<PAGE>
STI CLASSIC FUNDS
TRUST SHARES
INTERNATIONAL EQUITY FUND
INVESTMENT ADVISOR TO THE FUND:
STI CAPITAL MANAGEMENT, N.A.
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios. This Prospectus sets forth concisely
the information about the Trust Shares of the International Equity Fund (the
"Fund"). Investors are advised to read this Prospectus and retain it for future
reference.
A Statement of Additional Information relating to the Fund dated the same date
as this Prospectus has been filed with the Securities and Exchange Commission
and is available without charge through the Distributor, SEI Financial Services
Company, 680 East Swedesford Road, Wayne, PA 19087-1658 or by calling
1-800-428-6970. The Statement of Additional Information is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT SPONSORED, ENDORSED, OR GUARANTEED BY, AND DO NOT
CONSTITUTE OBLIGATIONS OR DEPOSITS OF, THE ADVISORS OR ANY OF THEIR AFFILIATES
OR CORRESPONDENTS INCLUDING SUNTRUST BANKS, INC., ARE NOT GUARANTEED OR INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
OCTOBER 31, 1995
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2
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Statement of
Additional Information relating to the Fund incorporated herein by reference, in
connection with the offering made by this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Trust or SEI Financial Services Company (the "Distributor"). This
Prospectus does not constitute an offering by the Trust or by the Distributor in
any jurisdiction in which such offering may not lawfully be made.
The Trust Shares are offered primarily to financial institutions
("Shareholders"), including SunTrust Banks, Inc. and its affiliates and
correspondents, for the investment of funds for which they act in a fiduciary,
agency, investment advisory or custodial capacity. Fund shares may not be
purchased directly by individuals, although institutions may purchase shares for
accounts maintained by individuals.
TABLE OF CONTENTS
Expense Summary...................... 3
The Trust............................ 4
Investment Objective................. 4
Investment Policies and Strategies... 5
General Investment Policies and
Strategies.......................... 6
Investment Risks..................... 6
Investment Limitations............... 8
Performance Information.............. 9
General Performance Information...... 9
Purchase Of Fund Shares.............. 9
Redemption Of Fund Shares............ 10
Dividends And Distributions.......... 10
Tax Information...................... 11
STI Classic Funds Information........ 12
Board of Trustees.................... 12
Investment Advisor................... 13
Portfolio Manager.................... 13
Banking Laws......................... 13
Distribution......................... 14
Administration....................... 14
Transfer Agent and Dividend
Disbursing Agent.................... 15
Custodian............................ 15
Legal Counsel........................ 15
Independent Public Accountants....... 15
Other Information.................... 15
Voting Rights........................ 15
Reporting............................ 15
Shareholder Inquiries................ 15
Description of Permitted
Investments......................... 15
Appendix............................. A-1
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3
EXPENSE SUMMARY
TRUST SHARES
Below is a summary of the annual operating expenses for Trust Shares of the
International Equity Fund. A hypothetical example based on the summary is also
shown. Actual expenses may vary.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY FUND
<S> <C>
- -----------------------------------------------------------------------------------------------
Advisory Fees (After Voluntary Reductions)(1)................................... 1.10%
All Other Expenses.............................................................. .36%
- -----------------------------------------------------------------------------------------------
Total Operating Expenses (After Voluntary Reductions)(1)........................ 1.46%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Absent voluntary reductions, advisory fees, and total operating expenses,
expressed as a percentage of average net assets for the Trust Shares of the
Fund would be: 1.25% and 1.61%. Fee reductions are voluntary and may be
terminated at any time. Additional information may be found under
"Investment Advisor" and "Administration." A person that purchases shares
through an account with a financial institution may be charged separate fees
by the financial institution.
<TABLE>
<CAPTION>
INTERNATIONAL
EXAMPLE EQUITY FUND
<S> <C>
- -----------------------------------------------------------------------------------------------
An investor would pay the following expenses on a $1,000 investment assuming:
(1) 5% annual return and (2) redemption at the end of each time period:
One year.................................................................... $ 15
Three Years................................................................. 46
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF THE FUND AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist
the investor in understanding the various costs and expenses that may be
directly or indirectly borne by investors in the Trust. "Other Expenses" for the
Fund are based on estimated amounts for the current fiscal year. The information
set forth in the foregoing table and example relates only to Trust Shares. The
Trust also offers Investor Shares and Flex Shares of the Fund which are subject
to the same expenses except for different distribution fees and sales charges
and different transfer agent fees.
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4
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUND
The International Equity Fund will be the successor to a collective investment
fund currently managed by the Advisor. It is anticipated that a substantial
portion of the assets of this collective investment fund will be transferred to
the Fund on or about December 1, 1995 in connection with the Fund's commencement
of operations. Set forth below is certain performance data for the predecessor
collective investment fund, which is deemed relevant because the collective
investment fund was managed using virtually the same investment objective,
policies and restrictions as those used by the Fund. However, the performance
data is not necessarily indicative of the future performance of the Fund. It is
expected that the Fund initially will be somewhat smaller in asset size than the
predecessor collective investment fund. It is anticipated, however, that the
Fund will reach the same asset size as the predecessor fund before the end of
the Fund's first year of operation and will continue to grow in size thereafter.
The predecessor collective fund did not incur expenses that correspond to the
advisory, administrative, and other fees to which the Fund is subject.
Accordingly, the following performance information has been adjusted by applying
the current total expense ratios for the Fund, which reduced the actual
performance of the collective fund. The expense ratio is that set forth under
"Annual Operating Expenses" (after giving effect to anticipated waivers and
reimbursements).
Total Cumulative Return (adjusted to reflect current Fund expenses, net of
voluntary waivers and reimbursements for period ended 9/30/95.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
DATE OF
INCEPTION SINCE
OF FUND 1 MONTH 3 MONTHS INCEPTION
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
International
Equity
Collective Fund 2/1/95 4.04% 10.86% 32.53%
</TABLE>
THE TRUST
STI CLASSIC FUNDS (the "Trust") is a diversified, open-end management investment
company that provides a convenient and economical means of investing in several
professionally managed portfolios of securities. The Trust currently offers
units of beneficial interest ("shares") in a number of separate Funds.
Shareholders may purchase shares in The International Equity Fund (the "Fund")
through three separate classes (Trust Shares, Flex Shares and Investor Shares)
which provide for variations in distribution and transfer agent fees, voting
rights and dividends. Except for differences between classes, each share of the
Fund represents an undivided, proportionate interest in the Fund. This
Prospectus relates to the Trust Shares of the Fund. The Flex Shares and Investor
Shares of the Fund currently are not available for purchase.
INVESTMENT OBJECTIVE
THE INTERNATIONAL EQUITY FUND seeks to provide long term capital appreciation by
investing primarily in a diversified portfolio of equity securities of foreign
issuers.
There can be no assurance that the Fund will achieve its investment objective.
The investment objective of the Fund is nonfundamental and may be changed
without shareholder approval.
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5
INVESTMENT POLICIES AND STRATEGIES
INTERNATIONAL EQUITY FUND
The Fund, under normal market conditions will invest at least 65% of its assets
in equity securities of foreign issuers consisting of: common and preferred
stocks, warrants, options and securities convertible into common stock.
Securities of foreign issuers purchased by the Fund may be purchased in foreign
markets, on United States registered exchanges, the over-the-counter market or
in the form of sponsored or unsponsored American Depositary Receipts ("ADRs")
traded on registered exchanges or NASDAQ, or sponsored or unsponsored European
Depositary Receipts ("EDRs").
The Fund may enter into forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. A forward foreign currency
contract is a commitment to purchase or sell a specified currency, at a
specified future date, at a specified price. The Fund may enter into forward
foreign currency contracts to hedge a specific security transaction or to hedge
a portfolio position. The Fund also may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter
markets) to manage the portfolios exposure to changes in dollar exchange rates.
The Fund expects to be fully invested in the investments described above, but
may invest up to 35% of its total assets in bonds and debentures issued by
non-U.S. or U.S. companies, securities issued or guaranteed by foreign and U.S.
governments and foreign and U.S. commercial paper. The Fund may invest in
futures contracts, including stock index futures contracts, and options on
futures contracts. The bonds that the Fund may purchase may be rated in any
rating category or may be unrated provided that no more than 10% of the Fund's
total assets will be rated below BBB by Standard & Poor's Corporation or below
Baa by Moody's Investor Service, Inc. or unrated securities of comparable
quality (see "Investment Risks -- High Yield -- Lower Rated Bonds"). When
investing in bonds, the Fund may seek capital gains by taking advantage of price
appreciation caused by interest rate and credit quality changes. The Fund may
also purchase shares of closed-end investment companies that invest in the
securities of issuers in a single country or region. The Fund is also permitted
to acquire floating and variable rate securities, purchase securities on a when-
issued basis and purchase illiquid securities.
The Fund will invest in the foreign issues of at least three different countries
outside the United States. A foreign issue is one the issuer of which (1) is
organized under the laws of a specific country, (2) for which the principal
securities trading market is in a specific country or (3) derives a significant
proportion (at least 50 percent) of their revenues or profits from goods
produced or sold, investments made, or services performed in a specific country
or which have at least 50 percent of their assets situated in that country. The
Fund will invest primarily in developed countries, (for example Japan, Canada
and the United Kingdom). In addition, the Fund may invest in securities of
issuers whose principal activities are in countries with emerging markets. The
Fund defines an emerging market country as any country the economy and market of
which the World Bank or the United Nations considers to be emerging or
developing.
The annual portfolio turnover rate for the Fund is not expected to exceed 100%.
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6
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes during periods when its Advisor determines that
market conditions warrant, the Fund may invest up to 100% of its assets in money
market instruments consisting of securities issued or guaranteed as to principal
and interest by the U.S. Government, its agencies or instrumentalities,
custodial receipts involving U.S. Treasury obligations, repurchase agreements,
certificates of deposit, bankers' acceptances, and time deposits issued by banks
or savings and loan associations and commercial paper rated in the highest
rating category, and may hold a portion of its assets in cash. The Fund may not
be pursuing its investment objective when it is engaged in temporary defensive
investing. The Fund may also invest in money market instruments for liquidity
purposes.
The Fund may invest, subject to its investment objective and policies, in zero
coupon obligations. Zero coupon obligations are sold at original issue discount
and do not make periodic payments. Zero coupon obligations may be subject to
greater fluctuations in value due to interest rate changes.
The Fund may purchase restricted securities, including Rule 144A securities,
that the Advisor determines are liquid pursuant to guidelines established by the
Trust's Board of Trustees.
In the event that a security owned by the Fund is downgraded below the stated
rating categories, the Advisor will review and take appropriate action with
regard to the security.
The Fund may borrow money for temporary or emergency purposes in an amount not
to exceed one-third of the value of its total assets. The Fund may not purchase
additional securities while its outstanding borrowings exceed 5% of its assets.
The Fund's purchase of shares of other investment companies is limited by the
Investment Company Act of 1940 and will ordinarily result in an additional layer
of charges and expenses.
The Fund may engage in securities lending and will limit such practice to 33
1/3% of its total assets.
It is a non-fundamental policy of the Fund to invest no more than 15% of its net
assets in illiquid securities. An illiquid security is a security which cannot
be disposed of within seven days in the usual course of business at a price
approximating its carrying value.
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
FOREIGN SECURITIES AND FOREIGN CURRENCY CONTRACTS
Investing in the securities of foreign companies and the utilization of forward
foreign currency contracts involve special risks and considerations not
typically associated with investing in U.S. companies. These risks and
considerations include differences in accounting, auditing and financial
reporting standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investment in foreign countries and potential
restrictions of the flow of international capital and currencies. Foreign
companies may also be subject to less government regulation than U.S. companies.
Moreover, the dividends payable on the foreign securities may be subject to
foreign withholding taxes, thus reducing the net amount of income
<PAGE>
7
available for distribution to the Fund's Shareholders. Further, foreign
securities often trade with less frequency and volume than domestic securities
and, therefore, may exhibit greater price volatility. Changes in foreign
exchange rates will affect, favorably or unfavorably, the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar.
By entering into forward foreign currency contracts, the Fund will seek to
protect the value of its investment securities against a decline in the value of
a currency. However, these forward foreign currency contracts will not eliminate
fluctuations in the underlying prices of the securities. Rather, they simply
establish a rate of exchange which one can obtain at some future point in time.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, also, they tend to limit any potential gain
which might result should the value of such currency increase.
The Fund's investments in emerging markets can be considered speculative, and
therefore may offer higher potential for gains and losses than investments in
developed markets of the world. With respect to any emerging country, there is
the greater potential for nationalization, expropriation or confiscatory
taxation, political changes, government regulation, social instability or
diplomatic developments (including war) which could affect adversely the
economies of such countries or investments in such countries. In addition, it
may be difficult to obtain and enforce a judgment in the courts of such
countries. The economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. Investment in Eastern European countries
and the countries which made up the former Soviet Union may be affected by
political decisions that could cause such countries to revert to a prior system
of government.
EQUITY SECURITIES
Investments in equity securities in general are subject to market risks that may
cause their prices to fluctuate over time. The value of convertible equity
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provision. Fluctuations in the value of equity
securities in which the Fund invests will cause the net asset value of the Fund
to fluctuate.
FIXED INCOME SECURITIES
The market value of the Fund's fixed income investments will change in response
to interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Securities with longer maturities are subject to
greater fluctuations in value than securities with shorter maturities. Changes
by a nationally recognized statistical rating organization ("NRSRO") in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal also affect the value of these investments.
Changes in the value of the Fund's securities will not affect cash income
derived from these securities but will affect the Fund's net asset value.
<PAGE>
8
Securities rated BBB by S&P or Baa by Moody's (investment grade bonds) are
deemed by these rating services to have speculative characteristics.
Guarantees of the Fund's Securities by the U.S. Government or its agencies or
instrumentalities guarantee only the payment of principal and interest on the
guaranteed securities, and do not guarantee the securities' yield or value of
the yield or value of the Fund's shares.
There is a risk that the current interest rate on floating and variable rate
instruments may not accurately reflect existing market interest rates.
HIGH YIELD, LOWER RATED BONDS
The Fund's investments in high yield, lower rated bonds ("junk bonds") involve
greater risk of default or price declines than investments in investment grade
securities (rated BBB or higher by S&P or Baa or higher by Moody's) due to
changes in the issuer's creditworthiness. The market for high risk, high yield
securities may be thinner and less active, causing market price volatility and
limited liquidity in the secondary market. This may limit the ability of the
Fund to sell such securities at their fair market value either to meet
redemption requests or in response to changes in the economy or the financial
markets. Market prices for high risk, high yield securities may also be affected
by investors' perception of credit quality and the outlook for economic growth.
Thus, prices for high risk, high yield securities may move independently of
interest rates and the overall bond market. In addition, the market for high
risk, high yield securities may be adversely affected by legislative and
regulatory developments.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of the
Fund. Fundamental policies cannot be changed with respect to the Fund without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if as a result more than 5% of the total assets of
the Fund would be invested in the securities of such issuer; provided, however,
that the Fund may invest up to 25% of its total assets without regard to this
restriction as permitted by applicable law.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities, repurchase agreements
involving such securities or tax-exempt securities issued by governments or
political subdivisions of governments. For purposes of this limitation, (i)
utility companies will be divided according to their services, for example, gas,
gas transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile
<PAGE>
9
finance, bank finance and diversified finance will each be considered a separate
industry; and (iii) supranational entities will be considered to be a separate
industry.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise performance (total return and yield).
These figures will be historical and are not intended to indicate future
performance. The yield of the Fund refers to the annualized income generated by
an investment in the Fund over a specified 30-day period. The yield is
calculated by assuming that the income generated by the investment during that
period is generated over one year and is shown as a percentage of the
investment.
The total return of the Fund refers to the average compounded rate of return on
a hypothetical investment, including any sales charge imposed, for designated
time periods (including but not limited to, the period from which the Fund
commenced operations through the specified date), assuming that the entire
investment is redeemed at the end of each period and assuming the reinvestment
of all dividend and capital gains distributions.
GENERAL PERFORMANCE INFORMATION
The performance of Trust Shares of the Trust will normally be higher than for
Investor Shares and Flex Shares of the Trust because Investor Shares and Flex
Shares are subject to distribution and certain transfer agent fees not charged
to Trust Shares. The performance of Flex Shares in comparison to Investor Shares
will vary depending upon investment time horizon.
The Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
PURCHASE OF FUND SHARES
Trust Shares of the Fund are sold primarily to financial institutions, including
subsidiaries of SunTrust Banks, Inc. ("SunTrust"), for the investment of funds
for which they act in a fiduciary, agency, investment advisory or custodial
capacity. Individuals may not purchase Trust Shares directly, although
individuals may be able to purchase Trust Shares through accounts maintained
with financial institutions. Trust Shares are sold without a sales charge,
although financial institutions may charge their customer accounts for services
provided in connection with the purchase of shares. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these orders to the Transfer
Agent for effectiveness the same day. Information concerning these services and
any charges will be provided to customers by the financial institutions. Trust
Shares will be held of record by the financial institutions, although customers
may have or be given the right to vote the shares depending upon the terms of
their relationship with the financial institution. Confirmations of share
purchases and redemptions will be sent to the financial institution as the
shareholder of record.
Shares may be purchased on days on which the New York Stock Exchange is open for
business ("business day").
A purchase order for the Fund will be effective as of the business day received
by the Transfer
<PAGE>
10
Agent if the Transfer Agent receives the order before 4:00 p.m. Eastern time and
payment is received within one day. The purchase price of shares of the Fund is
the net asset value next determined after a purchase order is effective plus any
applicable sales charge (the "offering price"). The net asset value per share of
the Fund is determined by dividing the total market value of the Fund's
investments and other assets, less any liabilities, by the total outstanding
shares of the Fund. Net asset value per share is determined daily as of the
close of business of the New York Stock Exchange (currently 4:00 p.m. Eastern
time) on any business day. Pursuant to guidelines established by the Trustees,
the Trust may use a pricing service to provide market quotations or valuations
for securities owned by the Fund. Purchases will be made in full and fractional
shares of the Trust calculated to three decimal places.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or
Shareholder(s).
Neither the Trust's Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon telephone or wire instructions
reasonably believed to be genuine. The Trust maintains procedures, including
identification methods and other means, for ascertaining the identity of callers
and authenticity of instructions.
Shares of the Fund are offered only to residents of states in which the shares
are eligible for purchase. Shareholders in certain states may be required to
purchase shares through institutions registered as Broker/Dealers in such
states.
Although the methodology and procedures for calculating the net asset value for
Trust Shares are identical to those of Investor Shares and Flex Shares, the net
asset value per share of the classes of the Fund may differ because of the
distribution, service, and certain transfer agent expenses charged to Investor
Shares and Flex Shares.
REDEMPTION OF FUND SHARES
An order to redeem shares must be transmitted to the transfer agent by the
financial institution as the record owner of Trust Shares. Financial
institutions may establish procedures for their customers to request redemption
of Trust Shares held in their account with the financial institution. Customers
should contact their financial institution for information concerning these
procedures.
Redemption orders must be received by the Transfer Agent before 4:00 p.m.
Eastern time on any business day to be effective that day. Redemption proceeds
are normally remitted in federal funds wired to the record owner of the shares
within one business day, but in no event more than seven days following the
effective date of the order. No charge for wiring redemption payments is imposed
by the Trust. Redemption orders are effected at the net asset value per share
next determined after an order is effective.
The Trust intends to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, payment may be made wholly or
partly in liquid portfolio securities with a market value equal to the
redemption price. In such circumstances, an investor may incur brokerage costs
in converting such securities to cash.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid annually by the Fund. The Fund's net realized
capital gains (including net short-term capital gains) are
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11
distributed at least annually. Net income for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) plus dividend or distribution income on such
assets, (iv) less accrued expenses directly attributable to the Fund and the
general expenses of the Trust prorated to the Fund on the basis of its relative
net assets. Shareholders of record on the record date will be entitled to
receive dividends.
The net asset value of Trust Shares of the Fund will be reduced by the amount of
any dividend or distribution. Dividends and distributions are paid in the form
of additional Trust Shares of the Fund unless the customer has elected prior to
the date of distribution to receive payment in cash. Such election, or any
revocation thereof, must be made in writing prior to the date of distribution to
the Trust's transfer agent and will become effective with respect to dividends
paid after its receipt. Dividends and distributions are paid within ten days of
the end of the time period to which the dividend relates. Dividends and
distributions payable to a Shareholder are paid in cash within ten business days
after a Shareholder's complete redemption of its Trust Shares in the Fund.
The amount of dividends payable on Trust Shares will be more than the dividends
payable on Investor Shares and Flex Shares because of the distribution and
certain transfer agent expenses charged to Investor Shares and Flex Shares. The
amount of dividends payable on Flex Shares generally will be less than the
amount of dividends payable on Investor Shares due to the higher distribution
and service expenses of Flex Shares.
TAX INFORMATION
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Fund or
its Shareholders. Shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
TAX STATUS OF THE FUND:
The Fund is treated as a separate entity for federal tax purposes and is not
combined with the Trust's other Funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies by the Internal
Revenue Code of 1986, as amended, (the "Code") so that it will be relieved of
federal income tax on that part of its net investment income and net capital
gains (the excess of long-term capital gains over net short-term capital loss)
which is distributed to Shareholders. The Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for
federal excise tax.
TAX STATUS OF DISTRIBUTIONS:
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) to Shareholders.
Dividends from net investment income paid by the Fund will be taxable to
Shareholders as ordinary income whether received in cash or in additional
shares. Dividends from net investment income will qualify for the dividends
received deduction for corporate Shareholders only to the extent such
<PAGE>
12
distributions are derived from dividends paid by domestic corporations. Any net
capital gains will be distributed annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares
and regardless of whether distributions are received in cash or in additional
shares. For certain individual Shareholders, net long-term capital gains may be
taxed at a lower rate than ordinary income. The Fund will make annual reports to
Shareholders of the federal income tax status of all distributions. Dividends
declared by the Fund in October, November or December of any year and payable to
Shareholders of record on a date in that month will be deemed to have been paid
by the Fund and received by the Shareholder on December 31 of that year, if paid
by the Fund at any time during the following January.
Income derived by the Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. The Fund expects to elect to treat Shareholders as
having paid their proportionate share of such foreign taxes.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by the Fund and may be exempt, depending on the state,
when received by the Shareholder as income dividends from the Fund, provided
certain state-specific conditions are satisfied. Not all states permit such
income dividends to be tax exempt and some require that a certain minimum
percentage of an investment company's income be derived from state tax-exempt
interest. The Fund will inform Shareholders annually of the percentage of income
and distributions derived from direct U.S. obligations. Shareholders should
consult their tax advisors to determine whether any portion of the income
dividends received from the Fund is considered tax-exempt in their particular
state.
Sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust dated January 15, 1992. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each portfolio of
shares. All consideration received by the Trust for shares of any portfolio of
shares and all assets of such portfolio of shares belong to that portfolio of
shares and would be subject to liabilities related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
BOARD OF TRUSTEES
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described below, certain
companies provide essential management services to the Trust.
<PAGE>
13
INVESTMENT ADVISOR
The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $44.2
billion as of June 30, 1995. SunTrust ranks among the twenty largest U.S.
banking companies. Its three principal subsidiaries -- SunTrust Banks of
Florida, Inc., Suntrust Banks of Georgia, Inc. and SunTrust Banks of Tennessee
- -- provide a wide range of personal and corporate banking, trust, and investment
services through more than 600 locations in the three-state area. Total
discretionary assets under management with SunTrust Banks, Inc. equalled
approximately $42 billion as of December 31, 1994.
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the Fund.
As of June 30, 1995, STI Capital had discretionary management authority with
respect to assets of approximately $11.1 billion. The principal business address
of STI Capital is P.O. Box 3808, Orlando, FL 32802.
The Trust and the Advisor have entered into an advisory agreement (the "Advisory
Agreement"). Under the Advisory Agreement, the Advisor makes the investment
decisions for the assets of the Fund and continuously reviews, supervises and
administers the Fund's investment program. The Advisor discharges its
responsibilities subject to the supervision of, and policies established by, the
Trustees of the Trust. STI CLASSIC FUNDS ARE NOT DEPOSITS, ARE NOT INSURED OR
GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY, AND ARE NOT ENDORSED OR
GUARANTEED BY AND DO NOT CONSTITUTE OBLIGATIONS OF SUNTRUST BANKS, INC. OR ANY
OF ITS AFFILIATES. INVESTMENTS IN THE FUND INVOLVES RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE AND SHARES AT
REDEMPTION MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THERE IS NO
GUARANTEE THAT ANY STI CLASSIC FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. With
respect to the Fund, the Advisor may execute brokerage or other agency
transactions through affiliates of the Advisor.
For the services provided and expenses incurred pursuant to the Investment
Advisory Agreement, STI Capital is entitled to receive advisory fees computed
daily and paid monthly at the annual rate of 1.25% of the average daily net
assets of the Fund.
Although the advisory fee for the Fund is higher than advisory fees paid by
other mutual funds, the Trust believes that the fee is comparable to the
advisory fee paid by other mutual funds with similar investment objectives and
policies. From time to time, the Advisor may waive (either voluntarily or
pursuant to applicable state limitations) the advisory fee payable by the Fund.
Currently, the Advisor has agreed to voluntary reductions in their respective
fees in amounts necessary to maintain the total operating expenses at the
amounts set forth in the Expense Summary. Voluntary reductions of fees may be
terminated at anytime.
PORTFOLIO MANAGER
Mr. Dan Jaworski has been responsible for the day-to-day management of the Fund
since its inception. Mr. Jaworski joined STI Capital in 1995. Prior to joining
STI Capital, he managed international portfolios at Lazard Freres Asset
Management from 1993 through 1994 and the Principal Financial Group from 1988
through 1993.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by
<PAGE>
14
the Board of Governors of the Federal Reserve System, presently (a) prohibit a
bank holding company registered under the Federal Bank Holding Company Act of
1956 or its affiliates from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares, and generally prohibit banks from underwriting
securities, but (b) do not prohibit such a bank holding company or affiliate or
banks generally from acting as an investment advisor, transfer agent, or
custodian to such an investment company or from purchasing shares of such a
company as agent for and upon the order of a customer. The Advisor believes that
it may perform the services for the Fund contemplated by its agreement described
in this Prospectus without violation of applicable banking laws or regulations.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
present requirements, could prevent the Advisor from continuing to perform
services for the Fund. If the Advisor was prohibited from providing services to
the Fund, the Board of Trustees would consider selecting other qualified firms.
Any new investment advisory agreements would be subject to Shareholder approval.
If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the Advisor, or its affiliates, would consider the
possibility of offering to perform additional services for the Fund. It is not
possible, of course, to predict whether or in what form such legislation might
be enacted or the terms upon which the Advisor, or such affiliates, might offer
to provide such services.
In addition, state securities laws on that issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DISTRIBUTION
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI Corporation ("SEI"), and the Trust are parties to a distribution agreement
("Distribution Agreement"). No compensation is paid to the Distributor for
distribution services for the Trust Shares of the Fund. Trust Shares of the Fund
are offered primarily to institutional investors, including affiliates and
correspondents for the investment of funds in which they act in a fiduciary,
agency or custodial capacity. It is possible that a financial institution may
offer different classes of shares to its customers and thus receive different
compensation with respect to different classes of shares.
The Fund may also execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
ADMINISTRATION
SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI, and the Trust are parties to an Administration Agreement (the
"Administration Agreement"). Under the terms of the Administration Agreement,
the Administrator provides the Trust with certain administrative services, other
than investment advisory services, including regulatory reporting, all necessary
office space, equipment, personnel, and facilities.
<PAGE>
15
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate as follows:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS FEE
- --------------------------------------------- ---------
<S> <C>
$1 - $1 billion .10%
over $1 billion to $5 billion .07%
over $5 billion to $8 billion .05%
over $8 billion to $10 billion .045%
over $10 billion .04%
</TABLE>
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, Pittsburgh, PA is the Transfer Agent for the shares
of the Trust and dividend disbursing agent for the Trust.
CUSTODIAN
SunTrust Bank, Atlanta, c/o STI Trust & Investment Operations, Inc., 303
Peachtree Street N.E., 14th Floor, Atlanta, GA 30308, serves as Custodian of the
assets of each Fund of the Trust except the International Equity Index Fund and
the International Equity Fund. The Bank of California, 475 Sansome Street, Suite
1200, San Francisco, CA 94111, serves as Custodian for the International Equity
Index Fund. The Bank of New York, One Wall Street, New York, NY 10286, serves as
Custodian for the International Equity Fund. Each Custodian holds cash,
securities and other assets of the Trust as required by the Investment Company
Act of 1940.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, PA, serves as legal counsel to the
Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen, LLP,
Philadelphia, PA.
OTHER INFORMATION
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. Each Fund or
class of a Fund will vote separately on matters relating solely to that Fund or
class. As a Massachusetts Business Trust, the Trust is not required to hold
annual meetings of Shareholders but approval will be sought for certain changes
in the operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders may contact their local Trust and Investment Services office of
SunTrust Bank, Inc.
DESCRIPTION OF PERMITTED INVESTMENTS
AMERICAN DEPOSITARY RECEIPTS ("ADRs") -- ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer and
deposited with the depositary. ADRs may be available through "sponsored" or
"unsponsored" facilities. A
<PAGE>
16
sponsored facility is established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an unsponsored facility may be
established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT-- Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES -- Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
CORPORATE DEBT OBLIGATIONS -- Debt instruments issued by corporations with
maturities exceeding 270 days. Such instruments may include putable corporate
bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Interests in separately traded interest and principal
component parts of U. S. Treasury obligations that are issued by banks or
brokerage firms and are created by depositing U. S. Treasury obligations into a
special account at custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TR's"), "Treasury Investment Growth Receipts" ("TIGR's"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TR's, TIGR's and
CATS are sold as zero coupon securities. See "Zero Coupon Obligations."
EUROPEAN DEPOSITARY RECEIPTS ("EDRs") -- EDRs are securities, typically issued
by a non-U.S. financial institution, that evidence ownership interests in a
security or a pool of securities issued by either a U.S. or foreign issuer. EDRs
may be available for investment through "sponsored" or "unsponsored" facilities.
See "ADRs."
FORWARD FOREIGN CURRENCY CONTRACTS -- A forward foreign currency contract
involves an obligation to purchase or sell a specific currency amount at a
future date, agreed upon by the parties, at a price set at the time of the
contract. The Fund may also enter into a contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency,
<PAGE>
17
the amount of foreign currency approximating the value of some or all of the
Fund's securities denominated in such foreign currency.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader,
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS -- Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. The Fund may use futures
contracts and related options for bona fide hedging purposes, to offset changes
in the value of securities held or expected to be acquired, to minimize
fluctuations in foreign currencies, or to gain exposure to a particular market
or instrument. The Fund will minimize the risk that it will be unable to close
out a futures contract by only entering into futures contracts which are traded
on national futures exchanges.
Stock index futures are futures contracts for various stock indices that are
traded on registered securities exchanges. A stock index futures contract
obligates the seller to deliver (and the purchaser to take) an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates, (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may restrict trading in
futures contracts and futures options.
ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be
disposed of within seven business days at approximately the price at which they
are being carried on the Fund's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, where there is no
secondary market for such security, and repurchase agreements with durations (or
maturities) over seven days in length.
OPTIONS ON CURRENCIES -- The Fund may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or over-the-counter
markets) to manage the portfolio's exposure to changes in dollar exchange rates.
Call options on foreign currency written by the Fund will be "covered," which
means that the Fund will own an equal amount of the underlying foreign currency.
With respect to put options on foreign currency written by the Fund, the Fund
will establish a segregated account with its custodian bank consisting of cash,
U.S. Government securities or other high grade liquid debt securities in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put.
<PAGE>
18
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which the Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. The Fund bears a risk of loss in the event the
other party defaults on its obligations and the Fund is delayed or prevented
from exercising its right to dispose of the collateral or if the Fund realizes a
loss on the sale of the collateral. The Fund will enter into repurchase
agreements only with financial institutions deemed to present minimal risk of
bankruptcy during the term of the agreement based on established guidelines.
Repurchase agreements are considered loans under the Investment Company Act of
1940.
RESTRICTED SECURITIES -- Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of 1933
or an exemption from registration. Rule 144A securities are securities that have
not been registered under the Securities Act of 1933, but which may be traded
between certain institutional investors, including investment companies. The
Trust's Board of Trustees is responsible for developing guidelines and
procedures for determining the liquidity of restricted securities and monitoring
the Advisors' implementation of the guidelines and procedures.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. The Fund continues to receive interest on the securities lent
while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits are considered to be illiquid
securities.
U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Federal Farm Credit Bank, the
Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association), others are supported by the right of the issuer to borrow
from the Treasury (e.g., Federal Farm Credit Bank), while still others are
supported only by the credit of the instrumentality (e.g., Federal National
Mortgage Association). Guarantees of principal by agencies or instrumentalities
of the U.S. Government may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to maturity there might not
be a market and thus no means of realizing on the obligation prior to maturity.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of the Fund's shares.
<PAGE>
19
U.S. TREASURY OBLIGATIONS -- U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS").
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WARRANTS -- Instruments giving holders the right, but not the obligation, to buy
shares of a company at a given price during a specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Fund will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, the Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.
ZERO COUPON OBLIGATIONS -- Zero coupon obligations are debt securities that do
not bear any interest, but instead are issued at a deep discount from par. The
value of a zero coupon obligation increases over time to reflect the interest
accreted. Such obligations will not result in the payment of interest until
maturity, and will have greater price volatility than similar securities that
are issued at par and pay interest periodically.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
A-1
APPENDIX
I. BOND RATINGS
*CORPORATE BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P's") and
Moody's Investors Service, Inc. ("Moody's") corporate bond ratings.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories.
Bonds which are rated BBB are considered to be medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Debt rated BB, B, CCC, CC and C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times
<PAGE>
A-2
over the future. Uncertainty of position characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal and interest. Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated C are the lowest rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
II. COMMERCIAL PAPER AND SHORT-TERM RATINGS
The following descriptions of commercial paper ratings have been published by
S&P, Moody's, Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff")
and IBCA Limited ("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+ and 1. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1 reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a safety regarding timely
payment but not as high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to have superior ability and strong ability for repayment, respectively.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
<PAGE>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISOR
STI Capital Management, N.A. P.O. Box 3808
Orlando, FL 32802
* DISTRIBUTOR
SEI Financial Services Company 680 E. Swedesford Road
Wayne, PA 19087-1658
* ADMINISTRATOR
SEI Financial Management 680 E. Swedesford Road
Corporation Wayne, PA 19087-1658
* TRANSFER AGENT
Federated Services Company Federated Investors
Tower
Pittsburgh, PA
15222-3779
* CUSTODIAN
SunTrust Bank, Atlanta c/o STI Trust &
Investment Operations,
Inc.
303 Peachtree Street
N.E., 14th Floor
Atlanta, GA 30308
The Bank of California 475 Sansome Street
(International Equity Index Fund Suite 1200
only) San Francisco, CA 94111
The Bank of New York One Wall Street
(International Equity Fund only) New York, NY 10286
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 2000 One Logan Square
Philadelphia, PA 19103
* INDEPENDENT AUDITORS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
<PAGE>
100525 / 10-95
DISTRIBUTOR
SEI Financial Services
Company
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
PROSPECTUS
TRUST SHARES
INTERNATIONAL EQUITY FUND
INVESTMENT ADVISOR
STI CAPITAL MANAGEMENT, N.A.
OCTOBER 31, 1995
[STI Classic Funds LOGO]
<PAGE>
STI CLASSIC FUNDS
International Equity Fund
Trust Shares
Supplement dated January 2, 1996 to Prospectus dated October 31, 1995
This Supplement provides new and additional information beyond that
contained in the prospectus and should be retained and read in conjunction
with such prospectus.
Effective January 2, 1996, the International Equity Fund began offering
its Investor Shares and Flex Shares to the public.
-----------------------------------------
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
