to a 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, a Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to a 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 a 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 a 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") which are
component parts of U.S. Treasury Securities traded through the Federal Book-
Entry System. The Advisers will purchase only STRIPS that it determines are
liquid or, if illiquid, do not violate a Fund's investment policy concerning
investments in illiquid securities. While there is no limitation on the
percentage of a Fund's assets that may be comprised of STRIPS, the Advisers will
monitor the level of such holdings to avoid the risk of impairing investors'
redemption rights and of deviations in the value of the shares of the Funds.
U.S. Government Agency Securities
Agencies of the United States Government which issue U.S. Government Agency
Securities consist of, among others, the Export Import Bank of the United
States, Farmers Home Administration, Federal
B-18
<PAGE>
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 (e.g., GNMA), 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 (e.g., Fannie Mae). 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.
Variable Rate Master Demand Notes
Variable rate master demand notes may or may not be backed by bank letters of
credit. These notes permit the investment of fluctuating amounts at varying
market rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. Such notes provide that the interest rate on the
amount outstanding varies on a daily, weekly or monthly basis depending upon a
stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There
is no secondary market for the notes and it is not generally contemplated that
such instruments will be traded. The quality of the note or the underlying
credit must, in the opinion of the Advisers, be equivalent to the ratings
applicable to permitted investments for a Fund. The Advisers 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.
When-Issued Securities
For securities purchased on a when-issued basis, delivery and payment normally
take place within 45 days after the date of commitment to purchase. A Fund will
only make commitments to purchase obligations on a when-issued basis with the
intention of actually acquiring the securities, but may sell them before the
settlement date. The when-issued securities are subject to market fluctuation,
and no interest accrues on these securities to the purchaser during this period.
The payment obligation and the interest rate that will be received on these
securities are each fixed at the time the purchaser enters into the commitment.
Purchasing 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 Custodian, and the Funds will
maintain cash or liquid securities in an amount at least equal in value to a
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, a Fund will place additional liquid securities, 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.
B-19
<PAGE>
Zero Coupon Obligations
Zero coupon obligations are debt obligations that do not bear any interest, but
instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
Such obligations will not result in the payment of interest until maturity, and
will have greater price volatility than similar securities that are issued at
face value or par and pay interest periodically.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective. The phrase "principally invests" as
used in the prospectus means that the Fund invests at least 65% of its assets in
the securities as described in the sentence. Each tax-exempt fund invests at
least 80% of its total assets in securities with income exempt from federal
income and alternative minimum taxes.
INVESTMENT LIMITATIONS
The following are fundamental policies of each Fund and cannot be changed with
respect to a Fund without the consent of the holders of a majority of a Fund's
outstanding shares.
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and, to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter or such longer
period as the Securities and Exchange Commission ("SEC") 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 Investment Grade Bond Fund, Growth
and Income Fund, Quality Growth Stock Fund, and the Value Income Stock Fund
may engage in securities lending as described in the Prospectus and in this
Statement of Additional Information.
B-20
<PAGE>
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 the Investment Grade Bond Fund may
purchase mortgage-backed and other mortgage-related securities, including
collateralized obligations and REMICs). However, subject to its permitted
investment spectrum, a Fund may purchase marketable securities issued by
companies which own or invest in real estate, commodities or commodities
contracts, and commodities contracts relating to financial instruments,
such as financial futures contracts and options on such 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 unless as
permitted by the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations thereunder, except that the International Equity and
Small Cap Value Equity Funds' purchases 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.
Non-Fundamental Policy
No Fund may purchase or hold illiquid securities, i.e., securities that cannot
be disposed of for their approximate carrying value in seven days or less (which
term includes repurchase agreements and time deposits maturing in more than
seven days) if, in the aggregate, more than 15% of its net assets would be
invested in illiquid securities.
With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
B-21
<PAGE>
THE INVESTMENT ADVISERS
The Trust and SunTrust Bank 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 bank holding company with assets of
$136.8 billion as of December 31, 1999. The Advisory Agreements provide that
each Adviser shall not be protected against any liability to the Trust or its
Investors by reason of willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Advisory Agreements provide 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 Advisers will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
The continuance of each Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
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, SunTrust Bank 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, Mid-Cap Equity Fund, and
Small Cap Value Equity Fund, 1.25% of the average daily net assets of the
International Equity Fund, .74% of the average daily net assets of the
Investment Grade Bond Fund, and .80% of the average daily net assets of the
Value Income Stock 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, and 1.00% of the average daily
net assets of the Quality Growth Stock Fund.
B-22
<PAGE>
For the period from commencement of operations to the fiscal years ended
December 31, 1999, 1998 and 1997, the Trust paid the following advisory
fees:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fees Paid Fees Waived or Reimbursed
Fund 1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund $1,155,474 $960,564 $310,665 $252,384 $218,450 $ 197,598
- ----------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund $ 0 * * $ 0 * *
- ----------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $ 159,341 $213,697 $ 0 $ 72,652 $ 81,229 $ 106,197
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond Fund $ 64,785 $107,213 $ 0 $ 94,583 $ 85,323 $ 70,532
- ----------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund $ 231,649 $316,697 $ 99,442 $ 99,773 $104,569 $ 117,453
- ----------------------------------------------------------------------------------------------------------------------------------
Quality Growth Stock Fund $ 0 * * $ 0 * *
- ----------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Equity Fund $ 60,711 $133,405 $ 0 $ 73,184 $ 80,770 $ 17,485
- ----------------------------------------------------------------------------------------------------------------------------------
Value Income Stock Fund $ 844,684 $715,023 $274,723 $ 8,317 $144,498 $ 151,040
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during the period.
THE ADMINISTRATOR
The Trust and SEI Investments Mutual Funds Services (the "Administrator") are
parties to an Administration Agreement (the "Administration Agreement") dated
August 18, 1995 as amended. 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
90 days' written notice.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments, is the owner of all beneficial
interest in the Administrator. SEI Investments and its subsidiaries and
affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors, and money managers.
The Administrator and its affiliates also serve as administrator or sub-
administrator to the following other mutual funds: The Achievement Funds Trust,
The Advisors' Inner Circle Fund, Alpha Select Funds, Amerindo Funds, Inc., The
Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds(R),
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 Funds, The
Nevis Fund, Inc., Oak Associates Funds, The Armada Advantage Fund, The Parkstone
Group of
B-23
<PAGE>
Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds,
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional International Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI
Classic Funds, TIP Funds, UAM Funds Trust, UAM Funds, Inc. II and UAM Funds,
Inc.
For the period from commencement of operations to the fiscal years ended
December 31, 1999, 1998, and 1997, the Funds paid the following administrative
fees:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Fees Paid Fees Waived
Fund 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation $62,500 $62,500 $62,500 $ 0 $0 $ 0
Fund
- --------------------------------------------------------------------------------------------------------
Growth and Income $ 171 * * $ 0 * *
Fund
- --------------------------------------------------------------------------------------------------------
International Equity $75,000 $75,000 $75,000 $ 0 $0 $ 0
Fund
- --------------------------------------------------------------------------------------------------------
Investment Grade Bond $62,500 $62,500 $62,500 $ 0 $0 $ 0
Fund
- --------------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund $62,500 $62,500 $62,500 $ 0 $0 $ 0
- --------------------------------------------------------------------------------------------------------
Quality Growth Stock $ 171 * * $ 0 * *
Fund
- --------------------------------------------------------------------------------------------------------
Small Cap Value Equity $62,500 $62,500 $11,815 $ 0 $0 $ 0
Fund
- --------------------------------------------------------------------------------------------------------
Value Income Stock $62,500 $62,500 $62,500 $ 0 $0 $ 0
Fund
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Not in operation during the period.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments distributes the Trust's Shares to the separate accounts,
which purchase and redeem these shares at the net asset value without sales or
redemption charges.
The Trust reserves the right to reject a purchase order when the Trust
determines that it is not in the best interest of the Trust to accept such
order.
B-24
<PAGE>
With respect to the Trust, the Distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of cash or other
compensation, to financial institutions whose representatives have sold or are
expected to sell significant amounts of these Funds.
THE TRANSFER AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, PA 15222-3779
serves as the Trust's transfer agent.
THE CUSTODIAN
SunTrust Bank, Atlanta, 303 Peachtree Street N.E., 14th Floor, Atlanta, GA 30308
serves as the custodian for the all of the Funds except the International Equity
Fund. The Bank of New York, One Wall Street, New York, NY 10286 serves as
custodian for the International Equity Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Trust.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust, their dates of birth, and their
principal occupations for the last five years are set forth below. Unless
otherwise noted, the principal business address for each officer listed below is
Oaks, Pennsylvania 19456.
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, Genuine Parts Company, 1961-
1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board, 1990 to
present. Director, Rolling, 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.
B-25
<PAGE>
F. WENDELL GOOCH (12/3/32) - Trustee - President, Orange County Publishing Co.,
Inc., since October 1981. Publisher of the Paoli News and the Paoli Republican
and Editor of the Paoli Republican since January, 1981. President, H & W
Distribution, Inc. since July 1984. 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. Trustee,
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust and STI
Classic Funds.
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 - Currently on sabbatical leave from
Florida State University (1991-92); now serves as visiting professor at the
University of New Orleans. President of Florida State University, 1976-91;
previous 4 years EVP and Chief Academic Officer; during educational career,
taught at Florida State, Michigan State, Louisiana State and Southern
University; spent 19 years as faculty member and administrator at Louisiana
State University and served as Head of Economics Department, member and Chairman
of the Graduate Council, Dean of Academic Affairs and Vice Chancellor. Member of
Board of Directors of Federal Reserve Bank of Atlanta, 1983-1988.
JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD
Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg
Trust.
WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust
Equitable Securities Corporation, January 1998-present. Chairman and CEO,
Equitable Asset Management, Inc., December 1993-present. Chairman and CEO,
Equitable Trust Company, June 1991-present. Chairman, Equitable Securities
Corporation, July 1972-January 1998.
MARK NAGLE (10/20/59) - President, Controller, Treasurer & Chief Financial
Officer - Vice President and Controller, Funds Accounting since 1996. Vice
President of the Administrator and Distributor since 1996. Vice President of the
Distributor since December 1997. Vice President, Fund Accounting, BISYS Fund
Services, September 1995 - November 1996. Senior Vice President and Site
Manager, Fidelity Investments, 1981 - September 1995.
TIMOTHY D. BARTO (3/28/68) -- Vice President and Assistant Secretary --Employed
by SEI Investments since October 1999. Vice President and Assistant Secretary of
the Administrator and Distributor since December 1999. Associate, Dechert Price
& Rhoads (law firm) 1997-1999. Associate, Richter, Miller & Finn (law firm)
1994-1997.
JAMES R. FOGGO (06/30/64) -- 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
B-26
<PAGE>
(law firm), 1998. Associate, Baker & McKenzie (law firm), 1995-1998. Associate,
Battle Fowler L.L.P. (law firm), 1993-1995. Operations Manager, The Shareholder
Services Group, Inc., 1986-1990.
LINDA 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.
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 of SEI, the Administrator and the Distributor since 1994.
RICHARD W. GRANT (10/25/45) - Secretary -1701 Market Street, Philadelphia,
Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm); Counsel to
the Trust, Administrator and Distributor, since 1989.
JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 1701 Market Street,
Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law
firm) since 1995, counsel to the Trust, Administrator and Distributor.
- ------------------
/*/ Messrs. Looney, Goodrum, McNair, and Cammack may be deemed to be
"interested persons" of the Trust as defined in the Investment Company Act
of 1940.
The Trustees and officers of the Trust own, in the aggregate, less than 1% of
the outstanding shares of the Trust.
For the fiscal year ended December 31, 1999, the Trust paid the following
amounts to the Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Pension or
Retirement
Aggregate Benefits Estimated Total Compensation From
Compensation Accrued as Part Annual Registrant and Fund
Name of Person From Registrant of Fund Benefits Upon Complex Paid to Directors
and Position for FYE 99 Expenses Retirement for FYE 99
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William H. Cammack, Trustee $ 0 N/A N/A $ 0 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
T. Gordy Germany, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
F. Wendell Gooch, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Pension or
Retirement
Aggregate Benefits Estimated Total Compensation From
Compensation Accrued as Part Annual Registrant and Fund
Name of Person From Registrant of Fund Benefits Upon Complex Paid to Directors
and Position for FYE 99 Expenses Retirement for FYE 99
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
Wilton Looney, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
Champney McNair, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
Bernard F. Sliger, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
Jonathan T. Walton, Trustee $2,000 N/A N/A $2,000 for services on 2
boards
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule
17j-1 under the Investment Company Act of 1940. In addition, the Investment
Advisers and Distributor have adopted Codes of Ethics pursuant to Rule 17j-1.
These Codes of Ethics apply to the personal investing activities of trustees,
officers and certain employees ("access persons"). Rule 17j-1 and the Codes are
designed to prevent unlawful practices in connection with the purchase or sale
of securities by access persons. Under each Code of Ethics, access persons are
permitted to engage in personal securities transactions, but are required to
report their personal securities transactions for monitoring purposes. In
addition, certain access persons are required to obtain approval before
investing in initial public offerings or private placements. Copies of these
Codes of Ethics are on file with the Securities and Exchange Commission and are
available to the public.
COMPUTATION OF YIELD
A Fund may advertise yield. These figures will be based on historical earnings
and are not intended to indicate future performance. The yield of a Fund refers
to the annualized income generated by an investment in such Fund over a
specified 30-day period. The yield is calculated by assuming that the income
generated by the investment during that period is generated over a one year
period and is shown as a percentage of the investment. In particular, yield will
be calculated according to the following formula:
Yield = 2[(a-b/cd + 1)/6/ - 1], where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of
reimbursement); c = the current daily number of shares outstanding during
the period that were entitled to receive dividends; and d = the maximum
offering price per share on the last day of the period.
B-28
<PAGE>
Actual yield will depend on such variables as asset quality, average asset
maturity, the type of instruments in which a Fund invests, changes in interest
rates on money market instruments, changes in the expenses of the Fund and other
factors.
For the 30-day period ended December 31, 1999, yields on the Funds were as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------
Fund Yield
- ----------------------------------------------
<S> <C>
Capital Appreciation Fund 0.27%
- ----------------------------------------------
Growth and Income Fund N/A
- ----------------------------------------------
International Equity Fund N/A
- ----------------------------------------------
Investment Grade Bond Fund 6.51%
- ----------------------------------------------
Mid-Cap Equity Fund N/A
- ----------------------------------------------
Quality Growth Stock Fund N/A
- ----------------------------------------------
Small Cap Value Equity Fund N/A
- ----------------------------------------------
Value Income Stock Fund 2.11%
- ----------------------------------------------
</TABLE>
CALCULATION OF TOTAL RETURN
From time to time, a Fund may advertise total return. The total return of a Fund
refers to the average compounded rate of return to a hypothetical investment for
designated time periods (including, but not limited to, the period from which
the Fund commenced operations through the specified date), assuming that the
entire investment is redeemed at the end of each period. In particular, total
return will be calculated according to the following formula:
P(1 + T)/n/ = ERV, where P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of
the designated time period as of the end of such period.
From time to time, the Trust may include the names of clients of the Advisers in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. SunTrust
Bank's investment advisory affiliate, STI Capital Management, N.A., acting as
the investment Adviser for the Funds, STI has been in the top 1% of the SEI
Funds Evaluation database for equity managers over the past ten years. SEI's
database includes research data on over 1,000 investment managers responsible
for over $450 billion in assets.
B-29
<PAGE>
Based on the foregoing, the average annual total returns for the Funds from
commencement of operations through December 31, 1999 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Average Annual Total Return
---------------------------------------
Fund One Year Since Inception
- ---------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund/1/ 8.73 % 24.54 %
- ---------------------------------------------------------------------
Growth and Income Fund/2/ N/A *
- ---------------------------------------------------------------------
International Equity Fund/3/ 8.81 % 12.10 %
- ---------------------------------------------------------------------
Investment Grade Bond Fund/1/ (1.67)% 5.24 %
- ---------------------------------------------------------------------
Mid-Cap Equity Fund/1/ 14.00 % 14.70 %
- ---------------------------------------------------------------------
Quality Growth Stock Fund/2/ N/A *
- ---------------------------------------------------------------------
Small Cap Value Equity Fund/4/ (4.78)% (8.69)%
- ---------------------------------------------------------------------
Value Income Stock Fund/1/ (3.00)% 13.62 %
- ---------------------------------------------------------------------
</TABLE>
/1/ Commenced operations on October 2, 1995.
/2/ Commenced operations on December 30, 1999.
/3/ Commenced operations on November 7, 1996.
/4/ Commenced operations on October 22, 1997.
* Fund not in operation during the period.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is
closed on the days the following holidays are observed: New Year's Day,
Presidents' Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It is currently the Trust's policy to pay for all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of readily marketable securities held
by the Funds in lieu of cash. Investors may incur brokerage charges on the sale
of any such securities so received in payment of redemptions. An Investor will
at all times be entitled to aggregate cash redemptions from all Funds of the
Trust during any 90-day period of up to the lesser of $250,000 or 1% of the
Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange ("NYSE") is restricted, or during the existence of
an emergency (as determined by the SEC by rule or regulation) as a result of
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares
B-30
<PAGE>
of a Fund for any period during which the NYSE, the Advisers, the Administrator
and/or the Custodian are not open for business.
NET ASSET VALUE--PRICING OF PORTFOLIO SECURITIES
The net asset value per share of the Funds is determined at the close of regular
trading on the NYSE (normally 4:00 p.m., Eastern time), each business day the
NYSE is open. Net asset value per share is calculated for purchases and
redemptions of Shares of each Fund by dividing the value of total Fund assets,
less liabilities (including Trust expenses, which are accrued daily), by the
total number of Shares of that Fund outstanding. The net asset value per share
of each Fund is determined each business day at the close of business.
The securities of the Funds are valued by the Administrator pursuant to
valuations provided by an independent pricing service. The pricing service
relies primarily on prices of actual market transactions as well as trader
quotations. However, the service may also use a matrix system to determine
valuations of fixed income securities, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
TAXES
The following is a summary of certain Federal income tax considerations
generally affecting the Funds and their Investors. No attempt is made to present
a detailed explanation of the Federal tax treatment of a Fund or its Investors,
and the discussion here and in the Trust's prospectus is not intended as a
substitute for careful tax planning. Further, this discussion does not address
the tax considerations affecting any Contract Owner. Federal income tax
considerations affecting such Owners is discussed in the prospectus and the
statement of additional information for such Contract.
Federal Income Tax
This discussion of Federal income tax considerations is based on the Internal
Revenue Code, 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.
In order to qualify for treatment as a regulated investment company ("RIC")
under the Code, the Funds 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) (the "Distribution Requirement") and also must
meet several additional requirements. Among these requirements are the
following: (i) at least 90% of a Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock or securities, or certain
other income, (ii) at the close of each quarter of a Fund's taxable year, at
least 50% of the value of its total
B-31
<PAGE>
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with such other securities
limited, in respect to any one issuer, to an amount that does not exceed 5% of
the value of a Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of a Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer, or of two or more issuers engaged
in same or similar businesses if a Fund owns at least 20% of the voting power of
such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gains (the excess of net long-term capital gains over net short-term capital
loss), a Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to 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 on-year period
ending on October 31 of that calendar year, plus certain other amounts. The
Funds intend 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.
Any gain or loss recognized on a sale or redemption of Shares of a Fund by an
Investor who is not a dealer in securities will generally be treated as a long-
term capital gain or loss if the shares have been held for more than twelve
months and otherwise will be generally treated as a short-term capital gain or
loss. If shares on which a net capital gain distribution has been received are
subsequently sold or redeemed and such shares have been held for six months or
less, any loss recognized will be treated as a long-term capital loss to the
extent of the long-term capital gain distributions.
State Taxes
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to Investors and the ownership of shares may be subject to state and local
taxes.
Foreign Taxes
Dividends and interests received by a Fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on the Fund's stock or securities. Tax conventions between
certain countries and the United States may reduce or eliminate these taxes.
Foreign countries generally do not impose taxes on capital gains with respect to
investments by foreign investors.
If a Fund meets the Distribution Requirement, and if more than 50% of the value
of the Fund's total assets at the close of its taxable year consists of stock or
securities of foreign corporations, the Fund will be eligible to, and will, file
an election with the Internal Revenue Service that will enable Shareholders, in
effect, to receive the benefit of the foreign tax credit with respect to any
foreign and U.S. possessions income taxes paid by the Fund. Pursuant to the
election, the Fund will treat those taxes as dividends paid to its Shareholders.
Each Shareholder will be required to include a proportionate share of those
taxes in gross income as income received from a foreign source and must treat
the amount so included as
B-32
<PAGE>
if the Shareholder had paid the foreign tax directly. The Shareholder may then
either deduct the taxes deemed paid by him or her in computing his or her
taxable income or, alternatively, use the foregoing information in calculating
the foreign tax credit against the Shareholders' Federal income tax. In no event
shall a Shareholder be allowed a foreign tax credit with respect to shares in
the Fund if such shares are held by the Shareholder for 15 days or less during
the 30-day period beginning on the date which is 15 days before the date on
which such shares become ex-dividend with respect to such dividend. If a Fund
makes the election, the Fund will report annually to its Shareholders the
respective amounts per share of the Fund's income from sources within, and taxes
paid to, foreign countries and U.S. possessions.
The Fund's transactions in foreign currencies and forward foreign currency
contracts will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may effect whether gains or losses are ordinary or capital), accelerate
recognition of income to the fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
Shareholders. These provisions also may require the Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out) which may cause the Fund to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy the 90%
and 98% distribution requirements for avoiding income and excise taxes. The Fund
will monitor its transactions, will make the appropriate tax elections, and will
make the appropriate entries in the books and records when it acquires any
foreign currency or forward foreign currency contract in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a RIC and
minimize the imposition of income and excise taxes.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisers are responsible for placing the orders
to execute transactions for a Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the Advisers generally seek reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. Where possible, the Advisers 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.
B-33
<PAGE>
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 the Advisers, brokerage business to
brokers or dealers who provide brokerage and research services. These research
services include rendering advice, either directly or through publications or
writings, about 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 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 the Advisers in connection
with its investment decision-making process with respect to one or more funds
and accounts managed by it, and may not be used exclusively with respect to the
fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker-dealers are not, in general, higher than
commissions that would be paid to broker-dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Trust. Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.
The Advisers 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
B-34
<PAGE>
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 the
Funds may obtain, it is the opinion of the Advisers 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 the Advisers, 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 the Advisers 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 the Advisers 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.
B-35
<PAGE>
For the fiscal year ended December 31, 1999, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
=======================================================================================================
Total $ Amount Of Total $ Amount of % Of Total % Of Total
Brokerage Brokerage Brokerage Brokered
Commissions Paid Commissions Paid Commissions Transactions
Fye 99 To Sidco In Paid To Sidco Effected
Fye 99 For Through
Fye 99 Sidco For
Portfolio Fye 99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Appreciation $429,902 $4,708 1.10% 3.70%
Fund
- -------------------------------------------------------------------------------------------------------
Growth and Income $ 0 $ 0 0% 0%
Fund
- -------------------------------------------------------------------------------------------------------
International Equity $192,192 $ 0 0% 0%
Fund
- -------------------------------------------------------------------------------------------------------
Investment Grade $ 624 $ 624 100.00% 100.00%
Bond Fund
- -------------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund $ 75,935 $ 752 1.00% 26.06%
- -------------------------------------------------------------------------------------------------------
Quality Growth Stock $ 0 $ 0 0% 0%
Fund
- -------------------------------------------------------------------------------------------------------
Small Cap Value $ 39,661 $ 124 0.31% 15.04%
Equity Fund
- -------------------------------------------------------------------------------------------------------
Value Income Stock $220,679 $5,561 2.52% 16.97%
Fund
=======================================================================================================
</TABLE>
For the fiscal year ended December 31, 1998, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
=======================================================================================================
Total $ Amount Of Total $ Amount Of Brokerage
Portfolio Brokerage Commissions Paid Commissions Paid To Sidco
Fye 98 Fye 98
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Grade Bond Fund $ 843 $ 843
- -------------------------------------------------------------------------------------------------------
Capital Appreciation Fund $340,807 $3,512
- -------------------------------------------------------------------------------------------------------
Growth and Income Fund * *
- -------------------------------------------------------------------------------------------------------
Value Income Stock Fund $196,590 $3,905
- -------------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund $ 55,918 $1,068
- -------------------------------------------------------------------------------------------------------
Quality Growth Stock Fund * *
- -------------------------------------------------------------------------------------------------------
</TABLE>
B-36
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================
Total $ Amount Of Total $ Amount Of Brokerage
Portfolio Brokerage Commissions Paid Commissions Paid To Sidco
Fye 98 Fye 98
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund $115,570 $ 0
- -------------------------------------------------------------------------------------------------------
Small Cap Value Equity $ 36,442 $ 435
Fund
=======================================================================================================
</TABLE>
* Not in operation during the period.
For the fiscal year ended December 31, 1997, the Funds paid the following
brokerage fees:
<TABLE>
<CAPTION>
====================================================================================================
Total $ Amount of Total $ Amount of Brokerage
Portfolio Brokerage Commissions Paid in Commissions Paid To Sidco in
Fye 97 Fye 97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Fund $160,630 $2,094
- ----------------------------------------------------------------------------------------------------
Growth and Income Fund * *
- ----------------------------------------------------------------------------------------------------
International Equity Fund $ 73,036 $ 0
- ----------------------------------------------------------------------------------------------------
Investment Grade Bond Fund $ 383 $ 383
- ----------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund $ 64,319 $ 788
- ----------------------------------------------------------------------------------------------------
Quality Growth Stock Fund * *
- ----------------------------------------------------------------------------------------------------
Small Cap Value Equity $ 9,824 $ 74
Fund
- ----------------------------------------------------------------------------------------------------
Value Income Stock Fund $183,900 $1,817
====================================================================================================
</TABLE>
* Not in operation during the period.
For the period from the commencement of operations to the fiscal years ended
December 31, 1999, 1998 and 1997, the portfolio turnover rate for each of the
Funds was as follows:
<TABLE>
<CAPTION>
====================================================================================================
Turnover Rate
Fund 1997 1998 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Capital Appreciation Fund 196% 219% 168%
- ----------------------------------------------------------------------------------------------------
Growth and Income Fund * * 0%
- ----------------------------------------------------------------------------------------------------
International Equity Fund 99% 129% 207%
- ----------------------------------------------------------------------------------------------------
</TABLE>
B-37
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Turnover Rate
Fund 1997 1998 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Bond Fund 219% 183% 243%
- ----------------------------------------------------------------------------------------------------
Mid-Cap Equity Fund 139% 92% 122%
- ----------------------------------------------------------------------------------------------------
Quality Growth Stock Fund * * 0%
- ----------------------------------------------------------------------------------------------------
Small Cap Value Equity Fund 4% 49% 63%
- ----------------------------------------------------------------------------------------------------
Value Income Fund 105% 76% 80%
====================================================================================================
</TABLE>
* Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number 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. 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 Investor held personally liable for the
obligations of the Trust.
B-38
<PAGE>
5% AND 25% SHAREHOLDERS
As of April 1, 2000, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% or 25% or
more of the shares of the Funds. Persons who owned of record or beneficially
more than 25% of a Fund's outstanding shares may be deemed to control the Fund
within the meaning of the 1940 Act. The Trust believes that most of the shares
of the Funds were held for the record owner's fiduciary, agency or custodial
customers.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Name of Fund Name and Address of Shareholder Account Share Percent of Total
Balance Shares
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Glenbrook Life and Annuity Company 6,015,302.2510 99.76%
Appreciation Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
- -----------------------------------------------------------------------------------------------------------------
Growth and Income Glenbrook Life and Annuity Company 13,732.9190 99.96%
Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
- -----------------------------------------------------------------------------------------------------------------
International Glenbrook Life and Annuity Company 1,172,531.7090 100.00%
Equity Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
- -----------------------------------------------------------------------------------------------------------------
Investment Grade Glenbrook Life and Annuity Company 2,044,245.4670 99.37%
Bond Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
- ------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Glenbrook Life and Annuity Company 1,913,540.7770 100.00%
Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
B-39
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quality Growth Glenbrook Life and Annuity Company 20,168.1700 99.98%
Stock Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
- --------------------------------------------------------------------------------------------------------------
Small Cap Value Glenbrook Life and Annuity Company 841,931.2550 62.02%
Equity Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
-------------------------------------------------------------------------------------------------------------
Small Cap Value Allstate Life Insurance Company 515,530.8510 37.98%
Equity Fund Attn: Deborah Bukowy
Investment Operations Equity Unit
3075 Sanders Road Suite G4A
Northbrook, IL 60062-7127
- --------------------------------------------------------------------------------------------------------------
Value Income Glenbrook Life and Annuity Company 6,570,935.6480 99.89%
Stock Fund Attn: Olga Prohny
Financial Control Unit
3100 Sanders Road Suite N4A
Northbrook, IL 60062-7127
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 adviserss, 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.
EXPERTS
The financial statements in this Statement of Additional Information have been
by Arthur Andersen LLP, independent public accountants to the Trust, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
B-40
<PAGE>
APPENDIX
I. BOND RATINGSA-11
*Corporate Bonds
The following are descriptions of Standard & Poor's Corporation ("S&P") and
Moody's Investors Service, Inc. ("Moody's") corporate bond ratings.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories.
Bonds which are rated BBB are considered to be medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Debt rated BB, B, CCC, CC and C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be a high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
A-1
<PAGE>
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small. Bonds which are Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal and
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
II. COMMERCIAL PAPER AND SHORT-TERM RATINGS
The following descriptions of commercial paper ratings have been published by
S&P, Moody's, Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff")
and IBCA Limited ("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+ and 1. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1, reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a safety regarding timely
payment but not as high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to have superior ability and strong ability for repayment, respectively.
The rating Fitch 1+ (Exceptionally Strong Credit Quality) is the highest
commercial rating assigned by Fitch. Paper rated Fitch -1+ is regarded as having
the strongest degree of assurance for timely payment. The rating Fitch-1 (Very
Strong Credit Quality) is the second highest commercial paper rating assigned by
Fitch which reflects an assurance of timely payment only slightly less in degree
than issues rated F-1+.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
A-2
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST December 31, 1999
CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (91.3%)
BASIC MATERIALS (1.5%)
Air Products & Chemicals 25,200 $ 846
Ecolab 25,400 994
Monsanto 6,300 224
-------
2,064
-------
CAPITAL GOODS (10.1%)
General Electric 35,100 5,432
W.W. Grainger 8,500 406
Minnesota Mining & Manufacturing 10,900 1,067
Republic Services, Cl A* 21,900 315
Textron 22,900 1,756
Tyco International 83,180 3,234
United Technologies 19,400 1,261
Waste Management Inc 1,569 27
-------
13,498
-------
COMMUNICATION SERVICES (2.5%)
Centurytel 19,600 929
Charter Communications 12,100 265
GTE 8,100 572
MCI WorldCom* 18,468 980
Sprint 9,300 626
-------
3,372
-------
CONSUMER CYCLICALS (17.8%)
Abercrombie & Fitch, Cl A* 7,400 197
Bed Bath & Beyond* 14,700 511
Brinker International* 31,900 766
Carnival 23,600 1,128
Cendant* 54,860 1,457
Costco Wholesale* 20,400 1,861
CVS 41,100 1,641
Family Dollar Stores 13,900 227
Harley-Davidson 4,600 295
Hasbro 38,100 726
Interpublic Group 7,200 415
Kroger* 77,700 1,467
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS (CONTINUED)
Lear* 19,300 $ 618
Linens 'N Things* 17,800 527
Lowe's 39,600 2,366
Masco 59,250 1,503
Maytag 9,200 442
Mediaone Group* 12,900 991
New York Times, Cl A 8,900 437
Office Depot* 78,500 859
Royal Caribbean Cruises 17,600 868
Saks* 33,500 521
SPX* 7,500 606
Tandy 48,400 2,381
Time Warner 6,900 500
United Rentals* 29,700 509
-------
23,819
-------
CONSUMER STAPLES (8.3%)
Anheuser Busch 6,300 447
Coca-Cola Enterprises 35,400 712
ConAgra 43,801 988
Dial 18,400 447
Flowers Industries 15,000 239
Kimberly Clark 9,100 594
McDonald's 19,200 774
Nabisco Group Holdings 39,100 415
Nike, Cl B 2,000 99
Pepsi Bottling Group 29,600 490
PepsiCo 27,500 969
Philip Morris 1,400 32
Ralston Purina 34,300 956
Safeway* 21,900 779
Sara Lee 20,400 450
Seagram 12,300 553
Unilever NV 4,500 245
US Foodservice* 52,400 878
Viacom, Cl B* 18,400 1,112
-------
11,179
-------
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
ENERGY (4.9%)
Anadarko Petroleum 8,700 $ 297
Burlington Resources 24,300 803
Conoco, Cl B 46,000 1,144
Consolidated Natural Gas 13,800 896
EOG Resourses 18,100 318
Exxon Mobil 6,852 552
Halliburton 3,900 157
Niagara Mohawk Holdings* 7,100 99
Texaco 29,500 1,602
Unocal 20,500 688
-------
6,556
-------
FINANCIALS (9.0%)
Ace Ltd 38,800 647
American International Group 14,953 1,617
AmSouth Bancorp 16,801 324
Associates First Capital 12,600 346
Atlantic Richfield 12,600 1,090
Bank of America 8,442 424
Bank United, Cl A 9,600 262
BB&T 4,100 112
Comerica 5,200 243
Conseco 26,300 470
First Security 4,500 115
Firstar 7,300 154
Fleet Boston Financial 21,581 751
Freddie Mac 18,500 871
Mellon Financial 24,600 838
PNC Bank 9,000 400
Radian Group 7,800 372
Torchmark 8,100 235
U.S. Bancorp 46,200 1,100
Unumprovident 27,600 885
Washington Mutual 30,368 790
-------
12,046
-------
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
HEALTH CARE (10.4%)
Abbott Laboratories 9,500 $ 345
American Home Products 44,000 1,735
Baxter International 48,600 3,053
Becton Dickinson 4,100 110
Bristol-Myers Squibb 12,800 822
Cardinal Health 43,734 2,094
Eli Lilly 13,800 918
Health Management
Associates, Cl A* 7,700 103
Healthsouth* 35,902 193
Medtronic 6,300 230
Merck 18,400 1,234
Schering Plough 13,700 578
Tenet Healthcare* 23,300 548
Warner Lambert 19,900 1,631
Watson Pharmaceuticals* 8,600 308
-------
13,902
-------
TECHNOLOGY (26.7%)
ADC Telecommunications* 30,200 2,191
Analog Devices* 8,200 763
BMC Software* 9,000 719
Ceridian* 47,300 1,020
Cisco Systems* 35,100 3,760
Computer Sciences* 8,100 766
Comverse Technology* 4,100 593
Dell Computer* 1,300 66
EMC* 18,300 1,999
General Instrument* 4,900 416
Hewlett Packard 9,800 1,117
Honeywell International 44,212 2,551
IBM 38,900 4,201
Intel 22,900 1,885
Lucent Technologies 35,141 2,629
Microsoft* 48,950 5,715
Nortel Networks 5,400 545
Sun Microsystems* 35,200 2,726
Texas Instruments 21,800 2,112
-------
35,774
-------
9
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST December 31, 1999
CAPITAL APPRECIATION FUND -- CONCLUDED
- --------------------------------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TRANSPORTATION (0.1%)
Delta Air Lines 1,400 $ 70
Southwest Airlines 6,000 97
--------
167
--------
Total Common Stocks
(Cost $97,619) 122,377
--------
PREFERRED STOCKS (1.9%)
COMMUNICATION SERVICES (0.3%)
Cox Communications,
CV to 0.8621 shares* 4,500 438
--------
CONSUMER STAPLES (0.7%)
Suiza Capital Trust II,
CV to 0.6390 share,
Callable 04/02/01 @ 51.719 25,000 856
--------
ENERGY (0.9%)
Apache,
CV to 0.8197 shares 20,000 710
CMS Energy,
CV to 0.783 shares 15,600 528
--------
1,238
--------
Total Preferred Stocks
(Cost $2,625) 2,532
--------
CONVERTIBLE BONDS (1.3%)
Echostar Communications,
CV to 11.0035 shares,
4.875%,01/01/07 $ 500 613
Potomac Electric Power,
CV to 29.5 shares,
5.000%,09/01/02 1,000 973
Tower Automotive,
CV to 38.6399 shares,
5.000%, 08/01/04 300 249
--------
Total Convertible Bonds
(Cost $1,715) 1,835
--------
- --------------------------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.2%)
Morgan Stanley
2.95%, dated 12/31/99,
matures 01/03/00,
repurchase price $8,315,946
(collateralized by U.S. Agency
Obligations: market value
$8,483,409) $8,316 $ 8,316
--------
Total Repurchase Agreement
(Cost $8,316) 8,316
--------
Total Investments (100.7%)
(Cost $110,275) 135,060
--------
OTHER ASSETS AND LIABILITIES, NET (-0.7%) (988)
--------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 6,613,954 outstanding
shares of beneficial interest 106,118
Accumulated net realized gain on
investments 3,139
Net unrealized appreciation on
investments 24,785
Undistributed net investment income 30
--------
Total Net Assets (100.0%) $134,072
========
Net Asset Value, Offering and
Redemption Price Per Share $20.27
========
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
CV -- CONVERTIBLE SECURITY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS (77.9%)
AUSTRALIA (1.9%)
Broken Hill Proprietary 216 $ 3
Leighton Holdings 39,600 153
National Australia Bank 12,665 194
-------
350
-------
AUSTRIA (0.9%)
Erste Bank 1,800 80
Mayr-Melnhof Karton 2,000 92
-------
172
-------
BELGIUM (0.0%)
Dexia Belgium-VVPR Strips* 1 --
-------
DENMARK (1.2%)
Danisco 5,700 222
-------
FRANCE (8.0%)
Coflexip Stena Offshore 2,275 165
ISIS 500 30
Lafarge 3,450 402
Lagardere S.C.A. 200 11
Rhone-Poulenc 600 35
Suez Lyonnaise des Eaux 1,660 266
Technip 2,840 291
Total Fina, Cl B 1,900 253
-------
1,453
-------
GERMANY (3.6%)
Henkel 3,680 243
Metallgesellschaft 20,250 406
-------
649
-------
GREECE (0.9%)
Hellenic Telecom Organization 6,882 164
-------
IRELAND (2.7%)
Bank of Ireland 61,389 488
-------
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
ISRAEL (2.2%)
ECI Telecommunications 12,970 $ 410
-------
ITALY (3.9%)
ENI 95,100 523
Parmalat Finanziaria 18,700 24
Saipem 44,100 159
-------
706
-------
JAPAN (14.7%)
Aucnet 1,210 73
East Japan Railway 82 442
Fuji Electric 64,000 336
Fuji Heavy Industries 39,900 273
KAO 7,300 208
Kirin Brewery 18,000 189
Matsushita Electric Industrial 14,000 388
NEC 7,000 167
Obayashi 45,000 213
Olympus Optical 11,000 156
Sumitomo Heavy Industries 38,000 104
Toshiba 18,000 137
-------
2,686
-------
NETHERLANDS (3.6%)
IHC Caland 5,005 183
KPN 46 5
Nutreco Holdings 9,800 302
Unique International 8,523 176
-------
666
-------
NEW ZEALAND (1.1%)
Fernz 30,700 70
Fletcher Challenge Building 83,145 123
-------
193
-------
NORWAY (4.4%)
Kvaerner 6,100 129
11
Amounts designated as "--" are either $0 or have been rounded to $0.
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
INTERNATIONAL EQUITY FUND -- CONCLUDED
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
NORWAY (CONTINUED)
Petroleum Geo Services ADR* 16,100 $ 286
Petroleum Geo Services* 21,500 384
-------
799
-------
PANAMA (0.4%)
Banco Latinamericano
de Exportaciones 3,600 85
-------
PHILIPPINES (0.5%)
Ayala 302,000 88
-------
SINGAPORE (1.9%)
Asia Pulp & Paper ADR* 21,900 172
Overseas - Chinese Banking 18,000 166
-------
338
-------
SOUTH AFRICA (0.8%)
Gold Fields ADR 6,800 31
Gold Fields 13,600 65
Harmony Gold ADR 4,600 29
Harmony Gold 4,000 26
-------
151
-------
SOUTH KOREA (0.7%)
Hite Brewery Limited 3,100 106
Pohang Iron & Steel ADR 800 28
-------
134
-------
SPAIN (2.6%)
Tabacalera, Cl A 33,300 476
-------
UNITED KINGDOM (21.9%)
Allied Zurich 33,050 390
Bass 20,460 255
Billiton 28,700 170
Diageo 64,066 516
Glaxo Wellcome 6,139 174
Granada Group 22,574 229
Hanson 21,800 183
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
Imperial Tobacco Group 36,100 $ 298
Invensys 62,000 338
Reckitt & Colman 22,200 208
Rolls-Royce 85,300 295
Royal & Sun Alliance Insurance 47,200 360
SmithKline Beecham 18,919 242
South African Breweries 28,665 290
Stagecoach Holdings 21,000 49
-------
3,997
-------
Total Foreign Common Stocks
(Cost $13,981) 14,227
-------
Total Investments (77.9%)
(Cost $13,981) $14,227
=======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
MID-CAP EQUITY FUND
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (85.1%)
BASIC MATERIALS (3.2%)
Stillwater Mining* 31,300 $ 998
-------
CAPITAL GOODS (2.0%)
Herman Miller 10,200 235
L-3 Communications* 9,400 391
-------
626
-------
COMMUNICATION SERVICES (2.3%)
Western Wireless, Cl A* 10,600 708
Winstar Communications* 58 4
-------
712
-------
CONSUMER CYCLICALS (12.2%)
Abercrombie & Fitch, Cl A* 9,600 256
Answerthink Consulting Group* 10,100 346
Antec* 7,600 277
BJ's Wholesale Club* 11,700 427
Harley-Davidson 5,600 359
Men's Wearhouse* 47,950 1,409
Outback Steakhouse* 10,000 259
Pixar* 7,100 251
Staff Leasing* 17,600 167
-------
3,751
-------
CONSUMER STAPLES (11.7%)
Dial 22,900 557
Flowers Industries 3,500 56
Hertz, Cl A 9,300 466
Imax* 33,500 917
Nordstrom 6,600 173
U.S. Foodservice* 84,400 1,414
-------
3,583
-------
ENERGY (12.9%)
Apache 7,800 288
BJ Services* 4,200 176
Barrett Resources* 16,200 477
Burlington Resources 8,200 271
Cooper Cameron* 4,500 220
Ensco International 14,700 336
Global Industries* 11,300 97
- ------------------------------------------------------------------------
117 509 1
180 868 800 1,451
- ------------------------------------------------------------------------
ENERGY (CONTINUED)
Global Marine* 12,100 $ 201
Nabors Industries* 10,700 331
Potomac Electric Power 15,100 346
Precision Drilling* 26,500 681
Smith International* 5,200 258
Weatherford International* 7,000 280
-------
3,962
-------
FINANCIALS (9.5%)
Bank United, Cl A 8,000 218
Colonial Bancgroup 38,700 402
Dime Bancorp 14,800 224
First Virginia Banks 7,600 327
Hibernia, Cl A 24,200 257
North Fork Bancorporation 22,200 388
Peoples Heritage Financial Group 19,400 292
Reliastar Financial 11,600 455
Trustmark 16,600 359
-------
2,922
-------
HEALTH CARE (5.7%)
Forest Laboratories* 7,100 436
Jones Pharmaceuticals 15,250 662
Renal Care* 23,400 547
VISX* 2,100 109
-------
1,754
-------
TECHNOLOGY (24.0%)
Concurrent Computer* 11,400 213
Cypress Semiconductor* 15,800 512
Flextronics International* 25,400 1,168
J.D. Edwards & Company* 14,300 427
Iona Technologies* 100 5
Legato Systems* 5,400 372
Luminant Worldwide Corp* 2,000 91
Nova* 19,187 606
Parametric Technology* 12,100 327
RF Micro Devices* 4,600 315
Sanmina* 3,700 370
Sawtek* 14,600 972
Scientific-Atlanta 7,800 434
Symbol Technologies 12,600 801
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
MID-CAP EQUITY FUND -- CONCLUDED
- --------------------------------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
Vitesse Semiconductor* 3,900 $ 205
Westinghouse Air Brake 9,900 176
Zoran* 6,700 374
-------
7,368
-------
TRANSPORTATION (1.6%)
CNF Transportation 14,300 493
-------
Total Common Stocks
(Cost $22,327) 26,169
-------
PREFERRED STOCKS (5.0%)
Adelphia Communications,
CV to 2.4555 shares* 5,100 959
Globalstar Telecommunication,
CV to 1.9263 shares 6,000 438
Winstar Communications Inc,
CV to 16.1391 shares* 100 135
-------
Total Preferred Stocks
(Cost $1,399) 1,532
-------
CONVERTIBLE BONDS (4.9%)
Affymetrix,
CV to 8.1301 shares,
Callable 10/07/02 @ 102.50
5.000%, 10/01/06 $ 150 223
Chiron Convertible,
CV to 34.59 shares,
Callable 08/16/99 @ 95.08
1.900%, 11/17/00 325 475
Human Genome,
CV to 6.9808 shares,
Callable 12/20/02 @ 102.50
5.000%, 12/15/06 125 150
Sanmina,
CV to 11.278 shares,
Callable 05/06/02 @ 101.70
4.250%, 05/01/04 150 198
Sepracor,
CV to 21.111 shares,
Callable 02/18/01 @ 103.57
6.250%, 02/15/05 215 464
-------
- --------------------------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (CONTINUED)
Total Convertible Bonds
(Cost $1,090) $ 1,510
-------
REPURCHASE AGREEMENT (3.7%)
Morgan Stanley
2.45%, dated 12/31/99,
matures 01/03/00, repurchase
price $1,146,308 (collateralized
by a U.S. Treasury Note:
market value $1,179,488) $1,146 1,146
-------
Total Repurchase Agreement
(Cost $1,146) 1,146
-------
Total Investments (98.7%)
(Cost $25,962) 30,357
-------
OTHER ASSETS AND LIABILITIES, NET (1.3%) 387
-------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 2,022,497 outstanding
shares of beneficial interest 23,469
Accumulated net realized gain on
investments 2,875
Net unrealized appreciation on
investments 4,395
Undistributed net investment income 5
-------
Total Net Assets (100.0%) $30,744
=======
Net Asset Value, Offering and
Redemption Price Per Share $ 15.20
=======
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
CV -- CONVERTIBLE SECURITY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (96.6%)
BASIC MATERIALS (11.2%)
Carpenter Technology 9,400 $ 258
Lilly Industries Incorporated, Cl A 26,200 352
Quixote 10,100 154
Texas Industries 9,200 392
Wausau-Mosinee Paper 7,100 83
-------
1,239
-------
CAPITAL GOODS (10.7%)
American Woodmark 5,500 133
BHA Group Holdings 6,100 48
Fedders 2,100 12
Fedders Cl A 8,000 41
Gerber Scientific 9,600 211
Kaman 10,200 131
Lindberg 8,700 67
LSI Industries 8,500 184
Milacron 1,100 17
Precision Castparts 7,900 207
Smith (A.O.) 5,900 129
-------
1,180
-------
CONSUMER CYCLICALS (21.5%)
Bush Industries 11,300 194
CBRL Group 16,100 156
Chemed 4,000 114
Federal Signal 8,400 135
Grey Advertising 200 80
Harman International 12,400 696
Interface 74,300 427
Midas 5,000 109
Pep Boys 15,100 138
Phillips Van Heusen 14,000 116
Service Experts* 14,200 83
Stride Rite 20,100 131
-------
2,379
-------
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONSUMER STAPLES (22.0%)
Bowne & Company 11,000 $ 149
Ingles Markets, Cl A 9,600 107
Pittston Brink's Group 28,000 616
Polaroid 28,200 531
Smucker (J.M.), Cl B 8,200 133
Standard Register 6,400 124
Universal Foods 23,100 471
Wolverine World Wide 22,300 244
York Group 14,100 61
-------
2,436
-------
ENERGY (2.9%)
Fletcher Challenge Energy ADR 5,200 134
Pennzoil-Quaker State 18,000 183
-------
317
-------
FINANCIALS (10.9%)
Administradora de Fondos de
Pensiones Provida ADR 4,100 88
Banco Latinamericano de
Exportaciones, Cl E 3,300 78
Downey Financial 6,000 121
Klamath First Bancorp 7,000 83
Mutual Risk Management 8,400 141
PXRE Group 7,400 96
Scottish Annuity & Life 12,700 104
Seacoast Banking of Florida 3,200 92
Student Loan 4,300 214
West Coast Bancorp 6,160 83
Westerfed Financial 6,500 99
-------
1,199
-------
HEALTH CARE (6.4%)
Block Drug, Cl A 1,107 34
Interim Services* 23,950 593
Vital Signs 3,400 78
-------
705
-------
15
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
SMALL CAP EQUITY FUND -- CONCLUDED
- --------------------------------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
SERVICE INDUSTRIES (1.0%)
ABM Industries 5,400 $ 110
-------
TECHNOLOGY (1.6%)
Innovex 10,000 94
Pioneer-Standard Electronics 5,500 79
-------
173
-------
TRANSPORTATION (5.2%)
Hunt J B Transportation Services 6,900 96
Knightsbridge Tankers Limited 6,300 85
Sea Containers 14,800 394
-------
575
-------
UTILITIES (3.2%)
Midcoast Energy Resources 5,700 95
Nui 7,000 185
UGI 3,800 78
-------
358
-------
Total Common Stocks
(Cost $11,986) 10,671
-------
REPURCHASE AGREEMENT (2.9%)
Morgan Stanley
5.25%, dated 12/31/99,
matures 01/03/00,
repurchase price $320,990
(collateralized by an U.S. Treasury
Note: market value $330,546) $321 321
-------
Total Repurchase Agreement
(Cost $321) 321
-------
Total Investments (99.5%)
(Cost $12,307) 10,992
-------
OTHER ASSETS AND LIABILITIES, NET (0.5%) 55
-------
- --------------------------------------------------------------------------------
VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited authorization
-- no par value) based on 1,386,363
outstanding shares of beneficial interest $14,071
Accumulated net realized loss on
investments (1,726)
Net unrealized depreciation on
investments (1,315)
Undistributed net investment income 17
-------
Total Net Assets (100.0%) $11,047
=======
Net Asset Value, Offering and Redemption
Price Per Share $7.97
=======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
- --------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (91.6%)
BASIC MATERIALS (5.5%)
Allegheny Technologies 38,700 $ 868
B.F. Goodrich 42,100 1,158
Boise Cascade 30,800 1,247
Consolidated Papers 14,800 471
Hercules 39,300 1,095
Rohm & Haas 19,300 785
-------
5,624
-------
CAPITAL GOODS (15.6%)
Cooper Industries 38,200 1,545
Crown Cork & Seal 27,500 615
Emerson Electric 30,300 1,738
General Dynamics 21,300 1,124
Harris 29,100 777
Hubbell, Cl B 38,900 1,060
Minnesota Mining & Manufacturing 13,500 1,321
National Service Industries 40,500 1,195
Northrop Grumman 21,000 1,135
Pactiv* 44,300 471
Pall 38,700 834
Perkinelmer 30,600 1,276
Sonoco Products 52,800 1,201
Thomas & Betts 25,800 822
W.W. Grainger 15,800 755
-------
15,869
-------
COMMUNICATION SERVICES (8.1%)
Alltel 10,900 901
AT&T 39,500 2,005
GTE 40,300 2,844
SBC Communications 40,100 1,955
Sprint 8,300 559
-------
8,264
-------
CONSUMER CYCLICALS (9.5%)
Albertson's 45,700 1,474
American Greetings, Cl A 36,300 858
Dana 36,000 1,078
Genuine Parts 42,700 1,059
- --------------------------------------------------------------------------------
SHARES VALUE (000)
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS (CONTINUED)
H&R Block 18,600 $ 814
J.C. Penney 25,400 506
Masco 78,400 1,989
Ryder 42,000 1,026
Stanley Works 29,800 898
-------
9,702
-------
CONSUMER STAPLES (15.1%)
Bestfoods 49,100 2,581
ConAgra 107,300 2,421
Dean Foods 15,900 632
Flowers Industries 41,900 668
Fort James Corp. 27,300 747
Fortune Brands 37,000 1,223
H.J. Heinz 28,600 1,139
International Flavors & Fragrances 49,100 1,854
Kimberly Clark 36,300 2,369
Newell Rubbermaid 36,200 1,050
Wallace Computer Services 40,700 677
-------
15,361
-------
ENERGY (6.5%)
Conoco, Cl B 91,372 2,273
Exxon Mobil 12,100 975
Montana Power 10,900 393
Texaco 36,500 1,982
Unocal 28,200 946
-------
6,569
-------
FINANCIALS (19.0%)
Allstate 73,500 1,764
American Financial Group 27,800 733
American General 15,800 1,199
AmSouth Bancorp 61,404 1,186
Bank of America 45,900 2,304
Bank One 16,300 523
Fleet Boston Financial 46,729 1,627
Hibernia, Cl A 59,000 627
KeyCorp 27,800 615
Paine Webber Group 36,700 1,424
17
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
VALUE INCOME STOCK FUND -- CONCLUDED
- --------------------------------------------------------------------------------
SHARES/FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FINANCIALS (CONTINUED)
PNC Bank 34,400 $ 1,531
Reliastar Financial 22,600 886
Summit Bancorp 38,900 1,191
Torchmark 36,400 1,058
U.S. Bancorp 22,800 543
Union Planters 22,036 869
Unumprovident 39,500 1,266
-------
19,346
-------
HEALTH CARE (7.2%)
American Home Products 35,400 1,396
Bausch & Lomb 13,700 938
Baxter International 54,600 3,430
Pharmacia Upjohn ADR 35,700 1,606
-------
7,370
-------
TECHNOLOGY (2.2%)
IBM 20,200 2,182
-------
UTILITIES (2.9%)
GPU 25,300 757
Questar 58,700 880
Scana 48,300 1,298
-------
2,935
-------
Total Common Stocks
(Cost $100,532) 93,222
-------
REPURCHASE AGREEMENT (8.3%)
Morgan Stanley
2.95%, dated 12/31/99, matures
01/03/00, repurchase price
$8,404,169 (collateralized by
U.S. Agency Obligations:
market value $8,597,949) $ 8,404 8,404
-------
Total Repurchase Agreement
(Cost $8,404) $ 8,404
-------
- --------------------------------------------------------------------------------
VALUE (000)
- --------------------------------------------------------------------------------
Total Investments (99.9%)
(Cost $108,936) $101,626
--------
OTHER ASSETS AND LIABILITIES, NET (0.1%) 115
--------
NET ASSETS:
Portfolio Shares (unlimited authorization
-- no par value) based on 7,690,109
outstanding shares of beneficial interest 104,685
Accumulated net realized gain on
investments 4,164
Net unrealized appreciation on
investments (7,310)
Undistributed net investment income 202
--------
Total Net Assets (100.0%) $101,741
========
Net Asset Value, Offering and Redemption
Price Per Share $13.23
========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
- --------------------------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (24.0%)
U.S. Treasury Bonds
7.500%, 11/15/16 $1,200 $ 1,284
8.750%, 08/15/20 500 606
U.S. Treasury Notes
6.000%, 08/15/09 3,225 3,124
6.125%, 08/15/29 220 210
-------
Total U.S. Treasury Obligations
(Cost $5,362) 5,224
-------
CORPORATE OBLIGATIONS (65.3%)
FINANCE (48.1%)
Aon
6.900%, 07/01/04 650 638
Aristar Inc
7.250%, 06/15/06 500 487
Associates
6.250%, 11/01/08 450 416
Bank of America
6.625%, 06/15/04 400 390
Cit Group Holdings
6.500%, 06/14/02 350 345
Conseco
6.400%, 06/15/01 450 442
8.500%, 10/15/02 425 431
6.800%, 06/15/05 350 325
Countrywide Home Loan
6.850%, 06/15/04 300 294
Countrywide Home Loan, MTN
6.510%, 02/11/05 300 285
Donaldson Lufkin Jenrette, MTN
6.150%, 05/04/04 200 189
Finova Capital
7.250%, 07/12/06 500 491
Finova Capital, MTN
7.300%, 09/22/03 550 545
Ford Motor Credit
6.125%, 04/28/03 750 726
- --------------------------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FINANCE (CONTINUED)
General Electric Capital, Ser A, MTN
6.267%, 07/23/03 $ 750 $ 730
6.810%, 11/03/03 300 297
Great Western Financial
8.600%, 02/01/02 140 143
Heller Financial, Ser I, MTN
6.500%, 07/22/02 500 491
Household Finance
7.200%, 07/15/06 450 440
Paine Webber Group, Ser C, MTN
6.020%, 04/22/02 500 484
Provident
7.000%, 07/15/18 550 478
Salomon
7.300%, 05/15/02 100 100
Salomon Smith Barney
6.250%, 01/15/05 250 236
Reliastar Financial
8.000%, 10/30/06 250 252
6.500%, 11/15/08 350 320
Wachovia
5.625%, 12/15/08 250 220
Washington Mutual
7.500%, 08/15/06 250 247
-------
10,442
-------
INDUSTRIAL (13.6%)
AT&T
6.500%, 03/15/29 425 363
Cooper Tire & Rubber
7.750%, 12/15/09 400 390
Dow Chemical
7.375%, 11/01/29 175 168
Dillards
6.430%, 08/01/04 450 423
Marriot International
7.875%, 09/15/09 250 246
Philip Morris
7.500%, 04/01/04 150 147
19
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
INVESTMENT GRADE BOND FUND -- CONCLUDED
- --------------------------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
INDUSTRIAL (CONTINUED)
Procter & Gamble
6.875%, 09/15/09 $ 200 $ 196
Sprint Capital
6.900%, 05/01/19 400 364
Times Mirror
7.450%, 10/15/09 175 173
Wal-Mart Stores
6.875%, 08/10/09 500 487
-------
2,957
-------
UTILITIES (3.6%)
Florida Power & Light
5.875%, 04/01/09 550 493
Trans-Canada Pipelines
7.150%, 06/15/06 300 291
-------
784
-------
Total Corporate Obligations
(Cost $14,639) 14,183
-------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (8.5%)
FHLMC
5.750%, 03/15/09 875 799
FNMA
6.250%, 05/15/29 1,175 1,049
-------
Total U.S. Agency Mortgage-Backed
Obligations (Cost $1,875) 1,848
-------
REPURCHASE AGREEMENT (0.6%)
Morgan Stanley
5.25%, dated 12/31/99,
matures 01/03/00,
repurchase price $130,801
(collateralized by an U.S.
Treasury Note: market value
$134,694) 131 131
-------
Total Repurchase Agreement
(Cost $131) 131
-------
- --------------------------------------------------------------------------------
VALUE (000)
- --------------------------------------------------------------------------------
Total Investments (98.4%)
(Cost $22,007) $21,386
-------
OTHER ASSETS AND LIABILITIES, NET (1.6%) 347
-------
NET ASSETS:
Portfolio Shares (unlimited authorization
-- no par value) based on 2,232,687
outstanding shares of beneficial interest 22,767
Accumulated net realized loss on
investments (413)
Net unrealized depreciation on
investments (621)
-------
Total Net Assets (100.0%) $21,733
=======
Net Asset Value, Offering and Redemption
Price Per Share $9.73
=======
FHLMC -- FEDERAL HOME LOAN MORTGAGE COMPANY
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SER -- SERIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
<TABLE>
<CAPTION>
---------- ------------- ------------
GROWTH INTERNATIONAL QUALITY
AND INCOME EQUITY GROWTH STOCK
FUND (1) FUND FUND (1)
---------- ------------- ------------
Assets:
<S> <C> <C> <C>
Investments at Market Value (Cost $--, $13,981 and $--respectively) ............ $ -- $14,227 $ --
Cash ........................................................................... 10 781 10
Foreign Currency (Cost $--, $3,243 and $-- respectively) ....................... -- 3,237 --
Receivable for Investment Securities Sold ...................................... -- 488 --
Receivable for Portfolio Shares Purchased ...................................... -- 19 --
Other Assets ................................................................... -- 58 --
------ ------- -----
Total Assets ................................................................... 10 18,810 10
------ ------- -----
Liabilities:
Payable for Investment Securities Purchased .................................... -- 429 --
Payable for Portfolio Shares Redeemed .......................................... -- 78 --
Accrued Expenses ............................................................... -- 31 --
Other Liabilities .............................................................. -- 4 --
------ ------- -----
Total Liabilities .............................................................. -- 542 --
------ ------- -----
Net Assets:
Portfolio Shares (unlimited authorization -- no par value) based on 1,010,
1,311,236, 1,010, respectively, outstanding shares of
beneficial interest .......................................................... 10 15,183 10
Undistributed net investment income ............................................ -- 149 --
Accumulated net realized gain on investments ................................... -- 2,847 --
Accumulated net realized loss on foreign currency transactions ................. -- (148) --
Net unrealized depreciation on forward foreign currency contracts, foreign
currency, and translation of other assets
and liabilities in foreign currency .......................................... -- (9) --
Net unrealized appreciation on investments ..................................... -- 246 --
------ ------- ------
Total Net Assets .................................................................. $10 $18,268 $10
====== ======= ======
Net Asset Value, Offering and Redemption Price Per Share .......................... $10.00 $13.93 $10.00
====== ======= ======
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Commenced operations December 30, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
STATEMENTS OF OPERATIONS (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
QUALITY VALUE
CAPITAL GROWTH INTERNATIONAL MID-CAP GROWTH SMALL CAP INCOME INVESTMENT
APPRECIATION AND INCOME EQUITY EQUITY STOCK EQUITY STOCK GRADE
FUND FUND (1) FUND FUND FUND (1) FUND FUND BOND FUND
------------ ---------- ------------ -------- -------- -------- -------- ----------
Investment Income:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 465 $ -- $ 36 $ 72 $ -- $ 12 $ 547 $ 1,360
Dividend Income 1,188 -- 366 202 -- 271 2,548 --
Less: Foreign Taxes Withheld -- -- (27) -- -- (1) -- --
------- ---- ------ ----- ---- ------ ------ -------
Total Investment Income 1,653 -- 375 274 -- 282 3,095 1,360
------- ---- ------ ----- ---- ------ ------ -------
Expenses:
Investment Advisory Fees 1,408 -- 232 331 -- 134 853 159
Less: Investment Advisory
Fees Waived (252) -- (73) (100) -- (73) (8) (94)
Administrator Fees 62 -- 75 62 -- 62 62 62
Custody Fees 48 -- 30 7 -- 3 30 8
Transfer Agent Fees 34 -- 4 8 -- 3 25 4
Professional Fees 60 -- 6 11 -- 5 26 10
Trustee Fees 5 -- 1 1 -- -- 3 1
Registration Fees 6 -- -- -- -- -- 4 1
Printing Expenses 26 -- 3 5 -- 2 8 5
Pricing Fees 3 -- 15 1 -- -- 2 1
Insurance and Other Fees 4 -- -- 1 -- 1 4 1
Amortization of Deferred
Organization Costs 4 -- 3 4 -- 2 4 4
------- ---- ----- ----- ---- ------ ------- -------
Total Expenses 1,408 -- 296 331 -- 139 1,013 162
------- ---- ----- ----- ---- ------ ------- -------
Net Investment Income (Loss) 245 -- 79 (57) -- 143 2,082 1,198
------- ---- ----- ----- ---- ------ ------- -------
Net Realized Gain (Loss) on
Securities Sold 4,287 -- 2,891 2,943 -- (1,194) 4,217 (403)
Net Realized Loss on Foreign
Currency Transactions -- -- (121) -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments 5,562 -- (1,281) 789 -- 349 (9,964) (1,128)
Net Change in Unrealized Depreciation
on Forward Currency Contracts,
Foreign Currency, and Translation
of Other Assets and Liabilities
in Foreign Currency -- -- (11) -- -- -- -- --
------- ---- ------ ------- ---- ------ ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency 9,849 -- 1,478 3,732 -- (845) (5,747) (1,531)
------- ---- ------ -------- ---- ------ ------- -------
Increase (Decrease) in Net Assets
from Operations $10,094 $ -- $1,557 $3,675 $ -- $ (702) $(3,665) $ (333)
======= ==== ====== ======== ==== ====== ======= =======
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Commenced operations on December 30, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST
<TABLE>
<CAPTION>
CAPITAL APPRECIATION GROWTH AND INTERNATIONAL
FUND INCOME FUND EQUITY FUND
-------------------- ----------- ---------------------
01/01/99- 01/01/98- 12/30/99 (1)- 01/01/99- 01/01/98-
12/31/99 12/31/98 12/31/99 12/31/99 12/31/98
-------- -------- ------------ -------- ----------
Investment Activities:
<S> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ 245 $ 356 $ -- $ 79 $ 108
Net Realized Gain (Loss) on Investments and
Foreign Currency Transactions 4,287 7,815 -- 2,770 255
Net Change in Unrealized Appreciation (Depreciation)
on Investments 5,562 12,917 -- (1,281) 1,029
Net Change in Unrealized Appreciation (Depreciation)
on Forward Foreign Currency Contracts, Foreign
Currency, and Translation of Other Assets and
Liabilities in Foreign Currency -- -- -- (11) 2
-------- -------- -------- -------- --------
Increase (Decrease) in Net Assets Resulting from
Operations 10,094 21,088 -- 1,557 1,394
-------- -------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income (275) (356) -- (93) (21)
Capital Gains (8,721) (8,084) -- (271) (113)
-------- -------- -------- -------- --------
Total Distributions (8,996) (8,440) -- (364) (134)
-------- -------- -------- -------- --------
Capital Transactions:
Proceeds from Shares Issued 24,657 26,149 10 2,079 5,290
Reinvestment of Cash Distributions 8,996 8,440 -- 364 134
Cost of Shares Repurchased (6,239) (3,554) -- (4,294) (1,605)
-------- -------- -------- -------- --------
Increase (Decrease) in Net Assets from
Capital Transactions 27,414 31,035 10 (1,851) 3,819
-------- -------- -------- -------- --------
Total Increase (Decrease) in Net Assets 28,512 43,683 10 (658) 5,079
-------- -------- -------- -------- --------
Net Assets:
Beginning of Period 105,560 61,877 -- 18,926 13,847
-------- -------- -------- -------- --------
End of Period $134,072 $105,560 $ 10 $18,268 $18,926
======== ======== ======== ======== ========
Shares Issued and Redeemed:
Shares Issued 1,202 1,374 1 156 406
Shares Issued in Lieu of Cash Distributions 460 510 -- 27 11
Shares Redeemed (314) (200) -- (322) (134)
-------- -------- -------- -------- --------
Net Share Transactions 1,348 1,684 1 (139) 283
======== ======== ======== ======== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Commenced operations on December 30, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
<TABLE>
<CAPTION>
MID-CAP QUALITY GROWTH SMALL CAP VALUE INCOME INVESTMENT GRADE
EQUITY FUND STOCK FUND EQUITY FUND STOCK FUND BOND FUND
-------------------- ---------------- -------------------- -------------------- -------------------------
01/01/99- 01/01/98- 12/30/99 (1)- 01/01/99- 01/01/98- 01/01/99- 01/01/98- 01/01/99- 01/01/98-
12/31/99 12/31/98 12/31/99 12/31/99 12/31/98 12/31/99 12/31/98 12/31/99 12/31/98
-------- --------- ------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ (57) $ (80) $ -- $ 143 $ 143 $ 2,082 $ 1,696 $ 1,198 $ 752
2,943 485 -- (1,194) (532) 4,217 8,551 (403) 268
789 1,389 -- 349 (1,561) (9,964) (2,853) (1,128) 251
-- -- -- -- -- -- -- -- --
------- ------- ------ ------- ------- -------- ------- ------- -------
3,675 1,794 -- (702) (1,950) (3,665) 7,394 (333) 1,271
------- ------- ------ ------- ------- -------- ------- ------- -------
-- -- -- (146) (143) (2,105) (1,696) (1,196) (754)
(475) (2,305) -- -- -- (8,555) (6,777) (262) --
------- ------- ------ ------- ------- -------- ------- ------- -------
(475) (2,305) -- (146) (143) (10,660) (8,473) (1,458) (754)
------- ------- ------ ------- ------- -------- ------- ------- -------
1,583 7,168 10 1,442 8,463 12,332 23,136 7,882 9,749
475 2,305 -- 146 143 10,660 8,473 1,458 755
(5,589) (1,800) -- (2,838) (931) (5,685) (4,518) (5,052) (1,687)
------- ------- ------ ------- ------- -------- ------- ------- -------
(3,531) 7,673 10 (1,250) 7,675 17,307 27,091 4,288 8,817
------- ------- ------ ------- ------- -------- ------- ------- -------
(331) 7,162 10 (2,098) 5,582 2,982 26,012 2,497 9,334
------- ------- ------ ------- ------- -------- ------- ------- -------
31,075 23,913 -- 13,145 7,563 98,759 72,747 19,236 9,902
------- ------- ------ ------- ------- -------- ------- ------- -------
$30,744 $31,075 $ 10 $11,047 $13,145 $101,741 $98,759 $21,733 $19,236
======= ======= ====== ======= ======= ======== ======= ======= =======
117 509 1 180 868 800 1,451 772 936
35 216 -- 19 16 734 622 146 72
(420) (145) -- (363) (107) (392) (307) (504) (161)
------- ------- ------ ------- ------- -------- ------- ------- ------
(268) 580 1 (164) 777 1,142 1,766 414 847
======= ======= ====== ======= ======= ======== ======= ======= ======
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
1. Organization
The STI Classic Variable Trust (the "Trust") was organized as a Massachusetts
business trust under a Declaration of Trust dated April 18, 1995. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with eight funds: the Capital Appreciation Fund,
(formerly Capital Growth Fund), the Growth and Income Fund, the International
Equity Fund, the Mid-Cap Equity Fund, the Quality Growth Stock Fund, the Small
Cap Equity Fund, the Value Income Stock Fund (collectively "the Equity Funds")
and the Investment Grade Bond Fund. The Growth and Income Fund and Quality
Growth Stock Fund commenced operations on December 30, 1999. The assets of each
Fund are segregated, and a shareholder's interest is limited to the Fund in
which shares are held. The Fund's prospectus provides a description of each
Fund's investment objective, policies and strategies.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Trust. These policies are in conformity with generally accepted accounting
principles.
SECURITY VALUATION -- Investments in equity securities that are traded on a
national securities exchange (or reported on the NASDAQ national market
system) are valued at the last quoted sales price, if readily available for
such equity securities, on each business day. If there is no such reported
sale, these securities, and unlisted securities for which market quotations
are readily available, are valued at the most recently quoted bid price.
Foreign securities in the International Equity Fund are valued based upon
quotations from the primary market in which they are traded.
Debt obligations exceeding sixty days to maturity for which market
quotations are readily available are valued at the most recently quoted bid
price. Debt obligations with sixty days or less until maturity may be
valued either at the most recently quoted bid price or at their amortized
cost.
Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by, or in accordance with
procedures approved by, the Board of Trustees.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a
regulated investment company for Federal income tax purposes and distribute
all of its taxable income and net capital gains. Accordingly, no provisions
for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Dividend
income is recognized on ex-dividend date, and interest income is recognized
on an accrual basis and includes, where applicable, the pro rata
amortization of premium or accretion of discount. The cost used in
determining net realized capital gains and losses on the sale of securities
are those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts and premiums during the applicable
holding period. Purchase discounts and premiums on securities are accreted
and amortized to maturity using the scientific interest method, which
approximates the effective interest method.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the repurchase agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters an
insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
28
<PAGE>
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day. It is computed by dividing the assets of
each Fund, less its liabilities, by the number of outstanding shares. The
offering price per share for the shares of the Investment Grade Bond and
Equity Funds is the net asset value per share.
FOREIGN CURRENCY TRANSACTIONS -- With respect to the International
Equity Fund, the books and records are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis:
[Bullet] market value of investment securities, assets and liabilities at
the current rate of exchange; and
[Bullet] purchases and sales of investment securities, income, and expenses
at the relevant rates of exchange prevailing on the respective dates of
such transactions.
The International Equity Fund does not isolate the portion of gains and
losses on investments in equity securities that is due to changes in the
foreign exchange rates from that which is due to change in market prices of
equity securities.
The International Equity Fund reports certain foreign currency-related
transactions as components of realized gains for financial reporting
purposes, whereas such components are treated as ordinary income for
Federal income tax purposes.
OTHER -- Distributions from net investment income for the Investment Grade
Bond Fund are declared daily and paid monthly to shareholders.
Distributions from net investment income for the Capital Appreciation Fund,
the Growth and Income Fund, the Mid-Cap Equity Fund, the Quality Growth
Stock Fund, the Small Cap Equity Fund and the Value Income Stock Fund are
declared and paid quarterly to shareholders. Distributions from net
investment income for the International Equity Fund are declared and paid
annually to shareholders. Any net realized capital gains are distributed to
shareholders at least annually.
In accordance with the Statement of Position 93-2, the International Equity
Fund and Mid-Cap Equity Fund reclassed $44,686 and $56,636, respectively,
from Accumulated Net Realized Gain on Investments to Undistributed Net
Investment Income in the Statement of Assets and Liabilities and the
Statement of Net Assets, respectively. This reclassification, which has no
impact on the net asset value of the Funds, is primarily attributable to
net operating losses and differences in the computation of distributable
income under Federal income tax rules versus generally accepted accounting
principles.
Expenses related to a specific Fund are charged to that Fund. Other
operating expenses of the Trust are pro-rated to the Funds on the basis of
relative net assets.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
3. Administration and Distribution Agreements
The Trust and SEI Investments Mutual Funds Services (the "Administrator") are
parties to an administration agreement (the "Administration Agreement") dated
August 18, 1995 as amended November 19, 1997 and March 1, 1999. Under the terms
of the Administration Agreement the Administrator is entitled to a fee, subject
to a minimum, (expressed as a percentage of the combined average daily net
assets of the Trust and the STI
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Concluded)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 1999
Classic Funds) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on
the next $3 billion, .065% on the next $2 billion, and
.06% for over $10 billion.
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated August 2, 1995 under which Federated Services Company
provides transfer agency services to the Trust.
The Trust and SEI Investments Distribution Co. ("the Distributor") are parties
to a Distribution Agreement dated August 18, 1995. The Distributor receives
no fees for its services under this agreement.
4. Investment Advisory Agreement
Investment advisory services are provided to the Trust by STI Capital
Management, N.A. ("STI Capital"), and Trusco Capital Management, Inc.
("Trusco"). Under the terms of the investment advisory agreements, STI Capital
is entitled to receive a fee from the Fund, computed daily and paid monthly, at
an annual rate of .74%, 1.15%, .80%, 1.15%, 1.15% and 1.25% of the average
daily net assets of the Investment Grade Bond Fund, Capital Appreciation Fund,
Value Income Stock Fund, Mid-Cap Equity Fund, Small Cap Equity Fund and
International Equity Fund, respectively. Trusco is entitled to receive a fee
from the Fund, computed daily and paid monthly, at an annual rate of .90% and
1.00% of the average daily net assets of the Growth and Income Fund and Quality
Growth Stock Fund, respectively. STI Capital and Trusco have voluntarily agreed
to waive all or a portion of their fees (and to reimburse Funds' expenses) in
order to limit operating expenses. Fee waivers and expense reimbursements are
voluntary and may be terminated at any time.
SunTrust Bank, Atlanta acts as Custodian for all the Funds except the
International Equity Fund which has a custodian agreement with the Bank of New
York. Fees of the Custodian are paid on the basis of net assets. The Custodian
plays no role in determining the investment policies of the Trust or which
securities are to be purchased or sold in the Funds.
5. Organizational Costs and Transactions
with Affiliates
In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting
on the Costs of Start-Up Activities." This SOP provides guidance on the
financial reporting of start-up costs and organization costs and requires costs
of start-up activities and organization costs to be expensed as incurred.
Investment companies that began operations prior to June 30, 1998 can adopt the
SOP prospectively. Therefore, previously capitalized costs will continue to be
amortized over a period of sixty months. Any future start-up organization costs
will be expensed as incurred. The Trust incurred organizational costs of
approximately $55,566 which include legal fees of approximately $44,153 for
organization work performed by a law firm of which two officers of the Trust are
partners. In the event any of the initial shares of the Trust are redeemed by
any holder thereof during the period that the Trust is amortizing its
organizational costs, the redemption proceeds payable to the holder thereof by
the Trust will be reduced by the unamortized organizational cost in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
Certain officers of the Trust are also officers of the Administrator and/or the
Distributor. Such officers are paid no fees by the Trust for serving as officers
of the Trust.
The Fund has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Funds. For its services the
Liquidity Desk received $11,769.62 for the year ended December 31, 1999.
6. Investment Transactions
The cost of security purchases and the proceeds from security sales, excluding
short-term investments, for the year ended December 31, 1999 were as follows:
30
<PAGE>
- --------------------------------------------------------------------------------
U.S. GOVT. U.S. GOVT.
PURCHASES SALES PURCHASES SALES
(000) (000) (000) (000)
-------- ------- ---------- ---------
Capital Appreciation Fund $208,117 $189,716 $ -- $ --
Growth and Income Fund .. -- -- -- --
International Equity Fund 35,196 40,328 -- --
Mid-Cap Equity Fund ..... 33,545 36,588 -- --
Quality Growth Stock Fund -- -- -- --
Small Cap Equity Fund ... 7,209 8,537 -- --
Value Income Stock Fund . 87,033 76,282 -- --
Investment Grade
Bond Fund ............ 19,581 12,033 34,560 36,506
At December 31, 1999, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the
Investment Grade Bond and Equity Funds at December 31, 1999 was as follows:
NET UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION/
SECURITIES SECURITIES (DEPRECIATION)
(000) (000) (000)
-------- ---------- ----------
Capital Appreciation Fund $31,474 $ (6,689) $24,785
Growth and Income Fund .. -- -- --
International Equity Fund 893 (647) 246
Mid-Cap Equity Fund ..... 5,949 (1,554) 4,395
Quality Growth Stock Fund -- -- --
Small Cap Equity Fund ... 616 (1,932) (1,316)
Value Income Stock Fund . 5,874 (13,184) (7,310)
Investment Grade Bond Fund 9 (630) (621)
The Funds had capital loss carryforwards at December 31, 1999 as follows:
CAPITAL
CARRYOVER EXPIRES EXPIRES
12/31/99 2006 2007
(000) (000) (000)
-------- ---------- ----------
Small Cap Equity Fund ... 1,721 517 1,204
Investment Grade Bond Fund 383 -- 383
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
The Capital Appreciation Fund and the Value Income Fund had cumulative wash
sales at December 31, 1999 amounting to $1,333,000 and $371,000, respectively.
These wash sale losses cannot be used for Federal income tax purposes in the
current year and have been deferred for use in future years.
7. Concentration of Credit Risk
The Investment Grade Bond Fund invests primarily in investment grade obligations
rated at least BBB or better by S & P or Baa or better by Moody's. Changes by
recognized rating agencies in the ratings of any fixed income security or in the
ability of an issuer to make payments of interest and principal may affect the
value of these investments.
8. Consents of Sole Shareholder
On December 29, 1999, the sole shareholder of the Growth and Income Fund (the
"Fund") approved the following appointments: SEI Investments Mutual Funds
Services to serve as administrator of the Fund, Trusco Capital Management, Inc.
to serve as investment advisor to the assets of the Fund and SEI Investments
Distribution Co. to serve as distributor of the shares of the Fund.
On December 29, 1999, the sole shareholder of the Quality Growth Stock Fund (the
"Fund") approved the following appointments: SEI Investments Mutual Funds
Services to serve as administrator of the Fund, Trusco Capital Management, Inc.
to serve as investment advisor to the assets of the Fund and SEI Investments
Distribution Co. to serve as distributor of the shares of the Fund.
31
<PAGE>
NOTICE TO SHAREHOLDERS Unaudited
OF
STI CLASSIC VARIABLE TRUST
For shareholders that do not have a December 31, 1999 tax year end, this notice
is for informational purposes only. For shareholders with a December 31, 1999
tax year end, please consult your tax advisor as to the pertinence of this
notice. For the fiscal year ended December 31, 1999, each portfolio is
designating the following items with regard to distributions paid during the
year:
<TABLE>
<CAPTION>
LONG TERM
(20% RATE) ORDINARY
CAPITAL GAIN INCOME TAX-EXEMPT TOTAL QUALIFYING
FUND DISTRIBUTION DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1)
- -------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Capital Appreciation Fund 21.82% 78.18% 0.00% 100.00% 0.78%
Growth and Income Fund 0.00% 0.00% 0.00% 0.00% 0.00%
International Equity Fund 74.34% 25.66% 0.00% 100.00% 0.00%
Mid-Cap Equity Fund 100.00% 0.00% 0.00% 100.00% 0.00%
Quality Growth Stock Fund 0.00% 0.00% 0.00% 0.00% 0.00%
Small Cap Equity Fund 0.00% 100.00% 0.00% 100.00% 92.91%
Value Income Stock Fund 28.54% 71.46% 0.00% 100.00% 53.80%
Investment Grade Bond Fund 2.01% 97.99% 0.00% 100.00% 0.00%
</TABLE>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends deduction.
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
STI Classic Variable Trust:
We have audited the accompanying statements of net assets of the Capital
Appreciation, Mid-Cap Equity, Small Cap Equity, Value Income, and Investment
Grade Bond Funds, and the statement of assets and liabilities of the Growth and
Income, International Equity, and Quality Growth Stock Funds, including the
schedule of investments of the International Equity Fund, of STI Classic
Variable Trust (the "Trust") as of December 31, 1999, and the related statements
of operations, the statements of changes in net assets, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999, by correspondence with the custodian
and the application of alternative auditing procedures with respect to unsettled
securities transactions. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Capital Appreciation, Growth and Income, International Equity, Mid-Cap Equity,
Quality Growth Stock, Small Cap Equity, Value Income Stock, and Investment Grade
Bond Funds of STI Classic Variable Trust as of December 31, 1999, the results of
their operations for the periods presented, the changes in their net assets, and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 11, 2000
33
<PAGE>
STI CLASSIC VARIABLE TRUST
PART C: OTHER INFORMATION
Post-Effective Amendment No. 9
Item 23. Exhibits:
(a) Agreement and Declaration of Trust of the Registrant is filed
herewith.
(b) By-Laws of the Registrant are filed herewith.
(c) Not applicable.
(d)(1) Investment Advisory Agreement between the Registrant and STI Capital
Management, N.A., dated August 18, 1995 - incorporated by reference to
Exhibit 5 of Post-Effective Amendment No. 1 to the Registrant's
Statement filed with the SEC via EDGAR Accession No.0000912057-96-
005898 on April 2, 1996.
(d)(2) Investment Advisory Agreement between the Registrant and Trusco Capital
Management, Inc., dated December 23, 1999 is filed herewith.
(d)(3) Amended Schedule A to the Investment Advisory Agreement between the
Registrant and STI Capital Management, N.A., dated October 22, 1997 is
filed herewith.
(e) Distribution Agreement between the Registrant and SEI Financial
Services Company, dated August 18, 1995 - incorporated by reference to
Exhibit 6 of Post-Effective Amendment No. 1 to the Registrant's
Statement filed with the SEC via EDGAR Accession No.0000912057-96-
005898 on April 2, 1996.
(f) Not applicable.
(g)(1) Custodian Agreement between the Registrant and SunTrust Bank, Atlanta,
dated August 18, 1995 - incorporated by reference to Exhibit 8 of Post-
Effective Amendment No. 1 to the Registrant's Statement filed with the
SEC via EDGAR Accession No.0000912057-96-005898 on April 2, 1996.
(g)(2) Custody Agreement with Bank of New York - incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 2 to the Registrant's
Statement filed with the SEC via EDGAR Accession No.0000912057-96-
018468 on August 21, 1996.
(g)(3) Third Amendment to Custodian Agreement dated October 10, 1996 -
incorporated by reference to Exhibit 8(c) of Post-Effective Amendment
No. 5 to the Registrant's Statement filed with the SEC via EDGAR
Accession No. 0001047469-98-008284 on March 2, 1998.
(g)(4) Fourth Amendment to Custodian Agreement dated May 6, 1997 -incorporated
by reference to Exhibit 8(d) of Post-Effective Amendment No. 5 to the
Registrant's Statement filed with the SEC via EDGAR Accession No.
0001047469-98-008284 on March 2, 1998.
(h)(1) Administration Agreement between the Registrant and SEI Financial
Management Corporation, dated August 18, 1995, as amended November 9,
1997 - incorporated by reference to Exhibit 9(a) of Post-Effective
Amendment No. 5 to the Registrant's Statement filed with the SEC via
EDGAR Accession No. 0001047469-98-008284 on March 2, 1998.
(h)(2) Form of Participation Agreement among the Registrant, SEI Financial
Services Company, Glenbrook Life and Annuity Company, dated October 2,
1995 -incorporated by reference to Exhibit 6 of Post-Effective
Amendment No. 1 to the Registrant's Statement filed with the SEC via
EDGAR Accession No.0000912057-96-005898 on April 2, 1996.
(h)(3) Agreement for Shareholder Recordkeeping between the Registrant and
Federated Services Company, dated August 2, 1995 - incorporated by
reference to Exhibit 6 of Post-Effective Amendment No. 1 to the
Registrant's Statement filed with the SEC via EDGAR Accession
No.0000912057-96-005898 on April 2, 1996.
(h)(4) Amended Schedule to the Administration Agreement between the Registrant
and SEI Financial Management Corporation dated August 19, 1996 -
incorporated by reference to Exhibit 9(a) of Post-Effective Amendment
No. 5 to the Registrant's Statement filed with the SEC via EDGAR
Accession No. 0001047469-98-008284 on March 2, 1998.
(i) Opinion of Counsel is filed herewith.
(j) Consent of Arthur Andersen LLP, independent public accountants is filed
herewith.
(k) Not applicable.
(l) Not applicable.
(m) Not applicable.
C-1
<PAGE>
(n) Not applicable.
(o) Not applicable.
(p)(1) Code of Ethics for SEI Investments Company is filed herewith.
(P)(2) Code of Ethics for Trusco Capital Management - incorporated by
reference to Exhibit (p)(4) of Post- Effective Amendment No. 35 to STI
Classic Funds' Statement filed with the SEC via EDGAR Accession
No.0000916641-00-000365 on March 28, 2000.
(q) Powers of attorney -incorporated by reference to Exhibit (p) of Post-
Effective Amendment No. 8 to the Registrant's Statement filed with the
SEC via EDGAR Accession No.0000912057-99-002727 on October 29,
1999.
_____________________________
Item 24. Persons Controlled by or under Common Control with Registrant:
See the Prospectuses and the Statement of Additional Information regarding the
Registrant's control relationships. The Administrator is a subsidiary of SEI
Investments Company, which also controls the distributor of the Registrant, SEI
Investments Distribution Co., other corporations engaged in providing various
financial and recordkeeping 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 1 to the
Registration Statement is incorporated by reference. Insofar as indemnification
liabilities arising under the Securities Act of 1933, as amended, 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 the Investment Advisers:
Other business, profession, vocation, or employment of a substantial nature in
which each director or principal executive officer of the Adviser 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.
Larry M. Cole -- --
Managing Director, Client Service
L. Earl Denney -- --
Managing Director, Fixed Income
Hunting Deutsch -- --
Member, Board of Directors
Anthony R. Gray -- --
chief Executive Officer
Elliott A. Perny -- --
Managing Director, Mid-Cap
Equity
Andre B. Prawoto -- --
Managing Director, Marketing,
Operations and Compliance
Jonathan D. Rich -- --
Member, Board of Directors
Mills A. Riddick -- --
Managing Director, Value Equity
Ronald H. Schwartz -- --
Managing Director, Fixed Income
E. Jenner Wood, III -- --
Member, Board of Directors
James R. Wood -- --
President & Chief Operations
Officer; Chairman, Board of
Directors
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C>
Trusco Capital Management Inc.
Douglas S. Phillips -- --
President & Chief Investment
Officer
Paul L. Robertson, III -- --
Senior Vice President &
Treasurer
Edward J. Wood, III SunTrust Banks, Inc. --
Executive Vice President
Donald Wayne Thurmond SunTrust Banks, Atlanta
Executive Vice President
Gregory L. Miller SunTrust Banks, Inc. --
Economist
Charles Blair Leonard -- --
Vice President
Robert J. Rhodes -- --
Director of Research
James R. Dillon, Jr. -- --
Portfolio Manager
</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:
<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
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 June 1, 1993
The PBHG Funds, Inc. July 16, 1993
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Armada Advantage Fund May 1, 1999
Amerindo Funds Inc. July 13, 1999
Huntington VA Funds October 15, 1999
Friends Ivory Funds December 16, 1999
SEI Insurance Products Trust March 29, 1999
</TABLE>
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and consulting
services ("Funds Evaluation") and automated execution, clearing and
settlement of securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the business address of
each director or officer is Oaks, PA 19456.
<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 --
Richard B. Lieb Director, Executive Vice President --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Gilbert L. Beebower 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 --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Kevin P. Robins Senior Vice President Vice President & Assistant Secretary
Patrick K. Walsh Senior Vice President --
Todd Cipperman Senior Vice President & General Counsel --
Wayne M. Withrow Senior Vice President --
Robert Aller Vice President --
Timothy D. Barto Vice President & Assistant Secretary Vice President & Assistant Secretary
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Richard A. Deak Vice President & Assistant Secretary --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice President & Assistant Secretary Vice President & Assistant Secretary
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 --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Christine M. McCullough Vice President & Assistant Secretary --
Carolyn McLaurin Vice President & Managing Director --
Mark Nagle Vice President President, Controller, Treasurer & Chief
Financial Officer
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Secretary --
Rob Redican Vice President --
Maria Rinehart Vice President --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President --
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
</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 will be maintained at the
offices of Registrant's Custodian:
C-5
<PAGE>
The Bank of New York SunTrust Banks, Inc.
One Wall Street Park Place
New York, NY 10286 P.O. Box 105504
(International Equity Fund) Atlanta, GA 30348
(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, PA 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 Advisers:
STI Capital Management, N.A.
P.O. Box 3808
Orlando, FL 32802
Trusco Capital Management
50 Hurt Plaza, Suite 1400
Atlanta, Georgia 30303
Item 29. Management Services: None
Item 30. Undertakings: None
NOTICE
A copy of the Agreement and Declaration of Trust for STI Classic
Variable Trust 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
No. 9 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Oaks, Commonwealth of
Pennsylvania on the 24th day of April, 2000.
STI CLASSIC VARIABLE TRUST
By: /s/ Mark Nagle
-------------------------------------
Mark Nagle, President, Controller,
Treasurer and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
person in the capacity on the dates indicated.
<TABLE>
<S> <C> <C>
* Trustee April 24, 2000
- ---------------------------
F. Wendell Gooch Date
* Trustee April 24, 2000
- ---------------------------
Daniel S. Goodrum Date
* Trustee April 24, 2000
- ---------------------------
Wilton Looney Date
* Trustee April 24, 2000
- ---------------------------
Champney A. McNair Date
* Trustee April 24, 2000
- ---------------------------
T. Gordy Germany Date
* Trustee April 24, 2000
- ---------------------------
William H. Cammack Date
* Trustee April 24, 2000
- ---------------------------
Jonathan T. Walton Date
* Trustee April 24, 2000
- ---------------------------
Dr. Bernard F. Sliger Date
/s/ Mark Nagle President, Controller, April 24, 2000
- --------------------------- Treasurer and Chief
Mark Nagle Financial Officer Date
</TABLE>
* By: /s/ Mark Nagle
---------------------------------
Mark Nagle, As Power of Attorney
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Number Exhibit
- ------ -------
<S> <C>
EX-99.A Agreement and Declaration of Trust of the Registrant - filed herewith.
EX-99.B By-Laws of the Registrant - filed herewith.
EX-99.C Not applicable.
EX-99.D1 Investment Advisory Agreement between the Registrant and STI Capital Management, N.A., dated
August 18, 1995 - incorporated by reference to Exhibit 5 of Post-Effective Amendment No. 1 to
the Registrant's Statement filed with the SEC via EDGAR Accession No.0000912057-96-005898 on
April 2, 1996.
EX-99.D2 Investment Advisory Agreement between the Registrant and Trusco Capital Management, Inc.,
dated December 30, 1999 - filed herewith.
EX-99.D3 Amended Schedule A to the Investment Advisory Agreement between the Registrant and STI Capital
Management, N.A., dated October 22, 1997 - filed herewith.
EX-99.E Distribution Agreement between the Registrant and SEI Financial Services Company, dated August
18, 1995 -incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 1 to the
Registrant's Statement filed with the SEC via EDGAR Accession No.0000912057-96-005898 on April
2, 1996.
EX-99.F Not applicable.
EX-99.G1 Custodian Agreement between the Registrant and SunTrust Bank, Atlanta, dated August 18, 1995 -
incorporated by reference to Exhibit 8 of Post-Effective Amendment No. 1 to the Registrant's
Statement filed with the SEC via EDGAR Accession No.0000912057-96-005898 on April 2, 1996.
EX-99.G2 Custody Agreement with Bank of New York - incorporated by reference to Exhibit 8(b) of Post-
Effective Amendment No. 2 to the Registrant's Statement filed with the SEC via EDGAR Accession
No.0000912057-96-018468 on August 21, 1996.
EX-99.G3 Third Amendment to Custodian Agreement dated October 10, 1996 -incorporated by reference to
Exhibit 8(c) of Post-Effective Amendment No. 5 to the Registrant's Statement filed with the
SEC via EDGAR Accession No. 0001047469-98-008284 on March 2, 1998.
EX-99.G4 Fourth Amendment to Custodian Agreement dated May 6, 1997 -incorporated by reference to
Exhibit 8(d) of Post-Effective Amendment No. 5 to the Registrant's Statement filed with the
SEC via EDGAR Accession No. 0001047469-98-008284 on March 2, 1998.
EX-99.H1 Administration Agreement between the Registrant and SEI Financial Management Corporation,
dated August 18, 1995, as amended November 9, 1997 - incorporated by reference to Exhibit 9(a)
of Post-Effective Amendment No. 5 to the Registrant's Statement filed with the SEC via EDGAR
Accession No.0001047469-98-008284 on March 2, 1998.
EX-99.H2 Form of Participation Agreement among the Registrant, SEI Financial Services Company,
Glenbrook Life and Annuity Company, dated October 2, 1995 - incorporated by reference to
Exhibit 6 of Post-Effective Amendment No. 1 to the Registrant's Statement filed with the SEC
via EDGAR Accession No.0000912057-96-005898 on April 2, 1996.
EX-99.H3 Agreement for Shareholder Recordkeeping between the Registrant and Federated Services Company,
dated August 2, 1995 - incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 1
to the Registrant's Statement filed with the SEC via EDGAR Accession No.0000912057-96-005898
on April 2, 1996.
EX-99.H3 Amended Schedule to the Administration Agreement between the Registrant and SEI Financial
Management Corporation dated August 19, 1996 - incorporated by reference to Exhibit 9(a) of
Post-Effective Amendment No. 5 to the Registrant's Statement filed with the SEC via EDGAR
Accession No. 0001047469-98-008284 on March 2, 1998.
EX-99.I Opinion of Counsel - filed herewith.
EX-99.J Consent of Arthur Andersen LLP, independent public accountants -
filed herewith.
EX-99.K Not applicable.
EX-99.L Not applicable.
EX-99.M Not applicable.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
EX-99.N Not applicable.
EX-99.O Not applicable.
EX-99.P1 Code of Ethics for SEI Investments Company is filed herewith.
EX-99.P2 Code of Ethics for Trust Capital Management - incorporated by reference to Exhibit (p)(4) of
Post-Effective Amendment No. 35 to STI Classic Funds' Statement filed with the SEC via EDGAR
Accession No.0000916641-00-000365 on March 28, 2000.
EX-99.Q Powers of attorney -incorporated by reference to Exhibit (p) of Post-Effective Amendment No. 8
to the Registrant's Statement filed with the SEC via EDGAR Accession No.0000912057-99-002727
on October 29, 1999.
</TABLE>
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
STI Classic Variable Trust
AGREEMENT AND DECLARATION OF TRUST dated as of the 18th day of April, 1995,
by Kevin P. Robins, the Trustee hereunder, and by the holders of Shares of
beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustee and any successor Trustees elected in accordance with
Article IV hereof have agreed to manage all property coming into their hands as
trustees of a Massachusetts voluntary association with transferable Shares in
accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustee and any successor Trustees elected in
accordance with Article IV hereof hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same for the
pro rata benefit of the holders from time to time of Shares in this Trust issued
hereunder on the terms and conditions hereinafter set forth.
ARTICLE I
Name, Principal Place of Business and Resident Agent, and Definitions
Name
- ----
Section 1. This Trust shall be known as the STI Classic Variable Trust,
---------
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
Principal Place of Business and Resident Agent
- ----------------------------------------------
Section 2. The principal place of business of the Trust is c/o CT
---------
Corporation System, 2 Oliver Street, Boston, MA 02109. The name of the Trust's
resident agent in the Commonwealth of Massachusetts is CT Corporation System at
2 Oliver Street, Boston, Massachusetts 02109.
Definitions
- -----------
Section 3. Whenever used herein, unless otherwise required by the context
---------
or specifically provided:
<PAGE>
(a) The "Trust" refers to the Insurance Investment Products Trust, the
trust created hereby.
(b) "Trustee" or "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV hereof and then in
office.
(c) "Shares" refers to units of beneficial interest in the assets of the
Trust, when used in relation to any particular series established by
the Trustees hereunder refers to units of beneficial interest in the
assets specifically allocated to that series, and includes fractional
as well as whole Shares.
(d) "Shareholder" means a record owner of Shares.
(e) "Affiliated Person," "Assignment," "Commission," "Interested Person,"
and "Principal Underwriter" shall have the meanings given them in the
1940 Act.
(f) "Majority Shareholder Vote" shall have the same meaning as "vote of a
majority of the outstanding voting securities" as that phrase is
defined in the 1940 Act, except that such term may be used herein with
respect to the Shares of the Trust as a whole or the Shares of a
particular series, as the context may require.
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time, provided that
reference made in this Agreement and Declaration of Trust to "hereby,"
"hereof," "herein," "hereunder" or similar terms shall be deemed to
refer to this Declaration of Trust rather than the Article or Section
in which such words appear, unless the context otherwise requires.
(h) "By-Laws" shall mean the By-Laws of the Trust referred to in Article
IV, Section 4 hereof, as amended from time to time.
(i) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
(j) "Disinterested Trustees" shall mean Trustees who are not "interested
persons" as such term is defined in the 1940 Act (including any
Trustee who has been exempted from being an "interested person" by any
rule, regulation or order of the Commission). In limitation of the
foregoing, however, as used in Article VIII hereof, a "Disinterested
Trustee" shall mean a Disinterested Trustee against whom, at the time
of the votes to be taken pursuant to said Article VIII, none of the
actions, suits or other proceedings referred to in such Article VIII,
nor any other action, suit or other proceeding on the same or similar
grounds is or has been pending.
2
<PAGE>
ARTICLE II
Purpose
The purpose of the Trust is to provide investors with one or more
investment portfolio(s) consisting primarily of securities, including debt
instruments or obligations.
ARTICLE III
Shares
Division of Beneficial Interest
- -------------------------------
Section 1. The Trustees may divide the beneficial interest in the Trust
---------
into an unlimited number of Shares and authorize the issuance of Shares without
prior Shareholder approval. Shares may be issued in series and, if so, Shares of
any series will constitute units of beneficial interest in assets of the Trust
specifically allocated to such series. Shares of the Trust, or any series
thereof, shall have no par value, shall represent equal and proportionate
interests in the Trust, or such series, with none having priority or preference
over any other except as specifically set forth in this Article III, and shall
be transferable. All Shares issued hereunder, including any Shares issued in
payment of dividends or other distributions or in connection with any split of
Shares, shall be fully paid and non-assessable. Shares of the Trust or of any
series may be issued in two or more classes, as the Trustees may, without
Shareholder approval, authorize, and Shares of any class shall be identical to
those of any other class of the Trust or such series except that, if the
Trustees have authorized the issuance of Shares of any particular series in two
or more classes, then such classes may, consistent with the 1940 Act, or
pursuant to any exemptive order issued by the Commission and other applicable
law, have such variations as to dividends, redemption charges, conversion,
voting rights, net asset value, expenses borne by the class, and other matters
as the Trustees shall have determined. The Trustees may from time to time,
without Shareholder approval, divide or combine the Shares of a series into a
greater or lesser number without thereby changing their proportionate beneficial
interests in assets allocated to such series.
Ownership of Shares
- -------------------
Section 2. The ownership of Shares shall be recorded on the books of the
---------
Trust or its transfer or similar agent. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent of the Trust, as the case may be, shall be conclusive
as to who are the Shareholders of each series or class and as to the number of
Shares of each series or class held from time to time by each Shareholder.
3
<PAGE>
Investments in the Trust; Assets of the Series
- -----------------------------------------------
Section 3. The Trustees may accept investments in the Trust from such
---------
persons and on such terms and, subject to any requirements of law, for such
consideration, which may consist of cash or tangible or intangible property or a
combination thereof, as they may from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares of
each series, together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the series of Shares
with respect to which the same were received by the Trust for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the books
of account of the Trust and are herein referred to as "assets of" such series.
In addition, any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any particular
series shall be allocated by the Trustees between and among one or more of the
series in such manner as they, in their sole discretion, deem fair and
equitable. Each such allocation to any series shall be conclusive and binding
upon the Shareholders of all series for all purposes, and shall be referred to
as assets belonging to that series. No holder of Shares of any particular
series shall have any claim on or right to any assets allocated or belonging to
any other series.
Establishment of Class or Series
- --------------------------------
Section 4. The establishment and designation of any class or series of
---------
Shares shall be effective upon the adoption of a resolution by a majority of the
Trustees (or of a committee thereof) setting forth such establishment and
designation and the relative rights and preferences of the Shares of such class
or series. Such establishment and designation shall not constitute an amendment
to this Declaration of Trust, although the Trustees may, at their option, set
forth such establishment and designation in a written instrument signed by them
or by an officer of the Trust. The Trustees (or a committee thereof) may by
majority vote amend such establishment and designation. At any time, if no
Shares are outstanding of a particular class or series previously so established
and designated, the Trustees (or a committee thereof) may by majority vote
abolish such class or series and said establishment and designation thereof.
No Preemptive Rights
- --------------------
Section 5. Shareholders shall have no preemptive or other right to
---------
receive, purchase or subscribe for any additional Shares or other securities
issued by the Trust, except as otherwise provided herein or as the Trustees in
their sole discretion shall have determined by resolution.
4
<PAGE>
Status of Shares and Limitation of Personal Liability
- -----------------------------------------------------
Section 6. Shares shall be deemed to be personal property giving only the
---------
rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to the
terms of this Declaration of Trust and to have become a party hereto. The death
of a Shareholder during the continuance of the Trust shall not operate to
terminate the same nor entitle the representative of any deceased Shareholder to
an accounting or to take any action in court or elsewhere against the Trust or
the Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor, except as specifically provided herein, to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
Trustees and Officers as Shareholders
- -------------------------------------
Section 7. Any Trustee, officer or other agent of the Trust may acquire,
---------
own and dispose of Shares of the Trust to the same extent as if he or she were
not a Trustee, officer or agent; and the Trustees may issue and sell or cause to
be issued and sold Shares to and buy such Shares from any such person of any
firm or company in which he is interested, subject only to the general
limitations herein contained as to the sale and purchase of such Shares; and all
subject to any restrictions which may be contained in the By-Laws.
ARTICLE IV
The Trustees
Qualification; Number of Trustees; Election
- -------------------------------------------
Section 1. Each Trustee shall be a natural person and may, but need not,
---------
be a Shareholder. A Trustee may be elected either by the Trustees or the
Shareholders subject to the limitations of the 1940 Act. Each Trustee shall
hold office during the lifetime of this Trust until the election and
qualification of his or her successor, or until he or she sooner dies, resigns
or is removed. The initial Trustee shall be Robert A. Nesher. The number of
Trustees shall be fixed from time to time by a vote of a majority of the
Trustees then in office, except that, commencing with the first Shareholders'
meeting at which Trustees are elected, there shall be not fewer than three nor
more than fifteen Trustees. The number of Trustees so fixed may be increased
either by the Shareholders or by the Trustees by a vote of a majority of the
Trustees then in office. The number of Trustees so fixed may be decreased
either by the Shareholders or by the Trustees by vote of a majority of the
Trustees then in office, but only to eliminate vacancies existing by reason of
the death, resignation or removal of one or more Trustees.
5
<PAGE>
In case of the declination, death, resignation, retirement, removal,
incapacity, or inability of any of the Trustees, or in case a vacancy shall
exist by reason of an increase in number, or for any other reason, the remaining
Trustees shall fill such vacancy by appointing such other person as they in
their discretion shall see fit consistent with the 1940 Act. Until any such
vacancy is filled as provided in this Section 1, the Trustees then in office
shall, regardless of their number, have all powers granted to and discharge all
duties imposed on the Trustees hereby. Such appointment shall be evidenced by a
written instrument signed by a majority of the Trustees in office, even though
less than a quorum, or by recording in the records of the Trust, and shall take
effect upon such signing or recording and the acceptance of such appointment by
the Trustee so appointed. An appointment of a Trustee may be made by the
Trustees then in office in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees.
Removal and Resignation
- -----------------------
Section 2. By vote of the Shareholders holding a majority of the shares
---------
entitled to vote, the Shareholders may remove a Trustee with or without cause.
By vote of a majority of the Trustees then in office, the Trustees may remove a
Trustee with or without cause. Any Trustee may resign at any time by written
instrument signed by him or her and delivered to any officer of the Trust, to
each other Trustee or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
Effect of Death, Resignation, Etc. of a Trustee
- -----------------------------------------------
Section 3. The death, declination, resignation, retirement, removal, or
---------
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
- ------
Section 4. Subject to the provisions of this Declaration of Trust, the
---------
Trustees shall manage the business of the Trust as an investment company, and
they shall have all powers necessary or convenient to carry out that
responsibility. Without limiting the foregoing, the Trustees may adopt By-Laws
not inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that such By-
Laws do not reserve that right to the Shareholders; they may fill vacancies in
their number, including vacancies resulting from increases in their number, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number, and terminate, any
one or more committees consisting of two or more Trustees, including an
executive committee which may, when the Trustees are not in session, exercise
some or all of the powers and authority of the Trustees as the Trustees may
determine;
6
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they may appoint an advisory board, the members of which shall not be Trustees
and need not be Shareholders; they may employ one or more investment advisers or
administrators as provided in Section 9 of this Article IV; they may employ one
or more custodians of the assets of the trust and may authorize such custodians
to employ subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities, retain a transfer
agent or a Shareholder servicing agent, or both, provide for the distribution of
Shares by the Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter; and they may
elect and remove such officers and appoint and terminate such agents as they
consider appropriate.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the
name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or
otherwise;
(f) To establish separate and distinct series of shares with separately
defined investment objectives, policies and purposes, and with
separately defined relative powers, rights, privileges and
liabilities, and to allocate assets, liabilities and expenses of the
Trust to a particular series of Shares or to apportion the same among
two or more series, provided that any liability or expense determined
by the Trustees to have been incurred by a particular series of Shares
shall be payable solely out of the assets of that series and to
establish separate classes of shares of each series, all in accordance
with Article III hereof;
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of
7
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property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees
shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or other obligations
of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any or all of
such obligations;
(m) To purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment
advisers or administrators, principal underwriters, or independent
contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent, investment adviser or
administrator, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power
to indemnify such person against such liability;
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all
of the Trustees, officers, employees and agents of the Trust;
8
<PAGE>
(o) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving
notice to such Shareholder;
(p) To enter into contracts of any kind and description;
(q) To name, or to change the name or designation of the Trust or any
series or class of the Trust;
(r) To take whatever action may be necessary to enable the Trust to comply
with any applicable Federal, state or local statute, rule or
regulation; and
(s) To engage in any other lawful act or activity in which corporations
organized under the Massachusetts Business Corporation Law may engage.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees.
Manner of Acting
- ----------------
Section 5. Except as otherwise provided herein or from time to time in the
---------
By-Laws, any action to be taken by the Trustees, or a committee thereof, may be
taken by a majority of the Trustees present at a meeting of Trustees, or of the
committee members present at a meeting of such committee (if in either case a
quorum be present), within or without Massachusetts, including any meeting held
by means of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can communicate with each other
simultaneously and participation by such means shall constitute presence in
person at a meeting, or by written consent of a majority of the Trustees, or
members of such committee, then in office. At any meeting of the Trustees, or a
committee thereof, a majority of the trustees or members of such committee, as
the case may be, shall constitute a quorum. If a quorum is present when a duly
called or held meeting is convened, the Trustees present thereat may, following
the withdrawal of one or more Trustees originally present, continue to transact
business until adjournment thereof, even though such Trustees would not
otherwise constitute a quorum. Meetings of the Trustees, or a committee
thereof, may be called orally or in writing by the Chairman of the Trustees or
of such committee or by any two other Trustees or committee members, as the case
may be. Notice of the time, date and place of all meeting of the Trustees, or a
committee thereof, shall be given to each Trustee or committee member as
provided in the By-Laws.
Notice of any meeting need not be given to any Trustee (or committee
member) who attends that meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to any
one of their number the authority to approve particular matters or take
particular actions on behalf of the Trust.
9
<PAGE>
Payment of Expenses by the Trust
- --------------------------------
Section 6. The Trustees are authorized to pay or to cause to be paid out
---------
of the principal or income of the Trust, or partly out of principal and partly
out of income, as they deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management thereof, including, but not limited to, the Trustees'
compensation, as authorized pursuant to Article VII, Section 1 hereof, and
reimbursement for expenses and disbursements and such expenses and charges for
the services of the Trust's officers, employees, investment adviser or
administrator, principal underwriter, auditor, counsel, custodian, transfer
agent, Shareholder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur, provided, however, that all expenses, fees,
--------
charges, taxes and liabilities incurred or arising in connection with a
particular series of Shares or class as determined by the Trustees consistent
with applicable law, shall be payable solely out of the assets of that series or
class. Any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees between or among any one or more
of the series in such manner as the Trustees in their sole discretion deem fair
and equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all series for all purposes. Any creditor of any series may
look only to the assets of that series to satisfy such creditor's debt.
Section 7. The Trustees shall have the power, as frequently as they may
---------
determine, to cause each Shareholder to pay directly, in advance or arrears, for
any and all expenses of the Trust, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.
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<PAGE>
Ownership of Assets of the Trust
- --------------------------------
Section 8. Title to all of the assets of each series of Shares and the
---------
Trust shall at all times be considered as vested in the Trustees as joint
tenants. The right, title and interest of the Trustees in such assets shall
vest automatically in each person who may hereafter become a Trustee, and upon
any Trustees' death, resignation or removal, such Trustee shall automatically
cease to have any right, title or interest in such assets. Vesting and
cessation of title as set forth in this Section 8 shall be effective
notwithstanding the absence of execution and delivery of any conveyancing
documents.
Advisory, Administration and Distribution
- -----------------------------------------
Section 9. The Trustees may, at any time and from time to time, contract
---------
with respect to the Trust or any series thereof for exclusive or nonexclusive
advisory and/or administration services with SEI Financial Management
Corporation, a Delaware corporation, and/or any other corporation, trust,
association or other organization, every such contract to comply with such
requirements and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine, including, without
limitation, in the case of a contract for advisory or sub-advisory services,
authority to determine from time to time what investments shall be purchased,
held, sold or exchanged and what portion, if any, of the assets of the Trust or
any series thereof shall be held uninvested and to make changes in the
investments of the Trust or any series thereof. Any contract for advisory
services shall be subject to such Shareholder approval as is required by the
1940 Act. The Trustees may also, at any time and from time to time, contract
with SEI Financial Services Company, a Pennsylvania corporation, and/or any
other corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or principal underwriter for the Shares,
every such contract to comply with such requirements and restrictions as may be
set forth in the By-Laws, and any such contract may contain such other terms
interpretive of or in addition to said requirements and restrictions as the
Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee,
administrator, adviser, principal underwriter, or distributor or
agent of or for any corporation, trust, association, or other
organization, or of or for any parent or affiliate of any
organization, with which an advisory or administration or principal
underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract may have been or may hereafter be
made, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with which
an advisory or administration or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be
11
<PAGE>
made also has an advisory or administration contract, or principal
underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has
other businesses or interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
The Shareholders shall have power to vote only (i) for the election or
removal of Trustees as provided in Article IV, Section 1 hereof, (ii) with
respect to any investment adviser as provided in Article IV, Section 7 hereof,
(iii) with respect to any termination of the Trust or any series or class to the
extent and as provided in Article IX, Section 4 hereof, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Article
IX, Section 7 hereof, (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, (vi) with
respect to any merger, consolidation, sale of assets, or incorporation of the
Trust or any series to the extent and as provided in Article IX, Sections 6 and
7 hereof, and (vii) with respect to such additional matters relating to the
Trust as may be required by law, by this Declaration of Trust, by the By-Laws or
by any registration of the Trust with the Securities and Exchange Commission or
any state, or as the Trustees may consider necessary or desirable.
Notwithstanding any other provisions of this Declaration of Trust, on any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall be voted by individual series or class, except that (1) when so
required by the 1940 Act, then Shares shall be voted in the aggregate and not by
individual series or class, and (2) when the Trustees have determined that the
matter affects only the interests of one or more series or class, then only
Shareholders of such series or class(es) shall be entitled to vote thereon. The
Shareholders may hold meetings and take action as provided in the By-Laws,
subject to the requirements of the 1940 Act where applicable. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
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ARTICLE VI
Distributions, Redemptions, Repurchases
and Determination of Net Asset Value
Distributions
- -------------
Section 1. The Trustees may, but need not, distribute from time to time to
---------
the Shareholders of each series such income and gains, accrued or realized, as
the Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices. The Trustees shall have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.
Distributions of each year's income of each series, if any be made, may be made
in one or more payments, which shall be in Shares, in cash or otherwise and on a
date or dates determined by the Trustees. At any time and from time to time in
their discretion, the Trustees may distribute to the Shareholders of any one or
more series as of a record date or dates determined by the Trustees, in Shares,
in cash or otherwise, all or part of any gains realized on the sale or
disposition of property of the series or otherwise, or all or part of any other
principal of the Trust attributable to the series. Each distribution pursuant
to this Section 1 shall be made ratably according to the number of Shares of the
series or class held by the several Shareholders on the applicable record date
thereof, provided that no distributions need be made on Shares purchased
pursuant to orders received, or for which payment is made, after such time or
times as the Trustees may determine. Any such distribution paid in Shares will
be paid at the net asset value thereof as determined in accordance with this
Declaration of Trust.
Redemptions and Repurchases
- ---------------------------
Section 2. Any holder of Shares of the Trust may, by presentation of a
---------
written request, together with his or her certificates, if any, for such Shares,
in proper form for transfer, at the office of the Trust, the adviser, the
underwriter or the distributors, or at a principal office of a transfer or
Shareholder services agent appointed by the Trust (as the Trustees may
determine), or in accordance with such other procedures for redemption as the
Trustees may from time to time authorize, redeem his or her Shares in accordance
with the provisions of this Section 2 for the net asset value thereof determined
and computed in accordance with the By-Laws, less any redemption charge the
Trustees may establish including any contingent deferred sales charge to which
redemption of such Shares may be subject. Upon receipt of such written request
for redemption of Shares by the Trust, the adviser, the underwriter or the
distributor, or the Trust's transfer or Shareholder services agent, the Trust
shall purchase such Shares and shall pay therefor the net asset value thereof
next determined after such receipt or, in the case of Shares for which
certificates have been issued, the net asset value thereof next determined after
such Shares are tendered in proper form for transfer to the Trust or, in either
case, the net asset value thereof determined as of such other time fixed by the
Trustees, as may be permitted or required by the 1940 Act.
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The obligation of the Trust to redeem its Shares as set forth in this
Section 2 shall be subject to the condition that, during any time of emergency,
as hereinafter defined, such obligation may be suspended by the Trust by or
under authority of the Trustees for such period or periods during such time of
emergency as shall be determined by or under authority of the Trustees. If
there is such a suspension, any Shareholder may withdraw any demand for
redemption and any tender of Shares which has been received by the Trust during
any such period and any tender of Shares the applicable net asset value of which
would but for such suspension be calculated as of a time during such period.
Upon such withdrawal, the Trust shall return to the Shareholder the certificates
therefor, if any. Shareholders who do not so withdraw any such demand shall
receive payment based on the net asset value next determined after the
termination of such suspension. For the purposes of any such suspension "time
of emergency" shall mean, either with respect to all Shares or any series of
Shares, as appropriate, any period during which:
(a) the New York Stock Exchange is closed other than for customary weekend
and holiday closings; or
(b) the Trustees or authorized officers of the Trust shall have
determined, in compliance with any applicable rules and regulations or
orders of the Commission, either that trading on the New York Stock
Exchange is restricted, or that an emergency exists as a result of
which (i) disposal by the Trust of securities owned by it is not
reasonably practicable or (ii) it is not reasonably practicable for
the Trust fairly to determine the current value of the net assets of
the Trust or of a series; or
(c) the suspension or postponement of such obligations is permitted by
order of the Commission.
The Trust may also purchase, repurchase or redeem Shares in accordance with
such other methods, upon such other terms and subject to such other conditions
as the Trustees may from time to time authorize at a price not exceeding the net
asset value of such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made.
Payment in Kind
- ---------------
Section 3. Subject to any generally applicable limitation imposed by the
---------
Trustees, any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or partly in kind,
instead of in cash. Such payment in kind shall be made by distributing
securities or other property, constituting, in the opinion of the Trustees, a
fair representation of the various types of securities and other property then
held by the series of Shares being redeemed, purchased or repurchased (but not
necessarily involving a portion of each of that series' holdings) and taken at
their value used in determining the net asset value of the Shares in respect of
which payment is made.
14
<PAGE>
Additional Provisions Relating to Redemptions and Repurchases
- -------------------------------------------------------------
Section 4. The completion of redemption, purchase or repurchase of Shares
---------
shall constitute a full discharge of the Trust and the Trustees with respect to
such Shares and the Trustees may require that any certificate or certificates
issued by the Trust to evidence the ownership of such Shares shall be
surrendered to the Trustees for cancellation or notation.
Assets Available for Dividends, Distributions, Redemptions and Repurchases
- --------------------------------------------------------------------------
Section 5. No dividend or distribution (including, without limitation, any
---------
distribution paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Shares of any series shall be
effected by the Trust other than from the assets of such series.
Redemptions at the Option of the Trust
- --------------------------------------
Section 6. The Trustees shall have the power at any time to redeem Shares,
---------
of any class of any series, of a Shareholder at a redemption price determined in
accordance with the provisions of Section 2 of this Article if at such time the
aggregate net asset value of the Shares of that class of that series in such
Shareholder's account is less than the minimum investment amount established by
the Trustees for that class of that series. A Shareholder shall be notified
prior to any such redemption and shall be allowed [60 days] to make additional
investments in Shares of that class of that series before such redemption is
effected.
ARTICLE VII
Compensation and Limitation
of Liability of Trustees
Compensation
- ------------
Section 1. The Trustees as such shall be entitled to reasonable
---------
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, administration, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Limitation of Liability
- -----------------------
Section 2. The Trustees shall not be responsible or liable in any event
---------
for any neglect or wrongdoing of any officer, agent, employee, investment
adviser or administrator, principal underwriter or custodian, nor shall any
Trustee be responsible for the act or omission of any other Trustee, but nothing
herein contained shall protect any Trustee against any liability to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office.
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Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his or her capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Subject to the exceptions and limitations contained in this Article, every
person who is, or has been, a Trustee or officer of the Trust shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Trustee or officer:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interests of the Trust;
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting
in a payment by a Trustee or officer, unless there has been either a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office by the court or other
body approving the settlement or other disposition or a reasonable
determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry) that he did not engage in such
conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification hereinafter provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee
16
<PAGE>
or officer may now or hereafter be entitled, shall continue as to a person who
has ceased to be such Trustee or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel other than
Trustees and officers may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in the next to the last paragraph
of this Article shall be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient to repay
such amount if it is ultimately determined that he is not entitled to
indemnification under this Article, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of
any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office
act on the matter) or independent legal counsel in a written opinion
shall determine, based upon a review of the readily available facts
(as opposed to a full trial-type inquiry), that there is reason to
believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Article, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include without limitation, attorney's fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of being or having been a shareholder and not
because of acts or omissions or for some other reason, the shareholder or former
Shareholder (or his or her heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled to be held harmless from and
indemnified against all loss and expenses arising from such liability, but only
out of the assets of the particular series of Shares of which he or she is or
was a Shareholder.
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ARTICLE IX
Miscellaneous
Trustees, Shareholders, Etc. Not Personally Liable; Notice
- ----------------------------------------------------------
Section 1. All persons extending credit to, contracting with or having any
---------
claim against the Trust or a particular series or class of Shares shall look
only to the assets of the Trust or the assets of that particular series of
Shares for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
Nothing in this Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts and shall recite that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or as officers or officer
and not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recital as he or
she or they may deem appropriate, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
Trustees' Good Faith Action, Expert Advice; No Bond or Surety
- -------------------------------------------------------------
Section 2. The exercise by the Trustees of their powers and discretion
---------
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
- ------------------------------------------------
Section 3. No person dealing with the Trustees shall be bound to make any
---------
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
18
<PAGE>
Duration and Termination of Trust
- ---------------------------------
Section 4. Unless terminated as provided herein, the Trust shall continue
---------
without limitation of time. The Trust may be terminated at any time by vote of
Shareholders holding at least a majority of the Shares entitled to vote or by
the Trustees by written notice to the Shareholders. Any series of Shares may be
terminated at any time by vote of Shareholders holding at least a majority of
the Shares of such series entitled to vote or by the Trustees by written notice
to the Shareholders of such series. Upon termination of the Trust or of any one
or more series of Shares, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated, of the
Trust or of the particular series as may be determined by the Trustees, the
Trust shall, in accordance with such procedures as the Trustees consider
appropriate, reduce the remaining assets to distributable form in cash or Shares
or other securities, or any combination thereof, and distribute the proceeds to
the Shareholders of the series involved, ratably according to the number of
Shares of such series held by the several Shareholders of such series on the
date of termination.
Section 5. The original or a copy of this instrument and of each amendment
---------
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of the Commonwealth of Massachusetts and
with the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such amendments. In this instrument and in such amendment, references to
this instrument, and the expression "herein," "hereof," and "hereunder" shall be
deemed to refer to this instrument as amended from time to time. Headings are
placed herein for convenience of reference only and shall not be taken as part
hereof or control or affect the meaning, construction or effect of this
instrument. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
Merger, Consolidation and Sale of Assets
- ----------------------------------------
Section 6. The Trust may merge or consolidate with any other corporation,
---------
association, trust or other organization or may sell, lease or exchange all or
substantially all of the assets of the Trust (or all or substantially all of the
assets allocated or belonging to a particular series of the Trust) including its
good will, upon such terms and conditions and for such consideration when and as
authorized, at any meeting of Shareholders called for such purpose, by the vote
or written consent of the Shareholders of all series of the Trust voting as a
single class, or of the affected series of the Trust, as the case may be; and
any such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. Nothing contained herein shall be construed as
requiring approval of Shareholders for any sale of assets in the ordinary course
of the business of the Trust. Holders of Shares of any series or class shall
have no appraisal rights with respect to their Shares.
19
<PAGE>
Incorporation, Reorganization
- -----------------------------
Section 7. With the approval of the Shareholders, the Trustees may cause
---------
to be organized or assist in organizing a corporation or corporations under the
laws of any jurisdiction, or any other trust, unit investment trust,
partnership, association or other organization to take over the assets of the
Trust or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer such assets to
any such corporation, trust, partnership, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or organization in which
the Trust holds or is about to acquire shares or any other interest. Subject to
Section 6 of this Article IX, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the assets of
the Trust to such organization or entities.
With the approval of Shareholders of any series, the Trustees may sell,
lease or exchange all of the assets allocated or belonging to that series, or
cause to be organized or assist in organizing a corporation or corporations
under the laws of any other jurisdiction, or any other trust, unit investment
trust, partnership, association or other organization, to take over all of the
assets allocated or belonging to that series and to sell, convey or transfer
such assets to any such corporation, trust, unit investment trust, partnership,
association, or other organization in exchange for the shares or securities
thereof or otherwise.
Applicable Law
- --------------
Section 8. The Trust shall be of the type commonly called a Massachusetts
---------
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust. This
Declaration of Trust is to be governed by and construed and administered
according to the laws of said Commonwealth.
Amendments
- ----------
Section 9. This Declaration of Trust may be amended at any time by an
---------
instrument in writing signed by a majority of the then Trustees when authorized
to do so by a vote or written consent of Shareholders, except that an amendment
which shall affect the holders of one or more series or classes of Shares but
not the holders of all outstanding series or classes shall be authorized by vote
or written consent of the Shareholders of each series or classes affected and no
vote of Shareholders of a series or classes not affected shall be required.
Amendments having the purpose of changing the name of the Trust or of supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
20
<PAGE>
IN WITNESS WHEREOF, the undersigned being the sole initial Trustee of the
Trust has executed this document this 17th day of April, 1995.
/s/ Kevin P. Robins
----------------------------------
Kevin P. Robins
c/o SEI Financial Services Company
680 E. Swedesford Road
Wayne, PA 19087
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
I, the undersigned authority, hereby certify that the foregoing is a true and
correct copy of the instrument presented to me by Kevin P. Robins as the
original of such instrument.
WITNESS my hand and official seal, this 17th day of April, 1995.
/s/ Christine L. Treroci
----------------------------
Notary Public
My commission expires: 10/12/98
[SEAL OF NOTARY PUBLIC APPEARS HERE]
<PAGE>
BY-LAWS
OF
STI CLASSIC VARIABLE TRUST
Section 1. Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to the
----------------------------------
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of STI Classic Variable Trust, a Massachusetts
business trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall be
-----------------------------
located in Boston, Massachusetts.
Section 2. Shareholders
2.1 Annual Meeting. The Trust will not hold annual meetings of the
--------------
shareholders.
2.2 Special Meetings. A special meeting of the Shareholders of the Trust or of
----------------
any series or class may be called at any time by the Trustees, by the
President or such other person or persons as may be specified by these By-
Laws, and held from time to time for the purpose of taking action upon any
matter requiring the vote or the authority of the Shareholders of the Trust
or any series or class as herein provided or upon any other matter deemed
by the Trustees to be necessary or desirable. Written notice of any meeting
of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage
prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of
the Trust. Each call of a meeting shall state the place, date, hour and
purposes of the meeting. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of thirty days after written
application by Shareholders holding at least 10% of the Shares then
outstanding requesting a meeting to be called for a purpose requiring
action by the Shareholders as provided herein or in the By-Laws, then
Shareholders holding at least 10% of the Shares then outstanding may call
and give notice of such meeting, and thereupon the meeting shall be held in
the manner provided for herein in case of call thereof by the Trustees.
Notice of a meeting need not be given to any Shareholder if a written
waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Shareholder who attends
the meeting without protesting prior thereto or at its commencement the
lack of notice to him or her.
2.3 Place of Meetings. All meetings of the Shareholders shall be held at such
-----------------
place within the United States as shall be designated by the Trustees or
the president of the Trust.
<PAGE>
2.4 Notice of Meetings. A written notice of each meeting of Shareholders,
------------------
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each Shareholder entitled
to vote thereat by leaving such notice with him or at his residence or
usual place or business or by mailing it, postage prepaid, and addressed to
such Shareholder at his address as it appears in the records of the Trust.
Such notice shall be given by the secretary or an assistant secretary or by
an officer designated by the Trustees. No notice of any meeting of
Shareholders need be given to a Shareholder if a written waiver of notice,
executed before or after the meeting by such Shareholders or his attorney
thereunto duly authorized, is filed with the records of the meeting.
2.5 Voting Powers. Each whole Share shall be entitled to one vote as to any
-------------
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by
proxy.
A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to the
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden of proving invalidity shall rest on the
challenger.
2.6 Quorum and Required Vote. A majority of the Shares entitled to vote shall
------------------------
be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of the Declaration of Trust
permits or requires that holders of any series or class shall vote as a
series or class, then a majority of the aggregate number of Shares of that
series or class entitled to vote shall be necessary to constitute a quorum
for the transaction of business by that series or class. Any lesser number,
however, shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set for the
original meeting without the necessity of further notice.
Except when a larger vote is required by any provisions of the Declaration
of Trust or these By-Laws, a majority of the Shares voted on any matter
shall decide such matter and a plurality shall elect a Trustee, provided
that where any provision of law or of this Declaration of Trust permits or
requires that the holders of any series or class shall vote as a series or
class, then a majority of the Shares of that series or class voted on the
matter shall decide that matter insofar as that series or class is
concerned.
2.7 Ballots. No ballot shall be required for any election unless requested by
-------
a shareholder present or represented at the meeting and entitled to vote in
the election.
2.8 Proxies. Shareholders entitled to vote may vote either in person or by
-------
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted.
Unless otherwise specifically limited by their terms, such proxies shall
entitle
2
<PAGE>
the holders thereof to vote at any adjournment of such meeting but shall
not be valid after the final adjournment of such meeting.
2.9 Action by Written Consent. Any action taken by Shareholders may be taken
-------------------------
without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger vote as shall be required by any provision of the
Declaration of Trust or these By-Laws) consent to the action in writing and
such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their number
-----------------------------
an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for conduct of its
business. The Trustees may appoint an advisory board to consist of not less
than two nor more than five members. The members of the advisory board
shall be compensated in such manner as the Trustees may determine and shall
confer with and advise the Trustees regarding the investments and other
affairs of the Trust. Each member of the advisory board shall hold office
until the first meeting of the Trustees following the next annual meeting
of the shareholders and until his successor is elected and qualified, or
until he sooner dies, resigns, is removed, or becomes disqualified, or
until the advisory board is sooner abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
----------------
call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A
regular meeting of the Trustees may be held without call or notice
immediately after and at the same place as the annual meeting of the
shareholders.
3.3 Special Meetings. Special meetings of the Trustees may be held at any time
----------------
and at any place designated in the call of the meeting, when called by the
Chairman of the Board, the president or the treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the
secretary or an assistant secretary or by the officer or one of the
Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by mail
------
at least forty-eight hours or by telegram at least twenty-four hours before
the meeting addressed to the Trustee at his or her usual or last known
business or residence address or to give notice to him or her in person or
by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him
or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3
<PAGE>
3.5 Quorum. At any meeting of the Trustees one-third of the Trustees then in
------
office shall constitute a quorum; provided, however, a quorum shall not be
less than two. Any meeting may be adjourned from time to time by a majority
of the votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
--------------------------
president, a treasurer, a secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint. The
Trust may also have such agents, if any, as the Trustees from time to time
may in their discretion appoint. Any officer may be but none need be a
Trustee or Shareholder. Any two or more offices may be held by the same
person.
4.2 Powers. Subject to the other provisions of these By-Laws, each officer
------
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
4.3 Election. The president, the treasurer and the secretary shall be elected
--------
annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time.
4.4 Tenure. The president, the treasurer and the secretary shall hold office
------
for a one-year term and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each agent shall retain his or her authority at
the pleasure of the Trustees.
4.5 President and Vice Presidents. The president shall be the chief executive
-----------------------------
officer of the Trust. The president shall, subject to the control of the
Trustees, have general charge and supervision of the business of the Trust.
Any vice president shall have such duties and powers as shall be designated
from time to time by the Trustees.
4.6 Chairman of the Board. If a Chairman of the Board of Trustees is elected,
---------------------
he shall have the duties and powers specified in these By-Laws and, except
as the Trustees shall otherwise determine, preside at all meetings of the
shareholders and of the Trustees at which he or she is present and have
such other duties and powers as may be determined by the Trustees.
4.7 Treasurer and Controller. The treasurer shall be the chief financial
------------------------
officer of the Trust and subject to any arrangement made by the Trustees
with a bank or trust company or other organization as custodian or transfer
or shareholder services agent, shall be in charge of its valuable papers
and shall have such other duties and powers as may be designated from time
to time by the Trustees or by the president. If at any time there shall be
no controller, the treasurer shall also be the chief accounting officer of
the Trust and shall have the duties and power prescribed by the Trust and
shall have the duties and powers prescribed herein for the
4
<PAGE>
controller. Any assistant treasurer shall have such duties and powers as
shall be designated from time to time by the Trustees.
The controller, if any be elected, shall be the chief accounting officer of
the Trust and shall be in charge of its books of account and accounting
records. The controller shall be responsible for preparation of financial
statements of the Trust and shall have such other duties and powers as may
be designated from time to time by the Trustees or the president.
4.8 Secretary and Assistant Secretaries. The secretary shall record all
-----------------------------------
proceedings of the Shareholders and the Trustees in books to be kept
thereof, which books shall be kept at the principal office of the Trust. In
the absence of the secretary from any meeting of Shareholders or Trustees,
an assistant secretary, or if there be none or he or she is absent, a
temporary clerk chosen at the meeting shall record the proceedings thereof
in the aforesaid books.
Section 5. Resignation and Removals
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of the Board, the
president, the treasurer or the secretary or to a meeting of the Trustees. The
Trustees may remove any officer elected by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee, officer,
or advisory board member resigning, and no officer or advisory board member
removed shall have any right to any compensation for any period following his or
her resignation or removal, or any right to damages on account of such removal.
Section 6. Vacancies
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the treasurer
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
5
<PAGE>
Section 7. Shares of Beneficial Interest
In lieu of issuing certificates for shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
Section 8. Record Date
The Trustees may fix in advance a time, which shall not be more than 60 days
before the date of any meeting of Shareholders or the date for the payment of
any dividend or making of any other distribution to Shareholders, as the record
date for determining the Shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts", together with the name of
the Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
Section 11. Fiscal Year
The fiscal year of the Trust shall end on such date in each year as the Trustees
shall from time to time determine.
Section 12. Reports to Shareholders; Distributions from Realized Gains
6
<PAGE>
The Trust shall send to each shareholder of record at least annually a statement
of the condition of the Trust and of the results of its operation, containing
all information required by applicable laws or regulations.
Section 13. Amendments
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by a such majority.
7
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 30th day of December, 1999, by and between STI Classic
Variable Trust, a Massachusetts business trust (the "Trust"), and Trusco Capital
Management, Inc. (the "Adviser").
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act") consisting of several series of shares, each having its own
investment policies; and
WHEREAS, the Trust has retained SEI Investments Mutual Funds Services (the
"Administrator") to provide administration of the Trust's operations, subject to
the control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to its Growth and Income Fund and Quality
Growth Stock Fund and such other portfolios as the Trust and the Adviser may
agree upon (the "Portfolios"), and the Adviser is willing to render such
services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. Duties of the Adviser. The Trust employs the Adviser to manage the
investment and reinvestment of the assets, and to continuously review,
supervise, and administer the investment program of the Portfolios, to
determine in its discretion the securities to be purchased or sold, to
provide the Administrator and the Trust with records concerning the
Adviser's activities which the Trust is required to maintain, and to
render regular reports to the Administrator and to the Trust's
Officers and Trustees concerning the Adviser's discharge of the
foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Trustees of the Trust and in compliance
with such policies as the Trustees may from time to time establish,
and in compliance with the objectives, policies, and limitations for
each such Portfolio set forth in the Portfolio's prospectus and
statement of additional information as amended from time to time, and
applicable laws and regulations.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on
the terms and for the compensation provided herein.
2. Portfolio Transactions. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Portfolios and is directed to use its
best efforts to obtain the best net results as described from time
<PAGE>
to time in the Portfolios' Prospectuses and Statement of Additional
Information. The Adviser will promptly communicate to the
Administrator and to the officers and the Trustees of the Trust such
information relating to portfolio transactions as they may reasonably
request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, by reason of its having directed a securities transaction
on behalf of the Trust to a broker-dealer in compliance with the
provisions of Section 28(e) of the Securities Exchange Act of 1934 or
as described from time to time by the Portfolios' Prospectuses and
Statement of Additional Information.
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust
shall pay to the Adviser compensation at the rate specified in the
Schedule(s) which are attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Adviser at the end
of each month, and calculated by applying a daily rate, based on the
annual percentage rates as specified in the attached Schedule(s), to
the assets. The fee shall be based on the average daily net assets for
the month involved.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
4. Other Expenses. The Adviser shall pay all expenses of printing and
mailing reports, prospectuses, statements of additional information,
and sales literature relating to the solicitation of prospective
clients. The Trust shall pay all expenses relating to mailing to
existing shareholders prospectuses, statements of additional
information, proxy solicitation material and shareholder reports.
5. Excess Expenses. If the expenses for any Portfolio for any fiscal
year (including fees and other amounts payable to the Adviser, but
excluding interest, taxes, brokerage costs, litigation, and other
extraordinary costs) as calculated every business day would exceed the
expense limitations imposed on investment companies by any applicable
statute or regulatory authority of any jurisdiction in which shares of
a Portfolio are qualified for offer and sale, the Adviser shall bear
such excess cost.
However, the Adviser will not bear expenses of any Portfolio which
would result in the Portfolio's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code.
Payment of expenses by the Adviser pursuant to this Section 5 shall be
settled on a monthly basis (subject to fiscal year end reconciliation)
by a reduction in the fee payable to the Adviser for such month
2
<PAGE>
pursuant to Section 3 and, if such reduction shall be insufficient to
offset such expenses, by reimbursing the Trust.
6. Reports. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.
7. Status of the Adviser. The services of the Adviser to the Trust are
not to be deemed exclusive, and the Adviser shall be free to render
similar services to others so long as its services to the Trust are
not impaired thereby. The Adviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
8. Certain Records. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the 1940 Act which are prepared or maintained by the Adviser on
behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.
9. Limitation of Liability of the Adviser. The duties of the Adviser
shall be confined to those expressly set forth herein, and no implied
duties are assumed by or may be asserted against the Adviser
hereunder. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for
any act or omission in carrying out its duties hereunder, except a
loss resulting from willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable state law or Federal
securities law which cannot be waived or modified hereby. (As used in
this Paragraph 9, the term "Adviser" shall include directors,
officers, employees and other corporate agents of the Adviser as well
as that corporation itself).
10. Permissible Interests. Trustees, agents, and shareholders of the
Trust are or may be interested in the Adviser (or any successor
thereof) as directors, partners, officers, or shareholders, or
otherwise; directors, partners, officers, agents, and shareholders of
the Adviser are or may be interested in the Trust as Trustees,
shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Trust as a shareholder or otherwise. In
addition, brokerage transactions for the Trust may be effected through
affiliates of the Adviser if approved by the Board of Trustees,
subject to the rules and regulations of the Securities and Exchange
Commission.
11. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is
3
<PAGE>
specifically approved at least annually (a) by the vote of a majority
of those Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of each Portfolio; provided, however, that if the
shareholders of any Portfolio fail to approve the Agreement as
provided herein, the Adviser may continue to serve hereunder in the
manner and to the extent permitted by the 1940 Act and rules and
regulations thereunder. The foregoing requirement that continuance of
this Agreement be "specifically approved at least annually" shall be
construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Portfolio on not less than 30 days nor more
than 60 days written notice to the Adviser, or by the Adviser at any
time without the payment of any penalty, on 90 days written notice to
the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postpaid, to
the other party at any office of such party.
As used in this Section 11, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the 1940
Act and the rules and regulations thereunder; subject to such
exemptions as may be granted by the Securities and Exchange Commission
under said Act.
12. Change in the Adviser's Membership. The Adviser agrees that it shall
notify the Trust of any change in the membership of the Adviser within
a reasonable time after such change.
13. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Trust, at One Freedom Valley Road,
Oaks, PA 19456 and if to the Adviser, at 50 Hurt Plaza, Suite 1400,
Atlanta, GA 30303.
14. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
15. Governing Law. This Agreement shall be governed by the internal laws
of the Commonwealth of Massachusetts, without regard to conflict of
law principles;
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<PAGE>
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
A copy of the Agreement and Declaration of Trust of the Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees, and is not binding upon any of the Trustees, officers, or shareholders
of the Trust individually but binding only upon the assets and property of the
Trust.
No portfolio of the Trust shall be liable for the obligations of any other
portfolio of the Trust. Without limiting the generality of the foregoing, the
Adviser shall look only to the assets of the Portfolios for payment of fees for
services rendered to the Portfolios.
5
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
STI CLASSIC VARIABLE TRUST
By:_____________________________
Attest:_________________________
TRUSCO CAPITAL MANAGEMENT, INC.
By:_____________________________
Attest:_________________________
6
<PAGE>
Schedule A
to the
Investment Advisory Agreement
between
STI CLASSIC VARIABLE TRUST
and
Trusco Capital Management, Inc.
dated December 30, 1999
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Portfolio Fee (in basis points)
--------- ---------------------
Growth and Income .90%
Quality Growth Stock 1.00%
7
<PAGE>
Amended Schedule A
to the
Investment Advisory Agreement
between
STI CLASSIC VARIABLE TRUST
and
STI Capital Management, N.A.
dated October 22, 1997
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Portfolio Fee (in basis points)
--------- ---------------------
Investment Grade Bond Fund .74%
Capital Growth Fund 1.15%
Value Income Stock Fund .80%
Mid-Cap Fund (formerly Aggressive Growth) 1.15%
International Equity Fund 1.25%
Small Cap Equity Fund 1.15%
<PAGE>
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
April 21, 2000
STI Classic Variable Trust
2 Oliver Street
Boston, MA 02109
Re: Opinion of Counsel regarding Post-Effective Amendment No. 9 to the
------------------------------------------------------------------
Registration Statement filed on Form N-1A under the Securities Act of 1933
--------------------------------------------------------------------------
(File No. 33-91476)
-------------------
Ladies and Gentlemen:
We have acted as counsel to STI Classic Variable Trust, a Massachusetts business
trust (the "Trust"), in connection with the above-referenced Registration
Statement on Form N-1A (as amended, the "Registration Statement") which relates
to the Trust's shares of beneficial interest, without par value (collectively,
the "Shares"). This opinion is being delivered to you in connection with the
Trust's filing of Post-Effective Amendment No. 9 to the Registration Statement
(the "Amendment") to be filed with the Securities and Exchange Commission
pursuant to Rule 485(b) of the Securities Act of 1933 (the "1933 Act"). With
your permission, all assumptions and statements of reliance herein have been
made without any independent investigation or verification on our part except to
the extent otherwise expressly stated, and we express no opinion with respect to
the subject matter or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things, executed
copies of the following documents:
(a) a certificate of the Commonwealth of Massachusetts as to the
existence and good standing of the Trust;
(b) copies of the Trust's Agreement and Declaration of Trust and of all
amendments and all supplements thereto (the "Declaration of Trust");
(c) a certificate executed by James R. Foggo, the Assistant Secretary of
the Trust, certifying to and attaching copies of the Trust's
Declaration of Trust and By-Laws (the "By-Laws"), and certain
resolutions adopted by the Board of Trustees of the Trust authorizing
the issuance of the Shares; and
<PAGE>
STI Classic Variable Trust
April 21, 2000
Page 2
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Trust. We have assumed that the Registration Statement, as filed with the
Securities and Exchange Commission, will be in substantially the form of the
printer's proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Trust's
Declaration of Trust and By-Laws, and for the consideration described in the
Registration Statement, will be legally issued, fully paid and non-assessable
under the laws of the Commonwealth of Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
<PAGE>
Exhibit 99.J
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Registration Statement of our report dated February 11, 2000, on the December
31, 1999 financial statements of STI Classic Variable Trust, included in Post-
Effective Amendment No. 9 to the Registration Statement on Form N1-A, and to all
references to our Firm included in or made part of this Registration Statement
File No. 33-91476.
/s/ Arthur Andersen LLP
Philadelphia, PA
April 21, 2000
<PAGE>
SEI INVESTMENTS COMPANY
CODE OF ETHICS AND
INSIDER TRADING POLICY
April, 2000
<PAGE>
SEI INVESTMENTS COMPANY
CODE OF ETHICS AND INSIDER TRADING POLICY
TABLE OF CONTENTS
I. General Policy
II. Code of Ethics
A. Purpose of Code
B. Employee/Associate Persons Categories
C. Generally Applicable Prohibitions and Restrictions
D. Pre-clearance of Personal Securities Transactions
E. Reporting Requirements
F. Detection and Reporting of Code Violations
G. Violations of the Code of Ethics
H. Confidential Treatment
I. Definitions Applicable to the Code of Ethics
J. Recordkeeping
III. Insider Trading Policy
A. What is "Material" Information?
B. What is "Nonpublic Information"?
C. Who is an Insider?
D. What is Misappropriation?
E. What is Tipping?
F. Identifying Inside Information?
G. Trading in SEI Investments Company Securities
H. Violations of the Insider Trading Policy
2
<PAGE>
I. GENERAL POLICY
SEI Investments Company, through various subsidiaries (jointly "SEI"), is an
investment adviser, administrator, distributor, and/or trustee of investment
companies, collective investment trusts, investment partnerships, and asset
management accounts (jointly "Investment Vehicles"). As an investment adviser,
SEI is subject to various U.S. securities laws and regulations governing the use
of confidential information and personal securities transactions. This Code of
Ethics and Insider Trading Policy (jointly "Policy") was developed based on
those laws and regulations, and sets forth the procedures and restrictions
governing the personal securities transactions of all SEI employees.
SEI has a highly ethical business culture and expects that all employees will
conduct any personal securities transactions consistent with this Policy and in
such a manner as to avoid any actual or potential conflict of interest or abuse
of a position of trust and responsibility. When an employee invests for his or
her own account, conflicts of interest may arise between a client's and the
employee's interest. Such conflicts may include using an employee's advisory
position to take advantage of available investment opportunities, taking an
investment opportunity from a client for an employee's own portfolio, or
frontrunning, which occurs when an employee trades in his or her personal
account before making client transactions. As a fiduciary, SEI owes a duty of
loyalty to clients which requires that an employee must always place the
interests of clients first and foremost and shall not take inappropriate
advantage of his or her position. Thus, SEI employees must conduct themselves
and their personal securities transactions in a manner that does not create
conflicts of interest with the firm's clients.
Pursuant to this Policy, employees and other persons associated with SEI will be
subject to various pre-clearance and reporting standards for their personal
securities transactions based on their status as defined in Section B of this
Policy. Therefore, it is important that every person pay special attention to
the categories set forth in that section to determine what provisions of this
Policy applies to him or her, as well as to the sections on restrictions, pre-
clearance, and reporting of personal securities transactions.
Some employees and other persons associated with SEI outside the United States
are subject to this Policy and the applicable laws of the jurisdictions in which
they are located. These laws may differ substantially from U.S. law and may
subject employees to additional requirements. To the extent any particular
portion of the Policy is inconsistent with foreign law not included herein or
within the firm's Compliance Manual, employees should consult their designated
Compliance Officer or the Compliance Department at SEI's Oaks facility.
Each employee subject to this Policy must read and retain a copy and agree to
abide by its terms. Failure to comply with the provisions of this Policy may
result in the imposition of serious sanctions, including, but not limited to
disgorgement of profits, dismissal, substantial personal liability and/or
referral to regulatory or law enforcement agencies.
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<PAGE>
Any questions regarding SEI's policy or procedures should be referred to the
Compliance Department, which currently includes Courtney Collier (X1839) and
Cyndi Parrish (x2807).
II. CODE OF ETHICS
A. Purpose of Code
This Code of Ethics ("Code") was adopted pursuant to the provisions of Section
17(j) of the Investment Company Act of 1940 ("the 1940 Act"), as amended, and
Rule 17j-1 thereunder, as amended. Those provisions of the U.S. securities laws
were adopted to prevent persons who are actively engaged in the management,
portfolio selection or underwriting of registered investment companies from
participating in fraudulent, deceptive or manipulative acts, practices or
courses of conduct in connection with the purchase or sale of securities held or
to be acquired by such companies. Employees (including contract employees) and
other persons associated with SEI will be subject to various pre-clearance and
reporting requirements based on their responsibilities within SEI and
accessibility to certain information. Those functions are set forth in the
categories listed below.
B. Employees/Associate Persons Categories
1. Access Person:
(a) any director, officer or general partner of SEI Investments Distribution
Co. ("SIDC") who, in the ordinary course of business, makes, participates in
or obtains information regarding, the purchases or sales of securities by an
Investment Vehicle for which SIDC acts as principal underwriter, or whose
functions or duties in the ordinary course of business relate to the making
of any recommendations to the Investment Vehicles regarding the purchase or
sale of securities;
(b) any director, officer, general partner or employee of SEI Investments
Mutual Fund Services who, in connection with his or her regular functions or
duties, participates in the selection of an Investment Vehicle's portfolio
securities, or who has access to information regarding an Investment
Vehicles' purchases or sales of portfolio securities;
(c) any natural person in a "control" relationship to an Investment Vehicle
or SEI Investments Management Company ("SIMC") who obtains information
concerning recommendations made to an Investment Vehicle with regard to the
purchase or sale of securities by the Investment Vehicle.
2. Investment Person - any director, officer or employee of the Asset
Management Group who (1) directly oversees the performance of one or more
sub-advisers for any Investment Vehicle for which SEI acts as investment
adviser, (2) executes or helps execute portfolio transactions for any such
Investment Vehicle, or (3) obtains or is able to obtain information
regarding the purchase or sale of an Investment Vehicle's portfolio
securities.
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<PAGE>
3. Fund Officers - any director, officer or employee of SEI who acts as a
director or officer of any U.S. registered investment company to which SEI
acts as an administrator or sub-administrator, or principal underwriter.
4. Portfolio Persons - any director, officer or employee entrusted with direct
responsibility and authority to make investment decisions affecting one or
more client portfolios.
5. Registered Representative - any director, officer or employee who is
registered with the National Association of Securities Dealers as a
registered representative (Series 6, 7 or 63), a registered principal
(Series 24 or 26) or an investment representative (Series 65), regardless of
job title or responsibilities.
6. Associate - any director, officer or employee of SEI who does not fall
within the above listed categories.
C. Generally Applicable Prohibitions and Restrictions
1. Prohibition Against Fraud, Deceit and Manipulation
All SEI employees and associated persons may not, directly or indirectly, in
connection with the purchase or sale, of a Security held or to be acquired by an
Investment Vehicle for which SEI acts as an investment adviser, administrator or
distributor:
a. employ any device, scheme or artifice to defraud the Investment
Vehicle;
b. make to the Investment Vehicle any untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements made, in light of the circumstances under which they
were made, not misleading;
c. engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Investment Vehicle; or
d. engage in any manipulative practice with respect to the Investment
Vehicle.
2. Personal Securities Restrictions
A. Access Persons:
. may not purchase or sell, directly or indirectly, any Security
within 24 hours before or after the time that the same (or a
related) Security is being purchased or sold by any Investment
Vehicle for which SEI acts as advisor, distributor and/or
administrator.
. may not acquire Securities as part of an Initial Public
Offering("IPO") without obtaining the written approval of the
designated Compliance
5
<PAGE>
Officer at Mutual Fund Services before directly or indirectly
acquiring a beneficial ownership in such securities.
. may not acquire a beneficial ownership interest in Securities
issued in a private placement transaction without obtaining prior
written approval from the designated Compliance Officer at Mutual
Fund Services.
. may not receive any gift of more than de minimus value (currently
$100.00 per year) from any person or entity that does business with
or on behalf of any Investment Vehicle.
B. Investment Persons:
. may not purchase or sell, directly or indirectly, any Security
within 24 hours before or after the time that the same (or a
related) Security is being purchased or sold by any Investment
Vehicle for which SEI or one of its sub-advisers acts as investment
adviser or sub-adviser to the Investment Vehicle.
. may not profit from the purchase and sale or sale and purchase of a
Security within 60 days of acquiring or disposing of Beneficial
Ownership of that Security. This prohibition does not apply to
transactions resulting in a loss, or to futures or options on
futures on broad-based securities indexes or U.S. government
securities.
. may not acquire Securities as part of an Initial Public Offering
without obtaining the written approval of the Compliance Department
before directly or indirectly acquiring a beneficial ownership in
such securities.
. may not acquire a beneficial ownership interest in Securities
issued in a private placement transaction without obtaining prior
written approval from the Compliance Department.
. may not receive any gift of more than de minimus value (currently
$100.00 per year) from any person or entity that does business with
or on behalf of any Investment Vehicle.
. may not serve on the board of directors of any publicly traded
company.
C. Portfolio Persons:
. may not purchase or sell, directly or indirectly, any Security
within 7 days before or after a client portfolio has executed a
trade in that same (or an quivalent) Security, unless the order is
withdrawn.
6
<PAGE>
. may not acquire Securities as part of an Initial Public Offering
without obtaining the written approval of the designated Compliance
Officer before directly or indirectly acquiring a beneficial
ownership in such securities.
. may not acquire a beneficial ownership interest in Securities
issued in a private placement transaction without obtaining prior
written approval from the Compliance Department.
. may not profit from the purchase and sale or sale and purchase of a
Security within 60 days of acquiring or disposing of Beneficial
Ownership of that Security. This prohibition does not apply to
transactions resulting in a loss, or to futures or options on
futures on broad-based securities indexes or U.S. government
securities.
. may not receive any gift of more than de minimus value (currently
$100.00 per year) from any person or entity that does business with
or on behalf of any Investment Vehicle.
. may not serve on the board of directors of any publicly traded
company.
D. Registered Representatives:
. may not acquire Securities as part of an Initial Public Offering.
D. Pre-clearance of Personal Securities Transactions
1. Access, Investment and Portfolio Persons:
. must pre-clear each proposed securities transaction with the
Compliance Department or the designated Compliance Officer for
Accounts held in their names in the names of others in which they
hold a Beneficial Ownership interest. No transaction in Securities
may be effected without the prior written approval of the
Compliance Department or the designated Compliance Officer, except
as set forth below in Section D.4 which sets forth the securities
transactions that do not require pre-clearance.
. the Compliance Department or the designated Compliance Officer will
keep a record of the approvals, and the rationale supporting,
investments in IPO and private placement transactions.
2. Registered Representatives/Associates:
. must pre-clear transactions with the Compliance Department or
designated Compliance Officer only if the Registered Representative
or Associate knew or should have known at the time of the
transaction that, during the 24 hour period immediately preceding
or following the transaction, the Security was
7
<PAGE>
purchased or sold or was being considered for purchase or sale by
any Investment Vehicle.
3. Transactions that do not have to be pre-cleared:
. Purchases or sales over which the employee pre-clearing the
transaction ( the "Pre-clearing Person") has no direct or indirect
influence or control;
. Purchases, sales or other acquisitions of Securities which are non-
volitional on the part of the Pre-clearing Person or any Investment
Vehicle, such as purchases or sales upon exercise of puts or calls
written by the Pre-clearing Person, sales from a margin account
pursuant to a bona fide margin call, stock dividends, stock splits,
mergers, consolidations, spin-offs, or other similar corporate
reorganizations or distributions;
. Purchases which are part of an automatic dividend reinvestment plan
or automatic employee stock purchase plans;
. Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the extent
such rights were acquired from such issuer;
. Acquisitions of Securities through gifts or bequests; and
. Transactions in open-end mutual funds.
4. Pre-clearance procedures:
. All requests for pre-clearance of securities transactions must be
submitted to the Compliance Department or the designated Compliance
Officer by completing a Pre-clearance Request Form (attached as
Exhibit 1). SEI Employees located in the U.S. with access to the I
drive may also complete an electronic version of the form located
at I:\register\preform.doc.
. The following information must be provided on the Form:
a. Name, date, extension, title;
b. Transaction detail, i.e., whether the transaction is a
buy or sell; the security name and security type; number of
shares; price; date acquired if a sale; and whether the
security is held in a portfolio or Investment Vehicle, part
of an initial public offering, or part of a private
placement transaction; and
c. Signature and date; if electronically submitted, initial
and date.
8
<PAGE>
. The Compliance Department or the designated Compliance Officer will
notify the employee whether the request is approved or denied by
telephone or email, and by sending a copy of the signed form to the
employee. An employee is not officially notified that the
transaction has been pre-cleared until he or she receives a copy of
the signed form. Employees should retain copies of the signed form.
. Employees may not submit a Pre-clearance Request Form for a
transaction that he or she does not intend to execute.
. Pre-clearance authorization is valid for 3 business days only.
Transactions, which are not completed within this period, must be
resubmitted with an explanation why the previous pre-cleared
transaction was not completed.
. Investment persons must submit to the Compliance Department or the
designated Compliance Officer transaction reports showing the
transactions in all the Investment Vehicles for which SEI or a sub-
adviser serves as an investment adviser for the 24 hour period
before and after the date on which their securities transactions
were effected. Transaction reports need only be submitted for the
portfolios that hold or are eligible to purchase and sell the types
of securities proposed to be bought or sold by the Investment
Person. For example, if the Investment Person seeks to obtain
approval for a proposed equity trade, only the transaction reports
for the portfolios effecting transactions in equity securities are
required.
. The Compliance Department or the designated Compliance Officer will
maintain pre-clearance records for 5 years.
E. Reporting Requirements
1. Duplicate Brokerage Statements [All Employees]
. All SEI Employees are required to instruct their brokers/dealers to
file duplicate brokerage statements with the Compliance Department
at SEI Oaks. Employees in SEI's global offices are required to have
their duplicate statements sent to the offices in which they are
located. Statements must be filed for all Accounts (including those
in which employees have a Beneficial Ownership interest), except
those that trade exclusively in open-end mutual funds, government
securities, or SEI stock through the employee stock/stock option
plan. Failure of a broker-dealer to send duplicate statements will
not excuse an Employee's violation of this Section, unless the
Employee demonstrates that he or she took every reasonable step to
monitor the broker's or dealer's compliance.
. Sample letters instructing the brokers/dealers to send the
statements to SEI are attached as Exhibit 2, and may be found at
I:\register\407pers.doc and I:\register\permltr.doc. If the broker
or dealer requires a letter authorizing a SEI
9
<PAGE>
employee to open an account, the permission letter may used and may
be found at I:\register\permltr.doc. Please complete the necessary
information in the letter and forward a signature ready copy to the
Compliance Department (Courtney Collier or Cyndi Parrish).
. If no such duplicate statement can be supplied, the Employee should
contact the Compliance Department or the designated Compliance
Officer.
2. Initial Holdings Report [Access, Investment and Portfolio Persons and
Fund Officers]
. Access, Investment and Portfolio Persons and Fund Officers, must
submit an Initial Holdings Report to the Compliance Department or
designated Compliance Officer disclosing every security
beneficially owned directly or indirectly by such person within 10
days of becoming an Access, Investment or Portfolio Person or Fund
Officer. Initial Holding Reports that are not returned by the date
they are due will be considered late and will be reported as
violations of the Code of Ethics. Any person who repeatedly returns
the reports late (5 late filings) may be subject to a monetary fine
for his or her Code of Ethics violations.
. The Initial Holdings Report must include the following information:
(1) the title of the security; (2) the number of shares held; (3)
the principal amount of the security; and (4) the name of the
broker, dealer or bank where the security is held. The information
disclosed in the report must be current as of a date no more than
30 days before the report is submitted.
. The Initial Holdings Report is attached as Exhibit 3 to this Code
and can be found on the I drive at I:\register\inhold.doc.
3. Quarterly Report of Securities Transactions [Access, Investment and
Portfolio Persons and Fund Officers]
. Access, Investment and Portfolio Persons, and Fund Officers, must
submit quarterly transaction reports of the purchases and/or sales
of securities in which such persons have a direct or indirect
Beneficial Ownership interest (See Exhibit 4- Quarterly Transaction
Report). The report will be provided to all of the above defined
persons before the end of each quarter by the Compliance Department
or the designated Compliance Officer and must be completed and
returned no later than 10 days after the end of each calendar
quarter. Quarterly Transaction Reports that are not returned by the
date they are due will be considered late and will be reported as
violations of the Code of Ethics. Any person who repeatedly return
the reports late (5 late filings) may be subject to a monetary fine
for his or her Code of Ethics violations.
. The following information must be provided on the report:
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<PAGE>
a. The date of the transaction, the description and number
of shares, and the principal amount of each security
involved;
b. Whether the transaction is a purchase, sale or other
acquisition or disposition;
c. The transaction price; and
d. The name of the broker, dealer or bank through whom the
transaction was effected.
4. Annual Report of Securities Holdings [Access, Investment and
Portfolio Persons and Fund Officers]
. On an annual basis, Access, Investment and Portfolio Persons, and
Fund Officers, must submit to the Compliance Department or the
designated Compliance Officer an Annual Report of Securities
Holdings that contains a list of all securities subject to this
Code in which they have any direct or indirect Beneficial Ownership
interest (See Exhibit 5 - Annual Securities Holdings Report). The
information disclosed in the report must be current as of a date no
more than 30 days before the report is submitted. The report will
be provided to the above defined persons by the Compliance
Department or designated Compliance Officer. The form may also be
found on the I drive at I:\register\annualholdings.doc.
. Annual reports must be returned to the Compliance Department or the
designated Compliance Officer within 30 days after the end of the
calendar year-end. Annual Reports that are not returned by the date
they are due will be considered late and will be reported as
violations of the Code of Ethics. Any person who repeatedly returns
the reports late (5 late filings) may be subject to a monetary fine
for his or her Code of Ethics violations.
5. Annual Certification of Compliance [All Employees]
. All employees will be required to certify annually that they:
- have read the Code of Ethics;
- understand the Code of Ethics; and
- have complied with the provisions of the Code of Ethics.
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<PAGE>
. The Compliance Department or the designated Compliance Officer will
send out annual forms (attached as Exhibit 6) to all employees that
must be completed and returned no later than 30 days after the end
of the calendar year.
F. Detection and Reporting of Code Violations
The Compliance Department or the designated Compliance Officer will:
. review the personal securities transaction reports or
duplicate statements filed by Employees and compare the
reports or statements to the Investment Vehicles' completed
portfolio transactions. The review will be performed on a
quarterly basis. If the Compliance Department or designated
Compliance Officer determines that a compliance violation may
have occurred, the Compliance Department will give the person
an opportunity to supply explanatory material.
. prepare an Annual Issues and Certification Report to the Board
of Trustees or Directors of the Investment Vehicles that, (1)
describes the issues that arose during the year under this
Code, including, but not limited to, material violations of
and sanctions under the Code, and (2) certifies that SEI has
adopted procedures reasonably necessary to prevent its access,
investment and portfolio personnel from violating this Code;
and
. prepare a written report to SEI management personnel outlining
any violations of the Code together with recommendations for
the appropriate penalties.
. prepare a written report detailing any approval(s) granted for
the purchase of securities offered in connection with an IPO
or a private placement. The report must include the rationale
supporting any decision to approve such a purchase.
G. Violations of the Code of Ethics
1. Penalties:
. Employees who violate the Code of Ethics may be subject to serious
penalties which may include:
- written warning;
- reversal of securities transaction;
- restriction on trading privileges;
- disgorgement of trading profits;
- fine;
- suspension or termination of employment; and/or
12
<PAGE>
- referral to regulatory or law enforcement agencies.
2. Penalty Factors:
. Factors which may be considered in determining an appropriate penalty
include, but are not limited to:
- the harm to clients;
- the frequency of occurrence;
- the degree of personal benefit to the employee;
- the degree of conflict of interest;
- the extent of unjust enrichment;
- evidence of fraud, violation of law, or reckless disregard of a
regulatory requirement; and/or
- the level of accurate, honest and timely cooperation from the
employee.
H. Confidential Treatment
. The Compliance Department or the designated Compliance Officer will
use their best efforts to assure that all requests for pre-clearance,
all personal securities transaction reports and all reports for
securities holding are treated as "Personal and Confidential."
However, such documents will be available for inspection by
appropriate regulatory agencies and other parties within and outside
SEI as are necessary to evaluate compliance with or sanctions under
this Code.
I. Definitions Applicable to the Code of Ethics
1. Account - a securities trading account held by an Employee and by any such
person's spouse, minor children and adults residing in his or her household
(each such person, an "immediate family member"); any trust for which the
person is a trustee or from which the Employee benefits directly or
indirectly; any partnership (general, limited or otherwise) of which the
Employee is a general partner or a principal of the general partner; and any
other account over which the Employee exercises investment discretion.
2. Beneficial Ownership - Security ownership in which a person has a direct or
indirect financial interest. Generally, an employee will be regarded as a
beneficial owner of Securities that are held in the name of:
a. a spouse or domestic partner;
b. a minor child;
c. a relative who resides in the employee's household; or
d. any other person IF: (a) the employee obtains from the securities
benefits substantially similar to those of ownership (for example,
income from securities that are held by a spouse); or (b) the
employee can obtain title to the securities now or in the
13
<PAGE>
future.
4. Control - means the same as it does under Section 2(a)(9) of the 1940 Act.
Section 2(a)(9) provides that "control" means the power to exercise a
controlling influence over the management or policies of a company, unless
such power is solely the result of an official position with such company.
Ownership of 25% or more of a company's outstanding voting securities is
presumed to give the holder of such securities control over the company. The
facts and circumstances of a given situation may counter this presumption.
5. Initial Public Offering - an offering of securities for which a registration
statement has not been previously filed with the U.S. SEC and for which
there is no active public market in the shares.
5. Purchase or sale of a Security - includes the writing of an option to
purchase or sell a security.
6. Security - includes notes, bonds, stocks (including closed-end funds),
convertibles, preferred stock, options on securities, futures on broad-based
market indices, warrants and rights. A "Security" does not include direct
obligations of the U.S. Government; bankers' acceptances, bank certificates
of deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements; and, shares issued by open-end mutual
funds.
J. Recordkeeping
SEI will maintain records as set forth below. These records will be maintained
in accordance with Rule 31a-2 under the 1940 Act and the following requirements.
They will be available for examination by representatives of the Securities and
Exchange Commission and other regulatory agencies.
1. A copy of this Code that is, or at any time within the past five years has
been, in effect will be preserved in an easily accessible place.
2. A record of any Code violation and of any sanctions taken will be preserved
in an easily accessible place for a period of at least five years following
the end of the fiscal year in which the violation occurred.
3. A copy of each Quarterly Transaction Report, Initial Holdings Report, and
Annual Holdings Report submitted under this Code, including any information
provided in lieu of any such reports made under the Code, will be preserved
for a period of at least five years from the end of the fiscal year in
which it is made, for the first two years in an easily accessible place.
4. A record of all persons, currently or within the past five years, who are
or were required to submit reports under this Code, or who are or were
responsible for reviewing these reports, will be maintained in an easily
accessible place.
14
<PAGE>
5. A record of any decision, and the reasons supporting the decision, to
approve the acquisition of securities acquired in an IPO or limited
--- -------
offering, for at least five years after the end of the fiscal year in which
--------
the approval is granted.
III. INSIDER TRADING POLICY
All Employees are required to refrain from investing in Securities based on
material nonpublic inside information. This policy is based on the U.S. federal
securities laws that prohibit any person from:
1. trading on the basis of material, nonpublic information;
2. tipping such information to others;
3. recommending the purchase or sale of securities on the basis of such
information;
4. assisting someone who is engaged in any of the above activities; and
5. trading a security, which is the subject of an actual or impending tender
offer when in possession of material nonpublic information relating to the
offer.
This includes any confidential information that may be obtained by Access,
Investment and Portfolio Persons, and Fund Officers, regarding the advisability
of purchasing or selling specific securities for any Investment Vehicles or on
behalf of clients. Additionally, this policy includes any confidential
information that may be obtained about SEI Investments Company or any of its
affiliated entities. This Section outlines basic definitions and provides
guidance to Employees with respect to this Policy.
A. What is "Material" Information?
-------------------------------
Information is material when there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions.
Generally, if disclosing certain information will have a substantial effect on
the price of a company's securities, or on the perceived value of the company or
of a controlling interest in the company, the information is material, but
information may be material even if it does not have any immediate direct effect
on price or value. There is no simple "bright line" test to determine when
information is material; assessments of materiality involve a highly fact-
specific inquiry. For this reason, any question as to whether information is
material should be directed to the Compliance Department.
15
<PAGE>
B. What is "Nonpublic" Information?
--------------------------------
Information about a publicly traded security or issuer is "public" when it has
been disseminated broadly to investors in the marketplace. Tangible evidence of
such dissemination is the best indication that the information is public. For
example, information is public after it has become available to the general
public through a public filing with the SEC or some other governmental agency,
the Dow Jones "tape" or the Wall Street Journal or some other publication of
general circulation, and after sufficient time has passed so that the
information has been disseminated widely.
Information about securities that are not publicly traded, or about the issuers
of such securities, is not ordinarily disseminated broadly to the public.
However, for purposes of this Policy, such private information may be considered
"public" private information to the extent that the information has been
disclosed generally to the issuer's security holders and creditors. For
example, information contained in a private placement memorandum to potential
investors may be considered "public" private information with respect to the
class of persons who received the memorandum, but may still be considered
---------------------------
"nonpublic" information with respect to creditors who were not entitled to
- --------------------------------------------------------------------------
receive the memorandum. As another example, a controlling shareholder may have
- ----------------------
access to internal projections that are not disclosed to minority shareholders;
such information would be considered "nonpublic" information.
C. Who Is an Insider?
------------------
Unlawful insider trading occurs when a person, who is considered an insider,
with a duty not to take advantage of material nonpublic information violates
that duty. Whether a duty exists is a complex legal question. This portion of
the Policy is intended to provide an overview only, and should not be read as an
exhaustive discussion of ways in which persons may become subject to insider
trading prohibitions.
Insiders of a company include its officers, directors (or partners), and
employees, and may also include a controlling shareholder or other controlling
person. A person who has access to information about the company because of some
special position of trust or has some other confidential relationship with a
company is considered a temporary insider of that company. Investment advisers,
lawyers, auditors, financial institutions, and certain consultants and all of
their officers, directors or partners, and employees are all likely to be
temporary insiders of their clients.
Officers, directors or partners, and employees of a controlling shareholder may
be temporary insiders of the controlled company, or may otherwise be subject to
a duty not to take advantage of inside information.
16
<PAGE>
D. What is Misappropriation?
-------------------------
Misappropriation usually occurs when a person acquires inside information about
Company A in violation of a duty owed to Company B. For example, an employee of
Company B may know that Company B is negotiating a merger with Company A; the
employee has material nonpublic information about Company A and must not trade
in Company A's shares.
For another example, Employees who, because of their association with SEI,
receive inside information as to the identity of the companies being considered
for investment by SEI Investment Vehicles or by other clients, have a duty not
to take advantage of that information and must refrain from trading in the
securities of those companies.
E. What is Tipping?
----------------
Tipping is passing along inside information; the recipient of a tip (the
"tippee") becomes subject to a duty not to trade while in possession of that
information. A tip occurs when an insider or misappropriator (the "tipper")
discloses inside information to another person, who knows or should know that
the tipper was breaching a duty by disclosing the information and that the
tipper was providing the information for an improper purpose. Both tippees and
tippers are subject to liability for insider trading.
F. Identifying Inside Information
------------------------------
Before executing any securities transaction for your personal account or for
others, you must consider and determine whether you have access to material,
nonpublic information. If you think that you might have access to material,
nonpublic information, you must take the following steps:
1. Report the information and proposed trade immediately to the Compliance
Department or designated Compliance Officer;
2. Do not purchase or sell the securities on behalf of yourself or others; and
3. Do not communicate the information inside or outside SEI, other than to the
Compliance Department or designated Compliance Officer.
These prohibitions remain in effect until the information becomes public.
Employees managing the work of consultants and temporary employees who have
access to material nonpublic information are responsible for ensuring that
consultants and temporary employees are aware of this Policy and the
consequences of non-compliance.
G. Trading in SEI Investments Company Securities
---------------------------------------------
This Policy applies to all employees with respect to trading in the securities
of SEI Investments Company, including shares held directly or indirectly in the
Company's 401(k) plan. Employees, particularly "officers" (as defined in Rule
16(a)-1(f) in the Securities
17
<PAGE>
Exchange Act of 1934, as amended), of the company should be aware of their
fiduciary duties to SEI and should be sensitive to the appearance of impropriety
with respect to any of their personal transactions in SEI's publicly traded
securities. Thus, the following restrictions apply to all transactions in SEI's
publicly traded securities occurring in an employee's Account and in all other
accounts in which the employee benefits directly or indirectly, or over which
the employee exercises investment discretion.
. Blackout Period - Directors and Officers are prohibited from buying or
selling SEI's publicly traded securities during the blackout period. The
blackout periods are as follows:
. for the first, second and third quarterly financial reports - begins at
the close of the prior quarter and ends after SEI publicly announces the
financial results for that quarter.
. for the annual and fourth quarter financial reports - begins on the
6/th/ business day of the first month following the end of the calendar
year-end and ends after SEI publicly announces its financial results.
All securities trading during this period may only be conducted with the
approval of SEI's General Counsel or the Compliance Director. In no event may
securities trading in SEI's stock be conducted while an Director or Officer
of the company is in possession of material nonpublic information regarding
SEI.
. Major Events - Employees who have knowledge of any SEI events or developments
that may have a "material" impact on SEI's stock that have not been publicly
announced are prohibited from buying or selling SEI's publicly traded
securities before such announcements. (See definition of "material
information" contained in III. A. above.)
. Short Selling and Derivatives Trading Prohibition - All employees are
prohibited from engaging in short sales and options trading of SEI's common
stock.
Section 16(a) directors and officers are subject to the following additional
trading restriction.
. Short Swing Profits - Directors and Officers may not profit from the purchase
and sale or sale and purchase of SEI's securities within 6 months of acquiring
or disposing of Beneficial Ownership of that Security.
H. Violations of the Insider Trading Policy
----------------------------------------
Unlawful trading of securities while in possession of material nonpublic
information, or improperly communicating that information to others, is a
violation of the federal securities laws and may expose violators to stringent
penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten
years imprisonment. The SEC can recover the profits gained or losses avoided
through the violative trading, a penalty of up to three times the illicit
windfall or loss avoided, and an order permanently enjoining violators from such
activities. Violators may be sued by investors seeking to recover damages for
insider trading violations. In addition, violations by an employee of SEI may
expose SEI to liability. SEI
18
<PAGE>
views seriously any violation of this Policy, even if the conduct does not, by
itself, constitute a violation of the federal securities laws. Violations of
this Policy constitute grounds for disciplinary sanctions, including dismissal.
19
<PAGE>
SEI INVESTMENTS COMPANY
CODE OF ETHICS AND INSIDER TRADING POLICY
EXHIBITS
Exhibit 1 Pre-clearance Request Form
Exhibit 2 Account Opening Letters to Brokers/Dealers
Exhibit 3 Initial Holdings Report
Exhibit 4 Quarterly Transaction Report
Exhibit 5 Annual Securities Holdings Report
Exhibit 6 Annual Compliance Certification
20
<PAGE>
EXHIBIT 1
21
<PAGE>
- ------------------------------------------------------------------------------
PRECLEARANCE REQUEST FORM
- ------------------------------------------------------------------------------
Name: Date:
Ext #: Title/Position:
- ------------------------------------------------------------------------------
Transaction Detail: I request prior written approval to execute the following
trade:
- ------------------------------------------------------------------------------
Buy: [_] Sell: [_] Security Name: Security type:
No. of Shares: Price: If sale, date acquired:
Held in an SEI Portfolio: Yes [_] No [_] If yes, provide: (a) the Portfolio's
name:
(b) the date Portfolio bought or sold the security:
Initial Public Offering: Private Placement:
[_] Yes [_] No [_] Yes [_] No
- -------------------------------------------------------------------------------
Disclosure Statements
- -------------------------------------------------------------------------------
I hereby represent that, to the best of my knowledge, neither I nor the
registered account holder: (1) have knowledge of a possible or pending purchase
or sale of the above security in any of the portfolios for which SEI acts as an
investment adviser, distributor, administrator, or for which SEI oversees the
performance of one or more it sub-advisers; (2) is in possession of any material
nonpublic information concerning the security to which this request relates; and
(3) is engaging in any manipulative or deceptive trading activity.
I acknowledge that if the Compliance Officer to whom I submit this written
request determines that the above trade would contravene SEI Investments
Company's Code of Ethics and Insider Trading Policy ("the Policy"), the
Compliance Officer in his or her sole discretion has the right not to approve
the trade, and I undertake to abide by his or her decision.
I acknowledge that this authorization is valid for a period of three (3)
business days.
- -------------------------------------------------------------------------------
Signature: Date:
- -------------------------------------------------------------------------------
Compliance Officer's Use Only
- -------------------------------------------------------------------------------
Approved: [_] Disapproved: [_] Date:
By: Comments:
Transaction Report Received: Yes [_] No [_]
- -------------------------------------------------------------------------------
Note: This preclearance will lapse at the end of the day on , 20 . If
you decide not to effect the trade, please notify the Compliance Department or
designated Compliance Officer immediately.
22
<PAGE>
EXHIBIT 2
23
<PAGE>
Date:
Your Broker
street address
city, state zip code
Re: Your Name
your S.S. number or account number
Dear Sir or Madam:
Please be advised that I am an employee of SEI Investments Distribution, Co., a
registered broker/dealer an/or SEI Investments Management Corporation, a
registered investment adviser. Please send duplicate statements only of this
brokerage account to the attention of:
SEI Investments Company
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456
This request is made pursuant to SEI's Code of Ethics and Insider Trading Policy
and Rule 3050 of the NASD's Code of Conduct.
Thank you for your cooperation.
Sincerely,
Your name
24
<PAGE>
Date:
[Address]
Re: Employee Name
Account #
SS#
Dear Sir or Madam:
Please be advised that the above referenced person is an employee of SEI
Investments Distribution, Co., a registered broker/dealer and/or SEI Investments
Management Corporation, a registered investment adviser. We grant permission
for him/her to open a brokerage account with your firm and request that you send
duplicate statements only of this employee's brokerage account to:
SEI Investments Company
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456
This request is made pursuant to SEI's Code of Ethics and Insider Trading Policy
and Rule 3050 of the NASD's Code of Conduct.
Thank you for your cooperation.
Sincerely,
Cynthia M. Parrish
Compliance Director
25
<PAGE>
EXHIBIT 3
<PAGE>
SEI INVESTMENTS COMPANY
INITIAL HOLDINGS REPORT
Name of Reporting Person:_________________________________________________
Date Person Became Subject to the Code's Reporting Requirements:__________
Information in Report Dated as of: _______________________________________
Date Report Due: _________________________________________________________
Date Report Submitted: ___________________________________________________
Securities Holdings
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name of Issuer and Title of Security No. of Shares (if applicable) Principal Amount, Maturity Date and
Interest Rate (if applicable)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
</TABLE>
If you have no securities holdings to report, please check here. [_]
Securities Accounts
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Name of Broker, Dealer or Bank Name(s) on and Type of Account
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
</TABLE>
If you have no securities accounts to report, please check here. [_]
I certify that I have included on this report all securities transactions and
accounts required to be reported pursuant to the Code of Ethics.
Signature: ____________________ Date: ________
Received by: __________________
2
<PAGE>
EXHIBIT 4
3
<PAGE>
SEI INVESTMENTS COMPANY
QUARTERLY TRANSACTION REPORT
Transaction Record of Securities Directly or Indirectly Beneficially Owned
For the Quarter Ended _____________
Name:________________________________________
Submission Date:_____________________________
Securities Transactions
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date of Transaction Name of Issuer and No. of Shares (if Principal Amount, Type of Transaction Price Name of Broker,
Title of Security applicable) Maturity Date and Dealer or Bank
Interest Rate (if Effecting Transaction
applicable)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
</TABLE>
If you had no reportable transactions during the quarter, please check here. [_]
Securities Accounts
If you established an account within the quarter, please provide the following
information:
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________
Name of Broker, Dealer or Bank Date Account was Established Name(s) on and Type of Account
______________________________________________________________________________________________________________
<S> <C> <C>
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
</TABLE>
If you did not establish a securities account during the quarter, please check
here. [_]
4
<PAGE>
This report is required of all officers, directors and certain other persons
under Section 204 of the Investment Advisers Act of 1940 and Rule 17j-1 of the
Investment Company Act of 1940 and is subject to examination. Transactions in
direct obligations of the U.S. Government need not be reported. In addition,
persons need not report transactions in bankers' acceptances, certificates of
deposit, commercial paper or open-end investment companies. The report must be
returned within 10 days of the applicable calendar quarter end. The reporting
of transactions on this record shall not be construed as an admission that the
reporting person has any direct or indirect beneficial ownership in the security
listed.
By signing this document, I represent that all reported transactions were pre-
cleared through the Compliance Department or the designated Compliance Officer
in compliance with the SEI Investments Company Code of Ethics and Insider
Trading Policy. In addition, I certify that I have included on this report all
securities transactions and accounts required to be reported pursuant to the
Policy.
Signature:__________________________
Received by: _______________________
5
<PAGE>
EXHIBIT 5
6
<PAGE>
SEI INVESTMENTS COMPANY
ANNUAL SECURITIES HOLDINGS REPORT
As of December 31, ____
Name of Reporting Person: __________________
Securities Holdings
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Name of Issuer and Title of Security No. of Shares (if applicable) Principal Amount, Maturity Date and
Interest Rate (if applicable)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
</TABLE>
If you had no securities holding to report this year, please check here. [_]
Securities Accounts
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Name of Broker, Dealer or Bank Date Account was Established Name(s) on and Type of Account
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
____________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________
</TABLE>
If you have no securities accounts to report this year, please check here. [_]
I certify that the above list is an accurate and complete listing of all
securities in which I have a direct or indirect beneficial interest.
________________________ _________________________
Signature Received by
_________
Date
Note: Do not report holdings of U.S. Government securities, bankers'
acceptances, certificates of deposit, commercial paper and mutual funds.
7
<PAGE>
EXHIBIT 6
<PAGE>
SEI INVESTMENTS COMPANY
CODE OF ETHICS
ANNUAL COMPLIANCE CERTIFICATION
TO: Compliance Department
FROM (Please Print):
DATE:
1. I hereby acknowledge receipt of a copy of the Code of Ethics and Insider
Trading Policy.
2. I have read and understand the Code of Ethics and Insider Trading Policy
and recognize that I am subject thereto.
3. I hereby declare that I have complied with the terms of the Code of Ethics
and Insider Trading Policy.
Signature: __________________
Date:_________
Received by: ________________
9
