Sti Classic Funds
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SECURITIES AND EXCHANGE COMMISSION FORM N-30D Initial annual and semi-annual reports mailed to investment company shareholders pursuant to Rule 30e-1 (other than those required to be submitted as part of Form NCSR) Filing Date: 1998-07-30 | Period of Report: 1998-05-31 SEC Accession No. 0000935069-98-000123 (HTML Version on secdatabase.com) FILER STI CLASSIC FUNDS Mailing Address Business Address 530 E SWEDESFORD ROAD 2 OLIVER STREET CIK:883939| State of Incorp.:MA | Fiscal Year End: 0531 WAYNE PA 19087-1693 BOSTON MA 02109 Type: N-30D | Act: 40 | File No.: 811-06557 | Film No.: 98674149 6109896602 Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ANNUAL ------------------------ FINANCIAL REPORT ------------------------ STI CLASSIC FUNDS ------------------------ A Family of Mutual Funds ------------------------ May 31, 1998 STI Classic Funds [logo omitted] Dear Valued STI Classic Trust Shareholder: As of May 31, 1998, your STI Classic Funds' assets totaled $11.7 billion or 36% more than the $8.6 billion reported to you as of May 31, 1997. The U.S. economic expansion has now passed seven years in duration and is noteworthy for continued modest inflation and excellent investment returns. Economic growth has been erratic, however, the U.S. experienced an acceleration in early 1998 despite the real difficulties being experienced in Asia. Even with the faster pace of economic activity, the Federal Reserve Board has not tightened monetary conditions and longer term interest rates have fallen below 5.75% from over 7% in early 1997. Thus, the inherent strengths of the U.S. economy are evident to investors world wide. In spite of all the volatility in the markets and uncertainty of world events, the STI Classic Funds continue to be managed with a disciplined, quality oriented approach. We believe our shareholders are well positioned for the current and anticipated investment environment. Sincerely, /S/ Signature Anthony R. Gray Chairman, Chief Investment Officer STI Capital Management, N.A. /S/ Signature Douglas S. Phillips, CFA President, Chief Investment Officer Trusco Capital Management, Inc. STI CLASSIC VALUE INCOME STOCK FUND ----------------------------------- The STI Classic Value Income Stock Fund (the "Fund") seeks to provide current income with the secondary goal of achieving capital appreciation by investing primarily in equity securities. The Fund's investment philosophy is a very structured, methodical approach to purchasing stocks. The bottom-up approach has three key factors to consider in all investment decisions -- minimum dividend yield criteria, low historical Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document relative valuation, and a fundamental catalyst which could upwardly value the individual security. Our process seeks high-dividend paying stocks that are trading at the lower end of their historical valuation ranges. These companies are in the midst of fundamental change that we expect will reignite investor interest in the near term. They tend to exhibit value characteristics such as low price-to-earnings ratios and have lower volatility. As a result, the Fund benefits when the market becomes less exuberant and more value oriented. The Fund's return from June 1997 to May 1998 was 23.10% (Trust Shares). The Fund underperformed the S&P/Barra Value Index, by 5.82%. We believe this underperformance was a result of the Fund's underweighting in the financial sector, a sector with strong performance in the fiscal year of 1998, as well as its overweighting in the basic materials sector, a sector that did not perform as well. Growth continues to have an advantage over value in the marketplace, as investors around the world buy stocks they know-typically large cap growth names such as General Electric, Microsoft and Procter & Gamble. /S/ Signature Mills A. Riddick, CFA Managing Director 2 Shown immediately following the Advisor's Discussion of Fund Performance are three line graphs depicting the growth (including reinvestment of dividends and capital gains) of a hypothetical investment of $10,000 as compared with the growth of a hypothetical investment of $10,000 in the Fund's benchmark(s). TRUST SHARES -------------------------------------------------------------------------------- Annualized Annualized Annualized Cumulative One Year 3 Year 5 Year Inception Inception Return Return Return to Date to Date -------------------------------------------------------------------------------- 23.10% 24.37% 20.30% 18.29% 322.71% -------------------------------------------------------------------------------- COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Value Income Lipper Equity Income Stock Fund, Trust Shares S&P/BARRA Value Index Funds Average -------------------------------------------------------------------------------- 10/31/89 $10,000 $10,000 $10,000 5/31/90 $10,359 $10,463 $10,237 5/31/91 $12,434 $11,432 $11,074 5/31/92 $15,195 $12,449 $12,429 5/31/93 $16,778 $14,438 $14,138 5/31/94 $18,453 $15,512 $14,880 5/31/95 $21,970 $18,160 $16,838 5/31/96 $28,102 $22,946 $20,792 5/31/97 $34,335 $28,788 $25,516 5/31/98 $42,266 $37,113 $31,806 INVESTOR SHARES ----------------------------------------------------------------- Annualized Annualized Annualized Cumulative One Year 3 Year 5 Year Inception Inception Return Return Return to Date to Date ----------------------------------------------------------------- 22.71% 23.90% 19.80% 18.00% 313.91% Without Load ----------------------------------------------------------------- 18.13% 22.34% 18.89% 17.48% 298.29% With Load ----------------------------------------------------------------- COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Value Income Lipper Equity Income Stock Fund, Investor Shares S&P/BARRA Value Index Funds Average -------------------------------------------------------------------------------- 10/31/89 $ 9,625 $10,000 $10,000 5/31/90 $ 9,971 $10,463 $10,237 5/31/91 $11,968 $11,432 $11,074 Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5/31/92 $14,626 $12,449 $12,429 5/31/93 $16,142 $14,438 $14,138 5/31/94 $17,642 $15,512 $14,880 5/31/95 $20,943 $18,160 $16,838 5/31/96 $26,679 $22,946 $20,792 5/31/97 $32,466 $28,788 $25,516 5/31/98 $39,839 $37,113 $31,806 FLEX SHARES -------------------------------------------------------------------------------- Annualized Annualized Annualized Cumulative One Year 3 Year 5 Year Inception Inception Return Return Return to Date to Date ------------------------------------------------------------------ 21.76% 23.04% 19.52% 17.85% 309.24% Without Load ------------------------------------------------------------------ 19.76% With Load ------------ COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Value Income Lipper Equity Income Stock Fund, Flex Shares S&P/BARRA Value Index Funds Average -------------------------------------------------------------------------------- 10/31/89 $10,000 $10,000 $10,000 5/31/90 $10,359 $10,463 $10,237 5/31/91 $12,434 $11,432 $11,074 5/31/92 $15,195 $12,449 $12,429 5/31/93 $16,778 $14,438 $14,138 5/31/94 $18,453 $15,512 $14,880 5/31/95 $21,970 $18,160 $16,838 5/31/96 $27,796 $22,946 $20,792 5/31/97 $33,609 $28,788 $25,516 5/31/98 $40,922 $37,113 $31,806 Past performance is no indication of future performance. The performance quoted includes past performance of the Common Trust Fund managed by STI Capital Management, N.A. adjusted for fees and expenses. The Common Trust Fund was not registered under the 1940 Act and therefore was not subject to certain investment restrictions which may have adversely affected performance. The Funds' comparative benchmarks do not include the annual operating expenses incurred by the Fund. 3 STI CLASSIC MID-CAP EQUITY FUND ------------------------------- The STI Classic Mid-Cap Equity Fund (the "Fund") seeks capital appreciation by investing in the stocks of companies with a market capitalization between $500 million and $5 billion. Mid-cap securities with a strong growth history are the primary consideration for this investment philosophy. These companies are evaluated relative to their industry sector and the market in general. Each industry sector is considered in relation to the business cycle, and the Fund maintains large positions in the sectors which appear to perform best in the given cycle. Stocks that fall within favored sectors are analyzed based on fundamentals -- the quality of earnings, dependability of growth rates, and relative attractiveness of price/earnings ratios. The Fund's return from June 1997 to May 1998 was 21.14% (Trust Shares). The Fund underperformed its index, S&P Mid Cap 400 Index, by 8.73%. We believe the Fund's underperformance was a result of sector weightings. The Fund was underweighted in both the financial and electrical sectors; both of those sectors performed well. The Fund was also overweighted in technology stocks, a sector that did not perform as well. In addition, the Fund held several individual stocks that proved disappointing. The biggest wildcard for 1998 is corporate earnings, and investors continue to be jittery when a company disappoints. Fortunately, these dips are often buying opportunities because the stocks generally recover. Recently, the most consistent winning group has been retailing. Part of the reason for the good performance was simply a