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Home My WebLink About1998 10 27 STI Capital Management Investment Performance Report 9/30/98 City of Winter Springs Money Purchase Pension Plan Investment Performance Report September 30, 1998 • • • • • i • • • • • • • STI Capital Management Summary Performance for WINTER SPGS, CITY OF-MPPP IM For the Period Ended September 30,1998 Fiscal Year Inception to Date to Date (12 Months) 3 Months (61 Months) Total Return -1.91 % -9.71 % 11.42% Current Asset Allocation Equity Assets 68.06% Fixed Assets 30.31% Cash Equivalent 1.64% Comparisons High Grade Equity 10.86% -12.37% 18.11% High Grade Eq Income -1.19% -8.99% 16.45% S&P 500 Index 9.07% -9.92% 19.38% STI Mid-Cap Equity -16.55% -19.96% S&P Mid Cap 400 Index -6.30% -14.46% 13.68% STI Small Cap Equity -23.71% -21.99% Russe112000Index -19.03% -20.15% 9.54% STI Intl Eq Fund -12.27% -18.29% MSCI EAFE Index -8.36% -14.22% 4.78% High Grade Bond 13.72% 5.24% 7.34% Lehman Govt/Corp Indx 12.84% 4.95% 7.16% Lehman Aggregate Bnd 11.50% 4.23% 7.15% Account # 56825788 STI Classic Fund results are reported after prospectus level investment manage ment and administrative fees. Your actual fees may be different. Longer term results for [he STI Classic Funds are linked with similar SunTmst Common Tmst Funds to show results prior to the inception of the STI Classic Funds. Prior common trust fiord results are reported after investment management fees at the same rate as the similar STI Classic Fund. All returns reflect reinvestment of all distributions. Investment results reflect past performance and aze not indi cative of fitture returns. Your actual fees are calculated based on the following fee schedule: Fees computed on market ealue of assets. 510.00 per 51.000 on first 51.000,000. S7.50 per 1,000 on next 59,000,000. 55.00 per ~I,000 on next 515.000.000. Over 525,000,000 fees are negotiable. Minimum Annual Fee-54A00. STI Capital Management Cash Flow, Report WINTER SPGS, CITY OF-MPPP IM For the 3 Months Ending: 09/30/98 Portfolio Value on 06/30/98 $3,274,854.67 Contributions $ 102,922.74 Withdrawals $ -266,234.42 Gain (Loss) $ -322,368.36 Interest and Dividends $ 4,735.24 Portfolio Value on 09/30/98 $2,793,909.87 Total Return -9.71 Equities -15.43% High Grade Equity -12.37% High Grade Eq Income -8.99% S&P 500 Index -9.92% STI Mid-Cap Equity -19.96% S&P Mid Cap 400 Index -14.46% STI Small Cap Equity -21.99% Russe112000 Index -20.15% STI Intl Eq Fund -18.29% MSCI SAFE Index -14.22% Fixed Income 5.13% High Grade Bond 5.24% Lehman Govt/Core Indx 4.95% Lehman Aggregate Bnd 4.23% Account # 56825788 STI Capital Management Cash Flow Report WINTER SPGS, CITY OF-MPPP IM For the 12 Months Ending: 09/30/98 Portfolio Value on 09/30/97 $2,680,077.71 Contributions $ 489,035.39 Withdrawals $ -305,380.58 Gain (Loss) $ -190,630.19 Interest and Dividends $ 120,807.54 Portfolio Value on 09/30/98 $2,793,909.87 Total Return -1.91% Equities -7.97% High Grade Equity 10.86% High Grade Eq Income -1.19% S&P 500 Index 9.05% STI Mid-Cap Equity -16.55% S&P Mid Cap 400 Index -6.30% STI Small Cap Equity -23.71 Russell 2000 Index -19.03% STI Intl Eq Fund -12.27% MSCI EAFE Index -8.36% Fixed Income 13.66% High Grade Bond 13.72% Lehman Aggregate Bnd 11.50% Lehman Int Govt/Corp 10.42% Account # 56825788 • • • • Asset Allocation WINTER SPGS, CITY OF-MPPP IM Period Ending 09/30/98 Asset Securities Units Book Value Price Market Value Alloc Equity Assets Cap. Growth SUNTRUST HI GRD EQUITY 10,850.00 $237,951.90 36.64 $397,569.39 14.23% Value Income SUNTRUST HI GD EQ INC 17,725.00 $298,127.52 22.86 $405,190.66 14.50% MidCap STI MID-CAP EQUITY FUND 40,266.00 $527,539.75 11.03 $444,139.27 15.90% Intl Equity STI INTL EQUITY FUND 16,171.00 $221,472.64 11.98 $193,728.82 6.93% Small Cap STI SMALL CAP EQTY FUND 48,916.00 $571,209.82 Sub-Total for Equity Assets $1,856,301.63 Fixed Assets Fixed Fds 9.42 $460,788.34 16.49% $1,901,416.48 68.06% SUNTRUST HI GRD BOND 37,644.00 $660,677.45 22.49 $846,779.95 30.31% Sub-Total for Fixed Assets $660,677.45 $846,779.95 30.31% Cash Equivalent Cash UNINVESTED CASH $.00 1.00 $45,541.44 1.63% Money Mkt Fds CASH MGMT FUND 172.00 $172.00 Sub-Total for Cash Equivalent $172.00 Total for Account # 56825788 $2,517,151.08 1.00 $172.00 .01 $45,713.44 1.64% $2,793,909.87 100.00 r ~ ~~~ ~:_./~I ~'~'f ~. s. • • • • • • • • • • • • • • • • • • • Lowy Hier 0 r r r Frrd CaAesory Growth Frlid Objsctiw The fund seeks capital appreciation by Invest- ing primarily in the stocks of large, well- established companies in the top three quali- ty rating categories of maJor credit rating agencies, including Value Line, Moody's or Standard & Poor's. .,.~ .,r~ ti r=riii~~ri;~r - ;; .; ' vs' ~ . E ~ _ _ ~~ Y ~~' r - . ... '~-.' _ ~ ~~Ik.~_ CYaradelridic Fred SiP 500 Plri/MYws Dividend Yield (current) 1.1 1.7 - Earnings Per Share Growth (5 year estimate) 15.6 16.6 - Market Capitalization ($bil) 69.8 67.9 + Price-to-Book 6.4 4.1 + Price-to-Earrnngs (12 months trailing) 31.4 27.2 + Return on Equity 22.1 23.8 - '$i, SunTrust High Grade Equity Fund :::< S&P 500 basic Materiels o 0 ^> 3 9 Irvadr~srt Proces . : ; <>; > /{%/ d5` The fund's manager uses abottom-up selec- s a ,( Capital Goods "__________________;?::::eo lion process to find high quality companies communication services o 0 with a history of earnings growth, which ---- . ..................`.`.;7 4 appear historically undervalued relative to the consumer cyclical', ~` a 7 19.7 market. Consumer Staples zo.7 ..............................................................::i::;:i Srrrrary DrlCllptioll Energy ' 1 5 ....................... Suitable for Florida Municipalities Financials iza • Primarily invests in stocks oiwell- ,:;,:ts9 established, high quality companies Health Care ;~'~, ~ ies • Focuses on growth characteristics """""""' "' • Evaluates historical relative value TechnoloQy~~~~r666G'G7~ i, 1 ...............r 16B zo5 • Bottom-up stock selection process Transportation o 0 ;;:: i o Frrd r.Od! Utilities 0 0 ';:::: a.a SHGEQ Sscrritr D~tifor Merck & Co. Inc. Psnwt of Total E4~Y IY.1 4.18 General Electric Co. 4.10 Microsoft Corp. 3.92 Home Depot Inc. 3.67 Cisco Systems Inc. 3.33 Bristol Myers Squibb Co. 2.87 E M C Corp. Mass 2.67 Johnson & Johnson 2.55 Procter & Gamble Co. 2.46 American International Group Inc. 2.45 Investments: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. PORTFOLIO COMPOSITION (%) For the most current information on the portfolio, please call STI Capital Management at 1-800-926-4STI. High profile, largecapitalization growth stocks such as Coca~ola, Gillette and Procter & Gamble fell sharply during the quar- ter after issuing earnings warnings. Prior to July, these companies had confounded the market by selling at very high price/earnings ratios that are disproportionate to their growth rates. Those valuations compressed once those growth rates were called into question, as international economic turmoil reduced sales and earnings. Other large companies whose stocks were punished include multinational banks and brokerage firms. In contrast, the pharmaceutical stocks held up well, primarily because they have many new drugs coming to market and acceF crating profits. The best performing drug company in the portfolio during the quarter was Eli Lilly, which was up 18.5%. The com- pany has developed a new drug that treats osteoporosis, and may have positive implica- tions for breast cancer. Another strong per- former was Warner-Lambert, which has a successful anticholesterol drug. In addition, the company is a leader in the field of dia- betes research. Despite their exposure to Asia, another strong performing group during the quarter was technology, with double-digit stock price increases for IBM, Compaq and Intel. The global economic picture continues to weaken, as Asia, Russia and Latin America performed poorly in the third quar- ter. Meanwhile, Europe's momentum slowed as did U.S. economic growth, We continue to seek companies that we believe are going to grow faster than the market as a whole. Investors are intolerant: stocks with high price/earnings ratios don't have much room for negative earnings surprises. As a result, our outlook for the rest of 1998 is somewhat cautious. AaaraBaad Slag nr.. war oa. ltro Trr.. Fiw ~oaPtb• MoalYs to Data Year Yana Years Years 03/31/1890 Fund -12.37 6.96 10.86 23.20 22.93 18.29 16.51 S&P 500 Index -9.92 6.02 9.07 23.77 22.61 19.92 1884 1885 1888 1887 1888 Frst Quarter -2.39 9.33 5.55 2.56 15.44 Second Quarter -1.23 6.54 5.55 18.80 5.73 Third Quarter 4.34 6.82 3.67 7.31 -12.37 Fourth Quarter 3.02 5.96 4.72 3.64 Fund -2.45 31.84 20.95 35.52 6.96 S&P 500 Index 1.32 37.58 22.96 33.36 6.02 530,000 Chrrrartarlatk Wlua Alpha -0.19 Beta 1.00 Rz 0.90 Standard Deviation 13.96 ~M~ tTl C•pnY M•n~n•nt 200 s•uM CnM M•nw, tN Fbv on^wo, Flene• a2sas saooe:saan sNalO F11CTi !/iffy 1. Managers' Quartery Perspective is not a complete anaysis of every material fad 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-0ate, 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. ImastmMB ntum and prlndpal ralw 9uetrr ats N that your aharN, wllarl radNmad, my b• worth more or Ins than thalr orlQ- nal cost. Pact psrhlrmanca CiMOt ~YaralltN hRura rasuRs. ~~ ~~ _ ~:- :~ `I Z ~ iF ~ , ,~ ',"~"~,:; ..,t ~i ~... }~:~_ .. . ~~: ~. ~:-~ ._ _ 1~ t P~ ~i~' ~M ~t to ~ `:Lli 'iifwR" ?pkt ~.~ ~r~'~ , ~~r~~~~~~ ~OeIK ~K 0 fed Cato~ory Equity Income Fed Objw.~llw The fund seeks to provide current income with the secondary goal of achieving capital appreciation by irnesting primarily in equity securities of companies rated A or better by major credit rating agencies including Value Line, Moody's and Standard & Poor's. YYrdMet PI'00Nt 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. 3ee~ery Doocriotfoe • Suitable for Florida Municipalities • Primarily invests in high quality, dividend paying stocks • Focuses on income • Valueorientation • Bottom-up stock selection process Fed Coda SHGEQI • r~ r r - • SoaAly PMiwt of Dooaiyffoe Tote) Ev~f lyl Baxter International Inc. 2.89 • ConaQra Inc. 2.50 Unocal Corp. 2.49 • KimberlyLlark Corp. 2.45 Banc One Corp. 2.38 . Alltel Corp. 2.37 Block H & R Inc. 2.36 • Ciana Corp. 2.24 Penney J C Inc. 2.21 • Mobil Corp. 2.19 . Investments: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. ~ORTFOI If CYaredaidk Fed SiP 500 Plee~iles Dividend Yield (current) 3.0 1.7 + Earnings Per Share Growth (5 year estimate) 11.1 16.6 - Market Capitalization (Ebil) 11.6 67.9 Price-to-Book 3.9 4.1 Price-to-EarnirtKs (12 month trailing) 18.9 27.2 Return on Equity 18.7 23.8 SunTrust High Grade Equity Income Fund :: S&P 500 Basic Materials ~ 12.3 Capital Goods 12.0 ...... ........... ................. ........... .:::< .0 CommufllCation Services s.4 ...... ........... ................. ..........:: 7. Consumer Cvclicals io.7 Consumer Staples is.o ...... ........... ................. ........... .............. .............. ..........::: ::::14.4 Ener2v 10.3 Fnancials ia.a Ts Tachnoloev i.o ~'i€ .~ Transportation ..::::;: 1.0 Utilitles 6.3 ...... ........... ... ;~ 3.6 For the most current information on the portfolio, please call STI Capital Management at 1-800-92Fr4STl. r1 ~ 1 For more than a year, the Asian eco- nomic crisis has negatively impacted U.S. manufacturers and commodity producers. However, during the third quarter, the global turmoil has begun to affect the consumerori- ented companies, as evidenced by their dis- appointing earnings. In addition, investors have become more concerned about the exposure of U.S. banks to global debt, in light of Russia's collapse and the worsening news in other emerging markets. The uncertain outlook for the consumer derailed many retailing stocks such as JC Penney, which is one of our larger positions. Investor concerns appear justified, as the company's same-store sales growth weak- ened during the quarter. In banking, Bank Boston underperformed for the quarter because of its heavy Latin American expo- sure. In addition, traditional manufacturers and commodity companies such as Hercules have continued to perform poorly, particularly when earnings are expected to be weak. On the plus side, two health compa- nies, which had been out of favor and trading at low price/earnings multiples, made excel- lent comebacks during the quarter. Baxter International made progress in getting FDA approval on some important blood therapy products. Pharmacia Upjohn appears to have turned the corner with the integration of the Pharmacia and Upjohn units, and now looks to be on track toward doubledigit earn- ings growth. The portfolio also benefited from the acquisition of American Stores by Albertson's, two grocery store chains. Our goal is to buy inexpensive stocks with high yields that have the potential for strong appreciation if one or more catalysts are activated. Such catalysts might include new management, new products, regulatory approvals or a major purchase or sale. We believe that the current global environment is creating tremendous value in our universe of stocks. Malsa4=ad Siac~ lYw Year Iltae lho llrnsa Fiw rwpfioa ~loatMs b Data Year Yaars Yaars Yasrs 03/31/1883 Fund -8.99 -1.67 -1.19 15.01 17.35 17.22 16.29 S&P 500 -9.92 6.02 9.07 23.77 22.61 19.92 1884 1885 1880 1887 1888 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 Quarter 7.19 7.98 2.68 8.87 -8.99 Fourth Quarter -2.38 8.37 5.92 0.48 Yw-1o~DablCsNrlar Fund 3.92 38.41 19.42 27.00 -1.67 S&P 500 1.32 37.58 22.96 33.36 6.02 Valor Charaetarlstlc Alpha 1.66 Beta 0.78 Rz 0.82 Standard Deviation 11.21 i. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- o ('IO1 resenting any country, industry, security or Ili11 ~~• 1111 investment. Opinions expressed are subject t to change without notice. Statements of fact have been obtained from sources believed to be reliable but no representation is made by sn c.pta la.n.a.n»m STI Capital Management or its affiliates as to zoo awm orr~ Awnw, aM F1aar its completeness or accuracy. oerwo, Fbna. aasoi s~wosasasrl 2. Cumulative and Annualized Total Return Performance represent the change and/or average annual change irl the value of an investment over the specified periods, a1larQl p1Crf 9/1996 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 indF Gated. 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. Irwastmsnt ratum and prlnclpal valor tluetu• ata w that your shares, when radssrnod, may tw worth mor• or lass than thN- orlfQ- nal cost. Past psrfomnna cannot `uarantaa hitta• rswks. 525,000 .- , . ,~, ~~'~#` . ~T~ ~~~ ,r} iLOMrf t~K 0 ~ ~ 0 Frrd Catr6ory Lipper Mid Cap Frrd Objrctirs 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 $5 billion. rv~ Proorss The fund's managers use abottom-up stock selection process to find high quality compa- nies with a history of earnings growth, which appear historically undervalued relative to the market. Srrrrary Dacr~tlor • Primarily invests in midsize companies • Focuses on high quality stocks • Growth-orientation • Bottom-up stock selection process 7iiClw Sfr•bol SAGTX SrcrrRy PM~.wI d D~rcripfior Tritrl E+.itr IY.t Interstate Bakeries Corp. 3.62 Watson Pharmaceuticals Inc. 3.49 Flserv Inc. 3.42 Allied Waste Inds Inc. 3.05 United States Fllter Corp. 3.04 Flextronics International Ltd. 3.00 Networks Associates Inc. 2.83 Papa Johns International Inc. 2.79 Borders Group Inc. 2.73 Harley Davidson Inc. 2.68 STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. ~~ CYarad•ridic Fad SiP MldCap I00 Plrs~ira Dividend Yield (current) 0.5 1.4 Earnings Per Share Growth (5 year estimate) 26.0 18.1 + Market Capitalization ($bil) 2.0 4.0 Price-to-Book 3.5 2.9 + Price-to-Earnir~s (12 months trailing) 23.4 22.1 + Return on Equity 16.6 15.9 + STI Classic MidLap Equity Fund ::: S&P MidCap 400 Basic Materials o.o ;;€.i Cani[al Goods 9.1 ....... ........... ....... - -....... ; ?;iii 8.7 Communication Services I0.0 :? 2.3 ...... ........... .......... .......... .............. ........... :•'•::::14.3 Consumer Sta 14.6 ....... ........... ......... .......... ...:::;:9.7 Enarc+v 6.5 "a.o Financials 11.a Health Care 14.4 ....... ........... ......... .......::: ::;:8.4 Technotoev 22.7 Transportation -0 0 :: ::1.6 _ Utilities o.o For the most current information on the portfolio, please call STI Capital Management at 1-SOQ926-4STI. Once again, the midcap sector underper- formed the S&P 500 Index during the third quarter. Valuations seem to be suggesting a recession in the quarters to come. The energy sector was especially hard hit, as the price of oil stayed down for much of the summer. Many energy stocks in the portfolio are selling at six or seven times earnings. There was one bright spot in energy during the quarter: Anadarko Petroleum, discovered a large field in the Gulf of Mexico, boosting the stock 17% during the quarter. The capital goods sector was mixed. Allied Waste, the trash hauler, was flat during the quarter. However, the stocks of two other capital goods companies, Watsco, an air condi- tioning distributor, and U.S. Fllter, performed poorly. The best performers during the quarter were defensive stocks in the consumer staples sector. Flowers Industries, a bakery company, and U.S. Food Service, a distributor of food products to restaurants, performed better than average. Drug companies such as Watson Pharmaceuticals and Forest Labs also per- formed well, primarily because of new drug approvals. However, health care management companies continued to encounter problems. For example, the stock of Quorum Healthcare, a manager of not-for-profit hospitals, fell sharply because of news that the U.S. Justice Department is investigating the way the indus- try conducts Medicare billing. As a whole, we believe that the Mid~ap Growth Equity porttolio is inexpensive. The top ten stocks have a compound earnings growth rate of 23%, yet the average price/earnings ratio is about 18. Even it the company growth rates are overstated, the stocks still appear to be selling at multiples below their growth rates. Tt+raa Year l~aa MoaWs to Dab Year Aaaaa6ad SNroa Two nn. lacaptloa Yaara Years 02/02/1881 Fund -19.96 -14.63 -16.56 4.39 6.83 9.75 Lipper Mid Cap Fd Index -17.95 -7.93 -12.34 4.59 8.60 S&P MidCap 400 Index -14.46 -7.07 -6.30 14.17 14.11 1884 1885 1886 1887 1886 Flrst Quarter 8.71 3.76 -2.89 8.75 Second Quarter -3.66 8.98 1.95 11.82 -1.92 Third Quarter 6.10 8.52 3.59 14.22 -19.96 Fourth Quarter -2.38 2.07 5.30 -2.26 Fund -0.22 31.22 15.42 21.23 -14.63 Lipper Mid Cap Fd Index 12.26 33.06 16.28 17.55 -7.93 S&P MidCap 400 Index 0.22 30.94 19.20 32.25 -7.07 CUMULATIVE GROWTH OF A $10,000 INVESTMENT; Charaetarktle Valve Alpha x.98 Beta 1.04 RZ 0.95 Standard Deviation 17.17 Star She d Parlod Ratla~ llaivanr Three-Year ** 2545 Overall ** 2545 UNVerse: Domestic EWry IinOa -711 0 ~~ srl c•on.l AMn•pmalt 200 aaM orr~. Avwu, aM Floe Or1Y1b, Ftalh 32b1 laaoa2surl fllaTx FACTa 9/199a 1. Managers' Quartery Perspective is not a complete analysis of every material fact rep- resenting any counVy, industry, security or investment. Opinions expressed are subject to change without notice. Statements of (act have been obtained from sources believed to be reliable but na 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 spedfied periods, assuming reinvestment of dividends and capi- tal gains at net asset value. 3. Quarterly, Yeanto-0ate, 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 usin¢ annualized monthry retums 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 June 30, 1998. Ratings are calculated from the fund's one-, three-, five-, and/or ten~year annualized retums in excess of 90day Treasury bill retums and a risk factor that reflects fund performance below 90day T-bill retums. The top ten peroent of the funds in an investment category receive five stars, 22.5% receive tour stars, 35% receive three stars, 22.5% receive two stars, and the bottom 1096 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 subiect • 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 onty when accompanied or proceeded by a current prospectus of the STI Classic MidLap Equity Fund, which contains more information including tees 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 affiliated with SunTrust or its affiliates. Invaatmarlt ntum and prlndpal valve 6rrrtu~ eta so that you aharas, when radasrnad, may bs worth more or loss than thNr orlQ- nal cost. Past psrfomance eamot guararltse future rw•nMa • • • M • RISN DATA IREL. to SS.P MiDCAP aoola MORNINGSTAR RATINGSs ~*,, ~'- ~•. .r ~. ~ (r ~ 'Ff~ r rsr~i~;irf7 ~ -.~__. ~ w ~ t . ~~ ,,, ~~. -~. m ~ .., ~ ~ kt, STI Classic Iri.~ernatioial %~ `V ~ ~~ r~ +~ E :Fund '~'-tY As of 3~pbmhn 311,1888 ` „. "' • Lorror INglrer • 0 ~ ~ 0 I r r r Frrd Category • Lipper International . Frrd Objective The fund seeks long-term capital appreciation • by investing primarily m a diversified portfolio of egwty securities of foreign issuers. • IrVsstmart Process The fund's managers employ abottom-up • stock selection process to find high quality companies selling at a discount to their glob- alindustry peers. Srrxrary Dsscriptior i es • Primarily invests in non-U.S. compan • Focuses on high quality stocks . • Value-0rientation • Bottom-up stock selection process Ticker Sprbol STITX Sscrrily Parcert of Desaiptior Total EgrNr lyl Novartis AG 3.99 Bank of Ireland 3.00 Telecom Italia 2.71 Suez Lyonnaise Des Eaux 2.51 Telefonica de Espa 2.22 Elf Aquitaine 2.21 Dexia France 2.16 Nestle SA 2.11 ING Groep NV 2.11 Terumo Corp. 2.09 STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. .#N~-.~ ti. x ~ ~"_ ~, Cturxteristic Frrd NISCI SAFE hde: Plra/Mirrs Dividend Yield (current) 2.6 2.2 + Market Capitalization (US $bil) 16.9 60.6 - Price-to-8ook 3.5 2.3 + Price-to-Cash Flow 9.8 10.1 Price-to-Earnin~s 19.4 23.1 - INDUSTRY CONCENTRATION .'{(~, STI Classic International Equity Fund .:: MSCI EAFE Index Asia ;04 ':i:: z s Central Europe ~~/off/////%//~/,i,,.~//,~%~26_s 1:;25.7 )span '~~ :12:1............ ?::zoa Latin America 2.1 00 Middle East i:0.z 0.0 Resource '~i.5.z %i 2 9 Scandinavia ~a:e ;i::'. 5.5 Western Europe ~}~~.C~i~}.~.'~ . 42f d~,. as2 For the most current information on the portfolio, please call STI Capital Management at 1-800-926~STI. Although we continue to focus on bot- tom-up stock picking, the environment in which we invest is always a factor in our perfor- mance. The global economic scenario has clearly deteriorated in recent months, as gross domestic products and profit forecasts contin- ue to be revised downward. In Europe, United Bank of Switzerland, the result of a merger between Union Bank of Switzerland and Swiss Bank, came under pres- sure as investors became concerned about certain derivative exposure. Even though news of the exposure was widely known before the merger took place, the stock fell during the quarter. Another poor performer during the quarter was Philips, the Dutch consumer elec- tronics company. General fears about the reliance on Asian markets as well as its per- ceived exposure to the computer chip busi- ness dragged down the stock. On the plus side, two Japanese pharma- ceutical companies, Terumo and Sankyo, per- formed well during the quarter, and continue to sell below U.S. valuations. In general, drug companies were one of the few sectors that did not report disappointing earnings. Another stock, British American Tobacco, was a strong performer during the quarter, having spun off the tobacco operations from financial services in the United Kingdom. The stock pays a very high dividend, which U. K. investors value high- ly. Suelyonaise Des Eaux, a French water com- pany, continues to exhibit strong growth char- acteristics. In addition, other investors have bought the stock for its safer stream of earn- ings. Fnally, we added Telecom New Zealand to the portfolio. New Zealand is not a huge market and is unlikely to attract an American competitor. We think the company represents a good valuation with a strong dividend yield and good earnings growth. n...a~«I Siat» Tlrres Year OM Two TLros Iaceptioa IModhs to Dab Year Years Years 02/02/1995 Fund -18.28 -4.65 -12.26 8.50 11.12 17.79 Lipper International Fd Index -15.78 -2.41 -9.86 4.94 6.84 MSCI EAFE Index -14.22 -0.56 -8.36 1.39 3.74 188 1985 1886 1887 1891 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 -18.28 Fourth Quarter 4.22 9.16 -7.79 Yurto~DatuCaNadar Fund 29.88 22.08 13.35 -4.85 Lipper International Fd Index • 12.82 14.43 7.27 -2.41 MSCI EAFE Index • 9.18 6.04 -7.83 -0.56 Cftaracterirtic ttelae Alpha 13.94 Beta 0.95 RZ 0.76 Standard Deviation 14.70 1. Managers' Quarterly Perspective is not a complete analysis of every material fact rep- resenting any country, industry, security or Q ~j~ investment. Opinions expressed are subject * ', a ` _ ____~ to change without notice. Statements of fact 1 ~ t1~CIII l SI ! have been obtained irom sources believed to be reliable but no representation is made by STI Capital Management or its affiliates as to sri aprr n"'"'a"n«" its completeness or accuracy. 30o faM or.na• 1lvrws, stn Floor oq.nb, Flvlh 3zso1 2. Cumulative and Annualized Total Return L+OO~B+bT~ 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 srnx rscra s~uea monthly returns for the fund, from the fund's first full calendar month of operation through prospectus for more details regarding the the most recent calendar quarter. fund's share classes. Index performance includes reinvested divi- Foreign investing involves special risks, Bends. One cannot invest directly in an including currency fluctuations and political index, which includes no management fees. uncertainty. 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 fmm February 2, 1995 to December 1, 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- 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 This material is authorized for distribution only when axompanied 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 affiliated with SunTrust or its affiliates. Investment ntum and principal valor fluctu- ate so that your shares, when redeemed, may be worth more or Isss than their orlgl- nal cost. Past performance cannot guarantee hrture results. }4 '. a n ~~ ii° ry. - '' a f ij. ~ ,r ,~ ~ ~«'y~" y '~s ~; l ~, ~ ~ • 0 r ~ i • Faad Catacorr Lipper Small Cap Faad ObJ«.tlw . The fund seeks long-term capital growth and income by investing in the stocks of compa- • Hies with a market capitalization between illi d Si billi S50 on an on. m • Ywd~at Pruass 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. Ea~ary DMCliptla • • Primarily invests in small cap stocks • Focuses on income • • Value-0rientation • Bottom-up stock selection process lickr E~bol • SCETX r i r - Sacarb Paoaat d Daaceiplloa Taal Ewtr 1X1 • Norrell Corp. 3.32 Regal-Beloit Corp. 3.31 • Universal Foods Corp. 2.72 K2 Inc. 2.70 Standard Register Co. 2.48 • Harman International Inds Inc. 2.46 Quimica y Minera Chil Sp Adr 2.27 . Sotheby's Holdings Inc. 2.14 Lilly Inds Inc. 2.14 • Banta Corp. 1.96 • STI Classic Funds: • Are not insured by the FDIC. • Do not have a bank guarantee. • May lose value. CYarad~rMic Faad Ras>~ 2000 Plaa~as Dividend Yield (current)* 2.7 1.6 + Earnings Per Share Growth (5 yr estimate) 18.4 15.6 + Market Capitalization (Si00mil) 4.6 7.0 Price-to-Book 1.6 2.2 - Price-to-Earnirt~s (12 months trailing) 11.5 16.3 Return on Equity 12.2 14.1 - PORTFOLIO COMPOSITION ('%.) For the most current information on the portfolio, please call STI Capital Management at 1-806926-4STI. *The SEC 30tlay yield is 1.37%. The small cap sector declined about twice as much as the S&P 500 Index during the third quarter. Foreign buyers continue to purchase the larger companies, even though the small cap sector is less exposed to eco- nomcc events outside the U.S. Within our porttolio, the sectors that were hit the hardest related to commodities, since inflation is not showing any signs of life. Late in the third quarter, the concern in the small cap sector was whether the U.S. economy was going to slow down and per- haps go into a recession. That knocked down cyclical stocks as much as 30 to 40 percent. For example, TXI, a cement and steel maker, was down sharply during the quarter, yet the company is expected to ben- efit dramatically from the E8 billion federal highway spending bill. Most of the porttolio's strong perform- ers were related to high dividend utilities including TNP (Texas New Mexico Power) Enterprises and Northwest Natural Gas. Other strong performers included Willis Corroon, a Londor~ased insurance broker that was taken private, Nash Fnch, a food distributor and K2, the sporting goods equip merit manufacturer. The valuation gap between large and small cap stocks continues to enlarge. Year to date, the performance spread between the S&P 500 Index and the Russell 2000 Index is about 25 percentage points. The porttolio's price/earnings ratio is about 15 times earnings, while the S&P 500 Index is at about 25 times. Despite this difference, the S&P 500 Index is likely to produce flat earnings in 1999 while our portfolio's earn- irgs growth rate is projected to be low doer ble digits. In many cases, the portfolio's cyclical stocks sell below book value. Needless to say, on a valuation basis, we believe that small cap stocks are inexpensive today. sn CsFrtr fNff~wnrt rao soar onfp A..w•, fq Fl•a ornf•, Farr sasos iaoosas~~sn fCFTI( FACIi 9/lfff Il~rNa~xad Slaw lhns Yisr a. ltro TYrus ttrcaptlo~ 81o~tYs to lido Ysr Nws Yssrs 6ti/31/1884 Fund -21.99 -22.05 -23.70 7.74 14.10 15.97 Lipper Small Cap Fd Index -21.39 -16.34 •21.24 -2.35 3.73 Russe1120001ndex -20.15 -16.22 -19.03 3.85 6.87 1884 1885 1886 1887 18811 Frst 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 -21.99 Fourth Quarter 0.18 7.06 12.23 •2.11 Fund 0.18 30.97 34.15 32.59 -22.05 Lipper Small Cap Fd Index d.25 31.62 14.37 15.06 -16.34 Russe1120001ndex -1.87 28.44 16.53 22.36 -16.22 1YI~s Alpha 8.39 Beta 0.72 RZ 0.76 Standard Deviation 14.58 1. Managers' Quarterly Perspective is not a complete analysis of every material (act 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 spedfied periods, assuming reinvestment of dividends and capi- tal gains at net asset value. 3. Quarterly, Year-to-0ate, 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 VaIUe. 4. Risk Data is calculated using annualized monthty 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. The performance of the STl 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 fmm August 31, 1994 to January 31, 1997. The collective Wst fund's performance has been adjusted to reflect the current expenses associated with the STI Classic Small Cap Equty 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 onty when accompanied or proceeded by a current prospectus of the STI Classic Small Cap Equity Fund, which contains more infor- mation inducting fees and expenses. Please read the prospectus carefully before investing money. The distributor of STl Classic Funds is SEI Investments Distribution Co., Oaks, Pennsylvania 19456, which is not affiliated with SunTrust or fts affiliates. IrnatmfrR ratan and prlndpsl rslw 6ueto- ab so that your shares, wMn radsomad, msy bs worth mono or loss than thslr orl0- ral cost. Ppt parMmranu carrot CwrarRss hRvs results. ~ t~ ` '~~ , ~;trs;~, ~. ,,, ~ w•'r'w ' ~ ~ r a~' vs 4 :r _~ ,. • • ~ x .~ _- - r'k ~` ~~ SunTrust Hl h Graff ~ , ,~ -. ~ ~ .~ -~ R - ~~• Bond-Fund _ ~ ~{ Ar of Srplrmbrr 301 1898 ~ ~ ~` ~ x.~„ ~' ~ ~ • 1 1 1 1 • Lower ~K LeYrar LeYrw Clwraderhtk Frrd a GoWCorv . ~ ~ ~ ~ O Average Coupon (%) 6.5 7.0 6.9 , , 1 Modified Duration 5.6 4.3 5.6 • Frrd Cate6ory Years to Maturit 8.2 8.5 10.4 Income and Growth Yield to Maturity (%) 4 9 5.4 5.1 Frrd dbj~ctiw . The fund seeks to provide a high level of , 1 total return through current income and capi- • tal appreciation by investing in corporate ~ SunTrust High Grade Bond Fund .;:; Lehman Aggregate JI Lehman Govt/Corp investment grade bonds rated A or higher by 23.9 major credit rating agencies and U.S. govern- ;. ~.~ •••.w • ••w,;•••:+,+++•;• •+ ~. +,•~~•, ., •; ;;, w::;~+ w~'+•.w'`~'`"ti` • ~ ~\ti ~`:: \• +. o :~'~~w `` `\`.+: ~ t ~\ ~~ tip: \\x::26.1 ment securities. 0-3 years " zs.5 IrYedNrl ProCes 14.3 ;:+~ •+:•. ' Sr• •?k v. \:•:i+tiQti:::.~~ 1++:.~::ii. \+:•\}fit ~.}A `*V~:~,\~4v\\ii\~\~~;`~:;::*:Za.6 • The fund's managers systematically reduce +~ " ~ ::> ~ ` ~~:`+" `~` ~': ~`~+``~~` ``^`~~'`~•~~+~•~<••+~••+•••• ~"~~`~•~~ 3-5 years '~ '' 1s.3 their reliance on interest rate forecasts and credit analysis, allowing them to focus on 17.4 exploiting undervalued sectors and areas \~',, ~~:,_`, \..+,~`•:++\'`+', `~~• ?\:..12.e • 5-7 years ' s 3 along the yield curve. 22.1 • $rrMr>ry ~MCr~IOr +\+` ~~~`~ ~ ~ ~ ~. ~~?•t?12.8 • Suitable for Florida municipalities 7-10 years lz.e . • Invests in investment grade bonds and u.o U.S. government securities \ \` \~.w ~ • Focuses on undervalued areas of the 1420 years los bond market 11.3 • Avoids reliance on interest rate forecasts ~~,~~~~~~.:~`~~~~ `'~\\~~\~\~~~~\~~ :;la.~ and credit quality improvements 20+ years 2is • Emphasizes sector selection and 1 maturity distribution • Frrd Cade 1 1 1 SHGBD • 1 1 1 . • p Peroerl d Portlalb IY.1 . U.S. Treasuries 48.16 F n ante 28.48 • Industrial 9.28 Mor~ages 8.29 • Aoency 3.33 Cash 2.46 • 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 1-804926-4STI. The third quarter saw the benchmark 30-year Treasury yield tall below 5% for the first time in several decades. As a result, Treasury bonds of all maturities rallied sharply. Overall, our performance was rela- tively sVong because the porttolio's duration was somewhat longer than average during the rally. Within the Treasury market, the best performing sector tended to be intermedi- ates. As a result, our sVategy of selling shorter and longer securities and focusing on the 5- to 14year area worked very well for us. Corporate bonds performed poorly dur- ing the quarter as the rush to quality fawred treasuries. The good news is that most of our exposure was in maturities of five years or less where the damage was not as great. Today, investmentgrade corporate bonds are offering exVemely atVactive values in relation to Treasury bonds. Mortgages performed somewhat better than corporate bonds. We expect mortgages to continue to underperform as long as the market rallies. We will begin to add to our mortgage component when we believe that the drop in interest rates has ended. During the quarter, we were substantially under- weighted in the mortgage sector, which helped our performance. In the short term, there is a chance for a correction in the bull market for bonds. As a whole, bond portfolio maturities are extend- ed and it's hard to gauge how much more demand we will get from foreign buyers. Nevertheless, given the global economic pio- lure, the long-term outlook for bonds is still positive. Ibaoa6asd 91aco lYraa Nsr Oao Tao TMM Fiw rapUoa 99oatYs to lllrta Year Yws Years Ywra 06/31/1988 Fund 5.24 9.86 13.72 11.49 9.21 7.40 9.33 Lehman A~reaate Index 4.23 8.31 11.50 10.62 8.67 7.21 Lehman Govt/Cory Index 4.95 9.33 12.84 11.20 8.92 7.21 1894 1996 1886 1987 1898 Frst 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 5.24 Fourth Quarter 0.86 4.56 2.84 3.51 Fund -2.66 18.09 3.05 10.02 9.86 Lehman Aggregate Index -2.92 18.48 3.61 9.68 8.31 Lehman Govt/Corp Index -3.51 19.24 2.91 9.75 9.33 Charaetorlstle Velua Alpha 0.78 Beta 0.93 R2 0.99 Standard Deviation 4.07 ~.r~ 1. Managers' Quarterly Perspective is not a rJ 11 complete analysis of every material fad rep- o Sa_7 resenting any country, industry, security or ~ ~+liWWll investment. Opinions expressed are subject t to change without notice. Statements of fact have been obtained from sources believed to be reliable but no representation is made by sn c.ptr Menepnwn< STI CapRal Management or its affiliates as to aao ewe! or^na. Awnw, aM Fleur its completeness or accuracy. anene•, Flena azsoa i.wosasun 2. Cumulative and Annualized Total Return Performance represent the change and/or average annual change in the value of an sHaso FACTa !/19la investment over the specified periods, assuming reinvestment of dividends and capi- tal gains. 3. Quarterty, Year-to-0ate, 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 pertormance includes reinvested dNi- dends. One cannot invest directly in an index, which includes no management fees. Irwostmaat stun and prlndpal valve 6ueto- ate w that you shares, wMn rsdssmad, may ba worth more or loss than thslr orlgF nal cost. PMt parfomnnrs CaMOt pprantN tntlaa rswlG. • • • CUMULATIVE GROWTH OF A $10,000 INVESTMENT' ~ ~~Tar~et Ove~•v~e~r For the Periods Ended September 30, 1998 • 1 I 1 1 t` t~~ ~ t~ • MSCI EAFE Net Dlv USS ~ -14.22 a~ ~.. ^-8.36 ~ 3.74 MSCI Canada Net Dlv USS x-25.49 ~-22.99 ~ 6.96 . MSCI Europe Net Dlv USS ~ -14.42 ~ 8.34 ~ 18.84 MSCI Japan Net Dlv USS x-14.96 ~-33.53 ~-17.50 • MSCI Paclflc Net Div USS ~-8.86 ~-42.13 ~-13.48 (excluding Japan) 1 1 1 Capital Equipment -18.99 -22.68 -6.44 Consumer Goods -10.84 0.03 3.26 Energy -3.41 2.45 6.31 Finance -23.06 -18.98 -11.20 Materials -21.11 -25.47 -9.19 ' ~ Metals/Mlning 6.84 -19.41 4.37 I Multiple Industry -14.73 -28.58 -13.75 ~ • Services -8.10 9.63 12.64 • • J _ i I r: ~~i~ ~i. MSCI Emerging Markets Free x-22.89 ~-49.24 ~-18.25 • IFCI Composite ~-21.70 ~ -46.70 ~ -15.20 IFCI Asia ^-7.55 ~-55.13 ~-30.91 IFCI Europe/MldEast/Ahlca ~-25.47 ~-37.37 ^ -6.82 IFCI Latin America ~-26.57 ~-47.43 ~-4.90 Capital Equipment -11.53 -48.72 -25.80 Consumer Goods -17.19 -40.24 -24.77 Energy -28.63 -58.61 -52.28 Finance -23.43 -47.41 -36.10 Materials -18.88 -51.73 -34.54 Metals/Mlning 25.84 -20.41 1.68 Multiple Industry -27.12 -63.54 -49.83 Services -23.80 -42.63 -35.26 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. Sector performances provided by Morgan Stanley. • w L~ . ~ . Fred I~lcc rile Market Overview For the Periods Ended September 30, 1998 91 Day Treasury BIII Lehman Brothers Mortgage Lehman Brothers 5 Year Munlclpal Lehngn Brothers Govt/Corp Irrhndt Lehman Brothers Govt/Corp Lehman Brothers Aggregate Lehman Brothers Corporate ~ 1.27 ~ 2.64 ~ 2.62 4.48 4.95 4.23 - 3.63 ~ 5.21 ~ 8.62 ~ 6.76 ~ 10.42 12.84 11.50 -11.07 ~ 5.26 - 8.14 ~ 5.91 ~ 7.89 8.92 8.67 8.84 U.S. Treasury Yield Curve ^ MARCH 31, 1998 JUNE 30, 1998 - SEPTEMBER 30, 1998 Historical Yeld Spreads ., A Industrial Versus 10-Year Treasury o 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. • •