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HomeMy WebLinkAbout1998 07 28 STI Capital Management Investment Performance Report 06/30/98.~ City of Winter Springs Money Purchase Plan Investment Performance Report June 30, 1998 a STI Capital Management Summary Performance for WINTER SPGS, CITY OF-MPPP IM For the Period Ended June 30, 1998 Inception to Date 3 Months. _ 9 Months (58 Months) Total Return -.41 % 8.64% 14.44% Current Asset Allocation Equity Assets 68.94% Fixed Assets 30.47% Cash Equivalent .59% Comparisons High Grade Equity 5.73% 26.51% 22.44% High Grade Eq Income -3.79% 8.56% 19.68% S&P 500 Index 3.30% 21.08% 23.11% STI Mid-Cap Equity -1.92% 4.25% S&P Mid Cap 400 Index -2.14% 9.54% 18.19% STI Small Cap Equity -8.91 % -2.20% Russell 2000 Index -4.67% 1.40% 15.31 STI Intl Eq Fund 1.10% 7.37% MSCI EAFE Index 1.06% 6.84% 8.42% High Grade Bond 2.70% 8.06% 6.61 Lehman Aggregate Bnd 2.34% 6.98% 6.61% STI Prime Money Mkt 1.27% 3.89% 4.73% Lehman Int Govt/Corp 1.88% 5.68% 5.93% Account # 56825788 STI Classic Fund results are reported after prospectus level inveshnent manage ment and administrative fees. Your actual fees may be dif7erent. Langer term results for the STI Classic Funds are linked with similar SunTnist Common Tmst Funds to show results prior to the inception of the STI Classic Funds. Prior common trust fund results are reported after investment management Fees at the same rate as the similar STI Classic Fund. All retums reFlect reinvestment of all distributions. Investment results reFlect past performance and are not indi cative of future retums. Your actual fees are calculated based on the following fee schedule: Fees computed on market value of assets. $6.00 per $1,000 on first $150,000, $5.25 per $1,000 on next $200,000, $3.00 per $1,000 on next $650,000, $2.25 per $1,000 on next $1,000,000, $1.90 per $1,000 on next $2,000,000, $ .75 per $1,000 over $4,000,000. Minimum Annual Fee-$850. STI Capital Management Cash Flow Report WINTER SPGS, CITY OF-MPPP IM For the 3 Months Ending: 06/30/98 Portfolio Value on 03/31/98 $3,162,550.07 Contributions $ 132,426.80 Withdrawals $ -6,554.78 Gain (Loss) $ -18,839.96 Interest and Dividends $ 5,272.54 Portfolio Value on 06/30/98 $3,274,854.67 Total Return -.41 Equities -1.77% High Grade Equity 5.73% High Grade Eq Income -3.79% S&P 500 Index 3.30% STI Mid-Cap Equity -1.92% S&P Mid Cap 400 Index -2.14% STI Small Cap Equity -8.91% Russell 2000 Index -4.67% STI Intl Eq Fund 1.10% MSCI EAFE Index 1.06% Fixed Income 2.73% High Grade Bond 2.70% Lehman Aggregate Bnd 2.34% STI Prime Money Mkt 1.27% Lehman Lrt Govt/Corp 1.88% Account # 56825788 STI Capital Management Cash Flow Report WINTER SPGS, CITY OF-MPPP IM For the 9 Months Ending: 06/30/98 Portfolio Value on 09/30/97 $2,680,077.71 Contributions $ 386,112.65 Withdrawals $ -39,146.16 Gain (Loss) $ 131,738.17 Interest and Dividends $ 116,072.30 Portfolio Value on 06/30/98 $3,274,854.67 Total Return 8.64% Equities 8.82% High Grade Equity 26.51% High Grade Eq Income 8.56% S&P 500 Index 21.08% STI Mid-Cap Equity 4.25% S&P Mid Cap 400 Index 9.54% STI Small Cap Equity -2.20% Russell 2000 Index 1.40% STI Intl Eq Fund 7.37% MSCI EAFE Index 6.84% Fixed Income 8.11 Higll Grade Bond 8.06% Lehman Aggregate Bnd 6.98% STI Prime Money Mkt 3.89% Lehman Int Govt/Corp 5.68% Accoun! # 56825788 Asset Allocation WINTER SPGS, CITY OF-MPPP IM Period Ending 06/30/98 Asset Securities Units Book Value Price Market Value Alloc Equity Assets Cap. Growth SUNTRUST HI GRD EQUITY 12,810.00 $236,315.31 41.82 $535,662.36 16.36% Value Income SUNTRUST HI GD EQ INC 19,954.00 $306,446.44 25.12 $501,194.46 15.30% MidCap STI MID-CAP EQUITY FUND 36,292.00 $520,145.03 13.78 $500,100.87 15.27% Intl Equity STI INTL EQUITY FUND 16,452.00 $227,859.58 14.66 $241,193.50 7.37% Small Cap STI SMALL CAP EQTY FUND 39,594.00 $490,200.34 12.1 I $479,477.77 14.64% Sub-Total for Equity Assets $1,780,966.70 $2,257,628.96 68.94% Fixed Assets Fixed Fds SUNTRUST HI GRD BOND 46,682.00 $818,055.83 21.37 $997,820.75 30.47% Sub-Total for Fixed Assets $818,055.83 $997,820.75 30.47% Cash Equivalent Cash UNINVESTED CASH $.00 1.00 $.96 .00% Money Mkt Fds CASH MGMT FUND 19,404.00 $19,404.00 1.00 $19,404.00 .59% Sub-Total for Cash Equivalent $19,404.00 $19,404.96 .59% Total for Account # 56825788 $2,618,426.53 $3,274,854.67 100.00% -~ ~ ~~''° ' ~. ~` ~~~ ;`~..`-. : ` fir, '"~' . ,, . v _ ~~ ~ n ~ " „ r~T...~~t.:.r `'" _ o `~ al ternata STI Glasslc In ,n°~, it xt b ~}:7 +r}Cy A+ ~~~' ~~ . . ,~ ~~ ~ . ~~ ~ ~1aFya~Y E F d t r _ .. - ` • un Y ~'- -~ ~ ~~~dt,e~, ~~ _ . ~ ;~ ~~ sr ~ y, .: - ~:~ . ~ ~ = = _ - - ,, ~. . ,. -. ~ - ® r r' r r Lower Higher Characteristic Fund MSCI SAFE Index PIus/Minus • Dividend Yield (current) 2.2 1.8 + O O O O • • Market Capitalization (US $bil) 20.1 70.7 - I r r Price-to-Book 3.1 2.8 + . Price-to-Cash Flow 11.6 11.9 - Fund Category Lipper International Price-to-Earnings 21.0 27.8 - Fund Objective • The fund seeks long-term capital appreciation by investing primarily in a diversified portfolio ..`::'. Sri Classic Int ernational Equity Fund 'i<: MSCI SAFE Index of equity securities of foreign issuers. . C aPital Equipment i %''sr#<i~f•`::? : - _ :?%5ti',•'~;ii::?y?_i3?:;13.8 :.:. Investment Process . ` u.a • The fund's managers employ abottom-up Consumer Goods r ~;. >,:;; ; , stock selection process to find high quality . ,, companies selling at a discount to their glotr al industry peers. Energy i['t£sE's'%s>as€<ii':.€ z':<:-~z • a e Summary Description Finance ,.,.y ~., ,»^wn '~f ~f:~'f~~',~f:"~' ~rf s .,~.;2,za ~ • Primarily invests in non-U.S. companies 21,2 • Focuses on high quality stocks .................... .... ............................ • Value-orientation Materials ?. t ; 70 • • Bottom-up stock selection process • Multiple Industry :^3 3.s - Ticker Symtal • STITX Services ;12 t 25 3 . Security Percent of . Description Total Equity IYeI r r r ING Groep NV CVA 3.47 .f"s STI Classic I nternational Equity Fund a MSCI EAFE Index • Novartis AG 3.03 Asia ~^?'t`2.~ I ~.8 • Schweizerischer Bankverein Ord 2.69 Central Europe >32.0 Bank of Ireland 2.68 _ ' ° zs.l . Nestle SA 2.65 Japan y ., ...70.6 AXA-UAP 2.61 -- -. _ • - ---- Latin America '::?i;?;?:!3.2 Elf Aquitaine 2.33 ____- ___ _ o o _ __ _ __ • Telefonica de Espa 2.08 - FZesource '€'S" zE31 z.s Telecom Italia 2.06 Scandinavia ..,.F 2 • Dexia France 1.84 ~.a TI Classic Funds: Western Europe "" ~~ S .; ~ `` ,;_aa.a <.: a22 • 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 1-800926-4ST1. • The focus of the portfolio remains in Europe, where economic growth continues to favor investors. Companies continue to ratio- nalize their business to compete more openly with the advent of the European Monetary Union and the single European currency. The benefits of stronger growth and more efficient companies are translating to higher earnings and higher stock prices for investors. During the second quarter, one of the portfolio's best performers was Hoechst, a German pharmaceutical manufacturer. In addi- tion to the company's accelerating product development, investors began to recognize Hoechst as one of the cheaper drug stocks in the world. Another strong performer was BTP. a specialty chemical/pharmaceutical manufac- turer with operations in the United Kingdom and the United States. The company has trad- ed at a significant discount to its peer group in the UK, but has shown significant improve- ment to profitability by streamlining its portfo- lio. The stock rebounded sharply over the last six months and had the additional boost to its stock price because of it being the contract manufacturer of Viagra in the U.S. Indeed, we sold the stock during the quarter because we believed that valuations were reflecting the Viagra craze and not fair value. Philips, the Netherlands-based electronics giant, has been a good investment for the portfolio. The com- pany continues to make good on its chair- man's promise to sell off underperforming businesses. including its Polygram media busi- ness. Stocks that did not perform well during the quarter included Banco Popular De Milano and other interest-sensitive stocks in Italy, as investors began to take their profits in these companies after having significant gains during the first quarter. However, we feel the bene- fits of the low interest rate environment will continue to accrue to them. In the Far East, National Mutual Asia, an insurance company based in Hong Kong, was also a poor performer. The stock has suffered because of its investment portfolio being focused in Asia. However, its business fundamentals remain strong and insurance premium growth is healthy, which leaves us quite comfortable with the holding. Annualized Since Three Six One Two Three Inception Months Months Year Years Years 02/02/95 Fund 1.10 16.44 13.05 20.76 23.26 26.49 Lipper International Fd Index 0.86 15.88 9.05 14.40 15.15 MSCI EAFE Index 1.06 15.92 6.08 9.41 10.68 1994 1995 1996 1997 1998 First Quarter 4.72 4.06 15.17 Second Quarter 11.76 5.52 12.19 1.10 Third Quarter • 11.52 1.21 5.29 Fourth Ouarter 4.22 9.16 -7.79 Year-to-Date/Calendar 29.88 22 Lipper International Fd Index 12.82 14.43 7.27 15.88 MSCI EAFE Index 9.18 6.04 -7.83 15.10 CUMULATIVE GROWTH OF A $10,000 INVESTMENT; 820,927 Characteristic Value A Ioha 19.02 R 2 0.67 Standard Deviation 11.37 STI o Capital Management STI Capital Management 200 South Orange Avenue, Bth Floor Oeaneo, Floriea 32801 1800-9264571 snix rncrs s~sa 1. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- resenting any 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 no representation is made by STI Capital Management or its affliates 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 investment 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 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 calernfar month of operation through the most recent calendar quarter. Indez performance includes reinvested 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 [he STI International Equity Fund, a collective trust fund account, advised by STI Capital Management *rom February 2, 1995 to December 1, :L995. The collective trust fund's performance has been adjusted to reflectthe 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- tain only to the fund's trust shares. Other share classe=_ 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 carefully before investing money. The distributor of STI Classic Funds is SEI Investments Distribution Co., Oaks, Pennsylvania 19456, which is not affliated with SunTrust or its affiliates. Investment return and principal value fluctlr ate so that your shares, when redeemed, may be worth more or less than their origi- nal cost. Past performance cannot guarantee future results. - - ~~'T ~~ ~ , Lower Higher Fund Category Lipper Small Cap Fund Objective The fund seeks long-term capital growth and income by investing in the stocks of compa- nieswith amarket capitalization between $50 million and $1 billion. Investment Process The fund's managers employ avalue-orient- ed. bottom-up stock selection process focus- ing on dividend paying companies, which appear undervalued by the market. Summary Description • Primarily invests in small cap stocks • Focuses on income • Value-orientation • Bottom-up stock selection process Ticker Symbol SCETX Security Percent of Description Total Equity IY.1 w , .•~, Norrell Corp. 3.23 Re al-Beloit Corp. 3.01_ Harman International Inds 2.71 Texas Industries 2.67 Sothet~'s Holdings Inc. _- 2.44_ Standard_ Re ister Co. _ 2.37_ Sea Containers Ltd. 2.35 K2 Inc. _2 29_ _ Universal Foods Corp. 2.22 Banta Corp. 2.18_ _ STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. (}'~ '' . ~. t f Characteristic Fund Russe112000 Plus/Minus Dividend Yield (currenp* 22 1.2 + Earnings Per Share Growth (5 yr estimate) 18.8 15.8 + Market Capitalization ($100mi1) 6.1 7.9 P riceto-Book 2.0 2.7 Price-to-Earnings f 12 months trailing) 13.9 25.5 - Return on Eouitv 13.2 14.1 - For the most current information on the portfolio, please call STI Capital Management at 1-800-926-4ST1. *The SEC 30-day yield is 0.96%. The second quarter was a challenging period for small cap value stocks. Although the Asian economic crisis appeared to be moderating early in 1998, investor percep- tion of it subsequently worsened by the spring. As a result, there was a renewed shift towards bonds and big brand-name U.S. stocks. With energy prices plunging to 10-year lows, we beefed up our exposure to energy and other commodity-related stocks, as stock prices became extremely attractive. However, because of further weakening in worldwide demand for energy, precious met- als and agricultural products, share prices in these companies continued to decline. For example. we increased our position in Belden. Inc., a stock that fell 27%during the quarter because of its Asian exposure. However, the company's fundamental busi- ness is strong and its actual exposure to Asia is much smaller than perceived by the market. Another attractive stock in the port- folio is Bush Industries, which makes ready- to-assemble furniture. The company has an outstanding outlook and is the dominant player in its industry. Because of some short-term problems in its office superstore market. the stock is selling at a very attrac- tive valuation. Although it was a difficult quarter, the portfolio had its share of winners. Fluke Corp., a maker of electronic instruments, was acquired, providing a 40% gain. Brown Group, a shoe manufacturer, was up 38%; the company has shed unprofitable divisions and cut costs. The valuation gap between large and small cap stocks is the widest it has been in 10 years. Yet. most of these companies will deliver good earnings and have less Asian exposure than large cap stocks. We are very positive about the outlook for these compa- nies and their compelling valuations. 1 1 1 1 Annualized Since Three Six One Two Three Inception Months Months Year Years Years 0881/94 Fund __ -8.90 -0.08 10.01 24.37_ _ 26.48 24.95 Lipper Small Cap Fd Index -3.87 6.43 15.48 10.82 16.90 Russe1120001ndex -4.66 4.93 16.49 16.42 18.86 1994 1995 1996 1997 1998 First Quarter 9.00 8.25 4.75 9.68 Second Quarter 5.62 6.22 14.95 -8.90 Third Quarter 6.26 3.95 12.48 Fourth Quarter 0.18 7.06 12.23 -2.11 Year-to-Date/Calendar Fund 0.18 30.97 34.15 32.59 -0.08 Lipper Small Cap Fd Index -0.25 31.62 14.37 15.06 6.43 Russe1120001ndex -1.87 28.44 16.53 22.36 4.93 CUMULATIVE GROWTH OF A 510,000 INVESTMENTS Characteristic Value Alpha 13.28 Beta 0.65 Rz 0.65 Standard Deviation 10.81 STI o Capital Management STI Capital Management 200 South Orange Avenue. 8th Floor Odando. Florida 32801 1-a0P926-4ST1 SCETX FACTS 6/98 1. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- resenting any 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 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 change in the value of an investment 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 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 frst full calendar month of operation through the most recent calendar quarter. Index performance includes reinvested divi- dends. 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 trust fund account, advised by STI Capital 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 Fund. The trust fund was not registered under the 1940 Act. and 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 investing money. The distributor of STI Classic Funds is SEI Investments Distribution Co.. Oaks, Pennsylvania 19456, which is not affliated with SunTrust or its affiliates. Investment return and principal value fluctu- ate so that your shares, when redeemed, may be worth more or less than their origk nal cost. Past performance cannot guarantee future results. • • • • • • • ,~,~j`~ ' `~ ~~ ~~. '~ ;; Lower Higher 0 Fund Category Lipper Mid Cap Fund Objective The fund seeks long-term capital growth and income by investing in the stocks of compa- nies with a market capitalization between $500 million and $5 billion. Investment Process The fund's managers use abottom-up stock selection process to find high quality compa- nies with a history of earnings growth. which appear historically undervalued relative to the market. Summary Description • Primarily invests in mid-size companies • Focuses on high quality stocks • Growthorientation • Bottom-up stock selection process Ticker Symbol SAGTX Security Percent of Description Total Equity IYo1 US Filter Corp. _ __ _ _ ___4.03_ Allied Waste Inds Inc. 3.38 Mens Wearhouse Inc. 3.26 Harley Davidson Inc. 3.18 Watson Pharmaceuticals Inc. _ _ __ 3.01 Interstate Bakeries Corp. 2.96 Flextronics International Ltd. 2.72 Networks Associates Inc. 2.71 ADC Telecommunication Inc. 2.64 Fiserv Inc. 2.41 STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. -. ~f- ~~~~. A `~ ~DarFOUc Characteristic Fund S&P MidCap 400 PIus/Minus Dividend Yield (current) 0.4 1.2 - Earnings Per Share Growth (5 year estimate) 24.6 17.4 + Market Capitalization ($bil) 2.4 4.3 Price-to-Book 4.2 3.9 + Price-to-Earnings (12 months trailin j _ 26.0 24.9 + Return on Equity 15.5 14.3 + INDUSTRY CONCENTRATION • .. ~~• Utilities n o u.o ~ ~ ~ Cash Equivalent __ Equity Assets ___ For the most current information on the portfolio. please call STI Capital Management at 1-800-92fr4STl. Despite stronger earnings growth and attractive valuations, the mid-cap sector gener- ally continued to underperform the S&P 500 Index during the second quarter. Asia's eco- nomic status, which seemed to be improving in the first quarter, worsened in the spring, caus- ing investors to seek the perceived safety and liquidity in the large-cap companies. As a result, the best performers in the Mid-Cap Growth portfolio were those in indus- tries unaffected by Asia's troubles, namely retailing and health care. Among the best per- forming stocks were Watson Pharmaceutical and Mylan Labs, two generic drug companies, up 29% and 31%, respectively for the quarter. In retailing, Just For Feet, an East Coast retail- er of athletic shoes, and Mens Wearhouse, a seller of discounted suits, showed strong results, up 39% and 33%. The worst performing group was energy. as the price of oil continued to fall sharply. However, the companies' fundamentals have not changed. For example, we own Santa Fe International, a deep water driller, National Oil Well, a rig manufacturer and Newpark Resources, a recycler, all of which are strong companies. A recovery in oil prices would help these stocks. Technology was mixed during the quarter. Intuit, a software manufacturer that makes per- sonal finance software, was up 27%. But Radiant Systems, which provides computer sys- tems for point-of-sale retailers such as gasoline stations, was down 41%. Investor preference for largecap stocks could shift during 1998 as it becomes apparent that large companies' earnings growth is strug- gling in single-digits. Meanwhile, the Mid-Cap Growth portfolio continues to be comprised of very high-quality companies characterized by strong earnings growth, good products, excel- lent management and little debt. Annualized Since Three Six One Two Three Inception Months Months Year Years Years 02/02/94 Fund -1.92 6.66 19.07 18.76 18.24 16.05 Lipper Mid Cap Fd Index -0.39 12.21 _ 21.92 16.89 .__20.65 ___ __ __ S&P MidCap 400 Index -2.14 8.63 _27.15 25.23 24.00 _ _ r r r t~ r~ 1994 1995 1996 1997 1998 First Quarter 8.71 3_78 -2.89 8.75__ Second Quarter -3.66 8.98 1.95 11.82 _ -1.92 Third Quarter 6.1.0 8.52 _ _ _ 3.59 14.22 _ Fourth uarter -2.:58 2.07 5.30 __ -2.26 _ Year-to-Date/Calendar Fund -0.:22 31.22 15.42 21.23 6.66 Lipper Mid Cap Fd Index 12.26 33.08 16.28 17.55 12.21. S&P MidCap 400 Index 0.22 30.94 19.20 32.25 8.64 Star Sae of Characteristic Value period Rating Universe Alpha -1.53 Three-Year ** 2437 Beta 0.91 R2 0.93 Standard Deviation 11.79 Overall *ir 2437 Universe: Domes[ic Egwry Funds STI o Capital Management STI Cayltal Management 200 South Orange Avenue, 8th Flaor 4rlarMO, Florida 32801 1~Oa926~45T1 SAGTX FACTS 6/98 1. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- resenting any 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 no representation is made by STI Capital Management or its affliates 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 investment 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 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 annual¢ed monthly 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 March 31, 1998. Ratings are calculated from the fund's one-, three-, fve-, and/or ten-year annualized returns in excess of 9aday Treasury bill returns and a rsk factor that reflects fund performance below 90day T-bill returns. The top ten percent of the funds in an investment category receive five stars, 22.5% receive four stars. 35°r; receive three stars, 22.5% receive two stars, and the bottom 10% receive one star. Index performance includes reinvested divi- dends. One cannot invest directly 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 investing money. The distributor of STI Classic Funds is SEI Investments Distribution Co.. Oaks, Pennsylvania 19456, which is not affliated with SunTrust or its affiliates. Investment return and principal value fluctu- ate so that your shares, when redeemed, may be worth more or less than their origi- nal cost. Past performance cannot guarantee future results. • • • • • • • • ,.. - ..,, w~~ . e, ~ S. .. _ t ,' ~:.^. - .~ -_~ ~:A~.. . ~_ ' ,,}.j,~7~ {gyp, -. ,".` may. ,~ J~ l3`fi-~~ ~+'f~'~11~ iiilf d ~~,~~ '4 big ~F .. S~ gr f ... 4 ~ ~ - ~ .. t ~.:. • 1 • Lower Higher • • I 1 1 Fund Category • Growth . Fund Objective The fund seeks capital appreciation by invest- ing primarily in the stocks of large, well- 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 • Bottom-up stock selection process Fund Code SHGEQ ' 1 1 1 Characteristic Dividend Yield (current) Fund 0 9 S8P 500 Plus/Minus 1 4 - Earnings Per Share Growth (5 year estimate) 16 6 17 2 - Market Capitalization ($bil) 77 1 70.6 + Price-to-Book 7.1 4.3 + Price-to-Earnings (12 months trailing) 27.3 __28.9 - Return on Equity 22.8 21.9 + L INDUSTRY CONCENTRATION ;i SunTrust High Grade Equity Fund I;1; S&P 500 1 I I Security Percent of 1 1 1 1 1 1 Description Total Equity IYoI General Electric Co. 4.14 Merck & Co. Inc. 3.84 Microsoft Corp. 3.51 Cisco Systems Inc. 3.49 Home Depot Inc. 3.26 Procter & Gamble Co. 2.79 Costco Cos Inc. 2.65 Coca Cola Co. 2.54 Bristol Myers Squibb Co. 2.47 American International Group Inc. 2.41 Investments: • 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 1-800926-4STI. Despite fears of higher interest rates, weakening corporate profits, and financial cri- sis in Asia, the stock market was able to achieve a positive return for the second quar- ter. thanks to a strong rebound in June. Once again the market was led by large capitalization stocks. Growth retailers per- formed well as consumer confidence remained at an all-time high. Companies such as Gap Stores and Home Depot demon- strated solid increases in sales and earn- ings. Gap is taking advantage of the contin- uedtrend toward casual attire in the work- place- Home Depot's success is in response to lower interest rates and booming demand for housing and remodeling. Technology continues to be the largest weighting in the portfolio. Returns for the quarter were mixed, with Cisco Systems and EMC Corp., performing extremely well while 3Com and Oracle did poorly. Another mixed performer was financial services, which sold off early in the quarter when it appeared the Federal Reserve Board might raise interest rates. This did not come to pass and the stocks were stronger as the quarter ended. The worst performer in the portfolio was Cendant Corp, the recent combination of CUC International and HFS, Inc. In April the company reported that accounting irregulari- ties had been discovered in its membership division which would necessitate earnings restatements. Investors were quick to sell the stock, which at one point was down over 50%. New management is in place in this division and we continue to expect above average growth from the company. We continue to view the stock market environment as positive. Although U.S. eco- nomic growth will likely slow from its recent pace and earnings disappointments will increase, the combination of low inflation, low interest rates and solid economic growth should bode well for investors. And as the economy slows, investors should continue to favor those companies that show consistent, above average earnings growth. Annual'IZed Since Three Sia; One Two Three Fire Inception Months Months Year Years Years Years 03/31/90 Fund 5.73 22.06 35.76 34.01 31.32 21.97 18.94_ S&P 500 Index 3.30 17.71 30.15 32.41 30.24 23.08 _ t I I I~ I~ 1994 1995 1996 1997 1998 First Quarter -2.39 9.33 5.55 2.56 15.44 Second Quarter -1.23 6.54 5.55 18.80 5.73 Third uarter 4.34 6.82 3.67 7.31 _ Fourth Quarter -3.02 5.96 _ _-_- 4.72 3.64 Year-to-Date/Calendar Fund -2.15 31.84 20.95 35.52 22.06 S&P 500 Index 1.32 37.58 22.96 33.36 17.71 CUMULATIVE GROWTH OF A $10,000 INVESTMENT; 528,137 Characteristic Value Alnha 0.09 Beta 1.01 Standard Deviation 12.91 STI o Capital ~ Management STI Capital Management 200 South Orange Avenue, BM Floor Odando, Florida 32801 180P92G-4571 SHGEQ FACTS 6/98 1. Managers' Quarterly Perspective is not a complete analysis of every material fact re{} resenting any country, industry, security or investment. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources believed to be reliable but no representation is made by STI Capital Management or its affiliates as to its completeness or accuracy. 2. Cumulative and Annualized Total Return Performance represent the change and/or average annual change in the value of an investment over';he specifed periods, assuming reinvestment of dividends and capi- tal gains at net z~sset value. 3. Quarterly, Year-to-Date, Calendar and Cumulative Performance show the change in value of an investment over the periods indi- cated. Calculations assume reinvestment of dividends and capital gains at net asset value. 4. Risk Data is calculated using annualized monthly returns for the fund, from the fund's first full calendar month of operation through the most recent calendar quarter. Index performance includes reinvested divi- dends. One cannot invest directly in an index, which includes no management fees. Investment return and principal value fluctu- ate so that your shares, when redeemed, may be worth more or less than their origi- nal cost. Past performance cannot guarantee future results. Lower Higher Characteristic Fund S&P 500 Plus/Minus Dividend Yield (current) 2.6 1.4 + 0 ~ ~ ~ ~ Earnings Per Share Growth (5 year estimate) 12.1 17.2 - r i r Market Capitalization ($bil) 13.1 70.6 Price-to-Book 3.3 4.3 - Fund Category Priceto-Earnings (12 month trailing) 19 5 28.9 - Equity Income , __ _ Return on Equity 15.0 21.9 Fund Objective The fund seeks to provide current income with the secondary goal of achieving capital r ~ r appreciation by investing primarily in equity securities of companies rated A or better by ;: SunTrust High Grade Equity Income Fund ? S&P 500 major credit rating agencies including Value Line, Moody's and Standard & Poor's. Basic Materials '> ?` >'>::::': "• '~`°"°•"">'"•`^'"13.5 a.l Investment Process Capital Goods ~,_~ -_ _~~::>::a::::':;i>.a z:1'i 13.1 The fund's managers employ avalue-orient- _--. as ed, bottom-up stock selection process. focus- Communication Services ing on dividend-paying companies, which Consumer Cvclicals~ '< ~ _ „__ ? lo.a appear undervalued by the market. - 3s _---Consumer Staoles ... >: ;: ::eai::e:::s~a 7 Summary Description : 15.1 • Suitable for Florida Municipalities Ener~v _ '' _mm E: ~~ z!u.o • Primarily invests in high quality, dividend _ _ 7.3 paying stocks Financials w ?<13 ~ __ _ • Focuses on income 1.17.s • Value-orientation Health Care ? s ,___ ~3 _._ .... . _.. . . . 1 l.ii • Bottom-up stock selection process TechnoloE?v ~ v _ -_ ~ _~ t5.1 Fund Code _ Transportation 0_0 _. - - --- SHGEQI ' 1 ........................................... Utilities ~ ................. »z~ 3.1 Security Percent of Description Total Equity IY.1 Pharmacia & Upjohn Inc. 2.77 Ameritech Cor~oration_, 2.58 Unocal C~_ __ - _ 2.52 Baxterlnternationallnc. 2.50 Kimbe~:Clark Corp. 2.46 Cona ra Inc. __ _ 2.45 Ci na Corp. 2.21 Mobil Cow. _ 2.16_ Texaco Inc. 2_10 ___ _ Alltel Corp. _ 1.95 Investments: • 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 1-80492G4STI. The "fishing pond" from which we select stocks includes companies with rela- tively low price/earnings multiples and rela- tively high yields. Often, these companies are economically sensitive or are associated with commodities such as oil, metals, chemi- cals and paper. However, because of the Asian economic crisis, these companies were generally out of favor during the second quar- ter. Instead, the massive flows into the U.S. stock market continued to pour into large-cap growth names like Coca-Cola, Procter and Gamble and Microsoft that are not in our uni- verse. In contrast, basic industry stocks such as Reynolds Metals performed poorly during the quarter. Even though the company has been moving toward a consumer focus, it is still vulnerable to the weakness in the alu- minum market. Another poor performer was Allegheny Teledyne, amulti-industry company with exposure in stainless steel. Generally, our stocks that did well dur- ing the quarter were driven by an event such as an acquisition, in which a larger company recognized the value inherent in the shares. For example, Giant Food and Mercantile Stores were acquired, resulting in 11% and 18% gains for the quarter, respectively. American Greetings, the card company, per- formed well during the quarter as it divested noncore operations, using the cash for share repurchases and acquisitions in the United Kingdom to round out their portfolio. As long as the Asian economic crisis looms large, and investors continue to pour money into stocks, it is likely that the 1990s version of the Nifty Fifty will get a dispropor- tionate amount of attention. Ultimately, how- ever, we believe investors will recognize that the valuation gap between growth and value is becoming unjustifiably large. CUMULATIVE AND ANNUALIZED TOTAL RETURN PERFORMANCE (%12 Since Three Six One Two Three Fire Inception Months Months Year Years Years Years 03/31/93 Fund -3.79 E3.04 18.19 22.28 24.24 20.15 19.25 _ S&P 500 3.30 17.71 30.15 32.41 30.24 23.08 t t t t~ t~ 1994 1995 1996 1997 1998 First Quarter -4.29 10.81 _ 5.26 3.14 12.30 Second Quarter 3.76 6.73 4.11 12.56 -3.79 Third uarter 7.19 7.98 2.88 8.87 __ Fourth Quarter -2.38 8.37 5.92 0.48 Year-to•Date/Calendar Fund 3.92 _ 38.41 __ 19.42 _ 27.00 8.04__ S&P 500 1.32 37.58 22.96 33.36 17.71 CUMULATIVE GROWTH OF A 510,000 INVESTMENTS 530.000 Characteristic Value Alpha 1.96 Beta 0.79 Standard Deviation 9.77 STI o Capital Management STI Capital Management 200 South Orange Arenue, 8th Floor OAanAO, Florida 32801 1aoa92s~sn SNGEQI FACTS 6/98 1. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- resenting any 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 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 change in the value of an investment over the specified periods, assuming reinvestment of dividends and capi tal gains at nest asset value. 3. Quarterly, 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 a[ 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 invest directly in an index, which includes no management fees. Investment return and principal value fluctu- ate so that your shares, when redeemed, may be worth more or less than their origi- nal cost. Past performance cannot guarantee future resuks. I~ 1 11 SunTrust Hi h Grade g Bond Fund As of June 30, 1998 Lower Higher Characteristic Lehman Lehman Fund Aggregate Govt/Corp Fund Category Income and Growth Fund Objective The fund seeks to provide a high level of total return through current income and capital appreciation by investing in corporate invest- ment grade bonds rated A or higher by major credit rating agencies and U.S. government securities. Investment Process The fund's managers systematically reduce their reliance on interest rate forecasts and credit analysis, allowing them to focus on exploiting undervalued sectors and areas along the yield curve. Summary Description • Suitable for Florida municipalities • Invests in investment grade bonds and U.S. government securities • Focuses on undervalued areas of the bond market • Avoids reliance on interest rate forecasts and credit quality improvements • Emphasizes sector selection and maturity distribution Fund Code SHGBD Description Percent of Portfolio 1%I U.S- Treasuries 41.49 Finance 31.48 Industrial 14.64 Mortgages 6.78 Telephone 2.82 Cash 2.78 Investments: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. Average Coupon (%) 6.7 7.0 7.0 Modified Duration 5.9 4.5 5.5 Years to Maturity 9.8 8.7 10.3 Yield to Maturity (%) 5.8 6.1 5.9 SunTrust High Grade Bond Fund ;:i Lehman Aggregate ;, Lehman Govt/Corp ................................ zs.z i 21 a 03 years __ __ _ 27.a o ': ti fd' ~"F'y:~r%. .'''~5, ~ 21.2 :::::::::::::::26.1 3-5 years ls.o . ..,.,. :; f~ :- r :... .......; :`r;i;i 16 3 5-7 years al_ <:: ::: iraa.a 7-10 years _ 132 ::f;:;:;:; ~ 11.2 10-20 years to a 22.3 >: ~: :; ..... ~ 14.3 20+yeaB ~;>:- ,......- _ ._ 20.6 ~ i ~ as G a0 30 20 in ~.o so 0 For the most current information on the portfolio, please call STI Capital Management at 1-800 926-4STI The bond market has been in a trading range since the beginning of 1998, with 30-year Treasury yields ranging from about 5.6% to 6%. Although the economy has been growing at a brisk pace and unemployment has been low, inflation has remained contained. As a result, investors expect the Federal Reserve Board to stay on the sidelines, particularly in light of the Asian economic crisis, which has begun to dampen the U.S. economy. Because of low inflation expectations, the yield curve has become virtually flat. As of June 30, 1998. the long-bond was offering just 12 basis points more than the fed funds rate. Because of this environment, our decision to position our portfolio with alonger-than-aver- age duration was beneficial to performance. Another positive factor was our decision to sig- nificantly underweight the mortgage sector, which generally underperformed U.S. Treasury securities. The Asia threat to U.S. exporters has cre- ated some underperformance among corporate securities. This created an opportunity for us to increase our positions in corporate bonds, par- ticularly in those industries unaffected by the Asian economic situation. During the second quarter, we increased our weightings in regional banks and insurance companies that we think will be good merger candidates. Often, the acquired company's credit rating is upgraded as a result of the transaction. Even though Asia has increased credit concerns, and will reduce U.S. GDP growth in 1998, we do not expect the U.S. to fall into a recession. In addition, with the U.S. working with Japan to stabilize the yen, we think that the worst may be over in Asia. If that's the case. then the decision to boost our weightings in cor- porate bonds will likely be rewarded. Mnualized Since ~ Three Six One Two Three Five Inception Molrths Months Year Years Years Years 08/31/89 Fund 2.70 4.40 11.70 9.50 8.04 6.96 8.98 Lehman Aggregate Index 2.34 3.93 10.54 9.34 7.88 6.88 Lehman Govt/Corn Index 2.61 4.17 11.28 9.51 786 6.88 1994 1995 1996 1997 1998 First Quarter -2.87 4.44 -1.76 -0.69 1.66 Second Quarter -0.91 6.13 0.50 3.55 2.70 Third Quarter 0.27 1.89 1.50 3.37 Fourth Quarter 0.86 4.56 2.84 3.51 Year-to-Date/Calendar Fund -2.66 18.09 3.05 10.02 4.40 Lehman Aggregate Index -2.92 18.48 3.61 9.68 3.93 Lehman Govt/Corp Index -3.51 19.24 2.91 9.75 4.17 Alpha 0.76 Beta 0.93 R2 0.99 Standard Deviation 4.03 STI o Capital Management STI Capital Managemerrt 200 South Orange Avenue, 8th Floor GaanAO, Florida 32801 1aoa9zs-ash SNGBD FACTS 6/98 1. Managers' Quarterly Perspective is not a complete analysis of every material fact repre- senting any 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 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 change in the value of an investment over the specified periods, assum- ing reinvestment of dividends and capital gains. 3. Quarterly, 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. 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 Bends. One cannot invest directly in an index, which includes no management fees. Investment return and principal value fluctu- ate so that your shares, when redeemed, may be worth more or less than their origi• nal cost. Past performance cannot guarantee future results. I~ r r r• Characteristic Value Ll.~. E~Iuity M~u~ket Ovel~vie~T For the Periods Ended June 30, 1998 S&P 500 ~ 3.30 S&P 500 Barra Growth 5.84 S&P 500 Barra Value ~ 0.41 S&P Mldcap 400 ^ -2.14 S&P 400 Barra Growth 1-0.22 S&P 400 Barra Value ~-4.14 S&P Small Cap 600 ^-4.47 S&P 600 Barra Growth ~ -5.15 S&P 600 Barra Value ^ -3.79 S&P Super Composite ~ 2.46 - 30.15 34.85 ~ 24.99 27.15 26.89 26.68 -19.45 ~ 14.49 24.77 29.44 • Basic Materials -1.21 -10.32 1.66 -2.43 Capital Goods -0.77 -6.10 -2.07 -1.36 Communication Services -2.45 -5.82 -33.06 -2.63 Consumer Cvcllcals 10.04 3.87 0.27 8.48 29.24 • Consumer Staples Energy 5.01 -0.41 4.15 -13.16 -4.00 -9.05 4.75 -1.40 Financials 4.33 -1.95 0.24 3.71 Health Care 8.44 2.14 1.48 7.78 • Technology 11.60 10.04 -0.81 11.02 Transportation -5.27 8.97 2.14 -2.51 • Utilities 2.04 -2.18 1.95 0.91 i• ~I• • 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 includes no management fees. 30.24 33.40 ~ 26.86 24.00 - 23.19 24.47 - 22.36 ~ 17.46 27.11 • ~i.~. ~~,i~f~~l lit~~~»ilt For the Periods Ended June 30, 1998 91 Day Treasury BIII Lehman Brothers Mortgage Lehman Brothers 5 Year Munlclpal Lehman Brothers Govt/Carp Irrtrridt Lehman Brothers Govt/Corp Lehman Brothers Aggregate Lehman Brothers Corporate ~ 1.24 1.72 ~ 1.12 1.88 2.61 2.34 2.58 ~ 5.08 ~ 8.93 ~ 6.25 ~ 8.54 11.28 ~ 10.54 11.38 ~ 5.09 7.95 ~ 5.83 ~ 6.91 ~ 7.86 - 7.88 40 U.S. Treasury Yield Curve . DECEMBER 31, 1997 MARCH 31, 1998 - JUNE 30, 1998 Nistorical Yield Spreads ., A Industrial Versus 10-Year Treasury 0 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 includes no management fees.