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Home My WebLink About1998 04 28 STI Capital Management Investment Performance Report 12/31/97• • • • • City of Winter Springs Money Purchase Pension Plan Investment Pertormance Report December 31, 1997 .~ ,.. uF. ~ ~.. ,_ - a ':~ cis n~ r , . • • 1 ~ Loner HiQber • • r i 1 • Fuud CataSsry Lipper Mid Cap • Fund Objective • The fund seeks long-term capital growth and income by investing in the stocks of compa- Hies with a market capitalization between • $500 million and $5 billion. • Inredment Process The fund's managers use a bottorr>-up stock • selection process to find high quality compa- nies wlih ahistory of earnings growth, which • appear historically undervalued relative to the market. Summary DeacripHorl • Primarily irnests in midsize companies • Focuses on high quality stocks • Growthorientation • Bottom•up stock selection process TicNer Symbol SAGTX Securib Description US Filter Corp. Psreeut of Total Equiq~ (%) 3.94 Networks Associates Inc. 3.22 Teradyne Inc. 2.91 Samsonite Corp. 2.64 Allied Waste Inds Inc. 2.55 ADC Telecommunications Inc. 2.44 Watson Pharmaceuticals Inc. 2.24 LClinternationallnc. 2.24 Solectron Corp. 2.23 Sawtek Inc. 2.21 STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. ~ORTFOIIr Characterhtic Fund SiP MidCap X00 PlusllYTalrs Dividend Yield (current)* 0.6 1.2 Earnings Per Share Growth (5 year estimate) 22.6 18.0 + Market Capitalization ($bip 2.5 3.6 Price-to-Book 4.3 3.6 + Price•to-Earninl:s (12 months trailir~) 25.8 26.6 Return on Equity 14.7 15.8 STI Classic Mid-Cap Equity Fund :;:: S&P MidCap 400 For the most current information on the portfolio, please call STI Capital Management at 1-800-926.4STI. *The SEC 30-day yield is 0.01%. r ,~ Su STI classic Intern.ati.o.a1 ~ ~ ~-ay~ J~- ,,~ .~ Fund - ~~ ~ r . ~~ , ~~~ - At of DeambK 93,1987 ~. `~° ` '~"~~ x + 'X;,r; • • ~1 1 1 1 • Lower Hider Characteridie Fund INSCIEAFEIndex Plua/Minus Dividend Yield (current) 2.4 1 9 + O O O O • Market Capitalization (US $biq 16.5 59 5 • , , , Priceto-Book 3.5 31 + Fund Category Price-to-Cash Flow 11.4 10.3 + • Lipper International Price-to-Earnirtks 17.6 23 6 - • Fund Objective 1 1 1 The fund seeks long-term capital appreciation by investing primarily in a diversified portfolio ~ STI Classic International Equity Fund :::: MSCI EAFE Index • of equfty securities of foreign issuers. Capital Equipment 19.9 Invedmellt Process ::13.a ............................ The fund's managers employ abottom-up Consumer Goods 2a s stock selection process to find high quality '3:'> zz. 2 companies selling at a discount to their glob- . al industry peers. Energy e.9 ::;:;:;::::1:::::10.3 $YIINtIary ~~~~ Finance 29 7 • Primaril invests in norrU.S. com anies • Y P <:>' 20 • Focuses on high quality stocks < :::........................................................ • • Value~orientation Materials 5.6 • Bottom-up stock selection process ~ 1 • Multiple Industry '0.0 ~:~:::::4.2 Ticker symbol • STITX Services 11.a :. :% '0 '21.7 ..... s ..; ~ ;:.; ;; • 1 1 I , SeCYllly Percent OI • ~ettflptlOn Total EgYlty 1%j 1 1 1 • ING Grcep NV CVA 2.63 STI Classic International Equity Fund :;1 MSCI EAFE Index Novartis AG 2.53 Asia z.z • ......:::::::4.5 Bass PLC 2.47 nrlEr 23.7 • Nestle SA 2.19 ........>::::3 :................................::::::23.3 Japan ~ s Honda Motor Co. 1.90 ..... ... _,:i : :::.:::::::::: 25.2 • Bayer AG 1.87 Latin America X2.6 o.o ACCOr 1.86 Middle East 4.2 • Skandia Forsakring AB 1.83 0.0 LucasvarftY 1.81 srandinavia 4 9 10.5 • Technip 1.74 wPn ,n F,~r~nv :..........:. as a ................... >:;~:39.0 ~:~i:~::~:4 ~::4<:;i1:~ :.................................................................................... • Other ~~~~~ STI Classic Funds: t:::;:3.1 • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. For the most current information on the portfolio, please call STI Capital Management at 1-800-926~4STI. • l.orver Higher • • ~ i i • Frnd Category Lipper Small Cap • Fund Objective • The fund seeks long-term capital growth and f comps income by investing in the stocks o Hies with a market capitalization between • $50 million and $1 billion. • Investrrrent Process ' s managers employ a valueorient- The fund • ed, bottom-up stock selection process focus- hi h c ing on dividend paying companies, w appear undervalued by the market. • snnrrury Description • • Primarily invests in small cap stocks • Focuses on income • • Valueorientation • Bottom-up stock selection process • Ticker symbol ~ scETx Security Percent of Description Tohl Equib (%) Regal-Beloit Corp. 3.14 Zurn Industries Inc. 3.01 Quaker State Corp. 2.99 Interface Inc. 2.75 Universal Foods Coro. 2.53 Guilford Mills Inc. 2.50 Harman International Inds 2.49 Sotheby's Holdings 2.35 Libbey Inc. 2.12 Banta Corp. 2.12 STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. Characterbtic Fund Rtlrsse112000 Plus/Minus Dividend Yield (current)* 2.0 1.3 + Earnings Per Share Growth (5 Yr estimate) 18.0 14.3 + Market Capitalization ($100mi1) 5.7 8.2 - Price-to-Book 2.2 2.9 - Price-to-Earnings (12 months trailing) 15.7 21.0 - Return on Equity 13 0 13.2 - INDUSTRY CONCENTRATION - ••r For the most current information on the portfolio, please call STI Capital Management at 1-800-9264STI. *The SEC 30day yield is 0.99%. T R, 4 ..~ etc' L - a i ~r !. :~... -. .. * ~~ (Y ~ - ~ _ .~: ».~: ~ ,- Lower Higrlar • • i i i • Fund Category Lipper Mid Cap • Fund Objective • The fund seeks long-term capital growth and income by investing in the stocks of compa• Hies with a market capitalization between • $500 million and $5 billion. • Inredmerrt Process The fund's managers use a bottonrup stock • selection process to find high quality compa- nies with a history of earnings growth, which • appear historically undervalued relative to the market. Swmlary Description • Primarily irnests in mld•size companies • Focuses on high quality stocks • Growthorientation • Bottom-up stock selection process Ticker Symbd SAGTX Securib Percent of Description Total t:gnib 1%1 US Filter Corp. 3.94 Networks Associates Inc. 3.22 Teradyne Inc. 2.91 Samsonite Corp. 2.64 Allied Waste Inds Inc. 2.55 ADC Telecommunications Inc. 2.44 Watson Pharmaceuticals Inc. 2.24 LCllnternationallnc. 2.24 Solectron Corp. 2.23 Sawtek Inc. 2.21 STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. anRTFnllf. Ckaracterisitie Fund SiP MklCap X00 Rus/6Onus Dividend Yield (current)* 0.6 1.2 Earnings Per Share Growth (5 year estimate) 22.6 18.0 + Market Capitalization ($bip 2.5 3.6 Price-to-Book 4.3 3.6 + Price-to-Earnings (12 months trailing) 25.8 26.6 Return on Equity 14.7 15.8 STI Classic Mid-Cap Equity Fund '::: S&P MidCap 400 For the most current information on the portfolio, please call STI Capital Management at 1-804926-4STI. •The SEC 30~day yield is 0.01%. The mid~ap portion of the market under- performed the large capitalization companies during the fourth quarter of 1997, as investors sought the safety and security of household names. Ironically, these large liquid companies often have more exposure to Asia than mid~ap companies. That's particularly true in technolo- gy, the largest portion of the Mid Cap Growth fund, where technology stocks fell sharply. For instance, even though Teradyne's exposure to Asia is only about 15% of sales, and earnings met expectations, the stock fell 30%. On the plus side, the telecommunications companies in the portfolio had a strong quar- ter. For instance, ADC Telecommunications, which makes equipment and parts for tele phone companies was up 20%. In financial services, every stock in the portfolio was up for the quarter, buoyed by lower interest rates and the continuing consolidation trend. First Security, aUtah-based bank that does business in several western states, was up 25%. PMI Group, a mortgage insurance underwriter, was up 26% as the company continued to benefit from lower mortgage rates and the rush to refi- nance. Another strong area was In the tradi- tionally defensive personal care, drug, food and beverage stocks, such as Dlal Corp., a maker of soap products, which was up 18%. In health care, Jones Medical and Watson Pharmaceuticals, pharmaceutical manufactur- ers, were up sharply for the quarter. The biggest wlldcard for 1998 Is corpo- rate earnings, and ineestors continue to lie jit- tery when a company disappoints. For instance, our largest holding, U.S. Filter, missed their third quarter profit forecast by one penny. Even though the company's earnings were up 38% from the year-ago quarter, the stock fell from $40 to $27 on the news. Fortunatey, these dips are often buying oppor- tunities because the stocks generally recover. Maualixed Since ihros oae Twe Three Inception Months Year Years Years 04/0?194 Fund -2.26 21.23 18.29 22.45 16.33 Lipper Mid Cap Fd Index -4.79 17.55 16.92 22.08 _ S&P MidCap 400 Index 0.83 32.25 25.56 27.33 1993 1994 1995 1996 1997 First Quarter • • 8.71 3.78 -2.89 Second Quarter -3.66 8.98 1.95 11.82 Third Quarter 6.10 8.52 3.59 14.22 Fourth Quarter • -2.38 2.07 5.30 -2.26 Ysar~to-DatalCa bndar Fund -0.22 31.22 15.42 21.23 Lipper Mid Cap Fd Index • 12.26 33.08 16.28 17.55 S&P MidCap 400 Index • 0.22 30.94 19.20 32.25 Characteristic Value Alpha -0.95 Beta 0.89 Rz 0.92 Standard Deviation 11.28 Star Size d Period Ratirr~ Universe Three-Year *** 2143 Overall *#* Universe: Oorr,estic Epulty Fulls STI O Capital Management 911 CsgM Mrurrn•nt 200 ball Onnp Awnus, 8M nror OAndo, Fl•Ada 32901 1~00.829~ST1 srwnc race 12/sv 1. Managers' Quartery Perspective is not a complete analysis of every matedal fact rep- resenting arty country, industry, security or irnestment. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources believed to be reliable but no representation is made by STI Capital Management or its affiliates as to its completeness a accuracy. 2. Cumulative and Annualized Total Return Performance represent the change and/or average annual change in the value of an investment over the specified periods, assuming reirnestment of dividends and capi- tal gains at net asset value. 3. Quartery, Yearto-Date, Calendar and Cumulative Performance show the change in value of an investment over the periods indi- cated. Calculations assume reirnestment of dividends and capital gains at net asset value. 4. Risk Data is calculated using annualized monthry returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. 5. Morningstar ratings reflect historical risk- adJusted performance as of September 30, 1997. Ratings are calculated from the fund's one, three-, five, and/or ten-year annualized returns in excess of 90-0ay Treasury bill returns and a dsk factor that reflects fund performance below 90day Till returns. The top ten percent of the funds in an irnestmerrt category receive five stars, 22.5% receive four stars, 35% receive three stars, 22.5% receive two stars, and the bot• tom 10% receive one star. Index performance includes reirnested divi- dends. One cannot irnest directry in an index, which includes no management fees. The historical performance data shown per- tain only to the fund's trust shares. Other share classes are available and are subject ~~ • to different fees and expenses, which will • affect their performance. Please see the prospectus for more details regarding the fund's share classes. This material is authorized for distribution only when accompanied or proceeded by a current prospectus of the STI Classic Mid-Cap Equity Fund, which contains more information including fees and expenses. Please read the prospectus carefully before irnesting money. The distributor of STI Classic Funds is SEI Irnestments Distribution Co., Oaks, Pennsylvania 19456, which is not affiliated with SunTrust or its affiliates. Imestmerrt return and prYrelpd value Muctrf ats so that your shares, when rodesmed, may be worth moro a bss than theM algE nal cost. Past perfomurrce cannot guarantee future results. • • • • • • • .• :. _ _ _ _ _ _ t ~ ~ t 4i'(f ~t.~ -. '~ , ~ ~.~ ~ ~ i, ,~ ~ ~~~~ _ IS< °°-sa--~., ~,y i -c ~ , STI Clas-sic Internatsoal ~ ~ - 4 ~~ '~, . rx,.:ti... E fund , ~ ~ , ~~ r - P S, ~~~~``____ y . t,: ~~ . - • • ~ I ~ 1 ~ I 1 • Eoa~r Niger Characteridic Fund MSCI EAFE Index Plus/Minus Dividend Yield (current) 2.4 1 9 + i O O O O • M k t C i li i ar e ap ta zat on (US $biq 16.5 59.5 • I , r Price-to-Book 3.5 3.1 + Price-to~Cash Flow 11.4 10.3 + Fund Category • Lipper International Priceto-Earnirt~s 17.6 23.6 - • Fund Objective I r I The fund seeks long-term capital appreciation • by investing primarily in a diversified portfolio ~ S71 Classic International Equity Fund ::::: MSCI EAFE Index of equity securities of foreign issuers. Capital Equipment 19.9 Inrestmerrt Process >:;:?;:13.8 The fund's managers employ a bottortrup stock selection process to find high quality Consumer Goods za a <:':> 2 . 22 companies selling at a discount to their glob- ` " . al industry peers. 9.9 EnerBY : i' ~ 10 3 ! . ..:::::.:.._......_.._ • Summary DefCription Finance 29.7 Prim ril inv inn n- m a ests o U S co anies P Y ; ::.:....................................... i[!>: zo .7 ................. • Focuses on high quality stocks • • Valueorientation Materials 5.6 ?i'i 7.1 • Bottom-up stock selection process . • Multiple Industry 0.0 4.2 Ticker Symbol • STITX Services u.a >:21.7 Securrq~ Percent of • Description Total Equib (%1 I r r • ING Gfoep NV CVA 2.63 STI Classic International Equity Fund ::~: MSCI EAFE Index Novartis AG 2.53 Asia X2.2 • ......::::i::a.5 Bass PLC 2.47 Central Euroce 23.7 • Nestle SA 2.19 ........! ::s :................................['>:::::23.3 laoan 7.s Honda Motor Co. 1.90 ................................................................: :~:;:; 25.2 • Bayer AG 1.87 Latin America ;12.6 0.0 ACCI)r 1.86 Middle East a.2 • 0.0 Skandia Forsakring AB 1.83 Scandinavia i0.5 LucasvaritY 1.81 a.9 • Technip 1.74 western Euroce aaa ~»:~:..<s:~>:~> >::>::> ::.......................................... >":::39.0 .......................................... • a.a Other STI Classic Funds: :::i:::::3 ~ • Are not insured by the FDIC. , • • Do not have a bank guarantee. • May lose value. • For the most current information on the portfolio, please call STI Capital Management at 1.800.926-4STI. During the fourth quarter of 1997, we continued to find excellent investment oppor- tunities in Europe. Although they have a long way to go to match U.S. standards, European companies are cutting costs, incentivizirg management and focusing on the needs of shareholders. In Europe as in the U.S., financial ser- vices stocks have performed very well. For example, San Paolo, an Italian bank, is oper- ating in a fast growing market and is consid• ered a merger candidate. The banks in Italy are benefiting from the transfer of pensions from public to private hands. Another strong bank in Europe is the Bank of Ireland, which is benefiting from a strong Irish economy where there is a highly educated labor force. Belgium-based Dexia serves the municipal market, which is benefiting from lower inter- est rates and investor perception that the municipal market is, though unexcfting, very steady. In business services, U.K.-based Compass Group, which provides catering ser- vices for many companies in Europe and the U.S., has been a strong performer. As a ser- vice company, its returns on capital are high. In periods of corporate restructuring, compa- niestend to outsource a great deal, benefit- ing companies such as Compass Group. European valuations are roughly 25-30 times earnings, about half the price/earnings multiples in Japan. Although we are still investing in Japanese exporters, which have done well as the yen continues to fall, we haven not made any significant new commit- ments to Japan to high valuations there. The fund's strong performance relative to the international benchmark is partly because of our underweigMirg in Japan. STI O Capital Management ST1 Caplral Manu(Mmnt T00 SoulA Orarp Avrw•, 8M Roor oe.nao, noAaa uaoi ieoo-assasn smx cACn iz/s~ Mnwlimd i Since ~ Throe One Two Throe Inception • Months Year Years Years 02N2/95 Fund -7.79 13.35 17.63 • 24.95 Lipper International Fd Index -7.63 7.27 10.79 MSCI EAFE Index -7.83 1.77 3.88 1993 1994 1995 1996 1997 • 4.72 4.06 Second Quarter • 11.76 5.52 12.19 Third Quarter • 11.52 1.21 5.29 Fourth Quarter • 4.22 9.16 -7.79 Year-to-Date/Cabndar • 29.88 22.08 Upper International Fd Index • • 12.82 14.43 7.27 MSCI EAFE Index 9.18 6.04 -7.83 Characteristic Yalw Alpha 18.82 Beta 0.80 Rz 0.71 Standard Deviation 11.47 1. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- resenting arty country, industry, security or investment. Opinions expressed are subject to change without ratice. Statements of fact have been obtained from sources believed to be reliable but no representation is made by STI Capital Management or its affiliates as to its completeness or accuracy. 2. Cumulative and Amm~ualized Total Return Performance represent the change and/or average annual change in the value of an irnestment over the specified periods, assuming reinvestment of dividends and capi- tal gains at net asset value. 3. Quarterly, Year-to-Date, Calendar and Cumulative Performance show the charge in value of an irnestmeM over the periods indi- cated. Calculations assume reinvestment of dividends and capital gains at net asset value. 4. Risk Data is calculated using annualized monthly returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. Index performance includes reirnested divi- dends. One cannot invest directly in an index, which includes no management fees. The performance of the STI Classic International Equity Fund includes that of the STI International Equity Fund, a collective trust fund account, advised by STI Capital Management from February 2, 1995 to December i, 1995. The collective trust fund's performance has been adjusted to reflect the current expenses associated with the STI Classic International Equity Fund. The trust fund was not registered under the 1940 Act, and therefore was not subject to certain restrictions which may have affected performance. The historical performance data shown per- tainonly to the fund's trust shares. Other share classes are available and are subject to different fees and expenses, which will affect their performance. Please see the prospectus for more details regarding the fund's share classes. Foreign investing involves special risks, including currency fluctuations and political uncertainty. This material is authorized for distribution only when accompanied or proceeded by a current prospectus of the STI Classic International Equity Fund, which contains more information including fees and expens- es. Please read the prospectus carefuly before irnestirg money. The distributor of STI Classic Funds is SEI Investments Distribution Co., Oaks, Pennsylvania 19456, which is not affiliated with SunTrust or its affiliates. Investment return and prhrclpal value fluctu- ate so that your aharos, when redeemed, may be worth more or bss than their ortgpl- nal cost. Past psrtonnarrce carrot guarantee futuro results. wu: ... ~' ~ ~~ I }~ V lilfii'S=I~al - ,. ___-.-~ _..~ ... ,r ' / . I, ._ ... ~, - . ~ G. : .. ~ a ..:,.. .. - Cl~s~~~ ~ ~ ~ ~ - 4' t ", ~. , 4 1. ~ _...~_r ~ r ~ _ ~ m. ~4 ~ . , ~ . '~.G' 'n ~' ~^~ ,ate ~' 4 ~ 1 ~ qY .y H ~ •N l'~~~C4 (t. •. ~~~P F~ .~ ~'k l • ~J RISK•RETURN PROFILE PORTFOLIO CHARACTERISTICS Lower H'Igher • Q • I I 1 • Fund Category Lipper Small Cap • Fund Objective • The fund seeks long-term capital growth and f compa- income by investing in the stocks o nieswith amarket capitalization between • $50 million and $1 billion. • Investment Process ' s managers employ a valueorient- The fund • ed, bottorrrup stock selection process focus- hi h i es, w c ing on dividend paying compan appear undervalued by the market. • Srmmary Description • • Primarily invests in small cap stocks • Focuses on income • • Valueorientation • Bottom-up stock selection process • Tu;ker Symbd • scETx • 1 I I ~ Security Percent of • Description Total Equity 1%) Regal-Beloit Corp. 3.14 • turn Industries Inc. 3.01 • Quaker State Corp. 2.99 Interface Inc. 2.75 • Universal Foods Corp. 2.53 Guilford Mills Inc. 2.50 • Harmanlnternationallnds 2.49 Sotheby's Holdings 2.35 • Libbey Inc. 2.12 • Banta Corp. 2.12 • STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. • Charaderidic Dividend Yield (current)* Fund 2.0 R1ate112000 Plus/Minus 1.3 + Earnings Per Share Growth (5 yr estimate) 18.0 14.3 + Market Capitalization ($100mip 5.7 8.2 - Price-to-Book 2.2 2.9 - Price-to-Earnings (12 months trailing) 15.7 21.0 - Return on Equity 13 0 13.2 - ~ S71 Classic Small Cap Equity Fund ::: Russell 2000 PORTFOLIO COMPOSITION (% I For the most current information on the portfolio, please call STI Capital Management at 1-SOU9264STI. *The SEC 30~day yield is 0.99%. Clearly, we have been surprised that small capitalization stocks have not per- formed better than large cap stocks in light of the Asian crisis. Although the large caps have most of the exposure to the Asian mar- kets, investors continue to make them the asset of choice. The worst performers in the small cap value portfolio are the companies that do the most business with the Far East-companies such as General Chemical, Harman International and Innovex, a maker of parts for hard disk drives. Commodity companies such as paper and metals companies were also vulnerable. The portfolio was able to outperform the Russell 2000 Index during the quarter primarily because of its under- weigMing in the technology sector. Star performers for the quarter includ- ed natural gas distributors such as Northwest Natural Gas and NUI Corp. On the electric utility side, Texas New Mexico Power (TNP) rose 32%, a beneficiary of falling inter- est rates. The electric utility industry contin- ues to consolidate. The portfolio benefited from a number of restructuring plays. Angelica Corp., which provides laundry services for hospitals and hotels brought in a new CEO who is known to be more shareholder oriented. Standard Register, a large printed forms company, made the biggest acquisition in its history which will expand revenues and profits. TXI Corp., one of the lowest cost cement and steel company in the U.S., recently bought a California cement operation and plans a new steel mill that will boost profits. The stock is selling at just 9 times next year's earnings. Our outlook for 1998 is that small cap stocks will begin to bridge the valuation gap with large cap shares. In addition to having less Asian exposure, small cap stocks have traditionally performed well the year after capital gains taxes are lowered. STI o Capital Management 5T1 CapM•I Mauarnsnt 100 aouM dmp ArMw•, BM Floor onanro, RoAe• 31901 Sd06els~sn SCETx FACTS 32/97 Mnwlimd Si Three One Two Three Inception Months Year Years Years 08l31A4 Fund -2.11 32.59 33.42 32.60 29.18 Lipper Small Cap Fd Index -5.86 15.06 14.71 20.09 _ Russe1120001ndex -3.35 22.36 19.41 22.35 1993 1994 1995 1996 1997 First Quarter • • 9.00 8.25 4.75 Second Quarter • 5.62 6.22 14.95 Third_Quarter 6.26 3.95 12.48 Fourth Quarter 0.18 7.06 12.23 -2 11 Yesr-to-Date/Cabndar Fund 0.18 30.97 34.15 32.59 LL~per Small Cap Fd Index • -0.25 31.62 14.37 15 06 Russe1120001ndex -1.87 28.44 16.53 22.36 CUMULATIVE GROWTH OF A 510,000 INVESTMENTS Characterhtic Vslw Alpha 17.85 Beta 0.59 Rz 0.68 Standard Deviation 9.49 i. Managers' Quartedy Perspective is not a complete analysis of every material fact rep- resenting arty country, industry, security or investment. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources believed to be reliable but ra representation is made by STI Capital Management or its affiliates as to its completeness or accuracy. 2. Cumulative and Annualized Total Return Performance represent the change and/or average annual change in the value of an irnestment over the specified periods, assuming reirnestment of dividends and capi- tal gains at net asset value. 3. Quartery, Year-to-Date, Calendar and Cumulative Performance show the change in value of an investment over the periods indi- cated. Calculations assume reinvestment of dividends and capital gains at net asset value. 4. Risk Data is calculated using annualized monthly returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. Index performance includes reinvested divi- deeds. One cannot invest directly in an index, which includes no management fees. The performance of the STI Classic Small Cap Equity Fund includes that of the SunTrust Small Cap Value Income Fund, a collective Vust fund account, advised by STI Capttal Management from August 31, 1994 to January 31, 1997. The collective trust fund's performance has been adjusted to reflect the current expenses associated with the STI Classic Small Cap Equity Furxl. The Vust fund was not registered under the 1940 Act, aril therefore was not subject to certain restrictions which may have affected perfor- mance. This material is authorized for distribution only when accompanied or proceeded by a current prospectus of the STI Classic Small Cap Equity Fund, which contains more infor- mation including fees and expenses. Please read the prospectus carefully before irnesting money. The distributor of STI Classic Funds is SEI Investments Distribution Co., Oaks, Pennsylvania 19456, which is not affiliated with SunTrust or its affiliates. Investment return and prkrclpal ralue fluctrf ate so that your shares, when redeemed, may be worth more or less than thek orl~ nal cost. Past performance cannot g]rarerrtee future resufls. r~ i iii ~J ~~_ ~'~ :~ ,~ _~ Stui ~r - r ~r ~~ ~narknllr Lower Higtrer 0 Fnnd Category Growth Fund Objective The fund seeks capital appreciation by invest- ing primarily in the stocks of large, welF established companies rated A or higher by major credit rating agencies, including Value Line, Moody's and Standard & Poor's. Investment Process The fund's manager uses abottom-up selec- tion process to find high quality companies with a history of earnings growth, which appear historically undervalued relative to the market. Summary Description • Suitable for Florida Municipalities • Primarily invests in stocks of well- . established, high quality companies • Focuses on growth characteristics • Evaluates historical relative value • • Bottomup stock selection process Fund Code SHGEQ Sscuriq~ Percent d Description Total Equity (%) General Electric Co. 4.09 Home Depot Inc. 3.77 Merck & Co. Inc. 3.73 Cisco Systems Inc. 3.02 American IM'I Group Inc. 2.84 Cendant Corp. 2.64 Johnson & Johnson Co. 2.56 Bristol Myers Squibb 2.49 Microsoft Corp. 2.47 Compaq Computer Corp. 2.44 Investments: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. ~, j , Characteristic Fund Sly 500 PhalMiers Dividend Yield (currerrt) 0.9 1.6 Earnings Per Share Growth (5 year estimate) 19.8 15.8 + Market Capftalization ($bil) 60.7 55.4 + Price-toBook 6.4 4.1 + Price-to-Earnings (12 months trailing) 29.0 26.9 + Return on Equity 20.5 20.1 + SunTrust High Grade Equity Fund :: : S&P 500 For the most current information on the portfolio, please call STI Capital Management at 1-804926-4STI. Of course, the big news during the quarter was Asia's financial difficulties. The Asian governments are beginning to address some of their problems, with the help and coaxing of the International Monetary Fund, which is making emergency loans to the area. It is important to remember that these countries still represent 85% of the world's population, and just 20% of the world's stock market capitalization, which will provide long term stability and growth. However, in the short term, we will see continued choppy cur- rency and stock prices in Asia until investors and governments become accustomed to their slower economic growth and slower company earnings growth. In the short term, these difficulties will continue to drag down the profits of compa- nies exposed to these marketseither for banks which have loan exposure, or manufac- turers, who will suffer decreased demand. In the very long term, it is a positive for the world economy because these countries are being forced to bring down their trade barri- ers and open their markets to competition. That provides a freer economy, which is to everybody's benefit. During the fourth quarter of 1997, the Asia crisis hit technology stocks hard, as exports were perceived as likely to slow dra- matically. However, other growth stocks which rely on a healthy U.S. and European economy did well. In addition, financial ser- vices continued to be strong, as interest rates fell sharply during the quarter. Non- money center banks did particularly well, as the consolidation theme continued to play itself out. We continued to see good perfor- mance in such stocks as General Electric, Tyco International, Carnival Cruise Lines, Costco, Office Depot and Home Depot. Our outlook for 1998 is cautious because of the uncertainty surrounding cor- porate profits. However, it must be remem- bered that the stock market has had its best three-year run in history. Even if 1998 turned out to be a flat to mildly down year, the nineties would still be considered an excellent decade for investors. Mnuali7ed Since Three One Two Three Fne Inception Months Year Years Years Years 03!31/90 Fund 3.64 35.52 28.03 29.29 18.18 17.22 S&P 500 Index 2.87 33.36 28.06 31.15 20.27 1993 1994 1995 1996 1997 First Quarter 2.49 -2.39 9.33 5.55 2.56 Second Quarter 1.71 -1.23 6.54 5.55 18.80 Third Quarter 2.13 4.34 6.82 3.67 7.31 Fourth Quarter 2.72 -3.02 5.96 4.72 3.64 Year-to-Date/Cakndar Fund 9.35 -2.45 31.84 20.95 35.52 S&P 500 Index 10.08 1.32 37.58 22.96 33.36 Characterlstlc Value Alpha -0.46 Beta 1.01 R2 0.89 Standard Deviation 12.94 1. Managers' Quarterty Perspective is not a STI complete analysis of every material fact rep- resenting any country, industry, security or o l~pltal investment. Opinions expressed are sut~ject to change without notice. Statements of fact Managemen t have been obtained from sources believed to be reliable but no representation is made by STI Capital Management or its affiliates as to sn c~ M.nywn.rtt zoo sous aranp a~ ~ ~~ its completeness or accuracy. °^an0o~ Floi1da X801 2. Cumulative and Annualized Total Return i~eoo-ezs+sn Performance represent the change and/or sncEp ~crs uisz average annual change in the value of an investment over the specified periods, assuming reinvestment of dividends and capi- tal gains at net asset value. 3. Quartedy, Year-to-Date, Calendar and Cumulative Performance show the change in value of an investment over the periods indi- cated. Calculations assume reirnestment of dividends and capital gains at net asset value. 4. Risk Data is calculated using annualized monthly returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. Index performance includes reinvested divi- dends. One cannot irnest directly in an index, which includes no management fees. Investment return and prirrcipal value fluctrr ate so that your shares, when redeemed, may be worth more or bas than thek orlgE nal cost. Past perfomrarrce carrot guararkee future results. • • • • .<~; - n. ., ,~ ~: ,~ ~., .. Sux~Tr~.t ~ h ~ - - e .r~ r .. -~ ~ 's • ~ • Lower Hi[drer • ~ ~ ~ 0 • i r r Fund Category • Equity Income Fund Objective • The fund seeks to provide current income with the secondary goal of achieving capital • appreciation by investing primarily in equity securities of companies rated A or better by • major credit rating agencies including Value Line, Moody's and Standard & Poor's. • Inrestmerrt Process The fund's managers employ avalue-0rient- • ed, bottorrrup stock selection process,focus- irtg on dividend-paying companies, which • appear undervalued by the market. Summary Description • • Suitable for Florida Municipalities • Primarily invests in high quality, dividend • paying stacks • Focuses on income • ValueorieMation • Bottom-up stock selection process . Fond Code SHGEQI • ~~ i • Secor~ Porcant d Description Total Egrib (%) . Pharmacia & Upjohn Inc. 2.61 Enron Corp. 2.29 • Tenneco Inc. 2.25 Cooper Industries Inc. 2.01 • Kimberly-Clark Corp. 2.01 ITT Industries Inc. 1.90 • Reynolds Metals Co. 1.81 May Department Stores Co. 1.79 • Unocal Corp. 1.73 Sonat Inc. 1.53 • Investments: • Are not insured by the FDIC. • • Do not have a bank guarantee. • May lose value. • anarFntlc Charac4eristic Fund SiP 500 Plos/Minos Dividend Yield (current) 2.6 1.6 + Earnings Per Share Growth (5 year estimate) 10.0 15 8 Market Capitalization ($bil) 10.7 55.4 Price-to-Book 2.8 4.1 Price-to-Earnings (12 month trailing) 21.7 26.9 Return on Equity 12.8 20.1 - INDUSTRY CONCENTRATION SunTrust High Grade Equity Income Fund :;:> S&P 500 For the most current information on the portfolio, please call STI Capital Management at 1-800.926~4STI. MANAGERS' QUARTERLY PERSPECTIVE1 CUMULATIVE AND ANNUALIZED TOTAL RETURN PERFORMANCE I"~Iz Our objective is to focus on large~api- talization stocks that pay a higher than aver- age dividend. These stocks, some of which are relatively inexpensive and perhaps out of favor, tend to be defensive in nature when the markets are turbulent. The portfolio tends to underperform when the market surges, as it did in November. Our strongest performing industry cor~ tinues to be banking, as interest rates trend lower and consolidations continue unabated. Regional banks such as Crestar Financial, Summit Bancorp, AmSouth and Hibernia are located in desirable markets and are likely to be acquired in the next year or two. For instance, Crestar has a strong deposit base in Virginia, which is one of the hotbeds of consolidation right now. It Is one of the largest ones left. Summit Bancorp has one of the largest market shares for an indepen- dent bank in New Jersey. AmSouth has a large market share in Alabama, and it contirr ues to meet and exceed earnings expecta- tions. The same can be said for Hibernia in Louisiana. Another strorg area was in telecommu- nications, where investors believe that funds mentals are improving. For one thing, tele• phone companies are domestic with little international exposure. The successful regional telephone companies will team up with longtlistance companies such as AT&T, rather than trying to enter the long distance business single handedly. On the downside, the commodity com- panies-the metals, papers and chemicals• had a tough quarter, as the Asian financial crisis reduced demand for these products and cooled inflation fears. Of the three, we think that the paper group is most likely to post stronger earnings in 1998 than 1997. Since Throe one 1Mo Three Inception Months Ysar Yssro Yeah 03/31/93 Fund 0.48 27.00 23.15 28.04 19.51 S&P 500 2.87 33.36 28.06 31.15 I I I I 1 1893 199 1995 1996 1997 First Quarter -4.29 10.81 5.26 3.14 Second Quarter 0.57 3.76 6.73 4.11 12.56 Third Quarter 3.01 7.19 7.98 2.88 8.87 Fourth Quarter 3.16 -2.38 8.37 5.92 0.48 Yservto-Data/Calendar Fund 6.88 3.92 38.41 19.42 27.00 S&P 500 5.47 1.32 37.58 22.96 33.36 $23,315 RISK DATA (RELATIVE TO S&P 50014 Charecteristk value Alpha 3.60 Beta 0.78 R2 0.80 Standard Deviation 9.53 STI O Capital Management sn c.nlnl rarua«~wr< Teo so~a~ o,.w •....w, eln woor oe,neo, Roam. azeol laoo-s7s~sn SIIOEgI F</CTa 17/97 1. Managers' Quarterry Perspective is not a complete analysis of every material fact rep• resenting arty country, industry, security or irnestment. Opinions expressed are subject to change without notice. Statements of fact have teen obtained from sources believed to be reliable txrt rq representation is made by STI Capital Management or Its arfiliates as to its completeness or accuracy. 2. Cumulative and Annualized Total Re[urn Performance represent the change and/or average annual charge in the value of an irnestment over the specified periods, assuming reirnestment of dividends and capi- tal gains at net asset value. 3. Quartedy Year-to-Date, Calendar and Cumulative Performance show the change in value of an irnestmeM over the periods indi- cated. Calculations assume reinvestment of dividends and capital gains at net asset value. 4. Risk Data is calculated using annualized nwrlthly returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. Index performance includes reinvested divi- dends. One cannot irnest directy in an index, which includes no management fees. Irnsstmerlt return and principal value flucto- ate so that your shares, when redeemed, may be worth moro or bss than thek orlgF nal cost. Past performarlcs carrot puararltes future results. _ _ __ ~ ~~ .- - i ~ ~• •- ~ ~ ~~. x g~ ~~ ~~ ~ .'~ ~:, - p ii ~~ w ~ Sf ,~ d E 4~~>~~ ~t f. II sunTrust Hi h G~~ ~ ~_,: ~. ~}.,: :. - 1'Y , tk. ~O~lt~: ~~ ~- At d December 31, 1997 .~ • ~ ~ .tit ~r~ ~ ~ .t ~ ~ ~ ~`~ ~, ~~~ yyY - •! Lei 'fy r ~"f: ., ~. ~~ n..f rFml.'~' ~,1'f: ~°1.'" _ , 4 .a• ~ ~r ~. ~ ""~ ~ • •, •r• , r • Lower Higher Lehman F d a Lehman Govt/Cor un Characteridk p O Average Coupon (%) 7 1 7.2 7.1 , ~ r Modified Duration 5.3 4.4 5.3 • r d C t F Years to Maturity 8.8 8.7 10.1 a eCo y un Income and Gravth Yield to Maturity (%) 6.2 6.2 6.0 • Fund Objective • The fund seeks to provide a high level of ~ , total return through current income and capi- • tal appreciation by investing in corporate ~ SunTrust High Grade Bond Fund ~ Lehman Aggregate ;4 Lehman Govt/Corp investment grade bonds rated A or higher by 39.3 major credit rating agencies and U.S. govern- ~. ~, • ment securties. ,. 43 za.9 Investment Process ls.l . The fund's managers systematically reduce "~ >: ';;~'/,F'z'f/f„~'23.s ,. 3-5 1a.5 • their reliance on interest rate forecasts and credit analysis, allowing them to focus on ls.o exploiting undervalued sectors and areas ., _ [: ~>y;~„fas.a • 5 7 s z along the yield curve. • Swnnary Description ... f ~:.' 3::4::''y~'~'!~'.:ff ~/~ %~~'://,y/f~'?' 17.5 ~ .. ..rr,• 7 10 13'2 • Suitable for Florida municipalities • Invests in irnestment grade bonds and o.o U.S. government securities ``~,l~%'`,~~lr%s.7 of the l d d 1420 9,8 • areas erva ue • Focuses on un bond market 22.2 • Avoids reliance on interest rate forecasts i`/~'f/~lG9l/~/%~;f~ •.1fii ~/ii,' 11a.1 • 20+ zo.a and credit quality improvements • Emphasizes sector selection and , , , , ~ • ib ti i di t r on matur s u ty • Fund Code ~ r ~ SHGBD 70 _ _ _- -. • _ 63 1 ' I ~ 60 -- . • Description Percent d U.S. Treasuries 53.01 Finance 23.10 33.7 • 13 79 Industrial 30 - . __ _ Mortga[des 9.31 Cash 0.79 ~ --- I t ents: _ _ - - nv m es 3.2 • h FDIC. in r b t e Ar not su ed e Y o • • Do not have a bank guarantee. • May lose value. For the most current information on the portfolio, please call STI Capital Management at 1-8049264STI. • It was a strong quarter for U.S. Treasury bonds, as investors around the world bought them as a safe haven. The Asia crisis tem- porarily weakened corporate credits, particulaf- ly those issued by companies having any expo- sure to Asia. And mortgages outperformed slightly during the quarter even though interest rates fell sharply, and homeowners began to refinance to take advantage of some of the low- est mortgage rates in years. The absence of inflation is creating an unusual situation for fixed income securities: short-term rates, such as the Federal Funds rate-the amount banks charge each other for overnight loans, currently hover around 5.50%. Meanwhile, yields on two-year U.S. Treasury securities are about 5.7096, while the 34year bond is about 5.9096. This so-called "flat yield curve" means that investors are willing to accept little extra yield in exchange for locking into a long maturity. Instead of these investors worrying about inflation, they are hoping to achieve capital gains because they expect long- term interest rates to fall even further. Given the current ernironment, our strate- gy is to shift from overweighting the short and long end of the maturity spectrum to more of a concentration in the middle maturities. Our belief is that interest rates are still likely to fall and the yield curve to steepen, which would generate more relative capital appreciation for mid-range securities. That was certainly a good strategy during the fourth quarter of 1997, and we believe R will continue in early 1998. Another strategy is to reduce our weighting in mortgages, and boost our alloca- tion to corporate bonds. Since we do not believe that the economy will slow to the point of a recession, we believe that corporate cred- its are not unduly risky-and they offer signifi- cantly more yield than U.S. Treasury bonds. ,• Annualized Sin Three One Two Three Five Inception Months Year Years Yeses Years 08/31/89 Fund 3.51 10.02 6.48 10.22 7.69 8.98 Lehman A~regate Index 2.95 9.68 6 61 10 42 7 49 Lehman Govt/Cory Index 3.21 9.75 6 27 10 43 7 61 r r r r~ r~ 1893 1894 1995 1996 1997 First Quarter 4.95 -2.87 444 -1 76 -0.69 Second Quarter 2.90 -0.91 6 13 0 50 3.55 Third Quarter 3.08 0.27 1.89 1 50 3 37 Fourth Quarter -0.19 0.86 4.56 2 84 3.51 Year-to-DateiCakndar Fund 11.10 -2.66 18.09 3.05 10.02 Lehman A~regate Index 9.75 -2.92 18.48 3 61 9 68 Lehman Govt/Cory Index 11.04 -3.51 19.24 2 91 9.75 CUMULATIVE GROWTH OF A $10,000 INVESTMENTS Sia,a~9 Charecterlstlc Value Alpha 0.75 Beta 0.93 R2 0.99 Standard Deviation 4.12 STI O Capital Management S71 Clglhl M~nganaM 100 Souei Orr,p Avaau, 8M Floor od.~da Flaw, 3sao1 100-sle-xsn SIIGBD r#CTS 11/97 i. Managers' Quarterry Perspective is not a complete analysis of every material fact rep- resenting any country, industry, security or irnestment. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources believed to be reliable but no representation is made by STI Capital Management or its affiliates as to its completeness or accuracy. 2. Cumulative and Annualized Total Return Performance represent the change and/or average annual charge in the value of an IMeSf meat OVef the Specified peflOdS, assuming reirnestment of dividends and capi- tal gains. 3. Quartedy Year-to-Date, Calendar and Cumulative Performance show the change in value of an irnestment over the periods indi- cated. Calculations assume reinvestment of dividends and capital gains. 4. Risk Data is calculated using annualized moMhry returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. Index performance includes reirnested divi- dends. One cannot invest directty in an index, which includes no management fees. Investment return and prYrclpal value tluehr ate so that your shares, when redeemed, may be worth more or kss than thek orlgF nal cost. Past perhxmarrce cannot guarantee hrture resuRs. • • • • • ~.~. Ii:~~uit~_ 1~1~rr•k(~t O~r(~r•~~it~~~~ For the Periods Ended December 31, 1997 S&P 500 ~ 2.87 33.36 31.15 S&P 500 Barra Growth 3.52 36.53 32.72 S&P 500 Barra Value ~ 2.22 - 29.58 ~ 29.51 U.S.. MID~CAP EQUITY MARKETS MOST RECENT QUARTER ONE YEAR ANNUALIZED THREE YEARS ANNUALIZED S&P Mldcap 400 ~ 0.83 32.25 27.33 S&P 400 Barra Growth ^ -3.95 ~ 30.27 - 25.22 S&P 400 Barra Value 5.40 34.32 29.06 U.S. SMALL CAP EQUITY MARKETS MOST RECENT QUARTER ONE YEAR ANNUALIZED THREE YEARS ANNUALIZED S&P Small Cap 600 1 -3.09 S&P 600 Barra Growth ~ -6.21 S&P 600 Barra Value ^ 0.25 25.58 25.57 ~ 15.58 - 20.09 36.37 30.98 MOST RECENT QUARTER ONE YEAR ANNUALIZED THREE YEARS ANNUALIZED I~ S&P Super Composite ^ 0.20 30.40 28.02 Basic Materials -6.64 -1.48 -2.11 -5.68 Capital Goods 0.24 -3.42 -3.83 -0.36 Communication Services 22.38 5.98 1.60 21.57 Consumer Cycllcals 4.09 2.15 2.14 3.66 Consumer Staples 11.81 6.75 4.51 11.33 Energy -4.60 -7.48 -16.88 -5.10 Financials 8.63 15.13 15.42 9.60 Health Care 10.67 -7.07 -1.16 9.16 Technology -9.42 -0.59 -10.28 -8.65 Transportation 3.55 -3.76 -0.99 2 18 Utilities 16.83 16.88 19.25 16.95 The indices are not necessarily indicative of the way the STI Classic Funds are managed Index performance includes reinvested dividends. One cannot invest directly in an index which rncludes no management tees. l ~.~. E~ l~f'(~ Lr~~~~~r7~f~ ~l~trkF~t O~rf~r~~iF~~~, For the Periods Ended December 31, 1997 91 Day Treasury BIII ~ 1.26 Lehman Brothers Mortgage ~ 2.37 Lehman Brothers 5 Year Munlclpal ~ 1.70 Lehman Brothers Govt/Carp Irrhrldt ~ 2.14 Lehman Brothers Govt/Corp 3.21 Lehman Brothers Aggregate 2.94 Lehman Brothers Corporate 2.g2 ~ 5.10 ~ 9.49 ~ 6.38 ~ 7.87 9.76 9.65 10.23 ~ 5.19 - 10.45 ~ 7.37 ~ 8.98 ~ 10.43 ~ 10.41 11.65 U.S. Treasury Yield Carver 7.5 7.0 a a 6.5 6.5 s.a s.a s.z 6.1 6.1 y. = - 6.0 ~~' 6.0 _~--- -- ss 5.7 5.8~ _.._~-_.,;... ~ 5.7 5.7 5.5 ~- ~ 5.6 5.5 s.a . JUNE 30, 1997 SEPTEMBER 30, 1997 - DECEMBER 31, 1997 s.J- __ ~,.0 Historical Yield Spreads ., A Industrial Versus 10-Year Treasury 0 The indices are no[ necessarily Indicative of the way the STI Classic Ftlndb a~a managed. Index performance includes ieu ~e- i,,.~, uwdends. One cannot invest directly in an index which includes no management fees. ,~~ti'~f'~ ~~~"f'I'~"If'~~" ~ fur the ?ariuds £Itded ~eceinUel' ~ i_ 1997 • • • • MSCI EAFE Net Dlv USS /.tS3 r 1. i Iii 6.27 MSCI Canada Net Dlv USS 1 -5.29 ~ 12.80 19.71 • MSCI Europe Net Dlv USS 10.07 23.80 22.16 MSCI Japan Net Dlv USS ^-19.75 ^ -23.67 ^ -13.40 • MSCI Paclflc Net Dlv USS ^ -24.09 ^ -32.69 ^ -4.39 (excluding Japan) • ~ 1 I I ._ ~~ -_..i 10 •~q~~ 1 1 Capltal Equlpment 13.90 5.80 5.80 Consumer Goods 2.50 24.00 24.00 Energy -0.80 15.10 15.10 Finance -2.40 20.20 20.20 Materlals -13.40 -9.40 -9.40 Metals/Mining -24.90 -26.10 -26.10 Multiple Industry -3.70 13.50 13.50 • Services 2.70 19-80 19.80 • • ~ 1 • ~,~ Jd-~' ~ 1 MSCI Emerging Markets Free ~ 1r.t5J 13.~;~ y-5.76 • IFCI Composite ^ -19.37 ^ -14.84 1 -5.13 IFCI Asla ^ -36.83 ^-56.64 ^-23.20 IFCI Europe/MldEast/A61ca 1 -10.50 ~ 12 .64 10.68 IFCI Latin America ^ -11.65 29.28 ~ 8.02 • • ~ ~ - : I : 11 ~ y' 1. • Capltal Equlpment -30.90 -5.70 -5.70 Consumer Goods -20.60 -10.70 -10.70 • Energy -13.30 -1.60 -1.60 Finance -17.70 -25.00 -25.00 • Materlals -26.30 -25.10 -25.10 Metals/Mining -25.30 16.80 -16.80 • Multiple Industry -27.30 -32.80 -32.80 Services -11.40 -1.10 -1.10 • • The indices are not necessarily indicative of the way the STI Classic Funds are managed. Index perf ormance includes reinvested dividends. One cannot invest • directly in an index which includes no management fees. •