<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1996
FILE NO. 33-45671
FILE NO. 811-6557
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 15 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 17 /X/
STI CLASSIC FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (800) 342-5734
DAVID G. LEE
C/O SEI CORPORATION
680 E. SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
RICHARD W. GRANT JOHN H. GRADY, JR.
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, N.W.
PHILADELPHIA, PA 19103 WASHINGTON, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
Immediately upon filing pursuant to paragraph (b), or
- ---
On [DATE] pursuant to paragraph (b), or
- ---
X 60 days after filing pursuant to paragraph (a) or
- ---
75 days after filing pursuant to paragraph (a) or
- ---
On [DATE] pursuant to paragraph (a) of Rule 485.
- ---
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of units of beneficial interest is
being registered by this Registration Statement. Registrant has filed a Rule
24f-2 Notice on July 29, 1996 for its fiscal year ended May
31, 1996 .
<PAGE>
STI CLASSIC FUNDS
POST-EFFECTIVE AMENDMENT #15
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- --------------------------------------------------------------------------------
<S> <C>
PART A - ALL FUNDS
Item 1. Cover Page Cover Page
Item 2. Synopsis *
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Funds and Investment Objectives;
Investment Policies and Strategies;
Investment Limitations; Appendix
Item 5. Management of the Fund Board of Trustees; Investment
Advisors;Administration;
Distribution
Item 6. Capital Stock and Other Securities Voting Rights; Shareholder
Inquiries;
Dividends and Distributions;
Tax Information
Item 7. Purchase of Securities Being
Offered Cover Page; Purchase of Fund
Shares; Redemption of Fund Shares
Item 8. Redemption or Repurchase Purchase of Fund Shares;
Redemption of Fund Shares;
Distribution
Item 9. Pending Legal Proceedings *
PART B - ALL FUNDS
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Trust
Item 13. Investment Objectives and Policies Description of Permitted
Investments;Investment Limitations
Item 14. Management of the Registrant Trustees and Officers of the Trust;
The Administrator
Item 15. Control Persons and Principal Trustees and Officers of the Trust
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisors; The
Services Administrator; The Distributor;
Legal Counsel (Prospectus);
Independent Auditors (Prospectus)
Experts
Item 17. Brokerage Allocation Fund Transactions
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption,and Pricing Purchase and Redemption of Shares;
of Securities Being Offered Determination of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Yield Quotations Computation of Yield; Calculation
of Total Return
Item 23. Financial Statements Financial Information
</TABLE>
<PAGE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration
Statement.
*Not applicable
<PAGE>
STI CLASSIC FUNDS
TRUST SHARES
INVESTMENT GRADE BOND FUND
INVESTMENT GRADE TAX-EXEMPT BOND FUND
U.S. GOVERNMENT SECURITIES FUND
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
SHORT-TERM BOND FUND
SHORT-TERM U.S. TREASURY SECURITIES FUND
FLORIDA TAX-EXEMPT BOND FUND
GEORGIA TAX-EXEMPT BOND FUND
TENNESSEE TAX-EXEMPT BOND FUND
PRIME QUALITY MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
INVESTMENT ADVISORS TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
STI CAPITAL MANAGEMENT, N.A.
SUNTRUST BANK, CHATTANOOGA, N.A.
SUNTRUST BANK, ATLANTA, N.A.
(THE "ADVISORS")
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios (each a "Fund" and, collectively, the
"Funds"). This Prospectus sets forth concisely the information about the Trust
Shares of the above-referenced Funds. Investors are advised to read this
Prospectus and retain it for future reference.
A Statement of Additional Information relating to the Funds 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, Pennsylvania 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.
- --------------------------------------------------------------------------------
AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
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 THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1996
<PAGE>
2
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
3
Throughout this Prospectus, the Investment Grade Bond Fund, Investment Grade
Tax-Exempt Bond Fund, Short-Term U.S. Treasury Securities Fund, Short-Term Bond
Fund, U.S. Government Securities Fund and Limited-Term Federal Mortgage
Securities Fund, which invest primarily in bonds and other fixed income
instruments, may be referred to as the "Bond Funds," the Florida Tax-Exempt Bond
Fund, Georgia Tax-Exempt Bond Fund and Tennessee Tax-Exempt Bond Fund, which
invest primarily in tax-exempt bonds and other fixed income instruments, may be
referred to as the "State Tax-Exempt Bond Funds," and the Prime Quality Money
Market Fund, U.S. Government Securities Money Market Fund and Tax-Exempt Money
Market Fund may be referred to as the "Money Market Funds."
The Trust Shares are offered primarily to financial institutions and
intermediaries ("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. Individuals may
not purchase Trust Shares directly, although individuals may be able to purchase
Trust Shares through accounts maintained with financial institutions.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary........................................................... 4
Financial Highlights...................................................... 6
The Trust................................................................. 8
Funds and Investment Objectives........................................... 8
Investment Policies and Strategies........................................ 9
General Investment Policies and Strategies................................ 18
Investment Risks.......................................................... 18
Investment Limitations.................................................... 20
Performance Information................................................... 21
Purchase of Fund Shares................................................... 22
Redemption of Fund Shares................................................. 23
Dividends and Distributions............................................... 24
Tax Information........................................................... 25
STI Classic Funds Information............................................. 27
The Trust................................................................. 27
Board of Trustees......................................................... 27
Investment Advisors....................................................... 27
Portfolio Managers........................................................ 29
Banking Laws.............................................................. 30
Distribution.............................................................. 30
Administration............................................................ 31
Transfer Agent and Dividend Disbursing Agent.............................. 31
Custodian................................................................. 31
Legal Counsel............................................................. 31
Independent Public Accountants............................................ 31
Other Information......................................................... 31
Voting Rights............................................................. 31
Reporting................................................................. 32
Shareholder Inquiries..................................................... 32
Description of Permitted Investments...................................... 32
Appendix.................................................................. A-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT OF
ADDITIONAL INFORMATION 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.
<PAGE>
4
EXPENSE SUMMARY
TRUST SHARES
The purpose of the following table is to help you understand the various costs
and expenses that a shareholder will bear, directly or indirectly, in connection
with an investment in the Trust Shares of each Fund.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LIMITED-TERM
INVESTMENT FEDERAL SHORT-TERM
INVESTMENT GRADE U.S. MORTGAGE SHORT-TERM U.S. TREASURY
GRADE BOND TAX-EXEMPT GOVERNMENT SECURITIES BOND SECURITIES
FUND BOND FUND SECURITIES FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers &
reimbursements)(1)................. .63% .61% .16% .43% .46% .22%
Other Fund Expenses................. .12% .14% .59% .22% .19% .43%
- --------------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (after
fee waivers &
reimbursements)(2)(3).............. .75% .75% .75% .65% .65% .65%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. The Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Investment Grade Bond Fund
-- .74%, Investment Grade Tax-Exempt Bond Fund -- .74%, U.S. Government
Securities Fund -- .74%, Limited-Term Federal Mortgage Securities Fund --
.65%, Short-Term Bond Fund -- .65% and Short-Term U.S. Treasury Securities
Fund -- .65%. See "Investment Advisors."
(2) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Investment Grade Bond Fund -- .86%, Investment Grade
Tax-Exempt Bond Fund -- .88%, U.S. Government Securities Fund -- 1.33%,
Limited-Term Federal Mortgage Securities Fund -- .87%, Short-Term Bond Fund
-- .84% and Short-Term U.S. Treasury Securities Fund -- 1.08%.
<PAGE>
5
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
U.S. GOVERNMENT
FLORIDA GEORGIA TENNESSEE PRIME QUALITY SECURITIES TAX-EXEMPT
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT MONEY MARKET MONEY MARKET MONEY MARKET
BOND FUND BOND FUND BOND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers
& reimbursements)(1).............. .38% .37% .00% .50% .51% .47%
Other Fund Expenses (after fee
waivers & reimbursements)(2)(3)... .27% .28% .65% .08% .10% .13%
- --------------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after fee waivers &
reimbursements)(4)(5)............. .65% .65% .65% .58% .61% .60%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. The Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Florida Tax-Exempt Bond
Fund -- .65%, Georgia Tax-Exempt Bond Fund -- .65%, Tennessee Tax-Exempt
Bond Fund -- .65%, Prime Quality Money Market Fund -- .65%, U.S. Government
Securities Money Market Fund -- .65% and Tax-Exempt Money Market Fund --
.55%. See "Investment Advisors."
(2) The Administrator is waiving, on a voluntary basis, a portion of its fee
from the Prime Quality Money Market and U.S. Government Securities Money
Market Funds. The Administrator reserves the right to terminate its waiver
at any time in its sole discretion. Absent such waivers, Other Fund Expenses
would be as follows: Prime Quality Money Market Fund -- .13% and U.S.
Government Securities Money Market Fund -- .13%. See "Administration."
(3) Absent waivers and reimbursements, Other Fund Expenses for the Tennesse
Tax-Exempt Bond Fund would be 1.03%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Florida Tax-Exempt Bond Fund -- .92%, Georgia
Tax-Exempt Bond Fund -- .93%, Tennessee Tax-Exempt Bond Fund -- 1.68%, Prime
Quality Money Market Fund -- .78%, U.S. Government Securities Money Market
Fund -- .78% and Tax-Exempt Money Market Fund -- .68%.
(5) Total Fund Operating Expenses for the Tax-Exempt Money Market Fund have been
restated to reflect current fees.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLES YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <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.
INVESTMENT GRADE BOND FUND....................................... $ 8 $ 24 $ 42 $ 93
INVESTMENT GRADE TAX-EXEMPT BOND FUND............................ $ 8 $ 24 $ 42 $ 93
U.S. GOVERNMENT SECURITIES FUND.................................. $ 8 $ 24 $ 42 $ 93
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND.................... $ 7 $ 21 $ 36 $ 81
SHORT-TERM BOND FUND............................................. $ 7 $ 21 $ 36 $ 81
SHORT-TERM U.S. TREASURY SECURITIES FUND......................... $ 7 $ 21 $ 36 $ 81
FLORIDA TAX-EXEMPT BOND FUND..................................... $ 7 $ 21 $ 36 $ 81
GEORGIA TAX-EXEMPT BOND FUND..................................... $ 7 $ 21 $ 36 $ 81
TENNESSEE TAX-EXEMPT BOND FUND................................... $ 7 $ 21 $ 36 $ 81
PRIME QUALITY MONEY MARKET FUND.................................. $ 6 $ 19 $ 32 $ 73
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND..................... $ 6 $ 20 $ 34 $ 76
TAX-EXEMPT MONEY MARKET FUND..................................... $ 6 $ 19 $ 33 $ 75
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF A FUND AND SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. A person that purchases shares through an
account with a financial institution may be charged separate fees by the
financial institution.
<PAGE>
6
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountant, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information and which appear, along with the report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information regarding each Fund is contained in the Trust's Annual Report to
Shareholders and is available without charge by calling 1-800-428-6970.
For a Trust Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED AND DISTRIBUTIONS NET ASSETS
VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET END OF
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL PERIOD
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (000)
--------- ---------- ----------------- -------------- -------------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------
INVESTMENT GRADE BOND FUND
-----------------------------
TRUST SHARES
1996................ $10.26 $ 0.60 $ (0.19) $ (0.60) -- $ 10.07 4.02% $ 599,514
1995................ 9.89 0.61 0.37 (0.61) -- 10.26 10.39% 543,308
1994................ 10.45 0.50 (0.36) (0.50) $ (0.20) 9.89 1.17% 460,538
1993 (1)............ 10.09 0.45 0.36 (0.45) -- 10.45 9.34%* 336,132
----------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
----------------------------------------
TRUST SHARES
1996................ $11.28 $ 0.45 $ 0.20 $ (0.46) $ (0.37) $ 11.10 5.82% $ 124,507
1995................ 10.68 0.46 0.60 (0.46) -- 11.28 10.21% 78,208
1994 (2)............ 11.37 0.22 (0.34) (0.22) (0.35) 10.68 (1.10%)+ 44,595
---------------------------------
U. S. GOVERNMENT SECURITIES FUND
---------------------------------
TRUST SHARES
1996................ $10.27 $ 0.62 $ (0.33) $ (0.62) $ (0.03) $ 9.91 2.77% $ 10,277
1995 (3)............ 9.98 0.53 0.29 (0.53) -- 10.27 8.64%+ 3,291
----------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
----------------------------------------------
TRUST SHARES
1996................ $10.11 $ 0.62 $ (0.14) $ (0.60) -- $ 9.99 4.84% $ 73,370
1995 (4)............ 10.00 0.58 0.13 (0.60) -- 10.11 7.50%+ 41,823
----------------------
SHORT-TERM BOND FUND
----------------------
TRUST SHARES
1996................ $ 9.98 $ 0.54 $ (0.10) $ (0.54) $ (0.02) $ 9.86 4.45% $ 91,156
1995................ 9.79 0.53 0.19 (0.53) -- 9.98 7.60% 60,952
1994................ 10.01 0.42 (0.21) (0.42) (0.01) 9.79 2.02% 34,772
1993 (5)............ 10.00 0.08 0.01 (0.08) -- 10.01 4.45%* 25,334
----------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
----------------------------------------
TRUST SHARES
1996................ $ 9.93 $ 0.55 $ (0.09) $ (0.55) -- $ 9.84 4.73% $ 10,149
1995................ 9.82 0.47 0.11 (0.47) -- 9.93 6.11% 9,599
1994................ 9.98 0.33 (0.11) (0.33) $ (0.05) 9.82 2.17% 12,723
1993 (6)............ 10.00 0.07 (0.02) (0.07) -- 9.98 2.22%* 30,336
<CAPTION>
RATIO OF NET
RATIO OF NET INVESTMENT INCOME
RATIO OF INVESTMENT RATIO OF EXPENSES TO (LOSS) TO AVERAGE NET
EXPENSES INCOME (LOSS) AVERAGE NET ASSETS ASSETS (EXCLUDING PORTFOLIO
TO AVERAGE TO AVERAGE NET (EXCLUDING WAIVERS WAIVERS AND TURNOVER
NET ASSETS ASSETS AND REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- -------------- --------------------- --------------------- ----------
<S> <C> <C> <C> <C> <C>
-----------------------------
INVESTMENT GRADE BOND FUND
-----------------------------
TRUST SHARES
1996................ 0.75% 5.81% 0.87% 5.69% 184.33%
1995................ 0.75% 6.22% 0.88% 6.09% 237.66%
1994................ 0.75% 4.77% 0.88% 4.64% 259.19%
1993 (1)............ 0.74%* 5.14%* 0.87%* 5.01%* 299.32%
----------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
----------------------------------------
TRUST SHARES
1996................ 0.75% 4.01% 0.89% 3.87% 513.90%
1995................ 0.75% 4.34% 0.91% 4.18% 591.91%
1994 (2)............ 0.75%* 3.46%* 0.95%* 3.26%* 432.46%
---------------------------------
U. S. GOVERNMENT SECURITIES FUND
---------------------------------
TRUST SHARES
1996................ 0.75% 6.05% 1.25% 5.55% 83.38%
1995 (3)............ 0.75%* 6.67%* 3.33%* 4.09%* 30.39%
----------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
----------------------------------------------
TRUST SHARES
1996................ 0.65% 6.04% 0.84% 5.85% 83.01%
1995 (4)............ 0.65%* 6.43%* 0.93%* 6.15%* 67.63%
----------------------
SHORT-TERM BOND FUND
----------------------
TRUST SHARES
1996................ 0.65% 5.39% 0.81% 5.23% 162.62%
1995................ 0.65% 5.49% 0.85% 5.29% 200.49%
1994................ 0.65% 4.15% 0.85% 3.95% 74.85%
1993 (5)............ 0.64%* 3.88%* 1.11%* 3.41%* 63.89%
----------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
----------------------------------------
TRUST SHARES
1996................ 0.65% 5.56% 1.00% 5.21% 94.00%
1995................ 0.65% 4.91% 1.08% 4.48% 87.98%
1994................ 0.65% 3.23% 0.81% 3.07% 116.57%
1993 (6)............ 0.63%* 3.34%* 1.04%* 2.93%* 36.44%
</TABLE>
<PAGE>
7
FINANCIAL HIGHLIGHTS CONTINUED
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED AND DISTRIBUTIONS NET ASSETS
VALUE INVESTMENT UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET END OF
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL PERIOD
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (000)
--------- ---------- ----------------- -------------- -------------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------
FLORIDA TAX-EXEMPT BOND FUND
------------------------------
TRUST SHARES
1996................ $10.18 $ 0.46 $ (0.07) $ (0.46) $ (0.05) $ 10.06 3.87% $ 30,790
1995................ 9.75 0.44 0.43 (0.44) -- 10.18 9.26% 10,118
1994 (7)............ 10.00 0.13 (0.25) (0.13) -- 9.75 (1.19%)+ 3,192
-------------------------------
GEORGIA TAX-EXEMPT BOND FUND
-------------------------------
TRUST SHARES
1996................ $ 9.63 $ 0.43 $ (0.05) $ (0.43) $ (0.02) $ 9.56 3.89% $ 22,950
1995................ 9.42 0.42 0.21 (0.42) -- 9.63 6.94% 13,187
1994 (8)............ 10.00 0.14 (0.58) (0.14) -- 9.42 (4.43%)+ 4,338
---------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
---------------------------------
TRUST SHARES
1996................ $ 9.50 $ 0.43 $ (0.11) $ (0.42) -- $ 9.40 3.43% $ 1,823
1995................ 9.22 0.44 0.28 (0.44) -- 9.50 8.17% 1,664
1994 (9)............ 10.00 0.12 (0.77) (0.13) -- 9.22 (6.52%)+ 594
---------------------------------
PRIME QUALITY MONEY MARKET FUND
---------------------------------
TRUST SHARES
1996................ $ 1.00 $ 0.05 -- $ (0.05) -- $ 1.00 5.25% $ 1,050,800
1995................ 1.00 0.05 -- (0.05) -- 1.00 4.79% 799,189
1994................ 1.00 0.03 -- (0.03) -- 1.00 2.88% 583,399
1993 (10)........... 1.00 0.03 -- (0.03) -- 1.00 2.92%* 410,991
-----------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
-----------------------------------------------
TRUST SHARES
1996................ $ 1.00 $ 0.05 -- $ (0.05) -- $ 1.00 5.14% $ 325,493
1995................ 1.00 0.05 -- (0.05) -- 1.00 4.67% 434,111
1994................ 1.00 0.03 -- (0.03) -- 1.00 2.77% 309,228
1993 (10)........... 1.00 0.03 -- (0.03) -- 1.00 2.79%* 453,567
-------------------------------
TAX-EXEMPT MONEY MARKET FUND
-------------------------------
TRUST SHARES
1996................ $ 1.00 $ 0.03 -- $ (0.03) -- $ 1.00 3.28% $ 273,613
1995................ 1.00 0.03 -- (0.03) -- 1.00 3.10% 215,413
1994................ 1.00 0.02 -- (0.02) -- 1.00 2.08% 143,982
1993 (10)........... 1.00 0.02 -- (0.02) -- 1.00 2.12%* 78,416
<CAPTION>
RATIO OF NET
RATIO OF NET INVESTMENT INCOME
RATIO OF INVESTMENT RATIO OF EXPENSES TO (LOSS) TO AVERAGE NET
EXPENSES INCOME (LOSS) AVERAGE NET ASSETS ASSETS (EXCLUDING PORTFOLIO
TO AVERAGE TO AVERAGE NET (EXCLUDING WAIVERS WAIVERS AND TURNOVER
NET ASSETS ASSETS AND REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- -------------- --------------------- --------------------- ----------
<S> <C> <C> <C> <C> <C>
------------------------------
FLORIDA TAX-EXEMPT BOND FUND
------------------------------
TRUST SHARES
1996................ 0.65% 4.49% 0.88% 4.26% 62.68%
1995................ 0.65% 4.63% 1.13% 4.15% 105.01%
1994 (7)............ 0.65%* 3.86%* 1.12%* 3.39%* 53.24%
-------------------------------
GEORGIA TAX-EXEMPT BOND FUND
-------------------------------
TRUST SHARES
1996................ 0.65% 4.36% 0.89% 4.12% 60.02%
1995................ 0.65% 4.56% 0.98% 4.23% 24.50%
1994 (8)............ 0.65%* 4.12%* 1.06%* 3.71%* 25.90%
---------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
---------------------------------
TRUST SHARES
1996................ 0.65% 4.49% 1.68% 3.46% 41.00%
1995................ 0.65% 4.90% 2.65% 2.90% 27.73%
1994 (9)............ 0.65%* 4.24%* 1.43%* 3.46%* 13.05%
---------------------------------
PRIME QUALITY MONEY MARKET FUND
---------------------------------
TRUST SHARES
1996................ 0.58% 5.11% 0.78% 4.91% --
1995................ 0.58% 4.77% 0.79% 4.56% --
1994................ 0.58% 2.86% 0.79% 2.65% --
1993 (10)........... 0.58%* 2.85%* 0.78%* 2.65%* --
-----------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
-----------------------------------------------
TRUST SHARES
1996................ 0.61% 5.02% 0.78% 4.85% --
1995................ 0.61% 4.64% 0.80% 4.45% --
1994................ 0.61% 2.69% 0.77% 2.53% --
1993 (10)........... 0.61%* 2.71%* 0.78%* 2.54%* --
-------------------------------
TAX-EXEMPT MONEY MARKET FUND
-------------------------------
TRUST SHARES
1996................ 0.50% 3.23% 0.68% 3.05% --
1995................ 0.45% 3.12% 0.70% 2.87% --
1994................ 0.42% 2.05% 0.71% 1.76% --
1993 (10)........... 0.41%* 2.07%* 0.70%* 1.78%* --
</TABLE>
* Annualized.
+ Cumulative since commencement of operations.
(1) The Investment Grade Bond Fund Trust Shares commenced operations on July
16, 1992.
(2) The Investment Grade Tax-Exempt Bond Fund Trust Shares commenced operations
on October 21, 1993.
(3) The U.S. Government Securities Fund Trust Shares commenced operations on
July 31, 1994.
(4) The Limited Term Federal Mortgage Securities Fund Trust Shares commenced
operations on June 7, 1994.
(5) The Short-Term Bond Fund Trust Shares commenced operations on March 15,
1993.
(6) The Short-Term U.S. Treasury Securities Fund Trust Shares commenced
operations on March 15, 1993.
(7) The Florida Tax-Exempt Bond Fund Trust Shares commenced operations on
January 25, 1994.
(8) The Georgia Tax-Exempt Bond Fund Trust Shares commenced operations on
January 18, 1994.
(9) The Tennessee Tax-Exempt Bond Fund Trust Shares commenced operations on
January 27, 1994.
(10) The Prime Quality Money Market Fund Trust Shares, the U.S. Government
Securities Money Market Fund Trust Shares, and the Tax-Exempt Money Market
Fund Trust Shares commenced operations on June 8, 1992.
<PAGE>
8
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 each non-money market Fund through three
separate classes (Trust Shares, Investor Shares and Flex Shares) and in each
Money Market Fund through two separate classes (Trust Shares and Investor
Shares) which provide for variations in distribution and service fees, transfer
agent fees, voting rights and dividends. Except for differences between classes,
each share of each Fund represents an undivided, proportionate interest in that
Fund. This Prospectus relates to the Trust Shares of the Funds described below.
FUNDS AND INVESTMENT OBJECTIVES
BOND FUNDS:
THE INVESTMENT GRADE BOND FUND seeks to provide as high a level of total return
through current income and capital appreciation as is consistent with the
preservation of capital primarily through investment in investment grade fixed
income securities.
THE INVESTMENT GRADE TAX-EXEMPT BOND FUND seeks to provide as high a level of
total return through federally tax-exempt current income and capital
appreciation as is consistent with the preservation of capital primarily through
investment in investment grade tax-exempt obligations.
THE U.S. GOVERNMENT SECURITIES FUND seeks to provide as high a level of current
income as is consistent with the preservation of capital by investing primarily
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
THE LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND seeks to provide as high a
level of current income as is consistent with the preservation of capital by
investing primarily in mortgage-related securities issued or guaranteed by U.S.
Government agencies and instrumentalities.
THE SHORT-TERM BOND FUND seeks to provide as high a level of current income,
relative to funds with like investment objectives, as is consistent with the
preservation of capital primarily through investment in short- to
intermediate-term investment grade fixed income securities.
THE SHORT-TERM U.S. TREASURY SECURITIES FUND seeks to provide as high a level of
current income, relative to funds with like investment objectives, as is
consistent with the preservation of capital through investment exclusively in
short-term U.S. Treasury securities.
STATE TAX-EXEMPT BOND FUNDS:
THE FLORIDA TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal income tax for Florida residents without undue investment risk.
THE GEORGIA TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal and state income tax for Georgia residents without undue
investment risk.
THE TENNESSEE TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal and state income tax for Tennessee residents without undue
investment risk.
<PAGE>
9
MONEY MARKET FUNDS:
THE PRIME QUALITY MONEY MARKET FUND seeks to provide as high a level of current
income as is consistent with preservation of capital and liquidity by investing
exclusively in high quality money market instruments.
THE U.S. GOVERNMENT SECURITIES MONEY MARKET FUND seeks to provide as high a
level of current income as is consistent with preservation of capital and
liquidity by investing exclusively in 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 Reserve Book-Entry System
("U.S. Treasury obligations"), securities of wholly-owned corporations of the
U.S. Government that are backed by the full faith and credit of the U.S.
Government and repurchase agreements with approved dealers collateralized by
U.S. Treasury obligations, and U.S. Government Subsidiary Corporation
securities.
THE TAX-EXEMPT MONEY MARKET FUND seeks to provide as high a level of current
interest income exempt from regular federal income tax as is consistent with
preservation of capital and liquidity. The Fund invests primarily in high
quality short-term municipal obligations.
Each Money Market Fund's ability to generate high current income will be limited
by the fact that it is only permitted to invest in high quality securities. It
is a fundamental policy of each Money Market Fund to use its best efforts to
maintain a constant net asset value of $1.00 per share. There can be no
assurance that a Money Market Fund will achieve its investment objective or that
the Money Market Funds will be able to maintain a net asset value of $1.00 per
share on a continuous basis. In addition, each Money Market Fund intends to
comply with federal regulations applicable to money market funds using the
amortized cost method for calculating net asset value which require each Fund to
invest only in U.S. dollar denominated obligations, to maintain an average
maturity on a dollar-weighted basis of 90 days or less and to acquire eligible
securities that present minimal credit risk and have a maturity of 397 days or
less. These requirements will also limit a Money Market Fund's ability to
generate high current income. For a further discussion of these rules, see
"Description of Permitted Investments."
There can be no assurance that a Fund will achieve its investment objective.
The investment objectives of the Investment Grade Bond Fund, U.S. Government
Securities Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond
Fund and Short-Term U.S. Treasury Securities Fund are non-fundamental and may be
changed without a shareholder vote.
INVESTMENT POLICIES AND STRATEGIES
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund will invest only in those obligations deemed
investment grade obligations rated BBB or better by Standard & Poor's
Corporation ("S&P") or Baa or better by Moody's Investors Services, Inc.
("Moody's") or, if not rated by S&P or Moody's, of comparable quality at the
time of purchase as determined by the Fund's Advisor, including corporate debt
obligations; mortgage-backed securities, collateralized mortgage obligations
("CMOs") and asset-backed securities; obligations issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or
<PAGE>
10
guaranteed by foreign governments, their political subdivisions, agencies or
instrumentalities; obligations of supranational entities and sponsored American
Depositary Receipts ("ADRs") that are traded on exchanges or listed on National
Association of Securities Dealers Automated Quotations ("NASDAQ"). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
corporate and government bonds and debentures. No more than 25% of the Fund's
assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if
not rated by S&P or Moody's, of comparable quality at the time of purchase as
determined by the Fund's Advisor.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies or
instrumentalities or, subject to a limit of 25% of the Fund's assets,
mortgage-backed securities issued by private issuers. These mortgage-backed
securities may be backed or collateralized by fixed, adjustable or floating rate
mortgages. The Fund may also invest in asset-backed securities which consist of
securities backed by company receivables, truck and auto loans, leases, credit
card receivables and home equity loans.
In order to reduce interest rate risk, and subject to a general limit of 25% of
the Fund's assets, the Fund may purchase floating or variable rate securities.
Some floating or variable rate securities will be subject to interest rate
"caps" or "floors." It may also buy securities on a when-issued basis, putable
securities, medium term notes, and zero coupon securities. The Fund may also
invest up to 10% of its assets in restricted securities. The Fund may also
engage in futures and options.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. In the case of mortgage related
securities and asset-backed securities, maturity will be determined based on the
expected average life of the security. The Fund may shorten its average weighted
maturity to as little as 90 days if deemed appropriate for temporary defensive
purposes. By so limiting the maturity of its investments, the Fund expects that
its net asset value will experience less price movement in response to changes
in interest rates than the net asset values of mutual funds investing in similar
credit quality securities with longer maturities.
The Fund's portfolio turnover rate was 184% for the fiscal year ended May 31,
1996. This rate of turnover, if continued, will likely result in higher
transaction costs and higher levels of realized capital gains than if the
turnover rate was lower.
INVESTMENT GRADE TAX-EXEMPT BOND FUND
The Investment Grade Tax-Exempt Bond Fund intends to be fully invested in
municipal securities the interest on which is exempt from regular federal income
taxes in the opinion of bond counsel to the issuer. The issuers of these
securities can be located in all fifty states, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. It is a fundamental policy of
the Investment Grade Tax-Exempt Bond Fund to invest at least 80% of its total
assets in securities the income from which is exempt from regular federal income
tax and treated as a preference item for purposes of the alternative minimum
tax. At least 65% of the Fund's assets will be invested in municipal bonds and
debentures, and at least 75% of its total assets invested in municipal bonds
will be in securities rated A or better by S&P or Moody's. Municipal securities
must be rated BBB or better by S&P or Baa or better by Moody's in the case of
bonds; SP-1,
<PAGE>
11
SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, P-1, P-2 in the case of
tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate
demand obligations. The Fund will only acquire unrated securities if, at the
time of purchase, the Fund's Advisor determines that such unrated obligations
are of comparable quality to rated obligations that may be acquired by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities, and may
purchase municipal forwards, medium term notes, putable securities, and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if unrated, of comparable quality at the
time of purchase as determined by the Fund's Advisor, repurchase agreements, and
securities subject to the alternative minimum tax. The Fund may also invest up
to 10% of its assets in restricted securities that the Fund's Advisor determines
are liquid under guidelines adopted by the Trust's Board of Trustees and may
engage in futures and options transactions.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes. By so limiting the maturity of its investments,
the Fund's net asset value is expected to experience less price movement in
response to changes in interest rates than the net asset values of mutual funds
investing in similar credit quality securities with longer maturities.
The Fund's portfolio turnover rate was 514% for the fiscal year ended May 31,
1996. This rate of turnover, if continued, will likely result in higher
transaction costs and higher levels of realized capital gains than if the
turnover rate was lower.
U.S. GOVERNMENT SECURITIES FUND
Under normal market conditions, the Fund will invest at least 65% of its assets
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including mortgage-backed securities issued or guaranteed by
U.S. Government agencies such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home
Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities consisting of
CMOs and real estate mortgage investment conduits ("REMICs") purchased by the
Fund will be issued or guaranteed as to payment of principal and interest by the
U.S. Government, its agencies or instrumentalities or, if issued by private
issuers, rated in one of the two highest rating categories by a nationally
recognized statistical rating organization (an "NRSRO").
The principal governmental issuers or guarantors of mortgage-backed securities
are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and
credit of the U.S. Government while obligations of FNMA and FHLMC are supported
by the respective agency only. The Fund may purchase mortgage-backed securities
that are backed or collateralized by fixed, adjustable or floating rate
mortgages.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of a governmental entity and thus may bear a risk of nonpayment.
The timely payment of principal
<PAGE>
12
and interest normally is supported, at least partially, by various forms of
insurance or guarantees. There can be no assurance, however, that such credit
enhancement will support full payment of the principal and interest on such
obligations. The average maturity of the Fund's investment portfolio will
typically range from 7 to 14 years.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P, or that are deemed by the Fund's Advisor to be of
comparable quality; commercial paper rated at the time of purchase within the
two highest ratings categories of an NRSRO; bankers' acceptances; certificates
of deposit and time deposits; and U.S. Treasury obligations, which include
custodial receipts and repurchase agreements involving securities that
constitute permissible investments for the Fund. The Fund intends to invest in
privately issued, mortgage-backed securities only if they are rated in one of
the two highest rating categories by an NRSRO.
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The Fund may purchase floating
or variable rate securities, and may engage in dollar rolls.
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Under normal market conditions, the Limited-Term Federal Mortgage Securities
Fund will invest at least 65% of its assets in mortgage-related securities
issued or guaranteed by U.S. Government agencies such as GNMA, FNMA or FHLMC.
Obligations of GNMA are backed by the full faith and credit of the U.S.
Government while obligations of FNMA and FHLMC are supported by the respective
agency only. The Fund may purchase mortgage-backed securities that are backed or
collateralized by fixed, adjustable or floating rate mortgages. The Fund's
holdings of mortgage-backed securities will typically have an average life of
from one to five years.
Mortgage-backed securities consisting of CMOs and REMICs purchased by the Fund
will be either issued or guaranteed as to payment of principal and interest by
the U.S. Government, its agencies or instrumentalities or, if issued by private
issuers, rated in one of the two highest rating categories by an NRSRO.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of the U.S. Government and thus bear a risk of nonpayment. The
timely payment of principal and interest normally is supported, at least
partially, by various forms of insurance or guarantees. There can be no
assurance, however, that such credit enhancement will support full payment of
the principal and interest on such obligations.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P, or that are deemed by the Fund's Advisor to be of
comparable quality; asset backed securities; commercial paper rated at the time
of purchase in the two highest ratings categories by an NRSRO; bankers'
acceptances; certificates of deposit and time deposits; U.S. Treasury
obligations and custodial receipts; and repurchase agreements involving
securities that constitute permissible investments for the Fund.
<PAGE>
13
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The Fund may purchase floating
or variable rate securities and engage in dollar roll transactions. The Fund may
also purchase stripped mortgage-backed securities, but will limit such purchases
to 5% of its net assets.
SHORT-TERM BOND FUND
Under normal circumstances, the Short-Term Bond Fund will invest solely in
investment grade obligations rated BBB or better by S&P or Baa or better by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Advisor consisting of debt obligations of
U.S. and foreign corporations; mortgage-backed securities; CMOs; asset-backed
securities; obligations (including mortgage-backed securities) issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; and custodial receipts involving U.S. Treasury obligations;
(including Separately Traded Registered Interest and Principal Securities
("STRIPS") and Coupon Under Book Entry System ("CUBES")). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
corporate and government bonds and debentures. No more than 25% of the Fund's
assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if
not rated by S&P or Moody's, of comparable quality at the time of purchase by
the Fund's Advisor.
The Fund may purchase, without limitation, mortgage-backed securities issued or
guaranteed as to the payment of principal and interest by the U.S. Government,
its agencies or instrumentalities and, subject to a limit of 25% of the Fund's
assets, mortgage-backed securities issued by private issuers. These
mortgage-backed securities may be backed or collateralized by fixed, adjustable
or floating rate mortgages. The Fund may also invest in asset-backed securities,
which consist of securities backed by company receivables, truck and auto loans;
leases; credit card receivables; and home equity loans. The Fund will purchase
mortgage-backed and asset-backed securities only if they are rated at least AA
by S&P or Aa by Moody's or, if unrated, determined to be of comparable quality
at the time of purchase by the Fund's Advisor.
The Fund may purchase securities on a when-issued basis and may acquire floating
or variable rate securities, medium term notes, putable securities, and zero
coupon securities. The Fund may also purchase securities issued by foreign
governments and supranational agencies. The Fund may also invest in municipal
securities when the Fund's Advisor feels it is consistent with the Fund's
investment objective. The Fund will not invest in municipal securities unless
the Fund's Advisor believes that the yield will be higher than the yield for
comparable taxable investments in which the Fund is permitted to invest. The
following quality criteria apply to the Fund's investments in municipal
securities. The Fund's investments in municipal notes will be limited to those
obligations (i) where both principal and interest are backed by the full faith
and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or better
at the time of investment by Moody's, (iii) which are rated SP-2 or better at
the time of investment by S&P, or (iv) which, if not rated, are of equivalent
quality to MIG-2, V-MIG-2, or SP-2 or better in the Advisor's judgment. The
Fund's investment in municipal bonds will be limited to bonds rated BBB or
better by S&P or Baa or better by Moody's, or, if not rated by S&P or Moody's,
deemed by the
<PAGE>
14
Fund's Advisor to be of comparable quality. For the Fund's investments in other
types of tax-exempt municipal investments, such as participation interests in
municipal lease/ purchase agreements, the quality of the underlying credit or of
the bank providing a credit support arrangement must, in the Fund's Advisor's
opinion, be equivalent to the municipal note or bond ratings stated above. The
Fund is also authorized to invest up to 10% of its assets in restricted
securities, including Rule 144A securities, that the Fund's Advisor determines
are liquid under guidelines adopted by the Trust's Board of Trustees. The Fund
may also enter into bond futures contracts and options on bond futures contracts
and engage in securities lending.
The Fund intends to maintain a dollar-weighted average maturity of 3 years or
less, and the maximum remaining maturity for any security held by the Fund is 7
years. Under normal market conditions it is anticipated that the Fund's
dollar-weighted average maturity will range from 2 to 3 years. In the case of
mortgage related securities and asset-backed securities, maturity will be
determined based on the expected average life of the security. The Fund may
shorten its average weighted maturity to as little as 90 days if deemed
appropriate for temporary defensive purposes. By so limiting the maturity of its
investments, the Fund expects that its net asset value will experience less
price movement in response to changes in interest rates than the net asset
values of mutual funds investing in similar credit quality securities with
longer maturities.
The Fund's turnover rate was 163% for the fiscal year ended May 31, 1996. This
rate of turnover, if continued, will likely result in higher transaction costs
and higher levels of realized capital gains than if the turnover rate was lower.
SHORT-TERM U.S. TREASURY SECURITIES FUND
The Short-Term U.S. Treasury Securities Fund will invest exclusively in
obligations issued by the U.S. Treasury with maximum remaining maturities of 3
years or less. U.S. Treasury securities are considered to be among the safest,
as to timely principal and interest payments, investments available. The Fund
will not invest in repurchase agreements. The Fund may borrow money for
temporary or emergency purposes in an amount not exceeding one-third of its
total assets, but has no present intention to do so.
Under normal market conditions, it is anticipated that the Fund's average
maturity will range from one to two years. Furthermore, for temporary defensive
purposes during periods when the Fund's Advisor determines that market
conditions warrant, the Short-Term U.S. Treasury Securities Fund may reduce its
average weighted maturity to less than one year.
FLORIDA TAX-EXEMPT BOND FUND
The Florida Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes
based on opinions from bond counsel to the issuers. The issuers of these
securities can be located in Florida, the District of Columbia, Puerto Rico and
other U.S. territories and possessions. It is a fundamental policy of the Fund
to invest at least 80% of its total assets in securities the income from which
is exempt from regular federal income tax and not treated as a preference item
for purposes of the alternative minimum tax. At least 65% of the Fund's assets
will be invested in Florida municipal bonds and debentures, and at least 75% of
its total assets invested in municipal bonds will be in securities rated A or
better by S&P or Moody's. Municipal securities must be
<PAGE>
15
rated BBB or better by S&P or Baa or better by Moody's in the case of bonds;
SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, or P-1, P-2 in the
case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of
variable rate demand obligations. No more than 25% of the Fund's assets will be
invested in bonds rated BBB by S&P or Baa by Moody's. The Fund will only acquire
securities not rated by S&P or Moody's if, at the time of purchase, the Fund's
Advisor determines that such unrated obligations are of comparable quality to
rated obligations that may be acquired by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities, and may
purchase municipal forwards, putable securities, medium term notes, and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities subject to the alternative minimum tax.
The Fund may also invest in futures and options, but has no present intention to
do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
GEORGIA TAX-EXEMPT BOND FUND
The Georgia Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes and
substantially exempt from State of Georgia income taxes based on opinions from
bond counsel to the issuers. The issuers of these securities can be located in
Georgia, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. It is a fundamental policy of the Fund to invest at least 80% of
its total assets in securities the income from which is exempt from regular
federal income tax and not treated as a preference item for purposes of the
alternative minimum tax. At least 65% of the Fund's assets will be invested in
Georgia municipal bonds and debentures, and at least 75% of its total assets
invested in municipal bonds will be in securities rated A or better by S&P or
Moody's. Municipal securities must be rated BBB or better by S&P or Baa or
better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case
of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and
VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than
25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by
Moody's. The Fund will only acquire securities not rated by S&P or Moody's if,
at the time of purchase, the Fund's Advisor determines that such unrated
obligations are of comparable quality to rated obligations that may be acquired
by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities, and may
purchase municipal forwards, putable securities, medium term notes, and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities
<PAGE>
16
subject to the alternative minimum tax. The Fund may also invest in futures and
options, but has no present intention to do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
TENNESSEE TAX-EXEMPT BOND FUND
The Tennessee Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes and
substantially exempt from State of Tennessee income taxes based on opinions from
bond counsel to the issuers. The issuers of these securities can be located in
Tennessee, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. It is a fundamental policy of the Fund to invest at least 80% of
its total assets in securities the income from which is exempt from regular
federal income tax and not treated as a preference item for purposes of the
alternative minimum tax. At least 65% of the Fund's assets will be invested in
Tennessee municipal bonds and debentures, and at least 75% of its total assets
invested in municipal bonds will be in securities rated A or better by S&P or
Moody's. Municipal securities must be rated BBB or better by S&P or Baa or
better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case
of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and
VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than
25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by
Moody's. The Fund will only acquire securities not rated by S&P or Moody's if,
at the time of purchase, the Fund's Advisor determines that such unrated
obligations are of comparable quality to rated obligations that may be acquired
by the Fund. The Fund may invest in floating or variable rate securities,
commitments to purchase the above securities on a when-issued or delayed
delivery basis, and may purchase municipal forwards, putable securities, medium
term notes, and zero coupon securities. The Fund's Advisor has discretion to
invest up to 20% of the Fund's total assets in taxable debt securities rated at
least BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P
or Moody's, of comparable quality at the time of purchase as determined by the
Fund's Advisor, repurchase agreements, and securities subject to the alternative
minimum tax. The Fund may also invest in futures and options, but has no present
intention to do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
PRIME QUALITY MONEY MARKET FUND
The Prime Quality Money Market Fund will invest in money market instruments
denominated in U.S. dollars consisting of (i) U.S. Treasury obligations; (ii)
custodial receipts representing interests in component parts of U.S. Treasury
obligations; (iii) obligations issued or guaranteed as to principal and interest
by agencies and instrumentalities of the U.S. Government; (iv) commercial paper
issued by domestic and foreign issuers rated in the highest short-term rating
category by one or more NRSROs as described in the "Appendix" or, if not rated,
determined by the Fund's Advisor to be of
<PAGE>
17
comparable quality; (v) high quality obligations (including certificates of
deposit, time deposits, bankers' acceptances, Eurodollar and Yankee bank
obligations) of U.S. commercial banks (including foreign branches of such
banks), and U.S. and London branches of foreign banks or savings and loan and
thrift institutions that are members of the Federal Reserve System, the Federal
Deposit Insurance Corporation, or the Federal Savings and Loan Insurance
Corporation; (vi) high quality short-term corporate obligations issued by
companies with commercial paper meeting the ratings indicated in (iv), above,
or, if not rated, determined by the Fund's Advisor to be of comparable quality;
(vii) repurchase agreements involving such obligations; (viii) high quality
obligations of supranational entities satisfying the credit ratings described in
(iv), above, or, if not rated, determined by the Fund's Advisor to be of
comparable quality; and (ix) medium term notes. The Fund may not invest more
than 25% of its total assets in obligations issued by foreign branches of U.S.
banks and London branches of foreign banks. The Fund may purchase securities
subject to standby commitments. As a money market fund, the Fund is subject to
limitations on the percentage of its assets that may be invested in any one
issuer and on the percentage that may be invested in securities carrying the
second highest rating assigned by the requisite NRSROs.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The U.S. Government Securities Money Market Fund will invest exclusively in U.S.
Treasury obligations, U.S. Government Subsidiary Corporation securities (e.g.,
GNMA Securities) and repurchase agreements with dealers selected pursuant to
guidelines adopted by the Trust's Board of Trustees and collateralized by U.S.
Treasury securities and U.S. Government Subsidiary Corporation securities.
TAX-EXEMPT MONEY MARKET FUND
The Tax-Exempt Money Market Fund intends to be fully invested in securities the
interest on which is exempt from regular federal income taxes in the opinion of
bond counsel to the issuer. It is a fundamental policy of the Tax-Exempt Money
Market Fund to invest at least 80% of its total assets in securities the income
from which is exempt from regular federal income taxes and not treated as a
preference item for purposes of the alternative minimum tax. The Fund may invest
in high quality, U.S. dollar denominated municipal securities of issuers located
in all fifty states, the District of Columbia, Puerto Rico and other U.S.
territories rated in one of the two highest short-term rating categories by S&P
or Moody's or, if not rated, determined by the Fund's Advisor to be of
comparable quality. The Fund will primarily purchase municipal bonds with a
remaining maturity of 397 days or less, and will also acquire municipal notes
and tax-exempt commercial paper with similar maturities. The Fund may agree to
purchase short-term securities on a when-issued basis and may invest in
securities subject to standby commitments. Securities purchased on a when-issued
basis are subject to settlement within 45 days of the purchase date.
The Fund's Advisor has discretion to invest up to 20% of the Fund's assets in
U.S. dollar denominated obligations consisting of taxable money market
instruments, obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities, repurchase agreements and securities subject to
the alternative minimum tax.
<PAGE>
18
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes, during periods when its Advisor determines
that market conditions warrant, each Fund, except the U.S. Government Securities
Money Market Fund and Short-Term U.S. Treasury Securities Fund, may hold a
portion of its assets in cash and 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; time
deposits issued by banks or savings and loan associations; and commercial paper
rated in the highest rating category. A Fund may not be pursuing its investment
objective when it is engaged in temporary defensive investing.
The municipal bonds that the Investment Grade Tax-Exempt Bond Fund and State
Tax-Exempt Bond Funds may purchase include general obligation bonds, revenue or
special obligation bonds, and private activity and industrial development bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality while revenue or special obligation bonds are backed by a specific
project or facility. The State Tax-Exempt Bond Funds may also purchase
certificates of participation which represent an interest in an underlying
obligation or commitment such as an obligation issued in connection with a
leasing arrangement. The payment of principal and interest on private activity
and industrial development bonds generally is dependent solely on the ability of
the facility's user to meet its obligation and the pledge, if any, of real or
personal property as security for such payment.
The Advisor to a State Tax-Exempt Bond Fund or the Investment Grade Tax-Exempt
Bond Fund may buy or sell portfolio securities with the intention of generating
capital gains. Such gains will increase the Fund's total return and will be
taxable upon distribution to Shareholders. See "Tax Information."
In the event that a security owned by a Fund is downgraded below the stated
rating categories, its Advisor will review and take appropriate action with
regard to the security.
A Fund's purchase of shares of other investment companies is limited by the
Investment Company Act of 1940 (the "1940 Act") and will ordinarily result in an
additional layer of charges and expenses.
Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its total assets. No Fund may purchase additional securities while
its outstanding borrowings exceed 5% of its assets.
It is a non-fundamental policy of each Fund to invest no more than 15% of its
net assets in illiquid securities (10% of the total assets of each Money Market
Fund). An illiquid security is a security which cannot be disposed of in the
usual course of business within seven days 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
FIXED INCOME SECURITIES
The market value of a 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
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19
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 an NRSRO to 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 a Fund's securities will not affect cash
income derived from these securities but will affect the Fund's net asset value.
Fixed income securities rated BBB by S&P or Baa by Moody's (the lowest rating of
investment grade bonds) are deemed by these rating services to have speculative
characteristics.
Guarantees of a Fund's securities by the U.S. Government, 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 or
the yield or value of a 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.
FOREIGN SECURITIES
Investing in the securities of foreign companies involves 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
available for distribution to a 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.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to the risk of prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund generally will
reinvest the proceeds in securities with a yield that reflects prevailing
interest rates, which may be lower than the prepaid security.
MUNICIPAL SECURITIES
Since each State Tax-Exempt Bond Fund invests in municipal securities issued by
governmental entities of its specific state, the performance of each State
Tax-Exempt Bond Fund may be especially affected by factors pertaining to such
state's economy and other factors specifically affecting the ability of issuers
in that state to meet their obligations. As a result, the value of each State
Tax-Exempt Bond Fund's shares may fluctuate more widely than the value of shares
of a portfolio investing in securities relating to a number of different states.
The ability of state, county, or local
<PAGE>
20
governments to meet their obligations will depend primarily on the availability
of tax and other revenues to those governments and on their fiscal conditions
generally. Municipal securities may be affected from time to time by economic,
political, geographic and demographic conditions. In addition, constitutional
amendments, legislative measures, executive orders, administrative regulations
and voter initiatives may limit a government's power to raise revenues or
increase taxes and thus could adversely affect an issuer's ability to meet
financial obligations.
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 than interest bearing
obligations. A Fund will be required to include the imputed interest in zero
coupon obligations in its current income. Because each Fund distributes all of
its net investment income to Shareholders, a Fund may have to sell portfolio
securities to distribute the income attributable to these obligations and
securities at a time when its Advisor would not have chosen to sell such
obligations or securities and which may result in a taxable gain or loss.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a 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 a
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 a
Fund's outstanding shares, whichever is less.
Each 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 a Fund would be invested in the securities of such issuer;
provided, however, that a 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 a 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 and, with respect to
only the Money Market Funds, obligations issued by domestic branches of U.S.
banks or U.S. branches of foreign banks subject to the same regulations as U.S.
banks. 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 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.
It is a non-fundamental policy of the Tax-Exempt Money Market Fund and
Investment
<PAGE>
21
Grade Tax-Exempt Bond Fund that they will not invest more than 25% of their
respective net assets in securities of one or more issuers conducting their
principal activities in the same state. In addition, the Tax-Exempt Money Market
Fund, Investment Grade Tax-Exempt Bond Fund and State Tax-Exempt Bond Funds will
not invest more than 25% of their respective total assets in securities the
interest on which is derived from revenues of similar type projects.
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
MONEY MARKET FUNDS
From time to time each Money Market Fund may advertise its "current yield" and
"effective compound yield." Both yield figures are based on historical earnings
and are not intended to indicate future performance. The "current yield" of each
Fund refers to the income generated by an investment in a Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
The Tax-Exempt Money Market Fund may also advertise a "tax-equivalent yield,"
which is calculated by determining the rate of return that would have been
achieved on a fully taxable investment to produce the after tax equivalent of
the Fund's yield, assuming certain tax brackets for a Shareholder.
BOND AND STATE TAX-EXEMPT BOND FUNDS
From time to time, the Bond and State Tax-Exempt Bond Funds may advertise yield
and total return. These figures will be based on historical earnings and are not
intended to indicate future performance. The yield of a Fund refers to the
annualized income generated by an investment in that 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 Investment Grade Tax-Exempt and State Tax-Exempt Bond Funds may also
advertise a "tax-equivalent yield," which is calculated by determining the rate
of return that would have been achieved on a fully taxable investment to produce
the after tax equivalent of the Fund's yield, assuming certain tax brackets for
a Shareholder.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment, including any sales charge imposed, for designated time
periods (including but not limited to, the period from which a 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.
The performance of the Shares of the Trust will normally be higher than for
Investor Shares and Flex Shares because Investor Shares and Flex Shares are
subject to distribution, service, and certain transfer agent fees not charged to
Trust Shares. Because of their differing distribution
<PAGE>
22
expense arrangements, the performance of Flex Shares in comparison to Investor
Shares will vary depending upon the investor's investment time horizon.
Each 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 Trust are sold primarily to financial institutions or
intermediaries, 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 the reorders to
the Trust's transfer agent, Federated Services Company (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 (a "business day"). However, money market mutual fund shares cannot be
purchased or redeemed for same day settlement on days the Federal Reserve is
closed.
MONEY MARKET FUNDS
A purchase order for any of the Money Market Funds will be effective as of the
Business Day it is received by the Transfer Agent and eligible to receive
dividends declared the same day if the Transfer Agent receives the order before
11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund or before 1:00 p.m.
Eastern time for the Prime Quality Money Market Fund and U.S. Government
Securities Money Market Fund and the Custodian receives federal funds before
4:00 p.m. Eastern time on such day. Otherwise, purchase orders for the Money
Market Funds will be effective the next Business Day provided the Custodian
receives readily available funds before 4:00 p.m. Eastern time on the next such
Business Day. The purchase price is the net asset value per share next computed
after the order is received and accepted by the Trust. The net asset value per
share of each Fund is determined by dividing the total value of its investments
and other assets, less any liabilities, by its total outstanding shares. The net
asset value per share is calculated as of the close of business of the New York
Stock Exchange (currently 4:00 p.m. Eastern time) each Business Day based on the
amortized cost method described in the Statement of Additional Information and
is expected to remain constant at $1.00 per share.
<PAGE>
23
BOND AND STATE TAX-EXEMPT BOND FUNDS
A purchase order for any of the Bond and State Tax-Exempt Bond Funds will be
effective as of the Business Day it is received by the Transfer Agent if the
Transfer Agent receives the order before 4:00 p.m. Eastern time and payment is
received within one day. Purchases will be made in full and fractional shares of
the Trust calculated to three decimal places. The purchase price of Trust Shares
of a Fund is the net asset value next determined after a purchase order is
effective. The net asset value per share of a 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 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 each
Fund.
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).
The Trust maintains procedures, including identification methods and other
means, for ascertaining the identity of callers and authenticity of
instructions. If reasonable procedures are not employed, the Trust and/or the
Transfer Agent may be liable for any losses due to the unauthorized or
fraudulent telephone transactions. Neither the 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.
Shares of the Funds are offered only to residents of states in which the shares
are eligible for purchase. Investors in certain states may be required to
purchase shares through institutions registered as brokers/dealers in such
states.
Although the methodology and procedures for calculating the net asset value of
the Trust Shares are identical to those of the Investor Shares and Flex Shares,
the net asset value per share of the classes may differ because of the
distribution and certain transfer agent expenses charged to Investor Shares and
Flex Shares.
REDEMPTION OF FUND SHARES
An order to redeem Trust shares must be transmitted to the Transfer Agent by the
financial institution as the record owner. 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.
With respect to the Money Market Funds, redemption orders must be received by
the Transfer Agent on a Business Day before 1:00 p.m. Eastern time for the Prime
Quality and U.S. Government Securities Money Market Funds and before 11:00 a.m.
Eastern time for the Tax-Exempt Money Market Fund to be effective that day.
Redemption orders received after the times noted above will normally be executed
the following day. STI Classic Funds reserves the right to wire redemption
proceeds within five Business Days after receiving the redemption orders if, in
the judgment of the Advisor, an earlier payment could adversely impact a Fund.
With respect to the Bond and State Tax-Exempt Bond Funds, redemption orders must
be received by the Transfer Agent before 4:00 p.m. Eastern time on any Business
Day to be
<PAGE>
24
effective that day. Redemption proceeds are normally remitted within five
Business Days following receipt of the order.
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
MONEY MARKET FUNDS
Dividends from net investment income (exclusive of capital gains) of each of the
Money Market Funds are declared on each Business Day to Shareholders at the
close of business on the day of declaration. 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 (except in the case
of the Tax-Exempt Money Market Fund) and minus the amortization of market
premium on such assets, (iii) 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. Trust Shares begin earning dividends on the Business
Day the purchase order is effective and continue earning dividends through and
including the Business Day before the redemption order is effective. Dividends
are paid within ten Business Days after the end of each month in the form of
additional Trust Shares of the same Fund unless the Shareholder has elected
prior to the date of distribution to receive payment in cash. Such election, or
any revocation thereof, must be made in writing at least 15 days prior to the
date of distribution to the Transfer Agent and will become effective with
respect to dividends paid after its receipt. Dividends are paid within ten
Business Days after a Shareholder's complete redemption of its Trust Shares in a
Fund.
BOND AND STATE TAX-EXEMPT BOND FUNDS
Dividends from net investment income (exclusive of capital gains) are declared
on each Business Day and paid monthly by each of the Bond and State Tax-Exempt
Bond Funds. Each Fund's net realized capital gains (including net short-term
capital gains) are 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 (except in the
case of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds)
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. Investor Shares and Flex Shares
invested in the Bond and State Tax-Exempt Bond Funds are eligible to begin
earning dividends that are declared on the Business Day after the purchase order
is effective and continue to be eligible for dividends through and including the
day the redemption order is effective.
The net asset value of Trust Shares of the non-Money Market Funds 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 same 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 Transfer Agent and will
<PAGE>
25
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 a Fund.
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 each Fund or
its Shareholders. In particular, no attempt has been made herein to provide
information on the tax laws of Florida, Georgia or Tennessee. Accordingly,
Shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local income taxes.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each 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. Each Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment companies.
TAX STATUS OF DISTRIBUTIONS:
MONEY MARKET FUNDS
The Prime Quality Money Market Fund and the U.S. Government Securities Money
Market Fund will each distribute all of their net investment income (including,
for this purpose, net short-term capital gains) to Shareholders. Dividends from
net investment income will be taxable to Shareholders as ordinary income whether
received in cash or in additional shares.
The Tax-Exempt Money Market Fund will distribute all of its net investment
income (including net short-term capital gains) to Shareholders. If, at the
close of each quarter of its taxable year, at least 50% of the value of the
Fund's assets consists of obligations the interest on which is excludable from
gross income, the Fund may pay exempt-interest dividends to its Shareholders.
Those dividends constitute the portion of the aggregate dividends as designated
by the Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
Shareholder's gross income for regular federal income tax purposes, but may have
alternative minimum tax consequences. See the Statement of Additional
Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Tax-Exempt Money Market Fund to purchase sufficient amounts of
tax-exempt securities to satisfy the Code's requirements for the payment of
exempt-interest dividends.
<PAGE>
26
TAX STATUS OF DISTRIBUTIONS:
BOND AND STATE TAX-EXEMPT BOND FUNDS
Each 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 Funds will be taxable to
Shareholders as ordinary income whether received in cash or in additional
shares.
Each of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds
will distribute all of its net investment income (including net short-term
capital gains) to Shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of each of the Fund's assets consist of
obligations the interest on which is excludable from gross income, the Fund may
pay exempt-interest dividends to its Shareholders. Those dividends constitute
the portion of the aggregate dividends as designated by the Fund, equal to the
excess of the excludable interest over certain amounts disallowed as deductions.
Exempt-interest dividends are excludable from a Shareholder's gross income for
regular federal income tax purposes, but may have alternative minimum tax
consequences. See the Statement of Additional Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds
to purchase sufficient amounts of tax-exempt securities to satisfy the Code's
requirements for the payment of exempt-interest dividends.
TAX STATUS OF DISTRIBUTIONS:
ALL FUNDS
Dividends from net investment income will qualify for the dividends received
deduction for corporate Shareholders only to the extent such distributions are
derived from dividends paid by domestic corporations. Dividends from net capital
gains (the excess of net long-term capital gains over net short-term capital
loss) will be treated 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. Each
Fund will make annual reports to Shareholders of the federal income tax status
of all distributions. Dividends declared by a 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
Shareholders on December 31, of that year, if paid by the Fund any time during
the following January.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by a Shareholder from a 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. Each 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
<PAGE>
27
portion of the income dividends received from a Fund is considered tax exempt in
their particular states.
Income derived by a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. No Fund will be able to treat Shareholders as having
paid their proportionate share of such foreign taxes.
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase shares of a "tax-exempt" Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or persons related to "substantial
users") of facilities financed by "private activity bonds" or certain industrial
development bonds should consult their tax advisors before purchasing shares.
For these purposes, the term "substantial user" is defined generally to include
a "non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of such bonds. See the Statement of
Additional Information.
A 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 Fund. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund 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 Share-
holders, 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.
INVESTMENT ADVISORS
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $66
billion as of December 31, 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, Inc.--
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 $47 billion as of December 31, 1995.
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the Prime
Quality Money Market, U.S. Government Securities Money Market, Tax-Exempt Money
Market, Short-Term U.S. Treasury Securities, Short-Term Bond and U.S. Government
Securities Funds. As of June 30, 1996, Trusco had approximately
<PAGE>
28
$13.7 billion in assets under management. The principal business address of
Trusco is 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303.
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the
Limited-Term Federal Mortgage Securities, Investment Grade Bond, Investment
Grade Tax-Exempt Bond and Florida Tax-Exempt Bond Funds. As of June 30, 1996,
STI Capital had discretionary management authority with respect to assets of
approximately $11 billion. The principal business address of STI Capital is P.O.
Box 3808, Orlando, Florida 32802.
SunTrust Bank, Chattanooga, N.A. ("SunTrust Bank, Chattanooga") (formerly
American National Bank & Trust Company) serves as the Advisor to the Tennessee
Tax-Exempt Bond Fund. SunTrust Bank, Chattanooga had approximately $1.7 billion
in assets under management as of December 31, 1995. The principal business
address of SunTrust Bank, Chattanooga is 736 Market Street, Chattanooga,
Tennessee 37402.
SunTrust Bank, Atlanta (formerly Trust Company Bank) serves as the Advisor to
the Georgia Tax-Exempt Bond Fund. As of December 31, 1995, SunTrust Bank,
Atlanta had approximately $12.5 billion in assets under management. The
principal address for SunTrust Bank, Atlanta is 25 Park Place, Atlanta, Georgia
30303.
The Trust and the above Advisors have entered into advisory agreements (the
"Advisory Agreements"). Under the Advisory Agreements, the Advisors make the
investment decisions for the assets of the Funds they advise and continuously
review, supervise and administer their Fund's respective investment programs.
The Advisors discharge their 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 FUNDS
INVOLVE 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 all Funds, the Advisors may
execute brokerage or other agency transactions through affiliates of the
Advisors.
For the services provided and expenses incurred pursuant to the applicable
Advisory Agreement: Trusco is entitled to receive advisory fees computed daily
and paid monthly at the annual rate of .74%, .65%, .65%, .55%, .65% and .65% of
the average daily net assets of the U.S. Government Securities Fund, Prime
Quality Money Market Fund, U.S. Government Securities Money Market Fund,
Tax-Exempt Money Market Fund, Short-Term U.S. Treasury Securities Fund and
Short-Term Bond Fund, respectively; STI Capital is entitled to receive advisory
fees computed daily and paid monthly at the annual rate of .65%, .74%, .74% and
.65% of the average daily net assets of the Florida Tax-Exempt Bond Fund,
Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund and
Limited-Term Federal Mortgage Securities Fund, respectively; SunTrust Bank,
Chattanooga, N.A. is entitled to receive advisory fees computed daily and paid
monthly at the annual rates of .65% of the average daily net assets of the
Tennessee Tax-Exempt Bond Fund and SunTrust Bank, Atlanta is entitled to receive
advisory fees computed daily and paid monthly at the annual rate of .65% of the
average daily net assets of the Georgia Tax-Exempt Bond Fund.
<PAGE>
29
From time to time, an Advisor may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. Currently, the
Advisors have 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 any time.
For the fiscal year ended May 31, 1996: Trusco received advisory fees computed
daily and paid monthly at the annual rate of .50%, .51%, .47%, .22%, .46%, and
.16% of the average daily net assets of the Prime Quality Money Market Fund,
U.S. Government Securities Money Market Fund, Tax-Exempt Money Market Fund,
Short-Term U.S. Treasury Securities Fund, Short-Term Bond Fund, and U.S.
Government Securities Fund, respectively; STI Capital received advisory fees
computed daily and paid monthly at the annual rate of .38%, .63%, .61%, and .43%
of the average daily net assets of the Florida Tax-Exempt Bond Fund, Investment
Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, and Limited-Term Federal
Mortgage Securities Fund, respectively; SunTrust Bank, Chattanooga received
advisory fees computed daily and paid monthly at the annual rate of .00% of the
average daily net assets of the Tennessee Tax-Exempt Bond Fund and SunTrust
Bank, Atlanta received advisory fees computed daily and paid monthly at the
annual rate of .37% of the average daily net assets of the Georgia Tax-Exempt
Bond Fund.
PORTFOLIO MANAGERS
Mr. Charles B. Leonard, CFA, First Vice President of Trusco, and Michael L.
Ford, an Associate of Trusco, have been responsible for the day-to-day
management of the U.S. Government Securities Fund since it commenced operations.
Mr. Leonard has been with Trusco since 1986 as the senior fixed income manager.
Mr. Ford has been with Trusco since April, 1994. Prior to joining Trusco, Mr.
Ford served as a senior securities analyst with Liberty Capital Advisors from
January, 1992 to April, 1994 and served as a securities analyst at Southern Farm
Bureau Life Insurance Company from 1990 to 1992.
Mr. L. Earl Denney CFA and Mr. Dave E. West CFA have been responsible for the
day-to-day management of the Limited-Term Federal Mortgage Securities Fund since
it commenced operations. Mr. Denney has served as Executive Vice President of
STI Capital since 1983. Mr. West has served as a fixed income portfolio manager
with STI Capital since 1989. Mr. Denney has also been responsible for the
day-to-day management of the Investment Grade Bond Fund since its inception.
Ms. Gay Cash has been responsible for the day-to-day management of the Georgia
Tax-Exempt Bond Fund since it commenced operations. Ms. Cash has served as a
Vice President of SunTrust Bank, Atlanta since January 1, 1987.
Mr. Ronald Schwartz has been responsible for the day-to-day management of the
Florida Tax-Exempt Bond and Investment Grade Tax-Exempt Bond Funds since each
Fund commenced operations. Mr. Schwartz joined STI Capital in 1988 and currently
serves as a Senior Vice President. Mr. Schwartz, has also been responsible for
the day-to-day management of the Tennessee Tax-Exempt Bond Fund since July,
1995. Mr. Schwartz serves as Vice President and Trust Investment Officer of
SunTrust Bank, Chattanooga.
Ms. Patricia Love has been responsible for the day-to-day management of the
Tennessee Tax-Exempt Bond Fund since September, 1995. Ms. Love serves as Vice
President and Trust
<PAGE>
30
Investment Officer of SunTrust Bank, Chattanooga. Ms. Love also is a portfolio
manager at STI Capital. Ms. Love has been with SunTrust Bank, Chattanooga since
1993 and prior to that served as a portfolio analyst with First City Texas from
1986 to 1993.
Mr. David Yealy has been responsible for the day-to-day management of the
Short-Term Bond and Short-Term U.S. Treasury Securities Funds since July 1996.
Mr. Yealy joined Trusco in 1991 and currently serves as a Vice President.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, currently
(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
Advisors believe that each may perform the services for STI Classic Funds
contemplated by their respective Advisory Agreements 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 Advisors from continuing to perform services for
STI Classic Funds. If the Advisors were prohibited from providing services to
STI Classic Funds, 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 Advisors, or their affiliates, would consider the
possibility of offering to perform additional services for STI Classic Funds. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which the Advisors, or such affiliates, might
offer to provide such services.
In addition, state securities laws on this 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
(the "Distribution Agreement"). No compensation is paid to the Distributor for
distribution services for the Trust Shares of each 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. The Flex Shares of a Fund are subject to a
contingent deferred sales charge, pay a distribution services fee to the
Distributor and are also subject to a services fee for personal service and
maintenance of shareholder accounts. The contingent deferred sales charge option
of the Flex Shares provides investors with an alternative purchase arrangement
to Investor
<PAGE>
31
Shares. An investor may call 1-800-428-6970 to receive more information
regarding Investor Shares or Flex Shares. 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.
Each Fund may execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. 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.
The Administrator is entitled to a fee from each Fund, 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 0.10%
over $1 billion to $5 billion 0.07%
over $5 billion to $8 billion 0.05%
over $8 billion to $10 billion 0.045%
over $10 billion 0.04%
</TABLE>
From time to time, the Administrator may waive (either voluntarily or pursuant
to applicable state limitations) all or a portion of the administration fee
payable with respect to the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, 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, Georgia 30308 serves as Custodian of
the assets of each Fund. The custodian holds cash, securities and other assets
of the Trust as required by the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
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.
<PAGE>
32
REPORTING
The Trust issues unaudited financial information audited financial statements
annually. The Trust furnishes proxy statements and other reports to Shareholders
of record.
SHAREHOLDER INQUIRIES
Shareholders may contact their financial institution's representative in order
to obtain information on account statements, procedures and other related
information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
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 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.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
<PAGE>
33
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.
CORPORATE DEBT OBLIGATIONS -- Corporate debt obligations are debt instruments
issued by corporations with maturities exceeding 270 days. Such instruments may
include putable corporate bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Custodial receipts are 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 a 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 ("TRs"), Treasury Investment Growth Receipts
("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS").
Receipts are sold as zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments. See "Zero Coupon Obligations."
DERIVATIVES -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, swap agreements, and some mortgage-back securities (CMOs,
REMICs and SMBs). See elsewhere in this "Description of Permitted Investments"
for discussions of these various instruments, and see "Investment Policies and
Strategies" for more information about any investment policies and limitations
applicable to their use.
DOLLAR ROLLS -- Dollar rolls are transactions in which securities are sold for
delivery in the current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment
<PAGE>
34
agreement by the Fund to buy a security. If the broker-dealer to whom the Fund
sells the security becomes insolvent, the Fund's right to repurchase the
security may be restricted. Other risks involved in entering into dollar rolls
include the risk that the value of the security may change adversely over the
term of the dollar roll and that the security the Fund is required to repurchase
may be worth less than the security that the Fund originally held.
To avoid any leveraging concerns, the Fund will place U.S. Government or other
liquid, high grade assets in a segregated account in an amount sufficient to
cover its repurchase obligation.
EURODOLLAR AND YANKEE BANK OBLIGATIONS -- Eurodollar bank obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
United States by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the United States
by foreign banks.
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. A 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. A 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.
GUARANTEED INVESTMENT CONTRACTS ("GICs") -- GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Fund on a monthly basis guaranteed
interest at either a fixed, variable or floating rate. A GIC provides that this
guaranteed interest will not be less than a certain minimum rate. A GIC is a
general obligation of the issuing insurance company and not a separate account.
The purchase price paid for a GIC becomes part of the
<PAGE>
35
general assets of the issuer, and the contract is paid at maturity from the
general assets of the issuer.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance company. For this reason, an active secondary market in GICs
does not currently exist and GICs are considered to be illiquid investments.
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.
LOAN PARTICIPATIONS -- Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or agent for a syndicate
of lending banks, and sold by the lending bank or syndicate member
("intermediary bank"). In a loan participation, the borrower corporation will be
deemed to be the issuer of the participation interest except to the extent the
Fund derives its rights from the intermediary bank. Because the intermediary
bank does not guarantee a loan participation, a loan participation is subject to
the credit risks associated with the underlying corporate borrower. In the event
of bankruptcy or insolvency of the corporate borrower, a loan participation may
be subject to certain defenses that can be asserted by such borrower as a result
of improper conduct by the intermediary bank. In addition, in the event the
underlying corporate borrower fails to pay principal and interest when due, the
Fund may be subject to delays, expenses and risks that are greater than those
that would have been involved if the Fund had purchased a direct obligation of
such borrower. Under the terms of a Loan Participation, the Fund may be regarded
as a creditor of the intermediary bank (rather than of the underlying corporate
borrower), so that the Fund may also be subject to the risk that the
intermediary bank may become insolvent.
The secondary market for loan participations is limited and any such
participation purchased by the Fund may be regarded as illiquid.
MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered
corporate or agency debt that differs from traditionally underwritten corporate
bonds only in the process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are the
<PAGE>
36
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporaiton ("FHLMC").
FNMA and FHLMC obligations are not backed by the full faith and credit of the
U.S. Government as GNMA certificates are, but FNMA and FHLMC securities are
supported by the instrumentalities' right to borrow from the U.S. Treasury.
GNMA, FNMA and FHLMC each guarantees timely distributions of interest to
certificate holders. GNMA and FNMA also each guarantees timely distributions of
scheduled principal. FHLMC has in the past guaranteed only the ultimate
collection of principal of the underlying mortgage loan; however, FHLMC now
issues mortgage-backed securities (FHLMC Gold PCs) which also guarantee timely
payment of monthly principal reductions. Government and private guarantees do
not extend to the securities' value, which is likely to vary inversely with
fluctuations in interest rates.
PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS: CMOs are debt obligations or multiclass
pass-through certificates issued by agencies or instrumentalities of the U.S.
Government or by private originators or investors in mortgage loans. In a CMO,
series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and thus is termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and thus is termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are
<PAGE>
37
extremely sensitive to changes in interest rates because of the impact thereon
of prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.
RISK FACTORS: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
MUNICIPAL FORWARDS -- Municipal forwards are forward commitments for the
purchase of tax-exempt bonds with a specified coupon to be delivered by an
issuer at a future date, typically exceeding 45 days but normally less than one
year after the commitment date. Municipal forwards are normally used as a
refunding mechanism for bonds that may only be redeemed on a designated future
date. A Fund will enter into municipal forwards when the price and yield of the
underlying bonds are believed to be favorable when compared to current prices
and yields. As with forward commitments, municipal forwards are subject to
market fluctuations due to changes in market interest rates between the
commitment date and the settlement date. Municipal forwards may be considered to
be illiquid investments.
To avoid any leveraging concerns, a Fund will maintain liquid, high grade
securities in a segregated account at least equal to the purchase price of the
municipal forward.
MUNICIPAL LEASE OBLIGATIONS -- Municipal lease obligations are securities issued
by state and local governments and authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. Depending upon the market for such securities, municipal lease
obligations may be illiquid.
MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. The payment of principal and interest
on private activity and industrial development bonds generally is dependent
solely on the ability of a facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as security for such payment.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes
<PAGE>
38
include general obligation notes, tax anticipation notes, revenue anticipation
notes, bond anticipation notes, certificates of indebtedness, demand notes and
construction loan notes and participation interests in municipal notes.
Municipal bonds include general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds and participation
interests in municipal bonds.
OBLIGATIONS OF SUPRANATIONAL ENTITIES -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, Inter-American Development Bank, International Bank
for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and Nordic Investment
Bank.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a 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. A 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. A 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS -- Investments by a money market
fund are subject to limitations imposed under regulations adopted by the
Securities and Exchange Commission. Under these regulations, money market funds
may only acquire obligations that present minimal credit risk and that are
"eligible securities," which means they are (i) rated, at the time of
investment, by at least two nationally recognized security rating organizations
(one if it is the only organization rating such obligation) in the highest
rating category or, if unrated, determined to be of comparable quality (a "first
tier security"), or (ii) rated according to the foregoing criteria in the second
highest rating category or, if unrated, determined to be of comparable quality
("second tier security"). A security is not considered to be unrated if its
issuer has outstanding obligations of comparable priority and security that have
a short-term rating. In the case of taxable money market funds, investments in
second tier securities are subject to the further constraints in that (i) no
more than 5% of a Fund's assets may be invested in second tier securities and
(ii) any investment in securities of any one such issuer is limited to the
greater of 1% of the Fund's total assets or $1 million. A taxable money market
fund may also hold more than 5% of its assets in first tier securities of a
single issuer for three "business days" (that is, any day other than a Saturday,
Sunday or customary business holiday).
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
<PAGE>
39
liquidity of restricted securities, and for monitoring the Advisor's
implementation of the guidelines and procedures.
SECURITIES LENDING -- In order to generate additional income, a 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. A 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.
SECURITIES OF FOREIGN ISSUERS -- There are certain risks connected with
investing in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less information on such
securities and their issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation of
capital invested abroad, and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable U.S. securities. The
value of a Fund's investments denominated in foreign currencies will depend on
the relative strengths of those currencies and the U.S. dollar, and a Fund may
be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Fund.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
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.
<PAGE>
40
Government, including, among others, FHLMC, 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., GNMA securities), others are supported by the
right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank
securities), while still others are supported only by the credit of the
instrumentality (e.g., FNMA securities). 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.
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") and Coupon Under Book Entry Safekeeping
("CUBES").
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.
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 segregate 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, a 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>
A-1
APPENDIX
I. BOND RATINGS
CORPORATE AND MUNICIPAL BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P") and
Moody's Investors Service, Inc. ("Moody's") corporate and municipal 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.
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.
MUNICIPAL NOTE RATINGS
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both. Short-term municipal securities rated MIG-2 and
VMIG-2 are of high quality. Margins of protection are ample although not so
large as in the preceding group.
<PAGE>
A-2
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment.
- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note)
Note rating symbols are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
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>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISORS
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
STI Capital Management, N.A. P.O. Box 3808
Orlando, FL 32802
SunTrust Bank, Chattanooga, N.A. 736 Market Street
Chattanooga, TN 37402
SunTrust Bank, Atlanta 25 Park Place
Atlanta, GA 30303
* DISTRIBUTOR
SEI Financial Services Company 680 E. Swedesford Road
Wayne, PA 19087
* ADMINISTRATOR
SEI Fund Resources 680 E. Swedesford Road
Wayne, PA 19087
* 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
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 2000 One Logan Square
Philadelphia, PA 19103
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
100486 / 10-95
DISTRIBUTOR
SEI Financial Services
Company
-- - - - - - - - - -
<PAGE>
STI CLASSIC FUNDS
TRUST SHARES
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
MID-CAP EQUITY FUND
BALANCED FUND
SUNBELT EQUITY FUND
INTERNATIONAL EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
INVESTMENT ADVISORS TO THE FUNDS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
(THE "ADVISORS")
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios (each a "Fund" and, collectively, the
"Funds"). This Prospectus sets forth concisely the information about the Trust
Shares of the above-referenced Funds. Investors are advised to read this
Prospectus and retain it for future reference.
A Statement of Additional Information relating to the Funds 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, Pennsylvania 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 THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1996
<PAGE>
2
The Trust Shares are offered primarily to financial institutions and
intermediaries ("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. Individuals may
not purchase Trust Shares directly, although individuals may be able to purchase
Trust Shares through accounts maintained with financial institutions.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary...................... 3
Financial Highlights................. 4
The Trust............................ 6
Funds and Investment Objectives...... 6
Investment Policies and Strategies... 7
General Investment Policies and
Strategies.......................... 13
Investment Risks..................... 14
Investment Limitations............... 15
Performance Information.............. 16
Purchase of Fund Shares.............. 16
Redemption of Fund Shares............ 17
Dividends and Distributions.......... 18
Tax Information...................... 18
STI Classic Funds Information........ 19
The Trust............................ 19
Board of Trustees.................... 20
Investment Advisors.................. 20
Portfolio Managers................... 21
Banking Laws......................... 22
Distribution......................... 22
Administration....................... 22
Transfer Agent and Dividend
Disbursing Agent.................... 23
Custodian............................ 23
Legal Counsel........................ 23
Independent Public Accountants....... 23
Other Information.................... 23
Voting Rights........................ 23
Reporting............................ 23
Shareholder Inquiries................ 24
Description of Permitted
Investments......................... 24
Appendix............................. A-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT OF
ADDITIONAL INFORMATION 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.
<PAGE>
3
EXPENSE SUMMARY
TRUST SHARES
The purpose of the following table is to help you understand the various costs
and expenses that a shareholder will bear, directly or indirectly, in connection
with an investment in the Trust Shares of each Fund.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CAPITAL MID-CAP SUNBELT INTERNATIONAL
GROWTH VALUE INCOME EQUITY BALANCED EQUITY EQUITY INDEX INTERNATIONAL
FUND STOCK FUND FUND FUND FUND FUND EQUITY FUND
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Management Fees (after
fee waivers &
reimbursements)(1).... 1.03% .80% 1.00% .79% 1.02% .76% 1.06%
Other Fund Expenses.... .12% .15% .15% .16% .13% .29% .40%
- ----------------------------------------------------------------------------------------------------------------------
Total Fund Operating
Expenses (after fee
waivers &
reimbursements)(2)(3)... 1.15% .95% 1.15% .95% 1.15% 1.05% 1.46%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. Each Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers, Advisory Fees for the
Funds would be as follows: Capital Growth Fund -- 1.15%, Value Income Stock
Fund -- .80%, Mid-Cap Equity Fund -- 1.15%, Balanced Fund -- .95%, Sunbelt
Equity Fund -- 1.15%, International Equity Index Fund -- .90%, and
International Equity Fund -- 1.25%. See "Investment Advisors."
(2) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Capital Growth Fund -- 1.27%, Value Income Stock Fund
-- .95%, Mid-Cap Equity Fund -- 1.30%, Balanced Fund -- 1.11%, Sunbelt
Equity Fund -- 1.28%, International Equity Index Fund -- 1.19%, and
International Equity Fund -- 1.65%.
(3)Total Fund Operating Expenses for the Value Income Stock Fund have been
restated to reflect current fees.
<TABLE>
<CAPTION>
EXAMPLES ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses on a $1,000 investment assuming: (1) a
5% annual return and (2) redemption at the end of each time period.
CAPITAL GROWTH FUND................................................................ $ 12 $ 37 $ 63
VALUE INCOME STOCK FUND............................................................ $ 10 $ 30 $ 53
MID-CAP EQUITY FUND................................................................ $ 12 $ 37 $ 63
BALANCED FUND...................................................................... $ 10 $ 30 $ 53
SUNBELT EQUITY FUND................................................................ $ 12 $ 37 $ 63
INTERNATIONAL EQUITY INDEX FUND.................................................... $ 11 $ 33 $ 58
INTERNATIONAL EQUITY FUND.......................................................... $ 15 $ 46 $ 80
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------
An investor would pay the following expenses on a $1,000 investment assuming: (1) a
5% annual return and (2) redemption at the end of each time period.
CAPITAL GROWTH FUND................................................................ $ 140
VALUE INCOME STOCK FUND............................................................ $ 117
MID-CAP EQUITY FUND................................................................ $ 140
BALANCED FUND...................................................................... $ 117
SUNBELT EQUITY FUND................................................................ $ 140
INTERNATIONAL EQUITY INDEX FUND.................................................... $ 128
INTERNATIONAL EQUITY FUND.......................................................... $ 175
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
THE EXAMPLES ARE BASED UPON THE TOTAL OPERATING EXPENSES OF THE FUNDS AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
4
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, independent
public accountants to the Trust, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information and which appear, along with the report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information regarding each Fund is contained in the Trust's Annual Report to
Shareholders and is available without charge by calling 1-800-428-6970.
For a Trust Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------- ---------- ------------ -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
--------------------
CAPITAL GROWTH FUND
- -------------------
TRUST SHARES
1996........................ $ 12.18 $ 0.12 $ 3.32 $ (0.13) $ (0.59) $ 14.90
1995........................ 11.99 0.16 0.57 (0.14) (0.40) 12.18
1994........................ 11.95 0.16 0.31 (0.17) (0.26) 11.99
1993 (1).................... 10.36 0.12 1.57 (0.10) -- 11.95
-------------------------
VALUE INCOME STOCK FUND
- ------------------------
TRUST SHARES
1996........................ $ 11.59 $ 0.35 $ 2.71 $ (0.34) $ (1.16) $ 13.15
1995........................ 10.54 0.32 1.56 (0.32) (0.51) 11.59
1994........................ 10.23 0.29 0.70 (0.32) (0.36) 10.54
1993 (2).................... 10.00 0.11 0.16 (0.04) -- 10.23
---------------------
MID-CAP EQUITY FUND
- --------------------
TRUST SHARES
1996........................ $ 11.00 $ 0.08 $ 2.63 $ (0.08) $ (0.87) $ 12.76
1995........................ 9.85 0.08 1.15 (0.08) -- 11.00
1994 (3).................... 10.00 0.02 (0.16) (0.01) -- 9.85
---------------
BALANCED FUND
- --------------
TRUST SHARES
1996........................ $ 10.26 $ 0.33 $ 1.41 $ (0.34) $ (0.11) $ 11.55
1995........................ 9.76 0.33 0.49 (0.32) -- 10.26
1994 (4).................... 10.00 0.11 (0.29) (0.06) -- 9.76
--------------------
SUNBELT EQUITY FUND
- -------------------
TRUST SHARES
1996........................ $ 10.03 $ (0.04) $ 4.32 -- $ (0.20) $ 14.11
1995........................ 9.70 (0.01) 0.38 -- (0.04) 10.03
1994 (4).................... 10.00 -- (0.30) -- -- 9.70
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TOTAL END OF TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
RETURN PERIOD (000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
-------- ------------ ---------- ------------ --------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------
CAPITAL GROWTH FUND
- -------------------
TRUST SHARES
1996........................ 28.97% $ 981,498 1.15% 0.90% 1.27% 0.78% 156.46%
1995........................ 6.63% 984,205 1.15% 1.38% 1.28% 1.25% 127.79%
1994........................ 3.87% 891,870 1.15% 1.25% 1.29% 1.11% 123.87%
1993 (1).................... 17.90%* 507,692 1.15%* 1.43%* 1.28%* 1.30%* 95.02
%
-------------------------
VALUE INCOME STOCK FUND
- ------------------------
TRUST SHARES
1996........................ 27.91% $ 1,244,399 0.92% 2.86% 0.92% 2.86% 133.99%
1995........................ 19.06% 991,977 0.95% 3.16% 0.95% 3.16% 125.71%
1994........................ 9.95% 573,082 0.88% 3.21% 0.97% 3.12% 149.28%
1993 (2).................... 9.05%* 137,761 0.80%* 4.32%* 0.96%* 4.16%* 34.71
%
---------------------
MID-CAP EQUITY FUND
- --------------------
TRUST SHARES
1996........................ 25.54% $ 253,905 1.15% 0.70% 1.29% 0.56% 115.62%
1995........................ 12.56% 125,562 1.15% 0.88% 1.32% 0.71% 65.63%
1994 (3).................... (1.39%)+ 57,036 1.15%* 1.20%* 1.68%* 0.67%* 7.99
%
---------------
BALANCED FUND
- --------------
TRUST SHARES
1996........................ 17.26% $ 111,638 0.95% 3.00% 1.09% 2.86% 154.63%
1995........................ 8.72% 89,051 0.95% 3.44% 1.11% 3.28% 156.61%
1994 (4).................... (1.78%)+ 90,579 0.95%* 2.76%* 1.25%* 2.46%* 105.65
%
--------------------
SUNBELT EQUITY FUND
- -------------------
TRUST SHARES
1996........................ 43.19% $ 412,430 1.15% (0.34%) 1.28% (0.47%) 106.27%
1995........................ 3.81% 258,908 1.15% (0.12%) 1.30% (0.27%) 80.03%
1994 (4).................... (2.99%)+ 128,280 1.15%* (0.19%)* 1.58%* (0.62%)* 21.
42%
</TABLE>
<PAGE>
5
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NET REALIZED
NET ASSET AND DISTRIBUTIONS
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT GAINS ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------- ---------- ------------ -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
------------------------------
INTERNATIONAL EQUITY INDEX FUND
- -----------------------------
TRUST SHARES
1996........................ $ 10.24 $ 0.10 $ 0.84 $ (0.13) $ (0.09) $ 10.96
1995 (5).................... 10.00 0.08 0.19 (0.02) (0.01) 10.24
-------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
TRUST SHARES
1996 (6).................... $ 10.00 $ 0.05 $ 1.35 -- -- $ 11.40
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
RATIO OF NET AVERAGE NET AVERAGE NET
RATIO OF INVESTMENT ASSETS ASSETS
NET ASSETS EXPENSES INCOME TO (EXCLUDING (EXCLUDING PORTFOLIO
TOTAL END OF TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
RETURN PERIOD (000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
-------- ------------ ---------- ------------ --------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------
INTERNATIONAL EQUITY INDEX FUN
- -----------------------------
TRUST SHARES
1996........................ 9.29% $ 90,980 1.05% 0.84% 1.19% 0.70% 30.46%
1995 (5).................... 2.69%+ 89,446 1.05%* 1.13%* 1.31%* 0.87%* 10.37
%
-------------------------
INTERNATIONAL EQUITY FUND
- ------------------------
TRUST SHARES
1996 (6).................... 14.00%+ $ 213,306 1.46%* 1.36%* 1.65%* 1.17%* 113.34
%
</TABLE>
* Annualized.
+ Cumulative since commencement of operations.
(1) The Capital Growth Fund Trust Shares commenced operations on July 1, 1992.
(2) The Value Income Stock Fund Trust Shares commenced operations on February
12, 1993.
(3) The Mid-Cap Equity Fund (formerly the Aggressive Growth Fund) Trust Shares
commenced operations on February 2, 1994.
(4) The Sunbelt Equity Fund Trust Shares and the Balanced Fund Trust Shares
commenced operations on January 3, 1994.
(5) The International Equity Index Fund Trust Shares commenced operations on
June 6, 1994.
(6) The International Equity Fund Trust Shares commenced operations on December
1, 1995.
<PAGE>
6
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUND
The International Equity Fund is the successor to a collective investment fund
previously managed by STI Capital Management, Inc. A substantial portion of the
assets of that collective investment fund were transferred to the Fund on
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 OF
PREDECESSOR SINCE
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 each non-money market Fund through three
separate classes (Trust Shares, Investor Shares and Flex Shares) and in each
Money Market Fund through two separate classes (Trust Shares and Investor
Shares), which provide for variations in distribution and service fees, transfer
agent fees, voting rights and dividends. Except for differences between classes,
each share of each Fund represents an undivided, proportionate interest in that
Fund. This Prospectus relates to the Trust Shares of the Funds described below.
FUNDS AND INVESTMENT OBJECTIVES
THE CAPITAL GROWTH FUND seeks to provide capital appreciation by investing
primarily in a portfolio of common stocks, warrants and securities convertible
into common stock which, in its Advisor's opinion, are undervalued in the
marketplace at the time of purchase.
<PAGE>
7
THE VALUE INCOME STOCK FUND seeks to provide current income with the secondary
goal of achieving capital appreciation by investing primarily in equity
securities.
THE MID-CAP EQUITY FUND (formerly known as Aggressive Growth Fund) seeks to
provide capital appreciation by investing primarily in a diversified portfolio
of common stocks, preferred stocks and securities convertible into common stock
of small to mid-sized companies with above-average growth of earnings. Current
income will not be an important criterion of investment selection and any such
income should be considered incidental.
THE BALANCED FUND seeks to provide capital appreciation and current income by
investing in common and preferred stocks, warrants, securities convertible into
common stock and investment grade fixed income securities.
THE SUNBELT EQUITY FUND seeks to provide capital appreciation by investing
substantially all, and under normal market conditions at least 65%, of its
assets in common stocks, preferred stocks, warrants and securities convertible
into common stock of U.S. companies headquartered and/or conducting a
substantial portion of their operations in the southern region of the United
States. Current income will not be an important criterion of investment
selection and any such income should be considered incidental.
THE INTERNATIONAL EQUITY INDEX FUND seeks to provide investment results that
correspond to the aggregate price and dividend performance of the securities
included in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australasia and Far East Index (the "MSCI EAFE-GDP Index"
or "EAFE-GDP Index").1
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 a Fund will achieve its investment objective.
The investment objective of each Fund is nonfundamental and may be changed
without shareholder approval.
INVESTMENT POLICIES AND STRATEGIES
CAPITAL GROWTH FUND
The Capital Growth Fund invests primarily in a diversified portfolio of common
stocks, warrants, and securities convertible into common stocks which, in the
Fund's Advisor's opinion, are undervalued in the marketplace at the time of
purchase. In selecting securities for the Fund, its Advisor will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. Dividend and interest income should be
considered incidental to the growth of capital. The Fund's Advisor will rotate
the Capital Growth Fund's holdings between various market sectors based on
economic analysis of the overall business cycle. Under normal conditions, at
least 65% of the total assets of the Capital Growth Fund will be invested in
common stocks.
All of the common stocks in which the Fund invests are traded on registered
exchanges or
- ------------------------
1 "MSCI EAFE-GDP Index" is a registered service mark of Morgan Stanley Capital
International, which does not sponsor and is in no way affiliated with the
International Equity Index Fund.
<PAGE>
8
on the over-the-counter market in the United States. Assets of the Capital
Growth Fund not invested in the securities described above may be invested in
U.S. dollar denominated equity securities of foreign issuers (including
sponsored American Depositary Receipts ("ADRs") that are traded on exchanges or
listed on National Association of Securities Dealers Automated Quotations
("NASDAQ")); securities issued by money market mutual funds; pay-in-kind
securities; and bonds. The bonds that the Capital Growth 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 invested in bonds rated below BBB by
Standard & Poor's Corporation ("S&P") or below Baa by Moody's Investors
Services, Inc. ("Moody's") or securities not rated by S&P or Moody's and of
comparable quality. See "Investment Risks -- High Yield, Lower Rated Bonds." In
addition, the Fund may invest up to 10% of its assets in restricted securities.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 156%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
VALUE INCOME STOCK FUND
The Value Income Stock Fund seeks to provide current income by structuring its
investments in an attempt to maintain the Fund's yield at a level above the
average dividend yield of the securities comprising the S&P 500 Stock Index.
Achieving such a yield will be the Fund's primary consideration when purchasing
securities. A secondary consideration of the Fund will be capital appreciation.
The Fund will invest at least 80% of its total assets in equity securities.
Investments will consist primarily of common stocks, and, under normal market
conditions, at least 65% of the Fund's assets will be invested in common stocks
issued by corporations which have a history of paying regular dividends,
although there can be no assurance that such corporations will continue to pay
dividends. Other equity securities in which the Fund may invest are convertible
debt securities; preferred stocks and warrants which are convertible into or
exchangeable for common stocks; and U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ). All of the common stocks in which the Fund invests are traded on
registered exchanges such as the New York or American Stock Exchange or on the
over-the-counter market in the United States (i.e., NASDAQ). The Fund may also
purchase debt securities (corporate debt obligations and U.S. Treasury
obligations) which 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 invested in
bonds rated below BBB by S&P or below Baa by Moody's or securities not rated by
S&P or Moody's and of comparable quality. The Fund may also invest in futures
and options.
The Fund will invest primarily in stocks of companies operating in all aspects
of the U.S. and world economies that have a market capitalization of at least
$500 million, and that the Fund's Advisor believes possess fundamentally
favorable long-term characteristics. However, stocks of companies with smaller
market capitalizations and stocks that are out of favor in the financial
community and in which little opportunity for price appreciation is recognized
by the financial community may also be purchased if the Fund's Advisor believes
they are undervalued.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 134%. This
rate of
<PAGE>
9
turnover, if continued, will likely result in higher brokerage commissions and
higher levels of realized capital gains than if the turnover rate was lower.
MID-CAP EQUITY FUND
The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common
stocks, preferred stocks, and securities convertible into common stocks of small
to mid-size companies, (i.e., $50 million to $1 billion and $500 million to $5
billion, respectively, as measured by their market capitalization), with
above-average growth of earnings. Under normal conditions, at least 80% of the
total assets of the Fund will be invested in equity securities, and as a matter
of non-fundamental policy, the Fund will invest at least 65% of its assets in
mid-size companies. Current income will not be an important criterion of
investment selection and any such income should be considered incidental. In
selecting securities for the Fund, the Fund's Advisor will evaluate factors such
as the issuer's background, industry position, historical returns on equity and
experience and qualifications of the management team.
Most of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Fund not invested in the securities described above may be invested in U.S.
dollar denominated equity securities of foreign issuers (including sponsored
ADRs that are traded on exchanges or listed on NASDAQ); securities issued by
mutual funds; repurchase agreements; and bonds. The bonds that the Fund may
purchase, including any variable or floating rate instruments, must be rated B
or better by S&P or Moody's, provided that this requirement shall not apply to
the Fund's purchase of bonds issued by the government of Canada or by various
supranational entities, and provided further that no more than 10% of the Fund's
total assets will be invested in bonds rated below BBB by S&P or below Baa by
Moody's or securities not rated by S&P or Moody's and of comparable quality. The
Fund may invest up to 10% of its assets in restricted securities.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 116%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
SUNBELT EQUITY FUND
The Sunbelt Equity Fund seeks to provide capital appreciation by investing
substantially all, and under normal market conditions at least 65%, of its
assets in common stocks; preferred stocks; warrants; and securities convertible
into common stock of U.S. companies headquartered and/or conducting a
substantial portion of their operations in (i.e., maintaining at least 50% of
their assets in or deriving at least 50% of their revenues and/or sales from)
the southern region of the United States. Current income will not be an
important criterion of investment selection and any such income should be
considered incidental. The Fund's Advisor will seek to identify and purchase
securities of companies that it believes to be undervalued and that possess a
strong balance sheet, a strong earnings record and adequate market liquidity.
Most of the common stocks in which the Fund invests are traded on registered
exchanges such as the New York or American Stock Exchange or on NASDAQ. The Fund
will invest no more than 10% of its assets in convertible securities rated lower
than BBB. (See "Investment Risks -- High Yield, Lower Rated
<PAGE>
10
Bonds.") The Fund may invest up to 10% of its total assets in restricted
securities. The Fund may also purchase futures and options for hedging purposes.
Obligations relating to futures contracts will be limited to not more than 20%
of the Fund's total assets.
The Fund will invest primarily in stocks of U.S. companies headquartered and/or
operating in the following U.S. states: Texas, Arkansas, Alabama, Mississippi,
Tennessee, Kentucky, Florida, Virginia, Georgia, North Carolina, South Carolina
and Louisiana. To the extent that the Fund's investments are not as
geographically dispersed across the U.S. as other funds with comparable
objectives, the impact of economic forces on and the relative economic
conditions of these states will be greater on Shareholders.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 106%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
BALANCED FUND
The Balanced Fund seeks to provide capital appreciation and current income
through investments in a diversified portfolio of common and preferred stocks,
warrants, securities convertible into common stocks, and investment grade fixed
income securities. Under normal conditions, no more than 70% of the total assets
of the Fund will be invested in common stocks and other equity securities, and
no more than 60% of the Fund's total assets will be invested in bonds and other
fixed income securities. The Fund will maintain at least 25% of its total assets
in senior fixed income securities.
In selecting equity securities for the Fund, the Fund's Advisor will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. The Fund's Advisor will rotate the Fund's
holdings between various market sectors based on economic analysis of the
overall business cycle.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on NASDAQ. Assets of the Fund not invested in the securities
described above may be invested in U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ), securities issued by investment companies, and bonds.
The Fund will invest in investment grade fixed income securities rated BBB or
better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
including corporate debt obligations; mortgage-backed securities, collateralized
mortgage obligations and asset-backed securities; obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; and obligations of supranational
entities. No more than 25% of the Fund's assets will be invested in securities
rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S.
<PAGE>
11
Government, its agencies or instrumentalities or, subject to a limit of 25% of
the Fund's assets, mortgage-backed securities issued by private issuers. These
mortgage-backed securities may be backed or collateralized by fixed, adjustable
or floating rate mortgages. The Fund may also invest in asset backed securities
which consist of securities backed by company receivables, truck and auto loans,
leases, credit card receivables and home equity loans.
In order to reduce interest rate risk, the Fund may purchase floating or
variable rate securities. It may also buy securities on a when-issued basis,
putable securities, pay-in-kind securities and zero coupon securities. The Fund
may also invest futures and options. Some floating or variable rate securities
will be subject to interest rate "caps" or "floors."
The Balanced Fund's turnover rate for the fiscal year ended May 31, 1996 was
148% for the equity portion of its portfolio and 164% for the fixed income
portion of its portfolio. These rates of turnover, if continued, will likely
result in higher transaction costs and brokerage commissions and higher levels
of realized capital gains than if the turnover rate was lower.
INTERNATIONAL EQUITY INDEX FUND
The Fund will invest substantially all and, under normal market conditions, at
least 65% of its assets in common and preferred stocks; warrants; options; and
securities convertible into common stock of companies headquartered or based in
the approximately twenty foreign countries included in the EAFE-GDP Index. The
Fund will invest only in the 1088 or so companies included in the EAFE-GDP
Index. Because it is impractical to invest in every company included in the
Index, the Fund will select a representative sample of securities in each
country using a statistically-based optimization process. Morgan Stanley & Co.
Incorporated maintains the optimization computer programs which will be utilized
to select companies within each country.
The Fund will be constructed to have aggregate investment characteristics
similar to those of the EAFE-GDP Index. The Fund will invest in a statistically
selected sample of the securities included in the EAFE-GDP Index, although not
all countries nor all companies within a country will be represented in the
Fund's portfolio of securities at any time. The Fund expects to invest in
approximately 300 stocks so that the results fall within a targeted tracking
error range. From time to time, adjustments may be made in the Fund's portfolio
because of changes in the composition of the EAFE-GDP Index. No attempt will be
made to manage the portfolio using traditional economic, financial and market
analyses.
The Fund expects that there will be a close correlation between the Fund's
performance and that of the EAFE-GDP Index. A 1.00 correlation would indicate
perfect correlation, which would be achieved when the net asset value of the
Fund, including the value of its dividend and capital gains distributions,
increases or decreases in exact proportion to changes in the EAFE-GDP Index. The
correlation between the Fund and the EAFE-GDP Index is expected to be over 0.95
on an annual basis. The Fund's ability to track the EAFE-GDP Index, however, may
be affected by, among other things, transaction costs, changes in either the
composition of the EAFE-GDP Index or number of shares outstanding for the
component companies of the EAFE-GDP Index, and the timing and amount of
purchases and redemptions.
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
<PAGE>
12
or unsponsored 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. These contracts may be bought or sold to protect the Fund,
to some degree, against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar.
The Fund expects to be fully invested in the investments described above, but
may invest up to 35% of its total assets in U.S. and non-U.S. denominated money
market instruments; repurchase agreements; futures contracts, including stock
index futures contracts; and options on futures contracts. Obligations relating
to futures contracts will be limited to 20% of the Fund's total assets. The Fund
is also permitted to acquire floating and variable rate securities; purchase
securities on a when-issued basis; and purchase illiquid securities.
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 ADRs traded on registered exchanges or
NASDAQ, or sponsored or unsponsored 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 or 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 S&P or below Baa by Moody's, Inc. or
securities not rated by S&P or Moody's and 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
<PAGE>
13
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 its 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 its 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 Fund's turnover rate for the fiscal year ended May 31, 1996 was 113%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes, during periods when its Advisor determines
that market conditions warrant, each Fund may hold a portion of its assets in
cash and 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; time deposits issued by banks or savings and loan associations; and
commercial paper rated in the highest rating category. A Fund may not be
pursuing its investment objective when it is engaged in temporary defensive
investing.
Each Fund, except the International Equity Index Fund, may purchase restricted
securities, including Rule 144A securities, that its respective Advisor
determines are liquid pursuant to guidelines established by the Trust's Board of
Trustees.
In the event that a security owned by a Fund is downgraded below the stated
rating categories, its Advisor will review and take appropriate action with
regard to the security.
Each Fund may borrow money for temporary or emergency purposes in an amount not
to exceed one-third of the value of its total assets. A Fund may not purchase
additional securities while its outstanding borrowings exceed 5% of its assets.
Each Fund may purchase securities issued by money market mutual funds. A Fund's
purchase of shares of other investment companies is limited by the Investment
Company Act of 1940 (the "1940 Act") and will ordinarily result in an additional
layer of charges and expenses.
Each of the Funds 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 each 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 in the usual course of business within seven days at a
price approximating its carrying value.
<PAGE>
14
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
EQUITY SECURITIES
Investments in equity securities are generally subject to market risks that may
cause their prices to fluctuate over time. The values of convertible equity
securities are 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 a Fund invests will cause the net asset value of the Fund to
fluctuate.
FIXED INCOME SECURITIES
The market value of a 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") to 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 a Fund's securities will not affect cash income derived
from these securities but will affect the Fund's net asset value.
There is a risk that the current interest rate on floating and variable rate
instruments may not accurately reflect existing market interest rates.
Fixed income securities rated BBB by S&P or Baa by Moody's (the lowest ratings
of investment grade bonds) are deemed by these rating services to have
speculative characteristics.
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 available for
distribution to a 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 International Equity
Index Fund and International Equity Fund will seek to protect the value of its
respective investment securities against a decline in the value of a
<PAGE>
15
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, they tend to limit any potential gain which
might result should the value of such currency increase.
HIGH YIELD, LOWER RATED BONDS
A 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 (E.G., 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 a 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 the issuer's 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.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to the risk of prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by the Balanced Fund are prepaid, the Balanced
Fund generally will reinvest the proceeds in securities with a yield that
reflects prevailing interest rates, which may be lower than the prepaid
security.
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 great fluctuations
in value due to interest rate changes.
A Fund will be required to include the imputed interest in zero coupon
obligations in its current income. Because each Fund distributes all of its net
investment income to investors, a Fund may have to sell portfolio securities to
distribute the income attributable to these obligations and securities at a time
when its Advisor would not have chosen to sell such obligations or securities.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a 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 a
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 a
Fund's outstanding shares, whichever is less.
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and
<PAGE>
16
repurchase agreements involving such securities) if as a result more than 5% of
the total assets of a Fund would be invested in the securities of such issuer;
provided, however, that a 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 a 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 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 Funds may advertise performance (total return and yield).
These figures will be historical and are not intended to indicate future
performance. The yield of a Fund refers to the annualized income generated by an
investment in that 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 a 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 a 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.
The performance of the Trust Shares of the Trust will normally be higher than
for Investor Shares and Flex Shares because Investor Shares and Flex Shares are
subject to distribution, service and certain transfer agent fees not charged to
Trust Shares. The performance of Flex Shares in comparison to Investor Shares
will vary depending upon the investment time horizon.
Each 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 Trust are sold primarily to financial institutions or
intermediaries, 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
<PAGE>
17
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 Trust's transfer agent, Federated Services
Company (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 (a "Business Day").
A purchase order for any of the Funds will be effective as of the Business Day
received by the Transfer Agent if the Transfer Agent receives the order before
4:00 p.m. Eastern time and payment is received within one day. Purchases will be
made in full and fractional shares of the Trust calculated to three decimal
places. The purchase price of shares of a 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 a 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 each Fund.
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).
The Trust maintains procedures, including identification methods and other
means, for ascertaining the identity of callers and authenticity of
instructions. If reasonable procedures are not employed, the Trust and/or the
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone transactions. Neither the 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.
Shares of the Funds are offered only to residents of states in which the shares
are eligible for purchase. Investors 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 Funds 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 Trust shares must be transmitted to the Transfer Agent by the
financial institution as the record owner. Financial institutions may establish
procedures
<PAGE>
18
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 from net investment income (exclusive of capital gains) are declared
and paid quarterly by each of the Funds, except that dividends are declared and
paid annually by the International Equity Index Fund and International Equity
Fund. Each Fund's net realized capital gains (including net short-term capital
gains) are distributed at least annually. Net income for dividend purposes
consists of (i) interest accrued and original issue discount earned on a 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 Funds 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 same 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 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 a Fund.
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 each 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 EACH FUND:
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded
<PAGE>
19
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.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for the federal excise tax applicable to
regulated investment companies.
TAX STATUS OF DISTRIBUTIONS:
Each 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 Funds 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
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 Funds will make annual reports
to Shareholders of the federal income tax status of all distributions. Dividends
declared by a 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 a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. The International Equity Index and International
Equity Funds expect to elect to treat Shareholders as having paid their
proportionate share of such foreign taxes. The other Funds will not be able to
make this election.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by the Shareholder as income dividends from a 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
Funds 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 a Fund is considered tax-exempt in their particular state.
A 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 Fund. All
consideration received by the
<PAGE>
20
Trust for shares of any Fund and all assets of such Fund belong to that Fund 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.
INVESTMENT ADVISORS
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $66
billion as of December 31, 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,
Inc. -- 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 $47 billion as of December 31, 1995.
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the
Capital Growth, Value Income Stock, Mid-Cap Equity, Balanced and International
Equity Funds and joint advisor to the International Equity Index Fund. As of
June 30, 1996, STI Capital had discretionary management authority with respect
to assets of approximately $11 billion. The principal business address of STI
Capital is P.O. Box 3808, Orlando, Florida 32802.
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the Sunbelt
Equity Fund and as joint advisor to the International Equity Index Fund. As of
June 30, 1996, Trusco had approximately $13.7 billion in assets under
management. The principal business address of Trusco is 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303.
The Trust and the above Investment Advisors have entered into advisory
agreements (the "Advisory Agreements"). Under the Advisory Agreements, the
Advisors make the investment decisions for the assets of the Funds they advise
and continuously review, supervise and administer their Fund's respective
investment programs. The Advisors discharge their 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 FUNDS INVOLVE 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 all Funds,
the Advisors may execute brokerage or other agency transactions through
affiliates of the Advisors.
<PAGE>
21
For the services provided and expenses incurred pursuant to the applicable
Advisory Agreements, STI Capital is entitled to receive advisory fees computed
daily and paid monthly at the annual rate of 1.15%, 0.95%, 1.15%, 0.80%, and
1.25% of the average daily net assets of the Capital Growth, Balanced, Mid-Cap
Equity, Value Income Stock and International Equity Funds, respectively. Trusco
is entitled to receive an advisory fee computed daily and paid monthly at the
annual rate of 1.15% of the average daily net assets of the Sunbelt Equity Fund.
Trusco and STI Capital jointly are entitled to receive an advisory fee computed
daily and paid monthly at the annual rate of 0.90% of the average daily net
assets of the International Equity Index Fund.
Although the advisory fee for each Fund is higher than advisory fees paid by
other mutual funds, the Trust believes that each such fee is comparable to the
advisory fee paid by many other mutual funds with similar investment objectives
and policies. From time to time, an Advisor may waive (either voluntarily or
pursuant to applicable state limitations) advisory fees payable by a Fund.
Currently, the Advisors have 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 any time.
For the fiscal year ended May 31, 1996, STI Capital received advisory fees
computed daily and paid monthly at the annual rate of 1.03%, 0.80%, 1.00%, 0.79%
and 1.06% of the average daily net assets of the Capital Growth, Value Income
Stock, Mid-Cap Equity, Balanced and International Equity Funds, respectively.
Trusco received an advisory fee computed daily and paid monthly at the annual
rate of 1.02% of the average daily net assets of Sunbelt Equity Fund. Trusco and
STI Capital jointly received an advisory fee computed daily and paid monthly at
the annual rate of 0.76% of the average daily net assets of the International
Equity Index Fund.
PORTFOLIO MANAGERS
Mr. Anthony Gray has been responsible for the day-to-day management of the
Capital Growth Fund since it commenced operations. Mr. Gray has served as Chief
Executive Officer and Chief Investment Officer of STI Capital since 1979. Mr.
Gray has also been responsible for the day-to-day management of the equity
portion of the Balanced Fund since it commenced operations.
Mr. Mills Riddick, CFA, has been responsible for the day-to-day management of
the Value Income Stock Fund since April, 1995. Mr. Riddick has been a value
portfolio manager at STI Capital since 1989.
Mr. Thomas Edgar has been responsible for the day-to-day management of the
Mid-Cap Equity Fund since it commenced operations. Mr. Edgar has served as
Senior Vice President of STI Capital since 1990.
Mr. L. Earl Denney CFA has been responsible for the day-to-day management of the
fixed income portion of the Balanced Fund since it commenced operations. Mr.
Denney has served as Executive Vice President of STI Capital since 1983.
Mr. Dan Jaworski has been responsible for the day-to-day management of the
International Equity Fund since it commenced operations. 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.
Mr. James Foster has been responsible for the day-to-day management of the
Sunbelt Equity
<PAGE>
22
Fund it commenced operations. Mr. Foster has served as a Vice President of
Trusco since 1989.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, currently
(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
Advisors believe that each may perform the services for STI Classic Funds
contemplated by their respective Advisory Agreements 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 Advisors from continuing to perform services for
STI Classic Funds. If the Advisors were prohibited from providing services to
STI Classic Funds, 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 Advisors, or their affiliates, would consider the
possibility of offering to perform additional services for STI Classic Funds. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which the Advisors, or such affiliates, might
offer to provide such services.
In addition, state securities laws on this 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
(the "Distribution Agreement"). No compensation is paid to the Distributor for
distribution services for the Trust Shares of each 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. An investor may call 1-800-428-6970 to receive
more information regarding Investor Shares or Flex Shares. 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.
Each Fund may execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with certain administrative
services, other than investment
<PAGE>
23
advisory services, including regulatory reporting, all necessary office space,
equipment, personnel and facilities.
The Administrator is entitled to a fee from the Trust, 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 0.10 %
over $1 billion to $5 billion 0.07 %
over $5 billion to $8 billion 0.05 %
over $8 billion to $10 billion 0.045%
over $10 billion 0.04 %
</TABLE>
From time to time, the Administrator may waive (either voluntarily or pursuant
to applicable state limitations) all or a portion of the administration fee
payable by the Trust.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779 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
Peacetree Street N.E., 14th Floor, Atlanta, Georgia 30308, serves as custodian
of the assets of each Fund with the exception of the International Equity Index
and International Equity Funds. Union Bank of California, 475 Sansome Street,
Suite 1200, San Francisco, California 94111, serves as Custodian for the
International Equity Index Fund. The Bank of New York, One Wall Street, New
York, New York 10286, serves as custodian for the International Equity Fund.
Each custodian holds cash, securities and other assets of the Trust as required
by the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
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 and audited financial
statements annually. The Trust furnishes proxy statements and other reports to
Shareholders of record.
<PAGE>
24
SHAREHOLDER INQUIRIES
Shareholders may contact their financial institution's representative in order
to obtain information on account statements, procedures and other related
information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
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 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.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
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.
<PAGE>
25
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" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TRs, TIGRs and
CATS are sold as zero coupon securities. See "Zero Coupon Obligations."
DERIVATIVES -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, swap agreements, and some mortgage-back securities (CMOs,
REMICs and SMBs). See elsewhere in this "Description of Permitted Investments"
for discussions of these various instruments, and see "Investment Policies and
Strategies" for more information about any investment policies and limitations
applicable to their use.
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. A Fund may also enter into a contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency, 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
<PAGE>
26
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. A 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. A 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.
MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered
corporate or agency debt that differs from traditionally underwritten corporate
bonds only in the process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
<PAGE>
27
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC obligations are not backed by the
full faith and credit of the U.S. Government as GNMA certificates are, but FNMA
and FHLMC securities are supported by the instrumentalities' right to borrow
from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS: CMOs are debt obligations or multiclass
pass-through certificates issued by agencies or instrumentalities of the U.S.
Government or by private originators or investors in mortgage loans. In a CMO,
series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an
<PAGE>
28
interest-only class ("IO"), while the other class may receive all of the
principal payments and is thus termed the principal-only class ("PO"). The value
of IOs tends to increase as rates rise and decrease as rates fall; the opposite
is true of POs. SMBs are extremely sensitive to changes in interest rates
because of the impact thereon of prepayment of principal on the underlying
mortgage securities. The market for SMBs is not as fully developed as other
markets; SMBs therefore may be illiquid.
OBLIGATIONS OF SUPRANATIONAL ENTITIES -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
OPTIONS ON CURRENCIES -- The International Equity Index 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.
PAY-IN-KIND SECURITIES -- Pay-in-kind securities are bonds or preferred stock
that pay interest or dividends in the form of additional bonds or preferred
stock.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a 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. A 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. A 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, a 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. A 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
<PAGE>
29
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.
STANDBY COMMITMENTS AND PUTS -- Standby commitments and puts are securities
subject to standby commitments or puts permit the holder thereof to sell the
securities at a fixed price prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current market price. However,
unless the standby commitment or put was an integral part of the security as
originally issued, it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the Fund owning the security
to which it relates. In certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of reducing the yield
otherwise payable on the underlying security. The Fund will limit standby
commitment or put transactions to institutions believed to present minimal
credit risk.
SWAPS, CAPS, FLOORS and COLLARS -- Interest rate swaps, mortgage swaps, currency
swaps and other types of swap agreements such as caps, floors and collars are
designed to permit the purchaser to preserve a return or spread on a particular
investment or portion of its portfolio, and to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date. In a
typical interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times a "notional principal amount," in return for
payments equal to a fixed rate times the same amount, for a specific period of
time. If a swap agreement provides for payment in different currencies, the
parties might agree to exchange the notional principal amount as well. Swaps may
also depend on other prices or rates, such as the value of an index or mortgage
prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specific interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on the Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements or reduce its exposure through
offsetting transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside liquid high grade securities in a
segregated account. The Fund will enter into swaps only with counterparties
believed to be creditworthy.
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
<PAGE>
30
Administration, and obligations issued or guaranteed by instrumentalities of the
U.S. Government, including, among others, FHLMC, 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., GNMA securities), others are supported by
the right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit
Bank securities), while still others are supported only by the credit of the
instrumentality (e.g., FNMA securities). 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.
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 segregate 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, a 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>
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 or 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. 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. Together with
bonds rated Aaa, they comprise what are generally known as high-grade bonds.
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 a 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>
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<PAGE>
<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISORS
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
STI Capital Management, N.A. P.O. Box 3808
Orlando, FL 32802
* DISTRIBUTOR
SEI Financial Services Company 680 E. Swedesford Road
Wayne, PA 19087
* ADMINISTRATOR
SEI Fund Resources 680 E. Swedesford Road
Wayne, PA 19087
* TRANSFER AGENT
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222-3779
* CUSTODIANS
SunTrust Bank, Atlanta c/o STI Trust & Investment
Operations, Inc.
303 Peachtree Street N.E.
14th Floor
Atlanta, GA 30308
Union 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 PUBLIC ACCOUNTANTS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
100093/10-95
DISTRIBUTOR
SEI Financial Services
Company
-- - - - - - - - - - - - - - -
PROSPECTUS
TRUST SHARES
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
MID-CAP EQUITY FUND
BALANCED FUND
SUNBELT EQUITY FUND
INTERNATIONAL EQUITY
INDEX FUND
INTERNATIONAL EQUITY
FUND
INVESTMENT ADVISORS
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
OCTOBER 1, 1996
ABCD
<PAGE>
STI CLASSIC FUNDS
INVESTOR SHARES
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
MID-CAP EQUITY FUND
BALANCED FUND
SUNBELT EQUITY FUND
INTERNATIONAL EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
INVESTMENT ADVISORS TO THE FUNDS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
(THE "ADVISORS")
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios (each a "Fund" and, collectively, the
"Funds"). This Prospectus sets forth concisely the information about the
Investor Shares of the above-referenced Funds. Investors are advised to read
this Prospectus and retain it for future reference.
A Statement of Additional Information relating to the Funds 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, Pennsylvania 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 THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1996
<PAGE>
2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary........................................................... 3
Financial Highlights...................................................... 5
The Trust................................................................. 7
Funds and Investment Objectives........................................... 7
Investment Policies and Strategies........................................ 8
General Investment Policies and Strategies................................ 14
Investment Risks.......................................................... 15
Investment Limitations.................................................... 16
Performance Information................................................... 17
Fundlink.................................................................. 17
Purchase of Fund Shares................................................... 18
Redemption of Fund Shares................................................. 21
Exchanges................................................................. 22
Dividends and Distributions............................................... 22
Tax Information........................................................... 23
STI Classic Funds Information............................................. 24
The Trust................................................................. 24
Board of Trustees......................................................... 24
Investment Advisors....................................................... 24
Portfolio Managers........................................................ 25
Banking Laws.............................................................. 26
Distribution.............................................................. 26
Administration............................................................ 27
Transfer Agent and Dividend Disbursing Agent.............................. 28
Custodian................................................................. 28
Legal Counsel............................................................. 28
Independent Public Accountants............................................ 28
Other Information......................................................... 28
Voting Rights............................................................. 28
Reporting................................................................. 28
Shareholder Inquiries..................................................... 28
Description of Permitted Investments...................................... 29
Appendix.................................................................. A-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S STATEMENT OF
ADDITIONAL INFORMATION 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.
<PAGE>
3
EXPENSE SUMMARY
INVESTOR SHARES
The purpose of the following table is to help you understand the various costs
and expenses that a shareholder will bear, directly or indirectly, in connection
with an investment in the Investor Shares.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
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ALL FUNDS
- -------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price)................................. 3.75%
Maximum Sales Charge Imposed on
Reinvested Dividends................... None
Maximum Deferred Sales Charge........... None
Redemption Fees(1)...................... None
Exchange Fee............................ None
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
(1) There is a $7.00 wire charge for redemptions for all funds processed from
retail accounts which require wires to particular banks.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CAPITAL MID-CAP SUNBELT INTERNATIONAL INTERNATIONAL
GROWTH VALUE INCOME EQUITY BALANCED EQUITY EQUITY INDEX EQUITY
FUND STOCK FUND FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers
& reimbursements)(1).............. 1.03% .80% 1.00% .79% 1.02% .76% 1.06%
12b-1 Service & Distribution Fees
(after fee waivers &
reimbursements)(2)................ .52% .28% .40% .25% .40% .01% .00%
Other Fund Expenses (after fee
waivers & reimbursements)(3)...... .25% .22% .20% .21% .18% .68% .75%
- --------------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after fee waivers &
reimbursements)(4)................ 1.80% 1.30% 1.60% 1.25% 1.60% 1.45% 1.81%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. Each Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Capital Growth Fund --
1.15%, Value Income Stock Fund -- .80%, Mid-Cap Equity Fund -- 1.15%,
Balanced Fund -- .95%, Sunbelt Equity Fund -- 1.15%, International Equity
Index Fund -- .90%, and International Equity Fund -- 1.25%. See "Investment
Advisors."
(2) The Distributor is reimbursing, on a voluntary basis, a portion of its
expenses from each Fund. The Distributor reserves the right to terminate its
reimbursement at any time in its sole discretion. Absent such
reimbursements, 12b-1 Service & Distribution Fees would be as follows:
Capital Growth Fund -- .68%, Value Income Stock Fund -- .33%, Mid-Cap Equity
Fund -- .43%, Balanced Fund -- .28%, Sunbelt Equity Fund -- .43%,
International Equity Index Fund -- .38%, and International Equity Fund --
.33%. See "Distribution."
(3) Absent waivers and reimbursements, Other Fund Expenses would be as follows:
Capital Growth Fund -- .25%, Value Income Stock Fund -- .24%, Mid-Cap Equity
Fund -- .38%, Balanced Fund -- .66%, Sunbelt Equity Fund -- .35%,
International Equity Index Fund -- .78% and International Equity Fund --
1.56%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expense
would be as follows: Capital Growth Fund -- 2.08%, Value Income Stock Fund
-- 1.37%, Mid-Cap Equity Fund -- 1.96%, Balanced Fund -- 1.89%, Sunbelt
Equity Fund -- 1.93%, International Equity Index Fund -- 2.06%, and
International Equity Fund -- 3.14%.
<PAGE>
4
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLES YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment
assuming: (1) a 5% annual return and (2) redemption at the end of each
time period.
CAPITAL GROWTH FUND........................................................ $ 55 $ 92 $ 131 $ 241
VALUE INCOME STOCK FUND.................................................... $ 50 $ 77 $ 106 $ 188
MID-CAP EQUITY FUND........................................................ $ 53 $ 86 $ 121 $ 220
BALANCED FUND.............................................................. $ 50 $ 76 $ 104 $ 183
SUNBELT EQUITY FUND........................................................ $ 53 $ 86 $ 121 $ 220
INTERNATIONAL EQUITY INDEX FUND............................................ $ 52 $ 82 $ 114 $ 205
INTERNATIONAL EQUITY FUND.................................................. $ 55 $ 92 $ 132 $ 242
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</TABLE>
The examples are based upon the total operating expenses of a Fund and should
not be considered a representation of past or future expenses. Actual expenses
may be greater or less than those shown. A person that purchases shares through
an account with a financial institution may be charged separate fees by the
financial institution. The rules of the Securities and Exchange Commission
require that the maximum sales charge be reflected in the above table. However,
certain investors may qualify for reduced sales charges. See "Purchase of Fund
Shares." Long-term Shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers, Inc.'s Rules of Fair Practice.
<PAGE>
5
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, independent
public accountants to the Trust, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information and which appear, along with the report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information regarding each Fund is contained in the Trust's Annual Report to
Shareholders and is available without charge by calling 1-800-428-6970.
For an Investor Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS
VALUE NET NET REALIZED AND FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT UNREALIZED GAINS INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ----------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------
CAPITAL GROWTH FUND
--------------------
INVESTOR SHARES
1996.............. $12.17 $ 0.03 $ 3.32 $ (0.04) $ (0.59) $ 14.89 28.18%
1995.............. 11.98 0.09 0.57 (0.07) (0.40) 12.17 5.93%
1994.............. 11.93 0.09 0.31 (0.09) (0.26) 11.98 3.26%
1993 (1).......... 10.00 0.06 1.93 (0.06) -- 11.93 20.49%*
-------------------------
VALUE INCOME STOCK FUND
-------------------------
INVESTOR SHARES
1996.............. $11.58 $ 0.30 $ 2.71 $ (0.30) $ (1.16) $ 13.13 27.39%
1995.............. 10.52 0.28 1.56 (0.27) (0.51) 11.58 18.71%
1994.............. 10.23 0.26 0.67 (0.27) (0.37) 10.52 9.27%
1993 (2).......... 9.73 0.09 0.44 (0.03) -- 10.23 19.42%*
---------------------
MID-CAP EQUITY FUND
---------------------
INVESTOR SHARES
1996.............. $10.99 $ 0.03 $ 2.62 $ (0.03) $ (0.87) $ 12.74 24.93%
1995.............. 9.84 0.03 1.15 (0.03) -- 10.99 11.96%
1994 (3).......... 10.00 0.01 (0.17) -- -- 9.84 (1.60%)+
---------------
BALANCED FUND
---------------
INVESTOR SHARES
1996.............. $10.30 $ 0.30 $ 1.41 $ (0.30) $ (0.11) $ 11.60 16.88%
1995.............. 9.79 0.28 0.51 (0.28) -- 10.30 8.29%
1994 (4).......... 10.00 0.03 (0.24) -- -- 9.79 (2.10%)+
--------------------
SUNBELT EQUITY FUND
--------------------
INVESTOR SHARES
1996.............. $ 9.96 $ (0.11) $ 4.30 -- $ (0.20) $ 13.95 42.58%
1995.............. 9.69 (0.05) 0.36 -- (0.04) 9.96 3.20%
1994 (4).......... 10.00 (0.02) (0.29) -- -- 9.69 (3.10%)+
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
RATIO OF EXPENSES (LOSS) TO AVERAGE
NET ASSETS RATIO OF RATIO OF NET TO AVERAGE NET NET ASSETS
END OF EXPENSES INVESTMENT INCOME ASSETS (EXCLUDING (EXCLUDING PORTFOLIO
PERIOD TO AVERAGE TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
(000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
----------- ---------- ----------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
--------------------
CAPITAL GROWTH FUND
--------------------
INVESTOR SHARES
1996.............. $191,078 1.80% 0.24% 2.08% (0.04%) 156.46%
1995.............. 160,875 1.80% 0.73% 2.10% 0.43% 127.79%
1994.............. 170,795 1.80% 0.64% 2.11% 0.33% 123.87%
1993 (1).......... 131,858 1.80%* 0.81%* 2.06%* 0.55%* 95.02%
-------------------------
VALUE INCOME STOCK FUND
-------------------------
INVESTOR SHARES
1996.............. $130,597 1.30% 2.47% 1.37% 2.40% 133.99%
1995.............. 92,256 1.30% 2.80% 1.41% 2.69% 125.71%
1994.............. 60,589 1.25% 2.80% 1.44% 2.61% 149.28%
1993 (2).......... 24,779 1.15%* 4.51%* 1.63%* 4.04%* 34.71%
---------------------
MID-CAP EQUITY FUND
---------------------
INVESTOR SHARES
1996.............. $ 17,971 1.60% 0.25% 1.96% (0.11%) 115.62%
1995.............. 7,345 1.60% 0.43% 2.27% (0.24%) 65.63%
1994 (3).......... 3,004 1.60%* 0.74%* 4.60%* (2.26%)* 7.99%
---------------
BALANCED FUND
---------------
INVESTOR SHARES
1996.............. $ 4,896 1.25% 2.70% 1.89% 2.06% 154.63%
1995.............. 3,765 1.25% 3.17% 1.80% 2.62% 156.61%
1994 (4).......... 2,311 1.25%* 2.46%* 4.91%* (1.20%)* 105.65%
--------------------
SUNBELT EQUITY FUND
--------------------
INVESTOR SHARES
1996.............. $ 29,002 1.60% (0.79%) 1.93% (1.12%) 106.27%
1995.............. 22,180 1.60% (0.57%) 1.98% (0.95%) 80.03%
1994 (4).......... 16,077 1.60%* (0.63%)* 2.04%* (1.07%)* 21.42%
</TABLE>
<PAGE>
6
FINANCIAL HIGHLIGHTS CONTINUED
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS
VALUE NET NET REALIZED AND FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT UNREALIZED GAINS INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ----------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------
INTERNATIONAL EQUITY INDEX FUND
------------------------------
INVESTOR SHARES
1996.............. $10.20 $ 0.05 $ 0.85 $ (0.13) $ (0.09) $ 10.88 8.90%
1995 (5).......... 10.00 0.05 0.17 (0.01) (0.01) 10.20 2.18%+
-------------------------
INTERNATIONAL EQUITY FUND
-------------------------
INVESTOR SHARES
1996 (6).......... $10.44 $ 0.04 $ 0.90 -- -- $ 11.38 9.00%+
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
RATIO OF EXPENSES (LOSS) TO AVERAGE
NET ASSETS RATIO OF RATIO OF NET TO AVERAGE NET NET ASSETS
END OF EXPENSES INVESTMENT INCOME ASSETS (EXCLUDING (EXCLUDING PORTFOLIO
PERIOD TO AVERAGE TO AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
(000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
----------- ---------- ----------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
------------------------------
INTERNATIONAL EQUITY INDEX FUND
------------------------------
INVESTOR SHARES
1996.............. $ 5,597 1.45% 0.48% 2.06% (0.13%) 30.46%
1995 (5).......... 3,960 1.45%* 0.67%* 2.44%* (0.32%)* 10.37%
-------------------------
INTERNATIONAL EQUITY FUND
-------------------------
INVESTOR SHARES
1996 (6).......... $ 3,448 1.81%* 1.73%* 3.14%* 0.40%* 113.34%
</TABLE>
* Annualized.
+ Cumulative since commencement of operations.
(1) The Capital Growth Fund Investor Shares Investor Shares commenced
operations on June 9, 1992.
(2) The Value Income Stock Fund Investor Shares commenced operation on February
17, 1993.
(3) The Mid-Cap Equity Fund (formerly, Aggressive Growth Fund) Investor Shares
commenced operations on February 1, 1994.
(4) The Sunbelt Equity Fund Investor Shares and the Balanced Fund Investor
Shares commenced operations on January 4, 1994.
(5) The International Equity Index Fund Investor Shares commenced operations on
June 6, 1994.
(6) The International Equity Fund commenced operations on January 2, 1996.
<PAGE>
7
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUND
The International Equity Fund is the successor to a collective investment fund
previously managed by STI Capital Management, Inc. A substantial portion of the
assets of this collective investment fund was transferred to the Fund on
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. The Fund will be
somewhat smaller in asset size than the predecessor collective investment fund.
It is anticipated, however, that the Fund will reach the same or greater 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 for the period ended 9/30/95 (adjusted to reflect
current Fund expenses, net of voluntary waivers and reimbursements and the
maximum sales charge of 3.75%.)
<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 0.18% 7.35% 27.51%
</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 each non-money market Fund through three
separate classes (Trust Shares, Investor Shares and Flex Shares) and in each
Money Market Fund through two separate classes (Trust Shares and Investor
Shares), which provide for variations in distribution and service fees, transfer
agent fees, voting rights and dividends. Except for differences between classes,
each share of each Fund represents an undivided, proportionate interest in that
Fund. This Prospectus relates to the Investor Shares of the Funds described
below.
FUNDS AND INVESTMENT OBJECTIVES
THE CAPITAL GROWTH FUND seeks to provide capital appreciation by investing
primarily in a portfolio of common stocks, warrants and securities convertible
into common stock which in its Advisor's opinion are undervalued in the
marketplace at the time of purchase.
<PAGE>
8
THE VALUE INCOME STOCK FUND seeks to provide current income with the secondary
goal of achieving capital appreciation by investing primarily in equity
securities.
THE MID-CAP EQUITY FUND (formerly known as the Aggressive Growth Fund) seeks to
provide capital appreciation by investing primarily in a diversified portfolio
of common stocks, preferred stocks and securities convertible into common stock
of small to mid-sized companies with above-average growth of earnings. Current
income will not be an important criterion of investment selection and any such
income should be considered incidental.
THE BALANCED FUND seeks to provide capital appreciation and current income by
investing in common and preferred stocks, warrants, securities convertible into
common stock and investment grade fixed income securities.
THE SUNBELT EQUITY FUND seeks to provide capital appreciation by investing
substantially all, and under normal market conditions at least 65%, of its
assets in common stocks, preferred stocks, warrants and securities convertible
into common stock of U.S. companies headquartered and/or conducting a
substantial portion of their operations in the southern region of the United
States. Current income will not be an important criterion of investment
selection and any such income should be considered incidental.
THE INTERNATIONAL EQUITY INDEX FUND seeks to provide investment results that
correspond to the aggregate price and dividend performance of the securities
included in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australasia and Far East Index (the "MSCI EAFE-GDP Index"
or "EAFE-GDP Index").1
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 a Fund will achieve its investment objective.
The investment objective of each Fund is nonfundamental and may be changed
without shareholder approval.
INVESTMENT POLICIES AND STRATEGIES
CAPITAL GROWTH FUND
The Capital Growth Fund invests primarily in a diversified portfolio of common
stocks, warrants, and securities convertible into common stocks which, in the
Fund's Advisor's opinion, are undervalued in the marketplace at the time of
purchase. In selecting securities for the Fund, its Advisor will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. Dividend and interest income should be
considered incidental to the growth of capital. The Fund's Advisor will rotate
the Capital Growth Fund's holdings between various market sectors based on
economic analysis of the overall business cycle. Under normal conditions, at
least 65% of the total assets of the Capital Growth Fund will be invested in
common stocks.
All of the common stocks in which the Fund invests are traded on registered
exchanges or
- ------------------------
1 "MSCI EAFE-GDP Index" is a registered service mark of Morgan Stanley Capital
International which does not sponsor and is in no way affiliated with the
International Equity Index Fund.
<PAGE>
9
on the over-the-counter market in the United States. Assets of the Capital
Growth Fund not invested in the securities described above may be invested in
U.S. dollar denominated equity securities of foreign issuers (including
sponsored American Depositary Receipts ("ADRs") that are traded on exchanges or
listed on National Association of Securities Dealers Automated Quotations
("NASDAQ"), securities issued by money market mutual funds; pay-in-kind
securities; and bonds. The bonds that the Capital Growth 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 invested in bonds rated below BBB by
Standard & Poor's Corporation ("S&P") or below Baa by Moody's Investors Service,
Inc. ("Moody's") or securities not rated by S&P or Moody's and of comparable
quality (see "Investment Risks -- High Yield, Lower Rated Bonds"). In addition,
the Fund may invest up to 10% of its assets in restricted securities.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 156%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
VALUE INCOME STOCK FUND
The Value Income Stock Fund seeks to provide current income by structuring its
investments in an attempt to maintain the Fund's yield at a level above the
average dividend yield of the securities comprising the S&P 500 Stock Index.
Achieving such a yield will be the Fund's primary consideration when purchasing
securities. A secondary consideration of the Fund will be capital appreciation.
The Fund will invest at least 80% of its total assets in equity securities.
Investments will consist primarily of common stocks, and, under normal market
conditions, at least 65% of the Fund's assets will be invested in common stocks
issued by corporations which have a history of paying regular dividends,
although there can be no assurance that such corporations will continue to pay
dividends. Other equity securities in which the Fund may invest are convertible
debt securities; preferred stocks and warrants which are convertible into or
exchangeable for common stocks; and U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ). All of the common stocks in which the Fund invests are traded on
registered exchanges such as the New York or American Stock Exchange or on the
over-the-counter market in the United States (i.e., NASDAQ). The Fund may also
purchase debt securities (corporate debt obligations and U.S. Treasury
obligations) which 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 invested in
bonds rated below BBB by S&P or below Baa by Moody's or securities not rated by
S&P or Moody's and of comparable quality. The Fund may also invest in futures
and options.
The Fund will invest primarily in stocks of companies operating in all aspects
of the U.S. and world economies that have a market capitalization of at least
$500 million, and that the Fund's Advisor believes possess fundamentally
favorable long-term characteristics. However, stocks of companies with smaller
market capitalizations and stocks that are out of favor in the financial
community and in which little opportunity for price appreciation is recognized
by the financial community may also be purchased if the Fund's Advisor believes
they are undervalued.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 134%. This
rate of
<PAGE>
10
turnover, if continued, will likely result in higher brokerage commissions and
higher levels of realized capital gains than if the turnover rate was lower.
MID-CAP EQUITY FUND
The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common
stocks, preferred stocks, and securities convertible into common stocks of small
to mid-size companies, (i.e., $50 million to $1 billion and $500 million to $5
billion, respectively, as measured by their market capitalization), with
above-average growth of earnings. Under normal conditions, at least 80% of the
total assets of the Fund will be invested in equity securities and as a matter
of non-fundamental policy, the Fund will invest at least 65% of its assets in
mid-size companies. Current income will not be an important criterion of
investment selection and any such income should be considered incidental. In
selecting securities for the Fund, the Fund's Advisor will evaluate factors such
as the issuer's background, industry position, historical returns on equity and
experience and qualifications of the management team.
Most of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Fund not invested in the securities described above may be invested in U.S.
dollar denominated equity securities of foreign issuers (including sponsored
ADRs that are traded on exchanges or listed on NASDAQ); securities issued by
mutual funds; repurchase agreements; and bonds. The bonds that the Fund may
purchase, including any variable or floating rate instruments, must be rated B
or better by S&P or Moody's, provided that this requirement shall not apply to
the Fund's purchase of bonds issued by the government of Canada or by various
supranational entities, and provided further that no more than 10% of the Fund's
total assets will be invested in bonds rated below BBB by S&P or below Baa by
Moody's or securities not rated by S&P or Moody's that are of comparable
quality. The Fund may invest up to 10% of its assets in restricted securities.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 116%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
SUNBELT EQUITY FUND
The Sunbelt Equity Fund seeks to provide capital appreciation by investing
substantially all, and under normal market conditions at least 65%, of its
assets in common stocks; preferred stocks; warrants; and securities convertible
into common stock of U.S. companies headquartered and/or conducting a
substantial portion of their operations in (i.e., maintaining at least 50% of
their assets in or deriving at least 50% of their revenues and/or sales from)
the southern region of the United States. Current income will not be an
important criterion of investment selection and any such income should be
considered incidental. The Fund's Advisor will seek to identify and purchase
securities of companies that it believes to be undervalued and that possess a
strong balance sheet, a strong earnings record and adequate market liquidity.
Most of the common stocks in which the Fund invests are traded on registered
exchanges such as the New York or American Stock Exchange or on NASDAQ. The Fund
will invest no more than 10% of its assets in convertible securities rated lower
than BBB. (See "Investment Risks -- High Yield, Lower Rated
<PAGE>
11
Bonds.") The Fund may invest up to 10% of its total assets in restricted
securities. The Fund may also purchase futures and options for hedging purposes.
Obligations relating to futures contracts will be limited to not more than 20%
of the Fund's total assets.
The Fund will invest primarily in stocks of U.S. companies headquartered and/or
operating in the following U.S. states: Texas, Arkansas, Alabama, Mississippi,
Tennessee, Kentucky, Florida, Virginia, Georgia, North Carolina, South Carolina
and Louisiana. To the extent that the Fund's investments are not as
geographically dispersed across the U.S. as other funds with comparable
objectives, the impact of economic forces on and the relative economic
conditions of these states will be greater on shareholders.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 106%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
BALANCED FUND
The Balanced Fund seeks to provide capital appreciation and current income
through investments in a diversified portfolio of common and preferred stocks,
warrants, securities convertible into common stocks, and investment grade fixed
income securities. Under normal conditions, no more than 70% of the total assets
of the Fund will be invested in common stocks and other equity securities, and
no more than 60% of the Fund's total assets will be invested in bonds and other
fixed income securities. The Fund will maintain at least 25% of its total assets
in senior fixed income securities.
In selecting equity securities for the Fund, the Fund's Advisor will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. The Fund's Advisor will rotate the Fund's
holdings between various market sectors based on economic analysis of the
overall business cycle.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on NASDAQ. Assets of the Fund not invested in the securities
described above may be invested in U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ), securities issued by investment companies, and bonds.
The Fund will invest in investment grade fixed income securities rated BBB or
better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
including corporate debt obligations; mortgage-backed securities, collateralized
mortgage obligations and asset-backed securities; obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; and obligations of supranational
entities. No more than 25% of the Fund's assets will be invested in securities
rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S.
<PAGE>
12
Government, its agencies or instrumentalities or, subject to a limit of 25% of
the Fund's assets, mortgage-backed securities issued by private issuers. These
mortgage-backed securities may be backed or collateralized by fixed, adjustable
or floating rate mortgages. The Fund may also invest in asset backed securities
which consist of securities backed by company receivables, truck and auto loans,
leases, credit card receivables and home equity loans.
In order to reduce interest rate risk, the Fund may purchase floating or
variable rate securities. It may also buy securities on a when-issued basis,
putable securities, pay-in-kind securities and zero coupon securities. The Fund
may also invest futures and options. Some floating or variable rate securities
will be subject to interest rate "caps" or "floors."
The Balanced Fund's turnover rate for the fiscal year ended May 31, 1996 was
148% for the equity portion of its portfolio and 164% for the fixed income
portion of its portfolio. These rates of turnover if continued will likely
result in higher transaction costs and brokerage commissions and higher levels
of realized capital gains than if the turnover rate was lower.
INTERNATIONAL EQUITY INDEX FUND
The Fund will invest substantially all and, under normal market conditions, at
least 65% of its assets in common and preferred stocks; warrants; options; and
securities convertible into common stock of companies headquartered or based in
the approximately twenty foreign countries included in the EAFE-GDP Index. The
Fund will invest only in the 1088 or so companies included in the EAFE-GDP
Index. Because it is impractical to invest in every company included in the
Index, the Fund will select a representative sample of securities in each
country using a statistically-based optimization process. Morgan Stanley & Co.
Incorporated maintains the optimization computer programs which will be utilized
to select companies within each country.
The Fund will be constructed to have aggregate investment characteristics
similar to those of the EAFE-GDP Index. The Fund will invest in a statistically
selected sample of the securities included in the EAFE-GDP Index, although not
all countries nor all companies within a country will be represented in the
Fund's portfolio of securities at any time. The Fund expects to invest in
approximately 300 stocks so that the results fall within a targeted tracking
error range. From time to time, adjustments may be made in the Fund's portfolio
because of changes in the composition of the EAFE-GDP Index. No attempt will be
made to manage the portfolio using traditional economic, financial and market
analyses.
The Fund expects that there will be a close correlation between the Fund's
performance and that of the EAFE-GDP Index. A 1.00 correlation would indicate
perfect correlation, which would be achieved when the net asset value of the
Fund, including the value of its dividend and capital gains distributions,
increases or decreases in exact proportion to changes in the EAFE-GDP Index. The
correlation between the Fund and the EAFE-GDP Index is expected to be over 0.95
on an annual basis. The Fund's ability to track the EAFE-GDP Index, however, may
be affected by, among other things, transaction costs, changes in either the
composition of the EAFE-GDP Index or number of shares outstanding for the
component companies of the EAFE-GDP Index, and the timing and amount of
purchases and redemptions.
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
<PAGE>
13
or unsponsored 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. These contracts may be bought or sold to protect the Fund,
to some degree, against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar.
The Fund expects to be fully invested in the investments described above, but
may invest up to 35% of its total assets in U.S. and non-U.S. denominated money
market instruments; repurchase agreements; futures contracts, including stock
index futures contracts; and options on futures contracts. Obligations relating
to futures contracts will be limited to 20% of the Fund's total assets. The Fund
is also permitted to acquire floating and variable rate securities; purchase
securities on a when-issued basis; and purchase illiquid securities.
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 portfolio's 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 or 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 S&P or below Baa by Moody's or
securities not rated by S&P or Moody's that are 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
<PAGE>
14
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 its 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 its 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 Fund's turnover rate for the fiscal year ended May 31, 1996 was 113%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes, during periods when its Advisor determines
that market conditions warrant, each Fund may hold a portion of its assets in
cash and 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; time deposits issued by banks or savings and loan associations; and
commercial paper rated in the highest rating category. A Fund may not be
pursuing its investment objective when it is engaged in temporary defensive
investing.
Each Fund, except the International Equity Index Fund, may purchase restricted
securities, including Rule 144A securities, that its respective Advisor
determines are liquid pursuant to guidelines established by the Trust's Board of
Trustees.
In the event that a security owned by a Fund is downgraded below the stated
rating categories, its Advisor will review and take appropriate action with
regard to the security.
Each Fund may borrow money for temporary or emergency purposes in an amount not
to exceed one-third of the value of its total assets. A Fund may not purchase
additional securities while its outstanding borrowings exceed 5% of its assets.
Each Fund may purchase securities issued by money market mutual funds. A Fund's
purchase of shares of other investment companies is limited by the Investment
Company Act of 1940 (the "1940 Act") and will ordinarily result in an additional
layer of charges and expenses.
Each of the Funds 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 each 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 in the usual course of business within seven days at a
price approximating its carrying value.
<PAGE>
15
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
EQUITY SECURITIES
Investments in equity securities are generally subject to market risks that may
cause their prices to fluctuate over time. The values of convertible equity
securities are 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 a Fund invests will cause the net asset value of the Fund to
fluctuate.
FIXED INCOME SECURITIES
The market value of a 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") to 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 a Fund's securities will not affect cash income derived
from these securities but will affect the Fund's net asset value.
There is a risk that the current interest rate on floating and variable rate
instruments may not accurately reflect existing market interest rates.
Fixed income securities rated BBB by S&P or Baa by Moody's (the lowest rating of
investment grade bonds) are deemed by these rating services to have speculative
characteristics.
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 available for
distribution to a 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 International Equity
Index Fund and International Equity Fund will seek to protect the value of its
respective investment securities against a decline in the value of a
<PAGE>
16
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, they tend to limit any potential gain which
might result should the value of such currency increase.
HIGH YIELD, LOWER RATED BONDS
A 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 (E.G., 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 a 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 the issuer's 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.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to the risk of prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by the Balanced Fund are prepaid, the Balanced
Fund generally will reinvest the proceeds in securities with a yield that
reflects prevailing interest rates, which may be lower than the prepaid
security.
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 fluctuation
in value due to interest rate changes than interest bearing obligations. A Fund
will be required to include the imputed interest in zero coupon obligations in
its current income. Because each Fund distributes all of its net investment
income to Shareholders, a Fund may have to sell portfolio securities to
distribute the income attributable to these obligations and securities at a time
when its Advisor would not have chosen to sell such obligations or securities
and which may result in a taxable gain or loss.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a 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 a
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 a
Fund's outstanding shares, whichever is less.
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities
<PAGE>
17
and repurchase agreements involving such securities) if as a result more than 5%
of the total assets of a Fund would be invested in the securities of such
issuer; provided, however, that a 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 a 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
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 Funds may advertise performance (total return and yield).
These figures will be historical and are not intended to indicate future
performance. The yield of a Fund refers to the annualized income generated by an
investment in that 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 a 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 a 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.
The performance of the Trust's Investor Shares and Flex Shares will normally be
lower than for Trust Shares because Investor Shares and Flex Shares are subject
to distribution, service, and certain transfer agent fees not charged to Trust
Shares. Because of their differing distribution expense arrangements, the
performance of Flex Shares in comparison to Investor Shares will vary depending
upon the investor's investment time horizon.
Each 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.
FUNDLINK
All purchases and redemptions of Investor Shares may be completed via FUNDLINK,
a telephone activated service that allows Shareholders to transfer money between
the STI Classic Funds and a Shareholder's SunTrust bank account(s). To initiate
a FUNDLINK transaction, Shareholders are provided a toll-free telephone number
(1-800-428-6970) to call the Trust's transfer
<PAGE>
18
agent. To utilize this service, a Shareholder must contact an Investment
Consultant of a SunTrust Banks, Inc. affiliate bank and complete the appropriate
application and authorization agreements.
PURCHASE OF FUND SHARES
Investor Shares are sold on a continuous basis and may be purchased by
contacting the Trust's transfer agent, Federated Services Company (the "Transfer
Agent"), either by mail, by telephone or by wire. Investor Shares may also be
purchased through Investment Consultants of SunTrust Banks, Inc. affiliate banks
which serve as Shareholder Servicing Agents to the Trust. Furthermore, Investor
Shares may be purchased through SunTrust Securities, Inc., as well as, certain
correspondent banks of SunTrust Banks, Inc.
Shares may be purchased on days on which the New York Stock Exchange is open for
business (a "Business Day").
A purchase order for any of the Funds will be effective as of the Business Day
it is received by the Transfer Agent if the Transfer Agent receives the order
before 4:00 p.m. Eastern time. Purchases will be made in full and fractional
shares of the Trust calculated to three decimal places. All purchases made by
check should be in U.S. dollars and made payable to "STI Classic Funds (Fund
Name)." Third party checks, credit cards, credit card checks and cash will not
be accepted. When purchases are made by check, redemptions will not be allowed
until the investment being redeemed has been in the account for 15 Business
Days. Purchases by mail are considered received after payment by check is
converted into federal funds. The purchase price of shares of a 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
a 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 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 each Fund.
Minimum initial and subsequent purchase amounts, respectively, for each Fund are
$2,000 and $1,000 ($100 via statement coupon). Purchases made pursuant to the
Systematic Investment Plan (described below) are subject to lower minimum
initial and subsequent purchase amounts. Employees and their immediate family
members (spouses and children under age 21) of SunTrust Banks, Inc. and its
affiliates may establish accounts with a minimum initial purchase amount of
$1,000. The minimum initial purchase amount for retirement plans is $2,000.
These minimums may be waived at the Distributor's discretion.
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.
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).
The Trust maintains procedures, including identification methods and other
means, for ascertaining the identity of callers and authenticity of
instructions. If reasonable procedures are not employed, the Trust and/or the
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone
<PAGE>
19
transactions. Neither the 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.
Shares of the Funds are offered only to residents of states in which the shares
are eligible for purchase. Investors 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 of
Investor Shares are identical to those for Trust Shares and Flex Shares, the net
asset value per share of the classes may differ because of the distribution and
certain transfer agent expenses charged to Investor Shares and Flex Shares.
SYSTEMATIC INVESTMENT PLAN
Shares of each Fund may be purchased systematically through deductions from
checking or savings accounts maintained through SunTrust Banks, Inc. affiliate
banks. Investors may purchase shares on a fixed schedule (semi-monthly or
monthly) with amounts from $100 up to $100,000. The Systematic Investment Plan
is subject to account minimum initial purchase and subsequent amounts of $500
and $50 and minimum maintained balance requirements. The purchases will be
effective on the Business Day that the Transfer Agent receives the transmission.
SALES CHARGE INFORMATION
The following schedule applies to the purchase of Investor Shares of a Fund:
<TABLE>
<CAPTION>
AMOUNT OF
SALES CHARGE SALES CHARGE SALES CHARGE
AS A AS A REALLOWED TO
PERCENTAGE PERCENTAGE OF DEALERS AS A
OF OFFERING NET AMOUNT % OF OFFERING
PRICE INVESTED PRICE*
------------------ ------------------- -----------------
<S> <C> <C> <C>
Less than $100,000...................... 3.75% 3.90% 3.375%
$100,000 but less than $250,000......... 3.25% 3.36% 2.925%
$250,000 but less than $1,000,000....... 2.50% 2.56% 2.250%
$1,000,000 and higher................... 1.50% 1.52% 1.350%
</TABLE>
* The entire sales charge will be reallowed to dealers affiliated with the
Advisers and their affiliates. Dealers who receive more than 90% of the sales
charge may be considered underwriters for purposes of the Securities Act of
1933.
Employees and their immediate family members (spouses and children under age 21)
of SunTrust Banks, Inc. and its affiliates, as well as persons investing
distributions from qualified employee benefit retirement plans or rollovers from
Individual Retirement Accounts ("IRAs") previously established with a SunTrust
Banks, Inc. affiliate bank trust department, will be exempt from sales charges
in purchasing Investor Shares.
When accounts for which a subsidiary bank of SunTrust Banks, Inc. has acted in a
fiduciary, administrative, custodial or investment advisory capacity are closed
and Investor Shares purchased, the Investor Shares that are purchased in an
amount equal to or lesser than the value of the account distribution will be
exempt from sales charges. Any subsequent purchases will be subject to the
applicable sales charge.
<PAGE>
20
Purchases of STI Classic Funds Investor Shares through a SunTrust Banks, Inc.
affiliate bank's asset allocation account will be exempt from sales charges.
Dealers will be reallowed the entire sales charge imposed on purchases of
Investor Shares and may, therefore, be deemed "underwriters" for purposes of the
Securities Act of 1933.
RIGHTS OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of a
Fund's Investor Shares by a "single purchaser," the Trust will cumulate current
purchases at the offering price with the current market value of previously
purchased Investor Shares of any Trust's non-Money Market Funds ("Eligible
Funds") which are sold subject to a sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of an Eligible Fund for their own account or for trust
or custodial accounts for their minor children, or (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended, including related plans of the same employer. Furthermore, under this
provision, purchases by a "single purchaser" shall include purchases by an
individual for his/her own account in combination with (i) purchases of that
individual and spouse for their joint account or for trust and custodial
accounts for their minor children and (ii) purchases of that individual's spouse
for his/her own account. To be entitled to a reduced sales charge based upon
shares already owned, the investor must ask the Distributor for such reduction
at the time of purchase and provide the account number(s) of the investor, the
investor and spouse, and their children (under age 21), and give the ages of
such children. The Funds may amend or terminate this right of accumulation at
any time as to subsequent purchases.
LETTER OF INTENT
By submitting a Letter of Intent to the Transfer Agent, a "single purchaser" may
purchase shares of an Eligible Fund during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. The purchase price for these prior trades will
not be adjusted.
A written Letter of Intent provided to the Transfer Agent, is not legally
binding on the signer or a Fund, and provides for the holding in escrow by the
transfer agent of 3.75% of the total amount intended to be purchased until such
purchase is completed within the 13-month period. A Letter of Intent may be
dated to include shares purchased up to 90 days prior to the date the Letter is
signed. The 13-month period begins on the date of the earliest purchase. If the
intended investment is not completed, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to realize the
difference between the sales charge on the shares purchased at the reduced rate
and the sales charge otherwise applicable to the total shares purchased.
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE
The Trust will combine purchases of Investor Shares of Eligible Funds made on
the same day by the investor, his/her spouse, and his/her children under age 21
when calculating the sales charge. This combination may also apply
<PAGE>
21
to purchases made pursuant to a Letter of Intent. Purchases made by such persons
over a 13-month period could thus qualify the entire purchase for a reduced
sales charge.
SPECIAL DIVIDEND SERVICES
Dividend distributions made by a Fund can be automatically reinvested in any one
Fund of the Trust without a sales charge, subject to account minimum initial
purchase amounts and minimum maintained balance requirements.
REPURCHASE OF FUND SHARES
Investor Shares of a Fund may be purchased at their net asset value if Investor
Shares sold subject to a sales charge were redeemed from a Fund within the past
60 days. The amount which may be reinvested is limited to an amount up to but
not exceeding the redemption proceeds. In order to exercise this privilege, a
written order for the purchases must be received by the Transfer Agent within 60
days after the redemption. It is the responsibility of the investor to notify
the Transfer Agent that the investor is repurchasing Investor Shares at the time
of the transaction.
REDEMPTION OF FUND SHARES
Shareholders may redeem their Investor Shares without charge on any day that net
asset value is calculated. Investor Shares may ordinarily be redeemed by mail or
telephone request to the Transfer Agent.
However, all or part of a shareholder's holdings of Investor Shares may be
redeemed in accordance with instructions and limitations pertaining to his or
her account. 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 remitted within five Business Days following receipt of the order.
Requests for redemptions from the Funds may be placed in writing or by telephone
directly to an Investment Consultant of a SunTrust Banks, Inc. affiliate bank,
through SunTrust Securities, Inc., and through certain correspondent banks of
SunTrust Banks, Inc. (or via FUNDLINK to the Transfer Agent). Redemptions placed
via telephone or FUNDLINK (1-800-428-6970) can only be placed for a minimum of
$1,000.
Redemption proceeds can be wired, distributed by check or transferred to a
Shareholder's account via FUNDLINK. There will be a $7.00 wire charge for
redemptions processed from accounts which require wires to particular banks.
When Investor Shares are purchased by check or through Automated Clearing House
("ACH") the proceeds from the redemption of those Shares are not available, and
the Shares may not be exchanged, until the Trust or its agents are reasonably
certain that the purchase check has cleared, which could take up to 15 Business
Days.
A Shareholder may be required to redeem Investor Shares if the balance in a
Shareholder's Fund account drops below $2,000 as a result of redemptions and the
Shareholder does not increase its balance to at least $2,000 on 60 days' written
notice. The minimum account balance for employees of SunTrust Banks, Inc. and
its affiliates is $1,000. 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 cases, an investor may incur brokerage costs in
converting such securities to cash.
<PAGE>
22
Redemptions of $25,000 or greater must be in writing and a signature guarantee
must accompany the written request.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan can be established for any Fund account with a
$10,000 minimum balance. Under the plan, redemptions can be automatically
processed (monthly, quarterly, semi-annually or annually) by check or through an
electronic transfer to a Shareholder's SunTrust Banks, Inc. affiliate bank
account with a minimum redemption amount of $50.
EXCHANGES
Some or all of the Investor Shares of the Funds for which payment has been
received (i.e., an established account) may be exchanged for Investor Shares of
other Funds within the Trust. Shares being exchanged for the first time from a
Money Market Fund into a Fund with a sales charge will be subject to the sales
charge of that Fund. Likewise, Shares being exchanged for the first time into a
Fund with a higher sales charge will be subject to an incremental sales charge.
Exchanges made from a Fund with a higher sales charge to a Fund with a lower
sales charge or a Money Market Fund are made without a sales charge.
Four exchanges may be made per calendar year. More than four exchanges in a year
may be considered an abuse of the exchange privilege. The Trust reserves the
right to charge a $10.00 fee for each exchange. A Shareholder with more than
four exchanges per year will be notified prior to the imposition of any such
fee. Exchanges may be requested through an Investment Consultant of a SunTrust
Banks, Inc. affiliate bank, SunTrust Securities, Inc. and certain correspondent
banks of SunTrust Banks, Inc., either by telephone or in writing, (or via
FUNDLINK through the Transfer Agent). The minimum exchange amount is $1,000
subject to account minimum initial purchase amounts and minimum maintained
balance requirements. This exchange offer is subject to change or termination by
the Trust upon 60 days' notice.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (exclusive of capital gains) are declared
and paid quarterly by each of the Funds except that dividends are declared and
paid annually by the International Equity Index Fund and International Equity
Fund. Each Fund's net realized capital gains (including net short-term capital
gains) are distributed at least annually. Net income for dividend purposes
consists of (i) interest accrued and original issue discount earned on a 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 Investor Shares of the Funds will be reduced by the
amount of any dividend or distribution. Dividends and distributions are paid in
the form of additional Investor Shares of the same 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 Transfer Agent and will become effective with respect to
dividends paid after its receipt. Dividends and distributions are paid within
ten
<PAGE>
23
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 Investor Shares in a Fund.
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 each 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 EACH FUND:
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each 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. Each Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment companies.
TAX STATUS OF DISTRIBUTIONS:
Each 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 Funds 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
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 Funds will make annual reports
to Shareholders of the federal income tax status of all distributions. Dividends
declared by a 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 a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. The International Equity Index and International
Equity Funds expect to elect to treat Shareholders as having paid their
proportionate share of such foreign taxes. The other Funds will not be able to
make this election.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by the Shareholder as income dividends from a fund, provided certain
state-specific conditions are satisfied. Not all states permit such income
dividends to be tax exempt and some require
<PAGE>
24
that a certain minimum percentage of an investment company's income be derived
from state tax-exempt interest. The Funds 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 a Fund is considered tax-exempt in their
particular state.
A 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 Fund. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund 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.
INVESTMENT ADVISORS
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $66
billion as of December 31, 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, Inc.--
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 $47 billion as of December 31, 1995.
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the
Capital Growth, Value Income, Mid-Cap Equity, Balanced and International Equity
Funds and joint advisor to the International Equity Index Fund. As of June 30,
1996, STI Capital had discretionary management authority with respect to assets
of approximately $11 billion. The principal business address of STI Capital is
P.O. Box 3808, Orlando, Florida 32802.
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the Sunbelt
Equity Fund and as joint advisor to the International Equity Index Fund. As of
June 30, 1996, Trusco had approximately $13.7 billion in assets under
management. The principal business address of Trusco is 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303.
The Trust and the above Advisors have entered into advisory agreements (the
"Advisory
<PAGE>
25
Agreements"). Under the Advisory Agreements, the Advisors make the investment
decisions for the assets of the Funds they advise and continuously review,
supervise and administer their Fund's respective investment program. The
Advisors discharge their 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 FUNDS
INVOLVE 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 all Funds, the Advisors may
execute brokerage or other agency transactions through affiliates of the
Advisors.
For the services provided and expenses incurred pursuant to the Advisory
Agreements, STI Capital is entitled to receive advisory fees computed daily and
paid monthly at the annual rate of 1.15%, 0.95%, 1.15%, 0.80% and 1.25% of the
average daily net assets of the Capital Growth, Balanced, Mid-Cap Equity, Value
Income Stock and International Equity Funds, respectively. Trusco is entitled to
receive an advisory fee computed daily and paid monthly at the annual rate of
1.15% of the average daily net assets of the Sunbelt Equity Fund. Trusco and STI
Capital jointly are entitled to receive an advisory fee computed daily and paid
monthly at the annual rate of 0.90% of the average daily net assets of the
International Equity Index Fund.
Although the advisory fee for each 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 many other mutual funds with similar investment objectives
and policies. From time to time, an Advisor may waive (either voluntarily or
pursuant to applicable state limitations) advisory fees payable by a Fund.
Currently, the Advisors and the Distributor have agreed to voluntary reductions
in their respective fees as well as reductions in service and distribution 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
any time.
For the fiscal year ended May 31, 1996, STI Capital received advisory fees
computed daily and paid monthly at the annual rate of 1.03%, 0.80%, 1.00%, 0.79%
and 1.06% of the average daily net assets of the Capital Growth, Value Income
Stock, Mid-Cap Equity, Balanced and International Equity Funds, respectively.
Trusco received an advisory fee computed daily and paid monthly at the annual
rate of 1.02% of the average daily net assets of Sunbelt Equity Fund. Trusco and
STI Capital jointly received an advisory fee computed daily and paid monthly at
the annual rate of 0.76% of the average daily net assets of the International
Equity Index Fund.
PORTFOLIO MANAGERS
Mr. Anthony Gray has been responsible for the day-to-day management of the
Capital Growth Fund since it commenced operations. Mr. Gray has served as Chief
Executive Officer and Chief Investment Officer of STI Capital since 1979. Mr.
Gray has also been responsible for the day-to-day management of the equity
portion of the Balanced Fund since it commenced operations.
Mr. Mills Riddick, CFA, has been responsible for the day-to-day management of
the Value
<PAGE>
26
Income Stock Fund since April, 1995. Mr. Riddick has been a value portfolio
manager at STI Capital Management since 1989.
Mr. Thomas Edgar has been responsible for the day-to-day management of the
Mid-Cap Equity Fund since it commenced operations. Mr. Edgar has served as
Senior Vice President of STI Capital since 1990.
Mr. L. Earl Denney, CFA, has been responsible for the day-to-day management of
the fixed income portion of the Balanced Fund since it commenced operations. Mr.
Denney has served as Executive Vice President of STI Capital since 1983.
Mr. Dan Jaworski has been responsible for the day-to-day management of the
International Equity Fund since it commenced operations. 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.
Mr. James Foster has been responsible for the day-to-day management of the
Sunbelt Equity Fund since it commenced operations. Mr. Foster has served as a
Vice President of Trusco since 1989.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, currently
(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
Advisors believe that each may perform the services for STI Classic Funds
contemplated by their respective Advisory Agreements 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 Advisors from continuing to perform services for
STI Classic Funds. If the Advisors were prohibited from providing services to
STI Classic Funds, 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 Advisors, or their affiliates, would consider the
possibility of offering to perform additional services for STI Classic Funds. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which the Advisors, or such affiliates, might
offer to provide such services.
In addition, state securities laws on this 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
<PAGE>
27
to a distribution agreement (the "Distribution Agreement") dated May 29, 1992.
The Investor Shares of each Fund have a distribution plan ("Investor Plan"). The
Distribution Agreement and the Investor Plan provide that the Investor Shares of
the Funds may pay a distribution services fee to the Distributor of up to .68%
of the daily net assets of the Capital Growth Fund, .33% of the average daily
net assets of the Value Income Stock Fund, .43% of the average daily net assets
of the Mid-Cap Equity and Sunbelt Equity Funds, .28% of the average daily net
assets of the Balanced Fund and .38% of the average daily net assets of the
International Equity Index Fund and .33% of the average daily net assets of the
International Equity Fund. The Distributor will waive all or a portion of the
distribution fee in order to limit the net expenses of the Investor Shares to
the amounts set forth under "Expense Summary." The Distributor may apply this
fee toward: (a) compensation for its services in connection with distribution
assistance or provision of shareholder services; or (b) payments to financial
institutions and intermediaries such as banks (including SunTrust Banks, Inc.'s
affiliate banks), savings and loan associations, insurance companies, and
investment counselors, broker-dealers, and the Distributor's affiliates and
subsidiaries as compensation for services, reimbursement of expenses incurred in
connection with distribution assistance, or provision of Shareholder services.
The Investor Plan is characterized as a compensation plan since the distribution
fee will be paid to the Distributor without regard to the distribution or
shareholder service expenses incurred by the Distributor or the amount of
payments made to financial institutions and intermediaries. SunTrust Banks,
Inc.'s affiliate banks and certain correspondent banks may serve as shareholder
servicing agents to the Trust. A prospective investor may visit any one of the
Investment Services offices of the SunTrust Banks, Inc.'s affiliate banks, as
listed on the last pages of the Prospectus, SunTrust Securities, Inc. or certain
correspondent banks of SunTrust Banks, Inc. to receive copies of the
Prospectuses for the Investor Shares of the Trust and application forms. Trust
Shares of each Fund are offered without a sales charge or a distribution fee
primarily to institutional investors, including affiliates and correspondents
for the investment of funds in which they act in a fiduciary, agency, investment
advisory or custodial capacity. The Flex Shares of a Fund are subject to a
contingent deferred sales charge, pay a distribution services fee to the
Distributor and are also subject to a services fee for personal service and
maintenance of shareholder accounts. The contingent deferred sales charge option
of the Flex Shares provides investors with an alterntive purchase arrangement to
Investor Shares. An investor may call 1-800-428-6970 to receive more information
regarding Trust or Flex Shares. 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.
Each Fund may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
With respect to each of the Funds, the Distributor may, from time to time and at
its own expense, provide promotional incentives, in the form of cash or other
compensation, to certain financial institutions whose representatives have sold
or are expected to sell significant amounts of these Funds.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The Administrator provides the Trust with certain
<PAGE>
28
administrative services, other than investment advisory services, including
regulatory reporting, all necessary office space, equipment, personnel and
facilities.
The Administrator is entitled to a fee from each Fund, which is calculated daily
and paid monthly, at an annual rate as follows:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE NET ASSETS FEE
- ------------------------------------------ ---------
<S> <C>
$1 - $1 billion 0.10%
over $1 billion to $5 billion 0.07%
over $5 billion to $8 billion 0.05%
over $8 billion to $10 billion 0.045%
over $10 billion 0.04%
</TABLE>
From time to time, the Administrator may waive (either voluntarily or pursuant
to applicable state limitations) all or a portion of the administration fee
payable with respect to the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, 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, Georgia 30308 serves as custodian of
the assets of each Fund with the exception of the International Equity Index and
the International Equity Funds. Union Bank of California, 475 Sansome Street,
Suite 1200, San Francisco, California 94111, serves as custodian for the
International Equity Index Fund. The Bank of New York, One Wall Street, New
York, New York 10286, serves as custodian for the International Equity Fund. The
custodians hold cash, securities and other assets of the Trust as required by
the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
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 and audited financial
statements annually. The Trust furnishes proxy statements and other reports to
Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders may contact the Transfer Agent in order to obtain information on
account statements, procedures and other related information by calling
1-800-428-6970.
<PAGE>
29
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
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 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.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
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
<PAGE>
30
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 -- Corporate debt obligations are debt instruments
issued by corporations with maturities exceeding 270 days. Such instruments may
include putable corporate bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Custodial receipts are 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" ("TRs"), "Treasury Investment Growth
Receipts" ("TIGRs"), and "Certificates of Accrual on Treasury Securities"
("CATS"). TRs, TIGRs and CATS are sold as zero coupon securities. See "Zero
Coupon Obligations."
DERIVATIVES -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, swap agreements, and some mortgage-back securities (CMOs,
REMICs and SMBs). See elsewhere in this "Description of Permitted Investments"
for discussions of these various instruments, and see "Investment Policies and
Strategies" for more information about any investment policies and limitations
applicable to their use.
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. A Fund may also enter into a contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency, 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,
<PAGE>
31
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. A 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. A 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.
MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered
corporate or agency debt that differs from traditionally underwritten corporate
bonds only in the process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an
<PAGE>
32
interest in a pool of mortgage loans. The primary issuers or guarantors of these
mortgage-backed securities are the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC"). FNMA and FHLMC obligations are not
backed by the full faith and credit of the U.S. Government as GNMA certificates
are, but FNMA and FHLMC securities are supported by the instrumentalities' right
to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS: CMOs are debt obligations or multiclass
pass-through certificates issued by agencies or instrumentalities of the U.S.
Government or by private originators or investors in mortgage loans. In a CMO,
series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and is thus termed the
principal-only
<PAGE>
33
class ("PO"). The value of IOs tends to increase as rates rise and decrease as
rates fall; the opposite is true of POs. SMBs are extremely sensitive to changes
in interest rates because of the impact thereon of prepayment of principal on
the underlying mortgage securities. The market for SMBs is not as fully
developed as other markets; SMBs therefore may be illiquid.
OBLIGATIONS OF SUPRANATIONAL ENTITIES -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
OPTIONS ON CURRENCIES -- The International Equity Index 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.
PAY-IN-KIND SECURITIES -- Pay-in-kind securities are bonds or preferred stock
that pay interest or dividends in the form of additional bonds or preferred
stock.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a 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. A 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. A 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, a 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. A 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
<PAGE>
34
even loss of rights in the collateral should the borrower of the securities fail
financially or become insolvent.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
SWAPS, CAPS, FLOORS and COLLARS -- Interest rate swaps, mortgage swaps, currency
swaps and other types of swap agreements such as caps, floors and collars are
designed to permit the purchaser to preserve a return or spread on a particular
investment or portion of its portfolio, and to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date. In a
typical interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times a "notional principal amount," in return for
payments equal to a fixed rate times the same amount, for a specific period of
time. If a swap agreement provides for payment in different currencies, the
parties might agree to exchange the notional principal amount as well. Swaps may
also depend on other prices or rates, such as the value of an index or mortgage
prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specific interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on the Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements or reduce its exposure through
offsetting transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside liquid high grade securities in a
segregated account. The Fund will enter into swaps only with counterparties
believed to be creditworthy.
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
<PAGE>
35
Administration, and obligations issued or guaranteed by instrumentalities of the
U.S. Government, including, among others, FHLMC, 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., GNMA securities), others are supported by
the right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit
Bank securities), while still others are supported only by the credit of the
instrumentality (e.g., FNMA securities). 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.
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 -- Warrants are 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 segregate 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, a 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>
A-1
APPENDIX
I. BOND RATINGS
CORPORATE BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P") 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 or 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. 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. Together with
bonds rated Aaa, they comprise what are generally known as high-grade bonds.
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 a 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.
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TRUST AND INVESTMENT SERVICES OFFICES OF SUNTRUST BANKS, INC. AFFILIATE BANKS:
FLORIDA: (STATEWIDE TOLL FREE) 1-800-526-1177
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
200 S. Orange Avenue
Tower 10
Orlando, FL 32801
(407) 237-4380
1-800-432-4760, ext. 4380
SUNTRUST BANK, SOUTH FLORIDA, N.A.
501 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
(305) 765-7422
Boca Raton Office
800 S. Federal Highway
Boca Raton, FL 33435
(407) 243-6707
Coral Ridge Office
2626 E. Oakland Park Blvd.
Ft. Lauderdale, FL 33306
(305) 765-2155
Delray Beach Office
302 E. Atlantic Avenue
Delray Beach, FL 33483
(407) 243-6750
Hollywood Office
2001 Hollywood Blvd.
Hollywood, FL 33021
(305) 765-7062
Palm Beach Office
303 Royal Poinciana Plaza
Palm Beach, FL 33480
(407) 835-2855
PGA Office
2570 PGA Blvd.
Palm Beach Gardens, FL 33410
(407) 835-2802
SUNTRUST BANK, MIAMI, N.A.
777 Brickell Avenue
Miami, FL 33131
(305) 579-7450
SUNTRUST BANK, TAMPA BAY
315 E. Madison Street
Tampa, FL 33602
(813) 224-2517
SUNTRUST BANK, TREASURE COAST, N.A.
700 Virginia Avenue
Ft. Pierce, FL 34982
(407) 467-6459
Osceola Office
111 E. Osceola Street
Stuart, FL 34994
(407) 223-6012
SUNTRUST BANK, EAST CENTRAL FLORIDA
Belnova Office
1590 S. Nova Road
Daytona Beach, FL 32114
(904) 258-2660
Bill France Office
299 Bill France Blvd.
Daytona Beach, FL 32114
(904) 258-2654
Deland Office
302 E. New York Avenue
Deland, FL 32724
(904) 822-5891
SUNTRUST BANK, NORTH FLORIDA, N.A.
200 W. Forsyth Street
Jacksonville, FL 32202
(904) 632-2534
SUNTRUST BANK, SOUTHWEST FLORIDA
12730 New Brittany Blvd.
Ft. Myers, FL 33907
(813) 277-2531
Pelican Bay Office
801 Laurel Oak Drive
Naples, FL 33963
(813) 598-0515
SUNTRUST BANK, GULF COAST
South Gate Office
3400 S. Tamiami Trail
Sarasota, FL 34230
(813) 951-3218
Port Charlotte Office
18501 Murdock Circle
Port Charlotte, FL 33949
(813) 625-9286
<PAGE>
North Beneva Office
3577 Fruitville Road
Sarasota, FL 34237
(813) 951-3040
South Beneva Office
8181 S. Tamiami Trail
Sarasota, FL 34231
(813) 951-3053
Venice Office
200 Nokomis Avenue South
Venice, FL 34285
(813) 486-4417
SUNTRUST BANK, MID-FLORIDA, N.A.
210 Security Square
Winter Haven, FL 33880
(813) 297-6855
Okeechobee Office
815 S. Parrott Avenue
Okeechobee, FL 34974
(813) 763-6417
SUNTRUST BANK, NATURE COAST
One East Jefferson Street
Brooksville, FL 34601
(904) 754-5799
Crystal River Office
1502 SE Highway 19
Crystal River, FL 32629
(904) 795-8214
Seven Hills Office
1170 Mariner
Spring Hill, FL 34609
(904) 754-5779
SUNTRUST BANK, NORTH CENTRAL FLORIDA
203 E. Silver Springs Blvd.
Ocala, FL 34470
(904) 368-6477
SUNTRUST BANK, TALLAHASSEE, N.A.
3522 Thomasville Road
Tallahassee, FL 32312
(904) 298-5030
SUNTRUST BANK, WEST FLORIDA
511 W. 23rd Street
Panama City, FL 32405
(904) 872-6087
GEORGIA:
SUNTRUST BANK, ATLANTA
55 Park Place
First Floor
Atlanta, GA 30303
(404) 588-7315
1-800-241-0901 Ext. 7315
SUNTRUST BANK, NORTHEAST GEORGIA, N.A.
101 N. Lumpkin Street
Athens, GA 30601
(706) 354-5346
Gainesville Branch
104 Green Street
Gainesville, GA 30503
(770) 503-8674
SUNTRUST BANK, NORTHWEST GEORGIA, N.A.
100 East Second Avenue
Rome, GA 30161
(706) 236-4325
SUNTRUST BANK, AUGUSTA, N.A.
2815 Wrightsboro Road
Augusta, GA 30909
(706) 821-2015
SUNTRUST BANK, MIDDLE GEORGIA, N.A.
606 Cherry Street
Macon, GA 31208
(912) 755-5175
SUNTRUST BANK, WEST GEORGIA, N.A.
1246 First Avenue
Columbus, GA 31901
(706) 649-3631
SUNTRUST BANK, SAVANNAH, N.A.
33 Ball Street
Savannah, GA 31401
(912) 944-1165
SUNTRUST BANK, SOUTH GEORGIA, N.A.
410 W. Broad Avenue
Albany, GA 31701
(912) 430-5468
<PAGE>
Coffee County Branch
201 S. Peterson Avenue
Douglas, GA 31533
(912) 384-1820
SUNTRUST BANK, SOUTHEAST GEORGIA, N.A.
510 Gloucester Street
Brunswick, GA 31520
(912) 262-5322
Sea Island Road Branch
701 Sea Island Road
St. Simons Island, GA 31522
(912) 638-3620
(912) 262-2227
TENNESSEE:
SUNTRUST BANK, NASHVILLE, N.A.
424 Church Street
4th Floor
Nashville, TN 37230
(615) 748-4477
1-800-932-2652
SUNTRUST BANK, CHATTANOOGA, N.A.
736 Market Street
Chattanooga, TN 37402
(615) 757-3085
TN WATS 1-800-572-7306, Ext. 3085
Bordering States WATS
1-800-874-1083, Ext. 3085
SUNTRUST BANK, EAST TENNESSEE, N.A.
700 East Hill Avenue
Knoxville, TN 37997
(615) 544-2181
1-800-225-0913, Ext. 2181
SUNTRUST BANK, NORTHEAST TENNESSEE
207 Mockingbird Lane
Johnson City, TN 37604
(615) 461-1005
SUNTRUST BANK, SOUTH CENTRAL TENNESSEE, N.A.
25 Public Square
Lawrenceburg, TN 38464
(615) 762-3511
ALABAMA:
SUNTRUST BANK, ALABAMA, N.A.
201 South Court Street
Florence, AL 35630
(205) 767-8463
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<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISORS
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
STI Capital Management, N.A. P.O. Box 3808
Orlando, FL 32802
* DISTRIBUTOR
SEI Financial Services Company 680 E. Swedesford Road
Wayne, PA 19087
* ADMINISTRATOR
SEI Financial Management 680 E. Swedesford Road
Corporation Wayne, PA 19087
* 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
Union Bank of California 475 Sansome Street
(International Equity Index Fund Suite 1200
only) San Francisco, CA 94111
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 2000 One Logan Square
Philadelphia, PA 19103
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
100092/10-95
DISTRIBUTOR
SEI Financial Services
Company
-- - - - - - - - - - - - - - - -
PROSPECTUS
INVESTOR SHARES
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
AGGRESSIVE GROWTH FUND
BALANCED FUND
SUNBELT EQUITY FUND
INTERNATIONAL EQUITY
INDEX FUND
INVESTMENT ADVISORS
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
OCTOBER 1, 1995
ABCD
<PAGE>
STI CLASSIC FUNDS
INVESTOR SHARES
INVESTMENT GRADE BOND FUND
INVESTMENT GRADE TAX-EXEMPT BOND FUND
U.S. GOVERNMENT SECURITIES FUND
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
SHORT-TERM BOND FUND
SHORT-TERM U.S. TREASURY SECURITIES FUND
FLORIDA TAX-EXEMPT BOND FUND
GEORGIA TAX-EXEMPT BOND FUND
TENNESSEE TAX-EXEMPT BOND FUND
PRIME QUALITY MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
INVESTMENT ADVISORS TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
STI CAPITAL MANAGEMENT, N.A.
SUNTRUST BANK, CHATTANOOGA, N.A.
SUNTRUST BANK, ATLANTA, N.A.
(THE "ADVISORS")
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios (each a "Fund" and, collectively, the
"Funds"). This Prospectus sets forth concisely the information about the
Investor Shares of the above-referenced Funds. Investors are advised to read
this Prospectus and retain it for future reference.
A Statement of Additional Information relating to the Funds 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, Pennsylvania 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.
- --------------------------------------------------------------------------------
AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
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 THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1996
<PAGE>
2
Throughout this Prospectus, the Investment Grade Bond Fund, Investment Grade
Tax-Exempt Bond Fund, Short-Term U.S. Treasury Securities Fund, Short-Term Bond
Fund, U.S. Government Securities Fund and Limited-Term Federal Mortgage
Securities Fund, which invest primarily in bonds and other fixed income
instruments, may be referred to as the "Bond Funds," the Florida Tax-Exempt Bond
Fund, Georgia Tax-Exempt Bond Fund and Tennessee Tax-Exempt Bond Fund, which
invest primarily in tax-exempt bonds and other fixed income instruments, may be
referred to as the "State Tax-Exempt Bond Funds," and the Prime Quality Money
Market Fund, U.S. Government Securities Money Market Fund and Tax-Exempt Money
Market Fund may be referred to as the "Money Market Funds."
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary........................................................... 3
Financial Highlights...................................................... 6
The Trust................................................................. 8
Funds and Investment Objectives........................................... 8
Investment Policies and Strategies........................................ 9
General Investment Policies and Strategies................................ 18
Investment Risks.......................................................... 18
Investment Limitations.................................................... 20
Performance Information................................................... 21
Fundlink.................................................................. 22
Purchase of Fund Shares................................................... 22
Redemption of Fund Shares................................................. 26
Exchanges................................................................. 27
Dividends and Distributions............................................... 28
Tax Information........................................................... 29
STI Classic Funds Information............................................. 31
The Trust................................................................. 31
Board of Trustees......................................................... 31
Investment Advisors....................................................... 31
Portfolio Managers........................................................ 33
Banking Laws.............................................................. 33
Distribution.............................................................. 34
Administration............................................................ 35
Transfer Agent and Dividend Disbursing Agent.............................. 36
Custodian................................................................. 36
Legal Counsel............................................................. 36
Independent Public Accountants............................................ 36
Other Information......................................................... 36
Voting Rights............................................................. 36
Reporting................................................................. 36
Shareholder Inquiries..................................................... 36
Description of Permitted Investments...................................... 36
Appendix.................................................................. A-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT OF
ADDITIONAL INFORMATION 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.
<PAGE>
3
EXPENSE SUMMARY
INVESTOR SHARES
The purpose of the following tables is to help you understand the various costs
and expenses that a shareholder will bear, directly or indirectly, in connection
with an investment in the Investor Shares of each Fund.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BOND,
INVESTMENT GRADE LIMITED-TERM SHORT-TERM
TAX-EXEMPT BOND FEDERAL U.S. TREASURY
AND U.S. GOVERNMENT MORTGAGE SHORT-TERM SECURITIES
SECURITIES FUNDS SECURITIES FUND BOND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price).................. 3.75% 2.50% 2.00% 1.00%
Maximum Sales Charge Imposed on Reinvested
Dividends...................................... None None None None
Maximum Deferred Sales Charge................... None None None None
Redemption Fees(1).............................. None None None None
Exchange Fee.................................... None None None None
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) There is a $7.00 wire charge for redemptions for all funds processed from
retail accounts which require wires to particular banks.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LIMITED-TERM
INVESTMENT FEDERAL SHORT-TERM
INVESTMENT GRADE TAX- MORTGAGE U.S. TREASURY
GRADE BOND EXEMPT BOND U.S. GOVERNMENT SECURITIES SHORT-TERM SECURITIES
FUND FUND SECURITIES FUND FUND BOND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee
waivers &
reimbursements)(1).......... .63% .61% .16% .43% .46% .22%
12b-1 Service & Distribution
Fees (after fee waivers &
reimbursements)(2).......... .22% .28% .35% .20% .20% .15%
Other Fund Expenses (after fee
waivers &
reimbursements)(3).......... .30% .26% .64% .27% .19% .43%
- -------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after fee waivers)(4)...... 1.15% 1.15% 1.15% .90% .85% .80%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. The Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Investment Grade Bond Fund
-- .74%, Investment Grade Tax-Exempt Bond Fund -- .74%, U.S. Government
Securities Fund -- .74%, Limited-Term Federal Mortgage Securities Fund --
.65%, Short-Term Bond Fund -- .65% and Short-Term U.S. Treasury Securities
Fund -- .65%. See "Investment Advisors."
(2) The Distributor is reimbursing, on a voluntary basis, a portion of its
expenses from each Fund. The Distributor reserves the right to terminate its
reimbursement at any time in its sole discretion. Absent such
reimbursements, 12b-1 Service & Distribution Fees for the Funds would be as
follows: Investment Grade Bond Fund -- .43%, Investment Grade Tax-Exempt
Bond Fund -- .43%, U.S. Government Securities Fund -- .38%, Limited-Term
Federal Mortgage Securities Fund -- .23%, Short-Term Bond Fund -- .23% and
Short-Term U.S. Treasury Securities Fund -- .18%. See "Distribution."
(3) Absent waivers and reimbursements, Other Fund Expenses would be as follows:
Investment Grade Bond Fund -- .30%, Investment Grade Tax-Exempt Bond Fund --
.26%, U.S. Government Securities Fund -- 1.38%, Limited-Term Federal
Mortgage Securities Fund -- 1.37%, Short-Term Bond Fund -- .84% and
Short-Term U.S. Treasury Securities -- .49%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Investment Grade Bond Fund -- 1.47%, Investment Grade
Tax-Exempt Bond Fund -- 1.43%, U.S. Government Securities Fund -- 2.50%,
Limited-Term Federal Mortgage Securities Fund -- 2.25%, Short-Term Bond Fund
-- 1.72% and Short-Term U.S. Treasury Securities Fund -- 1.32%.
<PAGE>
4
EXPENSE SUMMARY
INVESTOR SHARES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
STATE TAX-EXEMPT
BOND FUNDS
- -------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price)......................................... 3.75%
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Maximum Deferred Sales Charge............................... None
Redemption Fees(1).......................................... None
Exchange Fee................................................ None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) There is a $7.00 wire charge for redemptions for all funds processed from
retail accounts which require wires to particular banks.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
PRIME U.S. GOVERNMENT
FLORIDA GEORGIA TENNESSEE QUALITY SECURITIES TAX-EXEMPT
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT MONEY MARKET MONEY MARKET MONEY MARKET
BOND FUND BOND FUND BOND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee
waivers &
reimbursements)(1).......... .38% .37% .00% .50% .51% .47%
12b-1 Service & Distribution
Fees (after fee waivers &
reimbursements)(2).......... .15% .15% .10% .14% .08% .09%
Other Expenses (after fee
waivers &
reimbursements)(3).......... .32% .33% .75% .11% .16% .16%
- ---------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after fee waivers &
reimbursements)(4)(5)....... .85% .85% .85% .75% .75% .72%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. The Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Florida Tax-Exempt Bond
Fund -- .65%, Georgia Tax-Exempt Bond Fund -- .65%, Tennessee Tax-Exempt
Bond Fund -- .65%, Prime Quality Money Market Fund -- .65%, U.S. Government
Securities Money Market Fund -- .65%, and Tax-Exempt Money Market Fund --
.55%. See "Investment Advisors."
(2) The Distributor is reimbursing, on a voluntary basis, a portion of its
expenses from each Fund. The Distributor reserves the right to terminate its
reimbursement at any time in its sole discretion. Absent such
reimbursements, 12b-1 Service & Distribution Fees for the Funds would be as
follows: Florida Tax-Exempt Bond Fund -- .18%, Georgia Tax-Exempt Bond Fund
-- .18%, Tennessee Tax-Exempt Bond Fund -- .18%, Prime Quality Money Market
Fund -- .20%, U.S. Government Securities Money Market Fund -- .17% and
Tax-Exempt Money Market Fund -- .15%. See "Distribution."
(3) Absent waivers and reimbursements, Other Expenses would be as follows:
Florida Tax-Exempt Bond Fund -- .53%, Georgia Tax-Exempt Bond Fund -- .58%,
Tennessee Tax-Exempt Bond Fund -- 1.25%, Prime Quality Money Market Fund --
.15%, U.S. Government Securities Money Market Fund -- .17% and Tax-Exempt
Money Market Fund -- .16%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Florida Tax-Exempt Bond Fund -- 1.36%, Georgia
Tax-Exempt Bond Fund -- 1.41%, Tennessee Tax-Exempt Bond Fund -- 2.08%,
Prime Quality Money Market Fund -- 1.00%, U.S. Government Securities Money
Market Fund -- .99% and Tax-Exempt Money Market Fund -- .86%.
(5) Total Fund Operating Expenses for the Tax-Exempt Money Market Fund have been
restated to reflect current fees.
<PAGE>
5
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLES YEAR YEARS YEARS YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <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.
INVESTMENT GRADE BOND FUND....................................... $ 49 $ 73 $ 98 $ 172
INVESTMENT GRADE TAX-EXEMPT BOND FUND............................ $ 49 $ 73 $ 98 $ 172
U.S. GOVERNMENT SECURITIES FUND.................................. $ 49 $ 73 $ 98 $ 172
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND.................... $ 34 $ 53 $ 74 $ 133
SHORT-TERM BOND FUND............................................. $ 29 $ 47 $ 66 $ 123
SHORT-TERM U.S. TREASURY SECURITIES FUND......................... $ 18 $ 35 $ 54 $ 108
FLORIDA TAX-EXEMPT BOND FUND..................................... $ 46 $ 64 $ 83 $ 138
GEORGIA TAX-EXEMPT BOND FUND..................................... $ 46 $ 64 $ 83 $ 138
TENNESSEE TAX-EXEMPT BOND FUND................................... $ 46 $ 64 $ 83 $ 138
PRIME QUALITY MONEY MARKET FUND.................................. $ 8 $ 24 $ 42 $ 93
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND..................... $ 8 $ 24 $ 42 $ 93
TAX-EXEMPT MONEY MARKET FUND..................................... $ 7 $ 23 $ 40 $ 89
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF A FUND AND SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. A person that purchases shares through an
account with a financial institution may be charged separate fees by the
financial institution. The rules of the Securities and Exchange Commission
require that the maximum sales charge be reflected in the above table. However,
certain investors may qualify for reduced sales charges. See "Purchase of Fund
Shares." Long-term Shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers, Inc.'s Rules of Fair Practice.
<PAGE>
6
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, independent
public accountants to the Trust, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information and which appear, along with the report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information regarding each Fund is contained in the Trust's Annual Report to
Shareholders and is available without charge by calling 1-800-428-6970.
For an Investor Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ----------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------
INVESTMENT GRADE BOND FUND
------------------------------
INVESTOR SHARES
1996.............. $10.26 $ 0.56 $ (0.20) $ (0.56) -- $ 10.06 3.50%
1995.............. 9.89 0.57 0.38 (0.58) -- 10.26 10.04%
1994.............. 10.44 0.46 (0.35) (0.46) $ (0.20) 9.89 0.86%
1993 (1).......... 10.00 0.44 0.44 (0.44) -- 10.44 9.21%*
-------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------------
INVESTOR SHARES
1996.............. $11.30 $ 0.41 $ 0.19 $ (0.41) $ (0.37) $ 11.12 5.40%
1995.............. 10.69 0.42 0.61 (0.42) -- 11.30 9.91%
1994.............. 10.79 0.33 0.25 (0.33) (0.35) 10.69 5.37%
1993 (2).......... 10.00 0.35 0.82 (0.35) (0.03) 10.79 11.88%*
----------------------------------
U.S. GOVERNMENT SECURITIES FUND
----------------------------------
INVESTOR SHARES
1996.............. $10.26 $ 0.59 $ (0.33) $ (0.59) $ (0.03) $ 9.90 2.47%
1995 (3).......... 10.00 0.56 0.26 (0.56) -- 10.26 8.61+
-------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
-------------------------------------------------
INVESTOR SHARES
1996.............. $10.11 $ 0.60 $ (0.14) $ (0.60) -- $ 9.97 4.59%
1995 (4).......... 9.98 0.58 0.13 (0.58) -- 10.11 7.45%+
-----------------------
SHORT-TERM BOND FUND
-----------------------
INVESTOR SHARES
1996.............. $10.01 $ 0.52 $ (0.10) $ (0.53) $ (0.02) $ 9.88 4.23%
1995.............. 9.81 0.51 0.19 (0.50) -- 10.01 7.44%
1994.............. 10.03 0.40 (0.21) (0.40) (0.01) 9.81 1.81%
1993 (5).......... 10.06 0.06 (0.03) (0.06) -- 10.03 1.65%*
------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
------------------------------------------
INVESTOR SHARES
1996.............. $ 9.94 $ 0.54 $ (0.10) $ (0.54) -- $ 9.84 4.52%
1995.............. 9.83 0.46 0.11 (0.46) -- 9.94 6.03%
1994.............. 9.99 0.32 (0.12) (0.31) $ (0.05) 9.83 2.01%
1993 (6).......... 10.01 0.06 (0.02) (0.06) -- 9.99 1.84%*
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT INCOME
NET RATIO OF EXPENSES (LOSS) TO AVERAGE
NET ASSETS RATIO OF INVESTMENT TO AVERAGE NET NET ASSETS
END OF EXPENSES INCOME TO ASSETS (EXCLUDING (EXCLUDING PORTFOLIO
PERIOD TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
(000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
----------- ---------- ----------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
------------------------------
INVESTMENT GRADE BOND FUND
------------------------------
INVESTOR SHARES
1996.............. $ 36,155 1.15% 5.40% 1.44% 5.11% 184.33%
1995.............. 33,772 1.15% 5.79% 1.49% 5.45% 237.66%
1994.............. 35,775 1.14% 4.39% 1.41% 4.12% 259.19%
1993 (1).......... 24,375 1.14%* 4.75%* 1.46%* 4.43%* 299.32%
-------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------------
INVESTOR SHARES
1996.............. $ 37,427 1.15% 3.61% 1.42% 3.34% 513.90%
1995.............. 41,693 1.15% 3.88% 1.43% 3.60% 591.91%
1994.............. 46,182 1.14% 2.96% 1.51% 2.59% 432.46%
1993 (2).......... 15,844 1.12%* 3.61%* 1.83%* 2.90%* 344.87%
----------------------------------
U.S. GOVERNMENT SECURITIES FUND
----------------------------------
INVESTOR SHARES
1996.............. $ 2,396 1.15% 5.68% 2.50% 4.33% 83.38%
1995 (3).......... 589 1.15%* 6.08%* 6.84%* 0.39%* 30.39%
-------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
-------------------------------------------------
INVESTOR SHARES
1996.............. $ 2,512 0.90% 5.75% 2.25% 4.40% 83.01%
1995 (4).......... 623 0.90%* 6.27%* 7.74%* (0.57%)* 67.63%
-----------------------
SHORT-TERM BOND FUND
-----------------------
INVESTOR SHARES
1996.............. $ 2,700 0.85% 5.20% 1.72% 4.33% 162.62%
1995.............. 2,609 0.85% 5.24% 1.56% 4.53% 200.49%
1994.............. 2,381 0.85% 3.94% 2.52% 2.27% 74.85%
1993 (5).......... 716 0.85%* 3.85%* 7.22%* (2.52%)* 63.89%
------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
------------------------------------------
INVESTOR SHARES
1996.............. $ 4,192 0.80% 5.43% 1.32% 4.91% 94.00%
1995.............. 7,144 0.80% 4.74% 1.33% 4.21% 87.98%
1994.............. 4,841 0.78% 3.11% 1.41% 2.48% 116.57%
1993 (6).......... 2,423 0.80%* 3.16%* 3.42%* 0.54%* 36.44%
</TABLE>
<PAGE>
7
FINANCIAL HIGHLIGHTS CONTINUED
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ----------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------
FLORIDA TAX-EXEMPT BOND FUND
--------------------------------
INVESTOR SHARES
1996.............. $10.18 $ 0.44 $ (0.06) $ (0.44) $ (0.05) $ 10.07 3.76%
1995.............. 9.75 0.42 0.43 (0.42) -- 10.18 9.04%
1994 (7).......... 10.00 0.13 (0.25) (0.13) -- 9.75 (1.22%)+
---------------------------------
GEORGIA TAX-EXEMPT BOND FUND
---------------------------------
INVESTOR SHARES
1996.............. $ 9.65 $ 0.41 $ (0.05) $ (0.41) $ (0.02) $ 9.58 3.69%
1995.............. 9.44 0.40 0.21 (0.40) -- 9.65 6.70%
1994 (8).......... 10.00 0.13 (0.56) (0.13) -- 9.44 (4.29%)+
-----------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
-----------------------------------
INVESTOR SHARES
1996.............. $ 9.53 $ 0.41 $ (0.10) $ (0.42) -- $ 9.42 3.28%
1995.............. 9.23 0.44 0.29 (0.43) -- 9.53 8.24%
1994 (8).......... 10.00 0.13 (0.77) (0.13) -- 9.23 (6.39%)+
-----------------------------------
PRIME QUALITY MONEY MARKET FUND
-----------------------------------
INVESTOR SHARES
1996.............. $ 1.00 $ 0.05 -- $ (0.05) -- $ 1.00 5.08%
1995.............. 1.00 0.05 -- (0.05) -- 1.00 4.62%
1994.............. 1.00 0.03 -- (0.03) -- 1.00 2.71%
1993 (9).......... 1.00 0.03 -- (0.03) -- 1.00 2.75%*
--------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------------
INVESTOR SHARES
1996.............. $ 1.00 $ 0.05 -- $ (0.05) -- $ 1.00 4.99%
1995.............. 1.00 0.04 -- (0.04) -- 1.00 4.51%
1994.............. 1.00 0.03 -- (0.03) -- 1.00 2.63%
1993 (9).......... 1.00 0.03 -- (0.03) -- 1.00 2.65%*
---------------------------------
TAX-EXEMPT MONEY MARKET FUND
---------------------------------
INVESTOR SHARES
1996.............. $ 1.00 $ 0.03 -- $ (0.03) -- $ 1.00 3.16%
1995.............. 1.00 0.03 -- (0.03) -- 1.00 3.00%
1994.............. 1.00 0.02 -- (0.02) -- 1.00 1.96%
1993 (9).......... 1.00 0.02 -- (0.02) -- 1.00 2.00%*
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT INCOME
NET RATIO OF EXPENSES (LOSS) TO AVERAGE
NET ASSETS RATIO OF INVESTMENT TO AVERAGE NET NET ASSETS
END OF EXPENSES INCOME TO ASSETS (EXCLUDING (EXCLUDING PORTFOLIO
PERIOD TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
(000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
----------- ---------- ----------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------
FLORIDA TAX-EXEMPT BOND FUND
--------------------------------
INVESTOR SHARES
1996.............. $ 4,025 0.85% 4.28% 1.36% 3.77% 62.68%
1995.............. 3,320 0.85% 4.36% 1.50% 3.71% 105.01%
1994 (7).......... 2,280 0.85%* 3.67%* 3.20%* 1.32%* 53.24%
---------------------------------
GEORGIA TAX-EXEMPT BOND FUND
---------------------------------
INVESTOR SHARES
1996.............. $ 3,418 0.85% 4.17% 1.41% 3.61% 60.02%
1995.............. 3,268 0.85% 4.31% 1.43% 3.73% 24.50%
1994 (8).......... 3,300 0.85%* 3.93%* 2.36%* 2.42%* 25.90%
-----------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
-----------------------------------
INVESTOR SHARES
1996.............. $ 1,523 0.85% 4.29% 2.08% 3.06% 41.00%
1995.............. 1,170 0.85% 4.70%* 2.10% 3.45% 27.73%
1994 (8).......... 1,127 0.85%* 3.74%* 6.60%* (2.01%)* 13.05%
-----------------------------------
PRIME QUALITY MONEY MARKET FUND
-----------------------------------
INVESTOR SHARES
1996.............. $215,696 0.75% 4.94% 1.00% 4.69% --
1995.............. 157,616 0.75% 4.55% 1.01% 4.29% --
1994.............. 129,415 0.75% 2.67% 0.99% 2.43% --
1993 (9).......... 61,578 0.75%* 2.68%* 1.02%* 2.41%* --
--------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------------
INVESTOR SHARES
1996.............. $ 58,608 0.75% 4.88% 0.99% 4.64% --
1995.............. 46,639 0.75% 4.51% 1.02% 4.24% --
1994.............. 32,395 0.75% 2.54% 0.97% 2.32% --
1993 (9).......... 16,688 0.75%* 2.57%* 1.11%* 2.21%* --
---------------------------------
TAX-EXEMPT MONEY MARKET FUND
---------------------------------
INVESTOR SHARES
1996.............. $ 95,223 0.62% 3.10% 0.85% 2.87% --
1995.............. 87,647 0.55% 3.00% 0.87% 2.68% --
1994.............. 61,675 0.54% 1.93% 0.88% 1.59% --
1993 (9).......... 35,209 0.53%* 1.95%* 0.95%* 1.53%* --
</TABLE>
* Annualized.
+ Cumulative since commencement of operations.
(1) The Investment Grade Bond Fund Investor Shares commenced operations on June
11, 1992.
(2) The Investment Grade Tax-Exempt Bond Fund Investor Shares commenced
operations on June 9, 1992.
(3) The U.S. Government Securities Fund Investor Shares commenced operations on
June 9, 1994.
(4) The Limited-Term Federal Mortgage Securities Fund Investor Shares commenced
operations on July 17, 1994.
(5) The Short-Term Bond Fund Investor Shares commenced operations on March 22,
1993.
(6) The Short-Term U.S. Treasury Securities Fund Investor Shares commenced
operations on March 18, 1993.
(7) The Florida Tax-Exempt Bond Fund Investor Shares commenced operations on
January 18, 1994.
(8) The Georgia Tax-Exempt Bond Fund Investor Shares and the Tennessee
Tax-Exempt Bond Fund Investor Shares commenced operations on January 19,
1994.
(9) The Prime Quality Money Market Fund Trust Shares and Investor Shares, U.S.
Government Securities Money Market Fund Trust Shares and Investor Shares,
and Tax-Exempt Money Market Fund Trust Shares and Investor Shares commenced
opertions on June 8, 1992.
<PAGE>
8
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 each non-money Market Fund through three
separate classes (Trust Shares, Investor Shares and Flex Shares), and in each
Money Market Fund through two separate classes (Trust Shares and Investor
Shares), which provide for variations in distribution and service fees, transfer
agent fees, voting rights and dividends. Except for differences between classes,
each share of each Fund represents an undivided, proportionate interest in that
Fund. This Prospectus relates to the Investor Shares of the Funds described
below.
FUNDS AND INVESTMENT OBJECTIVES
BOND FUNDS:
THE INVESTMENT GRADE BOND FUND seeks to provide as high a level of total return
through current income and capital appreciation as is consistent with the
preservation of capital primarily through investment in investment grade fixed
income securities.
THE INVESTMENT GRADE TAX-EXEMPT BOND FUND seeks to provide as high a level of
total return through federally tax-exempt current income and capital
appreciation as is consistent with the preservation of capital primarily through
investment in investment grade tax-exempt obligations.
THE U.S. GOVERNMENT SECURITIES FUND seeks to provide as high a level of current
income as is consistent with the preservation of capital by investing primarily
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
THE LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND seeks to provide as high a
level of current income as is consistent with the preservation of capital by
investing primarily in mortgage-related securities issued or guaranteed by U.S.
Government agencies and instrumentalities.
THE SHORT-TERM BOND FUND seeks to provide as high a level of current income,
relative to funds with like investment objectives, as is consistent with the
preservation of capital primarily through investment in short- to
intermediate-term investment grade fixed income securities.
THE SHORT-TERM U.S. TREASURY SECURITIES FUND seeks to provide as high a level of
current income, relative to funds with like investment objectives, as is
consistent with the preservation of capital through investment exclusively in
short-term U.S. Treasury securities.
STATE TAX-EXEMPT BOND FUNDS:
THE FLORIDA TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal income tax for Florida residents without undue investment risk.
THE GEORGIA TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal and state income tax for Georgia residents without undue
investment risk.
THE TENNESSEE TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal and state income tax for Tennessee residents without undue
investment risk.
<PAGE>
9
MONEY MARKET FUNDS:
THE PRIME QUALITY MONEY MARKET FUND seeks to provide as high a level of current
income as is consistent with preservation of capital and liquidity by investing
exclusively in high quality money market instruments.
THE U.S. GOVERNMENT SECURITIES MONEY MARKET FUND seeks to provide as high a
level of current income as is consistent with preservation of capital and
liquidity by investing exclusively in 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 Reserve Book-Entry System
("U.S. Treasury obligations"), securities of wholly-owned corporations of the
U.S. Government that are backed by the full faith and credit of the U.S.
Government ("U.S. Government Subsidiary Corporations") and repurchase agreements
with approved dealers collateralized by U.S. Treasury obligations, and U.S.
Government Subsidiary Corporation securities.
THE TAX-EXEMPT MONEY MARKET FUND seeks to provide as high a level of current
interest income exempt from regular federal income tax as is consistent with
preservation of capital and liquidity. The Fund invests primarily in high
quality short-term municipal obligations.
Each Money Market Fund's ability to generate high current income will be limited
by the fact that it is only permitted to invest in high quality securities. It
is a fundamental policy of each Money Market Fund to use its best efforts to
maintain a constant net asset value of $1.00 per share. There can be no
assurance that a Money Market Fund will achieve its investment objective or will
be able to maintain a net asset value of $1.00 per share on a continuous basis.
In addition, each Money Market Fund intends to comply with federal regulations
applicable to money market funds using the amortized cost method for calculating
net asset value which require each Fund to invest only in U.S. dollar
denominated obligations, to maintain an average maturity on a dollar-weighted
basis of 90 days or less and to acquire eligible securities that present minimal
credit risk and have a maturity of 397 days or less. These requirements will
also limit a Money Market Fund's ability to generate high current income. For a
further discussion of these rules, see "Description of Permitted Investments."
There can be no assurance that a Fund will achieve its investment objective.
The investment objectives of the Investment Grade Bond Fund, U.S. Government
Securities Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond
Fund and Short-Term U.S. Treasury Securities Fund are nonfundamental and may be
changed without a shareholder vote.
INVESTMENT POLICIES AND STRATEGIES
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund will invest only in those obligations deemed
investment grade obligations rated BBB or better by Standard & Poor's
Corporation ("S&P") or Baa or better by Moody's Investors Service, Inc.
("Moody's") or, if not rated by S&P or Moody's, of comparable quality at the
time of purchase as determined by the Fund's Advisor, including corporate debt
obligations; mortgage-backed securities, collateralized mortgage obligations
("CMOs") and asset-backed securities; obligations issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or
<PAGE>
10
guaranteed by foreign governments, their political subdivisions, agencies or
instrumentalities; obligations of supranational entities and sponsored American
Depositary Receipts ("ADRs") that are traded on exchanges or listed on National
Association of Securities Dealers Automated Quotations ("NASDAQ"). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
corporate and government bonds and debentures. No more than 25% of the Fund's
assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if
not rated by S&P or Moody's, of comparable quality at the time of purchase as
determined by the Advisor.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies or
instrumentalities or, subject to a limit of 25% of the Fund's assets,
mortgage-backed securities issued by private issuers. These mortgage-backed
securities may be backed or collateralized by fixed, adjustable or floating rate
mortgages. The Fund may also invest in asset-backed securities which consist of
securities backed by company receivables, truck and auto loans, leases, credit
card receivables and home equity loans.
In order to reduce interest rate risk, and subject to a general limit of 25% of
the Fund's assets, the Fund may purchase floating or variable rate securities.
Some floating or variable rate securities will be subject to interest rate
"caps" or "floors." It may also buy securities on a when-issued basis, medium
term notes, putable securities and zero coupon securities. The Fund may also
invest up to 10% of its assets in restricted securities. The Fund may also
engage in futures and options transactions.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. In the case of mortgage related
securities and asset-backed securities, maturity will be determined based on the
expected average life of the security. The Fund may shorten its average weighted
maturity to as little as 90 days if deemed appropriate for temporary defensive
purposes. By so limiting the maturity of its investments, the Fund expects that
its net asset value will experience less price movement in response to changes
in interest rates than the net asset values of mutual funds investing in similar
credit quality securities with longer maturities.
The Fund's portfolio turnover rate was 184% for the fiscal year ended May 31,
1996. This rate of turnover, if continued, will likely result in higher
transaction costs and higher levels of realized capital gains than if the
turnover rate was lower.
INVESTMENT GRADE TAX-EXEMPT BOND FUND
The Investment Grade Tax-Exempt Bond Fund intends to be fully invested in
municipal securities the interest on which is exempt from regular federal income
taxes in the opinion of bond counsel to the issuer. The issuers of these
securities can be located in all fifty states, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. It is a fundamental policy of
the Investment Grade Tax-Exempt Bond Fund to invest at least 80% of its total
assets in securities the income from which is exempt from regular federal income
tax and not treated as a preference item for purposes of the alternative minimum
tax. At least 65% of the Fund's assets will be invested in municipal bonds and
debentures, and at least 75% of its total assets invested in municipal bonds
will be in securities rated A or better by S&P or Moody's. Municipal securities
must be rated BBB or better by S&P or Baa or better by Moody's in the case of
bonds; SP-1,
<PAGE>
11
SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, P-1, P-2 in the case of
tax-exempt commercial paper; and SP-1, SP-2, VMIG-1 or VMIG-2 in the case of
variable rate demand obligations. The Fund will only acquire securities not
rated by S&P or Moody's if, at the time of purchase, the Fund's Advisor
determines that such unrated obligations are of comparable quality to rated
obligations that may be acquired by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities and may
purchase municipal forwards, medium term notes, putable securities and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities subject to the alternative minimum tax.
The Fund may also invest up to 10% of its assets in restricted securities that
the Fund's Advisor determines are liquid under guidelines adopted by the Trust's
Board of Trustees and may engage in futures and options transactions.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes. By so limiting the maturity of its investments,
the Fund's net asset value is expected to experience less price movement in
response to changes in interest rates than the net asset values of mutual funds
investing in similar credit quality securities with longer maturities.
The Fund's portfolio turnover rate was 514% for the fiscal year ended May 31,
1996. This rate of turnover, if continued, will likely result in higher
transaction costs and higher levels of realized capital gains than if the
turnover rate was lower.
U.S. GOVERNMENT SECURITIES FUND
Under normal market conditions, the Fund will invest at least 65% of its assets
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including mortgage-backed securities issued or guaranteed by
U.S. Government agencies such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home
Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities consisting of
CMOs and real estate mortgage investment conduits ("REMICs") purchased by the
Fund will be issued or guaranteed as to payment of principal and interest by the
U.S. Government, its agencies or instrumentalities or, if issued by private
issuers, rated in one of the two highest rating categories by a nationally
recognized statistical rating organization (an "NRSRO").
The principal governmental issuers or guarantors of mortgage-backed securities
are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and
credit of the U.S. Government while obligations of FNMA and FHLMC are supported
by the respective agency only. The Fund may purchase mortgage-backed securities
that are backed or collateralized by fixed, adjustable or floating rate
mortgages.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of a
<PAGE>
12
governmental entity and thus may bear a risk of nonpayment. The timely payment
of principal and interest normally is supported, at least partially, by various
forms of insurance or guarantees. There can be no assurance, however, that such
credit enhancement will support full payment of the principal and interest on
such obligations. The average maturity of the Fund's investment portfolio will
typically range from 7 to 14 years.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P or better, or that are deemed by the Fund's Advisor to be
of comparable quality; commercial paper rated at the time of purchase within the
two highest ratings categories of an NRSRO; bankers' acceptances; certificates
of deposit and time deposits; and U.S. Treasury obligations, which include
custodial receipts and repurchase agreements involving securities that
constitute permissible investments for the Fund. The Fund intends to invest in
privately issued, mortgage-backed securities only if they are rated in one of
the two highest rating categories by an NRSRO.
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The Fund may purchase floating
or variable rate securities, and may engage in dollar roll transactions.
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Under normal market conditions, the Limited-Term Federal Mortgage Securities
Fund will invest at least 65% of its assets in mortgage-related securities
issued or guaranteed by U.S. Government agencies such as GNMA, FNMA or FHLMC.
Obligations of GNMA are backed by the full faith and credit of the U.S.
Government while obligations of FNMA and FHLMC are supported by the respective
agency only. The Fund may purchase mortgage-backed securities that are backed or
collateralized by fixed, adjustable or floating rate mortgages. The Fund's
holdings of mortgage-backed securities will typically have an average life of
from one to five years.
Mortgage-backed securities consisting of CMOs and REMICs purchased by the Fund
will be either issued or guaranteed as to payment of principal and interest by
the U.S. Government, its agencies or instrumentalities or, if issued by private
issuers, rated in one of the two highest rating categories by an NRSRO.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of the U.S. Government and thus bear a risk of nonpayment. The
timely payment of principal and interest normally is supported, at least
partially, by various forms of insurance or guarantees. There can be no
assurance, however, that such credit enhancement will support full payment of
the principal and interest on such obligations.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P, or that are deemed by the Fund's Advisor to be of
comparable quality; asset backed securities; commercial paper rated at the time
of purchase in one of the two highest ratings categories by an NRSRO; bankers'
acceptances; certificates of deposit and time deposits; U.S. Treasury
<PAGE>
13
obligations and custodial receipts; and repurchase agreements involving
securities that constitute permissible investments for the Fund.
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The Fund may purchase floating
or variable rate securities, and may engage in dollar roll transactions. The
Fund may also purchase stripped mortgage-backed securities, but will limit such
purchases to 5% of its net assets.
SHORT-TERM BOND FUND
Under normal circumstances, the Short-Term Bond Fund will invest solely in
investment grade obligations rated BBB or better by S&P or Baa or better by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Advisor consisting of debt obligations of
U.S. and foreign corporations, mortgage-backed securities; CMOs; asset-backed
securities; obligations (including mortgage-backed securities) issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; and custodial receipts involving U.S. Treasury obligations
(including Separately Traded Registered Interest and Principal Securities
("STRIPS") and Coupon Under Book Entry System ("CUBES")). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
corporate and government bonds and debentures. No more than 25% of the Fund's
assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if
not rated by S&P or Moody's, of comparable quality at the time of purchase by
the Fund's Advisor.
The Fund may purchase, without limitation, mortgage-backed securities issued or
guaranteed as to the payment of principal and interest by the U.S. Government,
its agencies or instrumentalities and, subject to a limit of 25% of the Fund's
assets, mortgage-backed securities issued by private issuers. These
mortgage-backed securities may be backed or collateralized by fixed, adjustable
or floating rate mortgages. The Fund may also invest in asset-backed securities,
which consist of securities backed by company receivables; truck and auto loans;
leases; credit card receivables; and home equity loans. The Fund will purchase
mortgage-backed and asset-backed securities only if they are rated at least AA
by S&P or Aa by Moody's or, if not rated by S&P or Moody's, determined to be of
comparable quality at the time of purchase by the Fund's Advisor.
The Fund may purchase securities on a when-issued basis and may acquire floating
or variable rate securities, medium term notes, putable securities, and zero
coupon securities. The Fund may also purchase securities issued by foreign
governments and supranational agencies. The Fund may also invest in municipal
securities when the Fund's Advisor feels it is consistent with the Fund's
investment objective. The Fund will not invest in municipal securities unless
the Fund's Advisor believes that the yield will be higher than the yield for
comparable taxable investments in which the Fund is permitted to invest. The
following quality criteria apply to the Fund's investments in municipal
securities. The Fund's investments in municipal notes will be limited to those
obligations (i) where both principal and interest are backed by the full faith
and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or better
at the time of investment by Moody's, (iii) which are rated SP-2 or better at
the time of investment by S&P, or (iv) which, if not rated by S&P or Moody's,
are of equivalent quality to MIG-2, V-MIG-2, or SP-2 or better in
<PAGE>
14
the Advisor's judgment. The Fund's investment in municipal bonds will be limited
to bonds rated BBB or better by S&P or Baa or better by Moody's, or, if not
rated by S&P or Moody's, deemed by the Fund's Advisor to be of comparable
quality. For the Fund's investments in other types of tax-exempt municipal
investments, such as participation interests in municipal lease/purchase
agreements, the quality of the underlying credit or of the bank providing a
credit support arrangement must, in the Fund's Advisor's opinion, be equivalent
to the municipal note or bond ratings stated above. The Fund is also authorized
to invest up to 10% of its assets in restricted securities, including Rule 144A
securities, that the Fund's Advisor determines are liquid under guidelines
adopted by the Trust's Board of Trustees. The Fund may also enter into bond
futures contracts and options on bond futures contracts and engage in securities
lending.
The Fund intends to maintain a dollar-weighted average maturity of 3 years or
less, and the maximum remaining maturity for any security held by the Fund is 7
years. Under normal market conditions it is anticipated that the Fund's
dollar-weighted average maturity will range from 2 to 3 years. In the case of
mortgage related securities and asset-backed securities, maturity will be
determined based on the expected average life of the security. The Fund may
shorten its average weighted maturity to as little as 90 days if deemed
appropriate for temporary defensive purposes. By so limiting the maturity of its
investments, the Fund expects that its net asset value will experience less
price movement in response to changes in interest rates than the net asset
values of mutual funds investing in similar credit quality securities with
longer maturities.
The Fund's turnover rate was 163% for the fiscal year ended May 31, 1996. This
rate of turnover, if continued, will likely result in higher transaction costs
and higher levels of realized capital gains than if the turnover rate was lower.
SHORT-TERM U.S. TREASURY SECURITIES FUND
The Short-Term U.S. Treasury Securities Fund will invest exclusively in
obligations issued by the U.S. Treasury with maximum remaining maturities of 3
years or less. U.S. Treasury securities are considered to be among the safest,
as to timely principal and interest payments, investments available. The Fund
will not invest in repurchase agreements. The Fund may borrow money for
temporary or emergency purposes in an amount not exceeding one-third of its
total assets, but has no present intention to do so.
Under normal market conditions, it is anticipated that the Fund's average
maturity will range from one to two years. Furthermore, for temporary defensive
purposes during periods when the Fund's Advisor determines that market
conditions warrant, the Short-Term U.S. Treasury Securities Fund may reduce its
average weighted maturity to less than one year.
FLORIDA TAX-EXEMPT BOND FUND
The Florida Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income tax based
on opinions from bond counsel to the issuers. The issuers of these securities
can be located in Florida, the District of Columbia, Puerto Rico and other U.S.
territories and possessions. It is a fundamental policy of the Fund to invest at
least 80% of its total assets in securities the income from which is exempt from
regular federal income tax and not treated as a preference item for purposes of
the alternative minimum tax. At least 65% of the Fund's assets will be invested
in Florida
<PAGE>
15
municipal bonds and debentures, and at least 75% of its total assets invested in
municipal bonds will be in securities rated A or better by S&P or Moody's.
Municipal securities must be rated BBB or better by S&P or Baa or better by
Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes;
A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and SP-1,
SP-2, VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more
than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa
by Moody's. The Fund will only acquire securities not rated by S&P or Moody's
if, at the time of purchase, the Fund's Advisor determines that such unrated
obligations are of comparable quality to rated obligations that may be acquired
by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities, and may
purchase municipal forwards, putable securities, medium term notes, and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities subject to the alternative minimum tax.
The Fund may also invest in futures and options, but has no present intention to
do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
GEORGIA TAX-EXEMPT BOND FUND
The Georgia Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes and
substantially exempt from State of Georgia income taxes based on opinions from
bond counsel to the issuers. The issuers of these securities can be located in
Georgia, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. It is a fundamental policy of the Fund to invest at least 80% of
its total assets in securities the income from which is exempt from regular
federal income tax and not treated as a preference item for purposes of
alternative minimum tax. At least 65% of the Fund's assets will be invested in
Georgia municipal bonds and debentures, and at least 75% of its total assets
invested in municipal bonds will be in securities rated A or better by S&P or
Moody's. Municipal securities must be rated BBB or better by S&P or Baa or
better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case
of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and
VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than
25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by
Moody's. The Fund will only acquire securities not rated by S&P or Moody's if,
at the time of purchase, the Fund's Advisor determines that such unrated
obligations are of comparable quality to rated obligations that may be acquired
by the Fund.
The Fund may commit to purchase the above securities on a when-issued or delayed
delivery basis, invest in floating or variable rate securities, and may purchase
municipal forwards, putable securities, medium term notes and zero coupon
securities. The Fund's Advisor has discretion to invest up to 20% of the Fund's
total assets in taxable debt securities rated at least BBB or better by S&P
<PAGE>
16
or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable
quality at the time of purchase as determined by the Fund's Advisor, repurchase
agreements, and securities subject to the alternative minimum tax. The Fund may
also invest in futures and options, but has no present intention to do so for
other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
TENNESSEE TAX-EXEMPT BOND FUND
The Tennessee Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes and
substantially exempt from State of Tennessee income taxes based on opinions from
bond counsel to the issuers. The issuers of these securities can be located in
Tennessee, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. It is a fundamental policy of the Fund to invest at least 80% of
its total assets in securities the income from which is exempt from regular
federal income tax and not treated as a preference item for purposes of the
alternative minimum tax. At least 65% of the Fund's assets will be invested in
Tennessee municipal bonds and debentures, and at least 75% of its total assets
invested in municipal bonds will be in securities rated A or better by S&P or
Moody's. Municipal securities must be rated BBB or better by S&P or Baa or
better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case
of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and
VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than
25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by
Moody's. The Fund will only acquire securities not rated by S&P or Moody's if,
at the time of purchase, the Fund's Advisor determines that such unrated
obligations are of comparable quality to rated obligations that may be acquired
by the Fund. The Fund may invest in floating or variable rate securities,
commitments to purchase the above securities on a when-issued or delayed
delivery basis, and may purchase municipal forwards, putable securities, medium
term notes and zero coupon securities. The Fund's Advisor has discretion to
invest up to 20% of the Fund's total assets in taxable debt securities rated at
least BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P
or Moody's, of comparable quality at the time of purchase as determined by the
Fund's Advisor, repurchase agreements, and securities subject to the alternative
minimum tax. The Fund may also invest in futures and options, but has no present
intention to do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
PRIME QUALITY MONEY MARKET FUND
The Prime Quality Money Market Fund will invest in money market instruments
denominated in U.S. dollars consisting of (i) U.S. Treasury obligations; (ii)
custodial receipts representing interests in component parts of U.S. Treasury
obligations; (iii) obligations issued or guaranteed as to principal and interest
by agencies and instrumentalities of the U.S. Government; (iv) commercial paper
issued by domestic and
<PAGE>
17
foreign issuers rated in the highest short-term rating category by one or more
NRSROs as described in the "Appendix" or, if not rated, determined by the Fund's
Advisor to be of comparable quality; (v) high quality obligations (including
certificates of deposit, time deposits, bankers' acceptances, Eurodollar and
Yankee bank obligations) of U.S. commercial banks (including foreign branches of
such banks), and U.S. and London branches of foreign banks or savings and loan
and thrift institutions that are members of the Federal Reserve System, the
Federal Deposit Insurance Corporation, or the Federal Savings and Loan Insurance
Corporation; (vi) high quality short-term corporate obligations issued by
companies with commercial paper meeting the ratings indicated in (iv), above,
or, if not rated, determined by the Fund's Advisor to be of comparable quality;
(vii) repurchase agreements involving such obligations; (viii) high quality
obligations of supranational entities satisfying the credit ratings described in
(iv), above, or, if not rated, determined by the Fund's Advisor to be of
comparable quality; and (ix) medium term notes. The Fund may not invest more
than 25% of its total assets in obligations issued by foreign branches of U.S.
banks and London branches of foreign banks. The Fund may purchase securities
subject to standby commitments. As a money market fund, the Fund is subject to
limitations on the percentage of its assets that may be invested in any one
issuer and on the percentage that may be invested in securities carrying the
second highest rating assigned by the requisite NRSROs.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The U.S. Government Securities Money Market Fund will invest exclusively in U.S.
Treasury obligations, U.S. Government Subsidiary Corporation securities (e.g.,
GNMA securities) and repurchase agreements with dealers selected pursuant to
guidelines adopted by the Trust's Board of Trustees and collateralized by U.S.
Treasury securities and U.S. Government Subsidiary Corporation securities.
TAX-EXEMPT MONEY MARKET FUND
The Tax-Exempt Money Market Fund intends to be fully invested in securities the
interest on which is exempt from regular federal income taxes in the opinion of
bond counsel to the issuer. It is a fundamental policy of the Tax-Exempt Money
Market Fund to invest at least 80% of its total assets in securities the income
from which is exempt from regular federal income taxes and not treated as a
preference item for purposes of the alternative minimum tax. The Fund may invest
in high quality U.S. dollar denominated municipal securities of issuers located
in all fifty states, the District of Columbia, Puerto Rico and other U.S.
territories rated in one of the two highest short-term rating categories by S&P
or Moody's or, if not rated, determined by the Fund's Advisor to be of
comparable quality. The Fund will primarily purchase municipal bonds with a
remaining maturity of 397 days or less, and will also acquire municipal notes
and tax-exempt commercial paper with similar maturities. The Fund may agree to
purchase short-term securities on a when-issued basis and may invest in
securities subject to standby commitments. Securities purchased on a when-issued
basis are subject to settlement within 45 days of the purchase date.
The Fund's Advisor has discretion to invest up to 20% of the Fund's assets in
U.S. dollar denominated obligations consisting of taxable money market
instruments, obligations issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, repurchase
<PAGE>
18
agreements and securities subject to the alternative minimum tax.
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes, during periods when its Advisor determines
that market conditions warrant, each Fund, except the U.S. Government Securities
Money Market Fund and Short-Term U.S. Treasury Securities Fund, may hold a
portion of its assets in cash and 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, time
deposits issued by banks or savings and loan associations, and commercial paper
rated in the highest rating category. A Fund may not be pursuing its investment
objective when it is engaged in temporary defensive investing.
The municipal bonds that the Investment Grade Tax-Exempt Bond Fund and State
Tax-Exempt Bond Funds may purchase include general obligation bonds, revenue or
special obligation bonds, and private activity and industrial development bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality while revenue or special obligation bonds are backed by a specific
project or facility. The State Tax-Exempt Bond Funds may also purchase
certificates of participation which represent an interest in an underlying
obligation or commitment such as an obligation issued in connection with a
leasing arrangement. The payment of principal and interest on private activity
and industrial development bonds generally is dependent solely on the ability of
the facility's user to meet its obligation and the pledge, if any, of real or
personal property as security for such payment.
The Advisor to a State Tax-Exempt Bond Fund or the Investment Grade Tax-Exempt
Bond Fund may buy or sell portfolio securities with the intention of generating
capital gains. Such gains will increase the Fund's total return and will be
taxable upon distribution to Shareholders. See "Tax Information."
In the event that a security owned by a Fund is downgraded below the stated
rating categories, its Advisor will review and take appropriate action with
regard to the security.
A Fund's purchase of shares of other investment companies is limited by the
Investment Company Act of 1940 (the "1940 Act") and will ordinarily result in an
additional layer of charges and expenses.
Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its total assets. No Fund may purchase additional securities while
its outstanding borrowings exceed 5% of its assets.
It is a non-fundamental policy of each Fund to invest no more than 15% of its
net assets in illiquid securities (10% of the net assets of each Money Market
Fund). An illiquid security is a security which cannot be disposed of in the
usual course of business within seven days 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
FIXED INCOME SECURITIES
The market value of a Fund's fixed income investments will change in response to
interest
<PAGE>
19
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 an NRSRO to 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 a Fund's securities will not affect cash income derived
from these securities but will affect the Fund's net asset value.
Fixed income securities rated BBB by S&P or Baa by Moody's (the lowest rating of
investment grade bonds) are deemed by these rating services to have speculative
characteristics.
Guarantees of a Fund's securities by the U.S. Government, 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 or
the yield or value of a 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.
FOREIGN SECURITIES
Investing in the securities of foreign companies involves 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
available for distribution to a 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.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to the risk of prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund generally will
reinvest the proceeds in securities with a yield that reflects prevailing
interest rates, which may be lower than the prepaid security.
MUNICIPAL SECURITIES
Since each State Tax-Exempt Bond Fund invests in municipal securities issued by
governmental entities of its specific states the performance of each State
Tax-Exempt Bond Fund may be especially affected by factors pertaining to such
state's economy and other factors specifically affecting the ability of issuers
in that state to meet their obligations. As a result, the value of each State
Tax-Exempt Bond Fund's shares may fluctuate more widely
<PAGE>
20
than the value of shares of a portfolio investing in securities relating to a
number of different states. The ability of state, county, or local governments
to meet their obligations will depend primarily on the availability of tax and
other revenues to those governments and on their fiscal conditions generally.
Municipal securities may be affected from time to time by economic, political,
geographic and demographic conditions. In addition, constitutional amendments,
legislative measures, executive orders, administrative regulations and voter
initiatives may limit a government's power to raise revenues or increase taxes
and thus could adversely affect an issuer's ability to meet financial
obligations.
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 than interest bearing
obligations. A Fund will be required to include the imputed interest in zero
coupon obligations in its current income. Because each Fund distributes all of
its net investment income to Shareholders, a Fund may have to sell portfolio
securities to distribute the income attributable to these obligations and
securities at a time when its Advisor would not have chosen to sell such
obligations or securities and which may result in a taxable gain or loss.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a 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 a
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 a
Fund's outstanding shares, whichever is less.
Each 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 a Fund would be invested in the securities of such issuer;
provided, however, that a 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 a 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 and, with respect to
only the Money Market Funds, obligations issued by domestic branches of U.S.
banks or U.S. branches of foreign banks subject to the same regulations as U.S.
banks. 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 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.
<PAGE>
21
It is a non-fundamental policy of the Tax-Exempt Money Market Fund and
Investment Grade Tax-Exempt Bond Fund that they will not invest more than 25% of
their respective net assets in securities of one or more issuers conducting
their principal activities in the same state. In addition, the Tax-Exempt Money
Market Fund, Investment Grade Tax-Exempt Bond Fund and State Tax-Exempt Bond
Funds will not invest more than 25% of their respective total assets in
securities the interest on which is derived from revenues of similar type
projects.
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
MONEY MARKET FUNDS
From time to time each Money Market Fund may advertise its "current yield" and
"effective compound yield." Both yield figures are based on historical earnings
and are not intended to indicate future performance. The "current yield" of each
Fund refers to the income generated by an investment in a Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
The Tax-Exempt Money Market Fund may also advertise a "tax-equivalent yield,"
which is calculated by determining the rate of return that would have been
achieved on a fully taxable investment to produce the after tax equivalent of
the Fund's yield, assuming certain tax brackets for a Shareholder.
BOND AND STATE TAX-EXEMPT BOND FUNDS
From time to time, the Bond and State Tax-Exempt Bond Funds may advertise
performance (yield and total return). These figures will be based on historical
earnings and are not intended to indicate future performance. The yield of a
Fund refers to the annualized income generated by an investment in that 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 Investment Grade Tax-Exempt and State Tax-Exempt Bond Funds may also
advertise a "tax-equivalent yield," which is calculated by determining the rate
of return that would have been achieved on a fully taxable investment to produce
the after tax equivalent of the Fund's yield, assuming certain tax brackets for
a Shareholder.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment, including any sales charge imposed, for designated time
periods (including but not limited to, the period from which a 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.
The performance of Investor Shares and Flex Shares of the Trust will normally be
lower than for Trust Shares of the Trust because Investor Shares and Flex Shares
are subject to
<PAGE>
22
distribution, service and certain transfer agent fees not charged to Trust
Shares. Because of their differing distribution expense arrangements, the
performance of Flex Shares in comparison to Investor Shares will vary depending
upon the investor's investment time horizon.
Each 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.
FUNDLINK
All purchases and redemptions of Investor Shares may be completed via FUNDLINK,
a telephone activated service that allows Shareholders to transfer money between
the STI Classic Funds and a Shareholder's SunTrust bank account(s). To initiate
a FUNDLINK transaction, Shareholders are provided a toll-free telephone number
(1-800-428-6970) to call the Trust's transfer agent. To utilize this service, a
Shareholder must contact an Investment Consultant of a SunTrust Banks, Inc.
affiliate bank and complete the appropriate application and authorization
agreements.
PURCHASE OF FUND SHARES
Investor Shares are sold on a continuous basis and may be purchased by
contacting the Trust's transfer agent, Federated Services Company (the "Transfer
Agent"), either by mail, by telephone or by wire. Investor Shares may also be
purchased through Investment Consultants of SunTrust Banks, Inc., affiliate
banks which serve as Shareholder Servicing Agents to the Trust. Furthermore,
Investor Shares may be purchased through SunTrust Securities, Inc., as well as
certain correspondent banks of SunTrust Banks, Inc. All purchases made by check
should be in U.S. dollars and made payable to the "STI Classic Funds (Fund
Name)." Third party checks, credit cards, credit card checks and cash will not
be accepted. When purchases are made by check, redemptions will not be allowed
until the investment being redeemed has been in the account for 15 Business
Days.
Shares may be purchased on days on which the New York Stock Exchange is open for
business (a "Business Day"). However, money market mutual fund shares cannot be
purchased or redeemed for same day settlement on days the Federal Reserve is
closed.
MONEY MARKET FUNDS
A purchase order for any of the Money Market Funds will be effective as of the
Business Day it is received by the Transfer Agent and eligible to receive
dividends declared the same day if the Transfer Agent receives the order before
11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund or before 1:00 p.m.
Eastern time for the Prime Quality Money Market Fund and U.S. Government
Securities Money Market Fund and the Custodian receives federal funds before
4:00 p.m. Eastern time on such day. Otherwise, purchase orders for the Money
Market Funds will be effective the next Business Day provided the Custodian
receives readily available funds before 4:00 p.m. Eastern time on the next such
Business Day. The purchase price is the net asset value per share next computed
after the order is received and accepted by the Trust. The net asset value per
share of each Fund is determined by dividing the total value of its investments
and other
<PAGE>
23
assets, less any liabilities, by its total outstanding shares. The net asset
value per share is calculated as of close of business of the New York Stock
Exchange (currently 4:00 p.m. Eastern time) each Business Day based on the
amortized cost method described in the Statement of Additional Information and
is expected to remain constant at $1.00 per share.
Minimum initial and subsequent purchase amounts for all Investor Shares of Money
Market Funds are $5,000 and $1,000, respectively. Purchases made pursuant to the
Systematic Investment Plan (described below) are subject to lower minimum
initial and subsequent purchase amounts. Subsequent purchases via statement
coupon are permitted in amounts of $100 or more. These minimums may be waived at
the Distributor's discretion.
BOND AND STATE TAX-EXEMPT BOND FUNDS
A purchase order for any of the Bond or State Tax-Exempt Bond Funds will be
effective as of the Business Day it is received by the Transfer Agent if the
Transfer Agent receives the order before 4:00 p.m. Eastern time. Purchases will
be made in full and fractional shares of a Fund calculated to three decimal
places. Purchases by mail are considered received after payment by check is
converted into federal funds. The purchase price of Investor Shares of a 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
a 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 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 each Fund.
Minimum initial and subsequent purchase amounts, respectively, for each Bond and
State Tax-Exempt Bond Fund are $2,000 and $1,000 ($100 via statement coupon).
Employees and their immediate family members (spouses and children under age 21)
of SunTrust Banks, Inc. and its affiliates may establish accounts with a minimum
initial purchase amount of $1,000. The minimum initial purchase amount for
retirement plans is $2,000. These minimums may be waived at the Distributor's
discretion.
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.
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).
The Trust maintains procedures, including identification methods and other
means, for ascertaining the identity of callers and authenticity of
instructions. If reasonable procedures are not employed, the Trust and/or the
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone transactions. Neither the 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.
Shares of the Funds are offered only to residents of states in which the shares
are eligible for purchase. Investors in certain states may be required to
purchase shares through institutions registered as brokers/dealers in such
states.
<PAGE>
24
Although the methodology and procedures for calculating the net asset value of
Investor Shares are identical to those for Trust Shares and Flex Shares, the net
asset value per share of the classes may differ because of the distribution and
certain transfer agent expenses charged to Investor Shares and Flex Shares.
SYSTEMATIC INVESTMENT PLAN
Shares of each Fund may be purchased systematically through deductions from
checking or savings accounts maintained through SunTrust Banks, Inc. affiliate
banks. Investors may purchase shares on a fixed schedule (semi-monthly or
monthly) with amounts from $100 up to $100,000. The Systematic Investment Plan
is subject to account minimum initial purchase and subsequent purchase amounts
of $500 and $50 and minimum balance requirements. The purchases will be
effective on the Business Day that the Transfer Agent receives the transmission.
SALES CHARGE INFORMATION
The following schedules apply to the purchase of Investor Shares of a Fund:
<TABLE>
<CAPTION>
AMOUNT OF
SALES CHARGE
SALES CHARGE SALES CHARGE REALLOWED TO
AS A AS A DEALERS
PERCENTAGE OF PERCENTAGE OF AS A
OFFERING NET AMOUNT PERCENTAGE OF
PRICE INVESTED OFFERING PRICE*
----------------- ----------------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES,
INVESTMENT GRADE TAX-EXEMPT BOND,
INVESTMENT GRADE BOND, and STATE TAX-EXEMPT BOND FUNDS
Less than $100,000.............................................. 3.75% 3.90% 3.375%
$100,000 but less than $250,000................................. 3.25% 3.36% 2.925%
$250,000 but less than $1,000,000............................... 2.50% 2.56% 2.250%
$1,000,000 and higher........................................... 1.00% 1.01% 0.900%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Less than $100,000.............................................. 2.50% 2.56% 2.250%
$100,000 but less than $250,000................................. 1.75% 1.78% 1.575%
$250,000 but less than $1,000,000............................... 1.25% 1.27% 1.125%
$1,000,000 and higher........................................... None None None
SHORT-TERM BOND FUND
Less than $100,000.............................................. 2.00 % 2.04 % 1.800 %
$100,000 but less than $250,000................................. 1.50 % 1.52 % 1.350 %
$250,000 but less than $1,000,000............................... 1.00 % 1.01 % 0.900 %
$1,000,000 and higher........................................... None None None
SHORT-TERM U.S. TREASURY SECURITIES FUND
Less than $100,000.............................................. 1.00 % 1.01 % 0.900 %
$100,000 but less than $250,000................................. 0.75 % 0.76 % 0.675 %
$250,000 but less than $500,000................................. 0.50 % 0.50 % 0.450 %
$500,000 and higher............................................. None None None
</TABLE>
*The entire sales charge will be reallowed to dealers affiliated with the
Advisers and their affiliates. Dealers who receive more than 90% of the sales
charge may be considered underwriters for purposes of the Securities Act of
1933.
<PAGE>
25
Employees and their immediate family members (spouses and children under age 21)
of SunTrust Banks, Inc. and its affiliates, as well as persons investing
distributions from qualified employee benefit retirement plans or rollovers from
Individual Retirement Accounts ("IRAs") previously established with a SunTrust
Banks, Inc. affiliate bank trust department, will be exempt from sales charges
in purchasing Investor Shares.
When accounts for which a subsidiary bank of SunTrust Banks, Inc. has acted in a
fiduciary, administrative, custodial or investment advisory capacity are closed
and Investor Shares purchased, the Investor Shares that are purchased in an
amount equal to or lesser than the value of the account distribution will be
exempt from sales charges. Any subsequent purchases will be subject to the
applicable sales charge.
Purchases of STI Classic Fund Investor Shares through a SunTrust Banks, Inc.
affiliate bank asset allocation account will be exempt from sales charges.
Dealers will be reallowed the entire sales charge imposed on purchases of
Investor Shares and may, therefore, be deemed "underwriters" for purposes of the
Securities Act of 1933.
RIGHTS OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of a
Fund's Investor Shares by a "single purchaser," the Trust will cumulate current
purchases at the offering price with the current market value of previously
purchased Investor Shares of any Trust's non-Money Market Funds ("Eligible
Funds") which are sold subject to a sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of an Eligible Fund for their own account or for trust
or custodial accounts for their minor children, or (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended, including related plans of the same employer. Furthermore, under this
provision, purchases by a "single purchaser" shall include purchases by an
individual for his/her own account in combination with (i) purchases of that
individual and spouse for their joint account or for trust and custodial
accounts for their minor children and (ii) purchases of that individual's spouse
for his/ her own account. To be entitled to a reduced sales charge based upon
shares already owned, the investor must ask the Distributor for such reduction
at the time of purchase and provide the account number(s) of the investor, the
investor and spouse, and their children (under age 21), and give the ages of
such children. The Funds may amend or terminate this right of accumulation at
any time as to subsequent purchases.
LETTER OF INTENT
By submitting a Letter of Intent to the Transfer Agent, a "single purchaser" may
purchase shares of an Eligible Fund during a 13-month period at the reduced
sales charge rates applicable to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. The purchase price for these prior trades will
not be adjusted.
A written Letter of Intent provided to the Transfer Agent, is not legally
binding on the signer or a Fund, and provides for the holding in escrow by the
Transfer Agent of 3.75% of the total amount intended to be purchased until such
purchase is completed within the
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26
13-month period. A Letter of Intent may be dated to include shares purchased up
to 90 days prior to the date the Letter is signed. The 13-month period begins on
the date of the earliest purchase. If the intended investment is not completed,
the Transfer Agent will surrender an appropriate number of the escrowed shares
for redemption in order to realize the difference between the sales charge on
the shares purchased at the reduced rate and the sales charge otherwise
applicable to the total shares purchased.
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE
The Trust will combine purchases of Investor Shares of Eligible Funds made on
the same day by the investor, his/her spouse, and his/her children under age 21
when calculating the sales charge. This combination may also apply to purchases
made pursuant to a Letter of Intent. Purchases made by such persons over a 13
month period could thus qualify the entire purchase for a reduced sales charge.
SPECIAL DIVIDEND SERVICES
Dividend distributions made by a Fund can be automatically reinvested in any one
Fund without a sales charge, subject to account minimum initial purchase amounts
and minimum maintained balance requirements.
REPURCHASE OF FUND SHARES
Investor Shares of a Fund may be purchased at their net asset value if Investor
Shares, sold subject to a sales charge, were redeemed from a Fund within the
past 60 days. The amount which may be reinvested is limited to an amount up to
but not exceeding the redemption proceeds. In order to exercise this privilege,
a written order for the purchases must be received by the Transfer Agent within
60 days after the redemption. It is the responsibility of the investor to notify
the Transfer Agent that the investor is repurchasing Investor Shares at the time
of the transaction.
REDEMPTION OF FUND SHARES
Shareholders may redeem their Investor Shares without charge on any day that net
asset value is calculated. Investor Shares may ordinarily be redeemed by mail or
telephone request to the Transfer Agent.
With respect to the Money Market Funds, redemption orders must be received by
the Transfer Agent on a Business Day before 1:00 p.m. Eastern time for the Prime
Quality and U.S. Government Securities Money Market Funds and before 11:00 a.m.
Eastern time for the Tax-Exempt Money Market Fund to be effective that day.
Redemption orders received after the times noted above will normally be executed
the following day. The Trust reserves the right to wire redemption proceeds
within five Business Days after receiving the redemption orders if, in the
judgment of the Advisor, an earlier payment could adversely impact a Fund.
With respect to the Bond and State Tax-Exempt Bond Funds, 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 within
five Business Days following receipt of the order.
Requests for redemptions from the Funds may be placed in writing or by telephone
directly to an Investment Consultant of a SunTrust Banks, Inc. affiliate bank,
through SunTrust Securities, Inc. and through certain correspondent banks of
SunTrust Banks, Inc. (or via FUNDLINK to the Transfer Agent). Redemptions placed
via
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27
telephone or FUNDLINK (1-800-428-6970) can only be placed for a minimum of
$1,000.
Redemption proceeds can be wired, distributed by check, or transferred to a
Shareholder's account via FUNDLINK. There will be a $7.00 wire charge for
redemptions processed from accounts which require wires to particular banks.
When Investor Shares are purchased by check or through ACH Automated Clearing
House ("ACH") the proceeds from the redemption of those Shares are not
available, and the Shares may not be exchanged, until the Trust or its agents
are reasonably certain that the purchase check has cleared, which could take up
to 15 Business Days.
A Shareholder may be required to redeem Investor Shares if the balance in a
Shareholder's Fund account drops below $2,000 for the Bond and State Tax-Exempt
Bond Funds ($5,000 for the Money Market Funds) as a result of redemptions, and,
the Shareholder does not increase its balance to at least $2,000 for the Bond
and State Tax-Exempt Bond Funds ($5,000 for the Money Market Funds) on 60 days'
written notice. The minimum account balance for employees of SunTrust is $1,000
for the Bond and State Tax-Exempt Bond Funds. 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 cases, an investor may
incur brokerage costs in converting such securities to cash.
Redemptions of $25,000 or greater for Bond and State Tax-Exempt Bond Funds must
be in writing and a signature guarantee must accompany the written request.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan can be established for any Fund account with a
$10,000 minimum balance. Under the plan, redemptions can be automatically
processed (monthly, quarterly, semi-annually or annually) by check or through an
electronic transfer to a Shareholder's SunTrust Banks, Inc. affiliate bank
account with a minimum redemption amount of $50.
EXCHANGES
Some or all of the Investor Shares of the Funds for which payment has been
received (i.e., an established account) may be exchanged for Investor Shares of
other Funds within the Trust. Shares being exchanged for the first time from a
Money Market Fund into a Fund with a sales charge will be subject to the sales
charge of that Fund. Likewise, Shares being exchanged for the first time into a
Fund with a higher sales charge will be subject to an incremental sales charge.
Exchanges made from a Fund with a higher sales charge to a Fund with a lower
sales charge or a Money Market Fund are made without a sales charge.
Four exchanges may be made per calendar year. More than four exchanges in a year
may be considered an abuse of the exchange privilege. The Trust reserves the
right to charge a $10.00 fee for each exchange. A Shareholder with more than
four exchanges per year will be notified prior to the imposition of any such
fee. Exchanges may be requested through an Investment Consultant of a SunTrust
Banks, Inc. affiliate bank, SunTrust Securities, Inc. and certain correspondent
banks of SunTrust Banks, Inc. either by telephone or in writing (or via FUNDLINK
through the Transfer Agent). The minimum exchange amount is $1,000 subject to
account minimum initial purchase amounts
<PAGE>
28
and minimum maintained balance requirements. This exchange offer is subject to
change or termination by the Trust at any time upon 60 days' notice.
DIVIDENDS AND DISTRIBUTIONS
MONEY MARKET FUNDS
Dividends from net investment income (exclusive of capital gains) of each of the
Money Market Funds are declared on each Business Day to Shareholders at the
close of business on the day of declaration. 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 (except in the case
of the Tax-Exempt Money Market Fund) and minus the amortization of market
premium on such assets, (iii) 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. Investor Shares begin earning dividends on the Business
Day the purchase order is effective and continue earning dividends through and
including the Business Day before the redemption order is effective. Dividends
are paid within ten Business Days after the end of each month in the form of
additional Investor Shares of the same Fund unless the Shareholder has elected
prior to the date of distribution to receive payment in cash. Such election, or
any revocation thereof, must be made in writing at least 15 days prior to the
date of distribution to the Transfer Agent and will become effective with
respect to dividends paid after its receipt. Dividends are paid within ten
Business Days after a Shareholder's complete redemption of his Investor Shares
in a Fund.
BOND AND STATE TAX-EXEMPT BOND FUNDS
Dividends from net investment income (exclusive of capital gains) are declared
on each Business Day and paid monthly by each of the Bond and State Tax-Exempt
Bond Funds. Each Fund's net realized capital gains (including net short-term
capital gains) are 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 (except in the
case of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds)
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. Investor Shares invested in the
Bond and State Tax-Exempt Bond Funds are eligible to begin earning dividends
that are declared on the Business Day after the purchase order is effective and
continue to be eligible for dividends through and including the day the
redemption order is effective.
The net asset value of Investor Shares of the non-Money Market Funds will be
reduced by the amount of any dividend or distribution. Dividends and
distributions are paid in the form of additional Investor Shares of the same
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 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
<PAGE>
29
Shareholder's complete redemption of its Investor Shares in a Fund.
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 each Fund or
its Shareholders. In particular, no attempt has been made herein to provide
information on the tax laws of Florida, Georgia or Tennessee. Accordingly,
Shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local income taxes.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each 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. Each Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment companies.
TAX STATUS OF DISTRIBUTIONS: MONEY MARKET FUNDS
The Prime Quality Money Market Fund and the U.S. Government Securities Money
Market Fund will each distribute all of their net investment income (including,
for this purpose, net short-term capital gains) to Shareholders. Dividends from
net investment income will be taxable to Shareholders as ordinary income whether
received in cash or in additional shares.
The Tax-Exempt Money Market Fund will distribute all of its net investment
income (including net short-term capital gains) to Shareholders. If, at the
close of each quarter of its taxable year, at least 50% of the value of the
Fund's assets consists of obligations the interest on which is excludable from
gross income, the Fund may pay exempt-interest dividends to its Shareholders.
Those dividends constitute the portion of the aggregate dividends as designated
by the Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
Shareholder's gross income for regular federal income tax purposes, but may have
alternative minimum tax consequences. See the Statement of Additional
Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Tax-Exempt Money Market Fund to purchase sufficient amounts of
tax-exempt securities to satisfy the Code's requirements for the payment of
exempt-interest dividends.
TAX STATUS OF DISTRIBUTIONS: BOND AND STATE TAX-EXEMPT BOND FUNDS
Each 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 Funds will be taxable to
Shareholders as ordinary income whether received in cash or in additional
shares.
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30
Each of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds
will distribute all of its net investment income (including net short-term
capital gains) to Shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of a Fund's assets consist of obligations the
interest on which is excludable from gross income, the Fund may pay
"exempt-interest dividends" to its Shareholders. Those dividends constitute the
portion of the aggregate dividends as designated by the Fund, equal to the
excess of the excludable interest over certain amounts disallowed as deductions.
Exempt-interest dividends are excludable from a Shareholder's gross income for
regular federal income tax purposes, but may have alternative minimum tax
consequences. See the Statement of Additional Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds
to purchase sufficient amounts of tax-exempt securities to satisfy the Code's
requirements for the payment of exempt-interest dividends.
TAX STATUS OF DISTRIBUTIONS: ALL FUNDS
Dividends from net investment income will qualify for the dividends received
deduction for corporate Shareholders only to the extent such distributions are
derived from dividends paid by domestic corporations. Dividends from net capital
gains (the excess of net long-term capital gains over net short-term capital
loss) will be treated 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. Each
Fund will make annual reports to Shareholders of the federal income tax status
of all distributions. Dividends declared by a 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
Shareholders on December 31, of that year, if paid by the Fund any time during
the following January.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by a Shareholder from a 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. Each 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 a Fund is considered tax
exempt in their particular states.
Income derived by a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. No Fund will be able to elect to treat Shareholders
as having paid their proportionate share of such foreign taxes.
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase shares of a "tax-exempt" Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or persons related to "substantial
users") of facilities financed by "private activity bonds" or certain industrial
development bonds should consult their tax advisors before purchasing shares.
For these purposes,
<PAGE>
31
the term "substantial user" is defined generally to include a "non-exempt
person" who regularly uses in trade or business a part of a facility financed
from the proceeds of such bonds. See the Statement of Additional Information.
A 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 Fund. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund 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.
INVESTMENT ADVISORS
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $66
billion as of December 31, 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,
Inc.--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 $47 billion as of December 31, 1995.
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the Prime
Quality Money Market, U.S. Government Securities Money Market, Tax-Exempt Money
Market, Short-Term U.S. Treasury Securities, Short-Term Bond and U.S. Government
Securities Funds. As of June 30, 1996, Trusco had approximately $13.7 billion in
assets under management. The principal business address of Trusco is 50 Hurt
Plaza, Suite 1400, Atlanta, Georgia 30303.
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the
Limited-Term Federal Mortgage Securities, Investment Grade Bond, Investment
Grade Tax-Exempt Bond and Florida Tax-Exempt Bond Funds. As of June 30, 1996,
STI Capital had discretionary management authority with respect to assets of
approximately $11 billion. The principal business address of STI Capital is P.O.
Box 3808, Orlando, Florida 32802.
SunTrust Bank, Chattanooga, N.A. ("SunTrust Bank, Chattanooga") (formerly
American National Bank & Trust Company) serves as the Advisor to the Tennessee
Tax-Exempt Bond Fund. SunTrust Bank, Chattanooga, N.A. had
<PAGE>
32
approximately $1.7 billion in assets under management as of December 31, 1995.
The principal business address of SunTrust Bank, Chattanooga, N.A. is 736 Market
Street, Chattanooga, Tennessee 37402.
SunTrust Bank, Atlanta (formerly Trust Company Bank) serves as the Advisor to
the Georgia Tax-Exempt Bond Fund. As of December 31, 1995, SunTrust Bank,
Atlanta had approximately $12.5 billion in assets under management. The
principal address for SunTrust Bank, Atlanta is 25 Park Place, Atlanta, Georgia
30303.
The Trust and the above Advisors have entered into advisory agreements (the
"Advisory Agreements"). Under the Advisory Agreements, the Advisors make the
investment decisions for the assets of the Fund(s) they advise and continuously
review, supervise and administer their respective Fund's investment program. The
Advisors discharge their 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 FUNDS
INVOLVE 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 all Funds, the Advisors may
execute brokerage or other agency transactions through affiliates of the
Advisors.
For the services provided and expenses incurred pursuant to the Advisory
Agreement: Trusco is entitled to receive advisory fees computed daily and paid
monthly at the annual rate of .74%, .65%, .65%, .55%, .65% and .65% of the
average daily net assets of the U.S. Government Securities Fund, Prime Quality
Money Market Fund, U.S. Government Securities Money Market Fund, Tax-Exempt
Money Market Fund, Short-Term U.S. Treasury Securities Fund and Short-Term Bond
Fund, respectively; STI Capital is entitled to receive advisory fees computed
daily and paid monthly at the annual rate of .65%, .74%, .74% and .65% of the
average daily net assets of the Florida Tax-Exempt Bond Fund, Investment Grade
Bond Fund, Investment Grade Tax-Exempt Bond Fund and Limited-Term Federal
Mortgage Securities Fund, respectively; SunTrust Bank, Chattanooga is entitled
to receive advisory fees computed daily and paid monthly at the annual rates of
.65% of the average daily net assets of the Tennessee Tax-Exempt Bond Fund; and
SunTrust Bank, Atlanta is entitled to receive advisory fees computed daily and
paid monthly at the annual rate of .65% of the average daily net assets of the
Georgia Tax-Exempt Bond Fund.
From time to time, an Advisor may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. Currently, the
Advisors and the Distributor have agreed to voluntary reductions in their
respective fees as well as reductions in service and distribution 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
any time.
For the fiscal year ended May 31, 1996: Trusco received advisory fees computed
daily and paid monthly at the annual rate of .50%, .51%, .47%, .22%, .46% and
.16% of the average daily net assets of the Prime Quality Money Market Fund,
U.S. Government Securities Money Market Fund, Tax-Exempt Money Market Fund,
Short-Term U.S. Treasury Securities Fund, Short-Term Bond Fund and U.S.
Government
<PAGE>
33
Securities Fund, respectively; STI Capital received advisory fees computed daily
and paid monthly at the annual rate of .38%, .63%, .61%, and .43% of the average
daily net assets of the Florida Tax-Exempt Bond Fund, Investment Grade Bond
Fund, Investment Grade Tax-Exempt Bond Fund and Limited-Term Federal Mortgage
Securities Fund, respectively; SunTrust Bank, Chattanooga received advisory fees
computed daily and paid monthly at the annual rate of .00% of the average daily
net assets of the Tennessee Tax-Exempt Bond Fund and SunTrust Bank, Atlanta
received advisory fees computed daily and paid monthly at the annual rate of
.37% of the average daily net assets of the Georgia Tax-Exempt Bond Fund.
PORTFOLIO MANAGERS
Mr. Charles B. Leonard, CFA, First Vice President of Trusco, and Michael L.
Ford, an Associate of Trusco, have been responsible for the day-to-day
management of the U.S. Government Securities Fund since it commenced operations.
Mr. Leonard has been with Trusco since 1986 as the senior fixed income manager.
Mr. Ford has been with Trusco since April 1994. Prior to joining Trusco, Mr.
Ford served as a senior securities analyst with Liberty Capital Advisors from
January, 1992 to April, 1994 and has served as a securities analyst at Southern
Farm Bureau Life Insurance Company from 1990 to 1992.
Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA, have been responsible for
the day-to-day management of the Limited-Term Federal Mortgage Securities Fund
since it commenced operations. Mr. Denney has served as Executive Vice President
of STI Capital since 1983. Mr. West has served as a fixed income portfolio
manager with STI Capital since 1989. Mr. Denney has also been responsible for
the day-to-day management of the Investment Grade Bond Fund since it commenced
operations.
Ms. Gay Cash has been responsible for the day-to-day management of the Georgia
Tax-Exempt Bond Fund since it commenced operations. Ms. Cash has served as a
Vice President of SunTrust, Atlanta since January 1, 1987.
Mr. Ronald Schwartz, CFA, has been responsible for the day-to-day management of
the Florida Tax-Exempt Bond and Investment Grade Tax-Exempt Bond Funds since
each Fund commenced operations. Mr. Schwartz joined STI Capital in 1988 and
currently serves as a Senior Vice President. Mr. Schwartz, has also been
responsible for the day-to-day management of the Tennessee Tax-Exempt Bond Fund
since July, 1995. Mr. Schwartz serves as Vice President and Trust Investment
Officer of SunTrust Bank, Chattanooga.
Ms. Patricia Love has been responsible for the day-to-day management of the
Tennessee Tax-Exempt Bond Fund since September 1995. Ms. Love serves as Vice
President and Trust Investment Officer of SunTrust Bank, Chattanooga. Ms. Love
is also a portfolio manager at STI Capital. Ms. Love has been with SunTrust
Bank, Chattanooga since 1993 and prior to that served as a portfolio analyst
with First City Texas from 1986 to 1993.
Mr. David Yealy has been responsible for the day-to-day management of the
Short-Term Bond and Short-Term U.S. Treasury Securities Funds since July 1996.
Mr. Yealy joined Trusco in 1991 and currently serves as a Vice President.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, currently
(a) prohibit a bank holding
<PAGE>
34
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 Advisors believe that
each may perform the services for STI Classic Funds contemplated by their
respective Advisory Agreements 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 Advisors from continuing to perform services for STI Classic Funds.
If the Advisors were prohibited from providing services to STI Classic Funds,
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 Advisors, or their affiliates, would consider the
possibility of offering to perform additional services for STI Classic Funds. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which the Advisors, or such affiliates, might
offer to provide such services.
In addition, state securities laws on this 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
(the "Distribution Agreement") dated May 29, 1992. The Investor Shares of each
Fund have a distribution plan dated May 29, 1992, as amended ("Investor Plan").
The Distribution Agreement and the Investor Plan provide that the Investor
Shares of the Funds may pay a distribution services fee to the Distributor of up
to .20% of the average daily net assets of the Prime Quality Money Market Fund,
.17% of the average daily net assets of the U.S. Government Securities Money
Market Fund, .15% of the average daily net assets of the Tax-Exempt Money Market
Fund, .18% of the average daily net assets of the Short-Term U.S. Treasury
Securities Fund, .23% of the average daily net assets of the Short-Term Bond
Fund, .43% of the average daily net assets of the Investment Grade Bond Fund,
.43% of the average daily net assets of the Investment Grade Tax-Exempt Bond
Fund, .18% of the average daily net assets of the Florida Tax-Exempt Bond Fund,
.18% of the average daily net assets of the Georgia Tax-Exempt Bond Fund, .18%
of the average daily net assets of the Tennessee Tax-Exempt Bond Fund, .38% of
the average daily net assets of the U.S. Government Securities Fund and .23% of
the average daily net assets of the Limited-Term Federal Mortgage Securities
Fund. The Distributor will waive all or a portion of the distribution fee in
order to limit the net expenses of the Investor Shares to the amounts set forth
under "Expense Summary." The Distributor may apply this fee toward: (a)
compensation for its services in connection
<PAGE>
35
with distribution assistance or provision of shareholder services; or (b)
payments to financial institutions and intermediaries such as banks (including
SunTrust Banks, Inc.'s affiliate banks), savings and loan associations,
insurance companies, and investment counselors, broker-dealers, and the
Distributor's affiliates and subsidiaries as compensation for services,
reimbursement of expenses incurred in connection with distribution assistance,
or provision of Shareholder services. The Investor Plan is characterized as a
compensation plan since the distribution fee will be paid to the Distributor
without regard to the distribution or shareholder service expenses incurred by
the Distributor or the amount of payments made to financial institutions and
intermediaries. SunTrust Banks, Inc.'s affiliate banks and certain correspondent
banks may serve as shareholder servicing agents to the Trust. A prospective
investor may visit any one of the Investment Services offices of the SunTrust
Banks, Inc.'s affiliate banks, as listed on the last pages of the Prospectus,
SunTrust Securities, Inc. or certain correspondent banks of SunTrust Banks, Inc.
to receive copies of the Prospectuses for the Investor Shares of the Trust and
application forms. Trust Shares of each Fund are offered without a sales charge
or a distribution fee primarily to institutional investors, including affiliates
and correspondents for the investment of funds in which they act in a fiduciary,
agency, investment advisory or custodial capacity. The Flex Shares of a Fund are
subject to a contingent deferred sales charge, pay a distribution services fee
to the Distributor and are also subject to a services fee for personal service
and maintenance of shareholder accounts. The contingent deferred sales charge
option of the Flex Shares provides investors with an alternative purchase
arrangement to Investor Shares. An investor may call 1-800-428-6970 to receive
more information regarding Trust Shares or Flex Shares. 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.
Each Fund may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
With respect to each of the Funds, the Distributor may, from time to time and at
its own expense, provide promotional incentives, in the form of cash or other
compensation, to certain financial institutions whose representatives have sold
or are expected to sell significant amounts of these Funds.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as Administrator of the Trust.
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.
The Administrator is entitled to a fee from each Fund, 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 0.10%
over $1 billion to $5 billion 0.07%
over $5 billion to $8 billion 0.05%
over $8 billion to $10 billion 0.045%
over $10 billion 0.04%
</TABLE>
From time to time, the Administrator may waive (either voluntarily or pursuant
to applicable state limitations) all or a portion of the administration fee
payable with respect to the Trust.
<PAGE>
36
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, 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 and Investment Operations, Inc., 303
Peachtree Street N.E., 14th Floor, Atlanta, Georgia 30308, serves as custodian
of the assets of each Fund. The custodian holds cash, securities and other
assets of the Trust as required by the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
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 and audited financial
statements annually. The Trust furnishes proxy statements and other reports to
Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders may contact the Transfer Agent in order to obtain information on
account statements, procedures and other related information by calling
1-800-428-6970.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
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 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
<PAGE>
37
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.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
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.
CORPORATE DEBT OBLIGATIONS -- Corporate debt obligations are debt instruments
issued by corporations with maturities exceeding 270 days. Such instruments may
include putable corporate bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Custodial receipts are 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 a
<PAGE>
38
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 ("TRs"), Treasury
Investment Growth Receipts ("TIGRs"), and Certificates of Accrual on Treasury
Securities ("CATS").
Receipts are sold as zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments. See "Zero Coupon Obligations."
DERIVATIVES -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, swap agreements, and some mortgage-back securities (CMOs,
REMICs and SMBs). See elsewhere in this "Description of Permitted Investments"
for discussions of these various instruments, and see "Investment Policies and
Strategies" for more information about any investment policies and limitations
applicable to their use.
DOLLAR ROLLS -- Dollar rolls are transactions in which securities are sold for
delivery in the current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering into dollar rolls include the risk
that the value of the security may change adversely over the term of the dollar
roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held.
To avoid any leveraging concerns, the Fund will place U.S. Government or other
liquid, high grade assets in a segregated account in an amount sufficient to
cover its repurchase obligation.
EURODOLLAR AND YANKEE BANK OBLIGATIONS -- Eurodollar bank obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
United States by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the United States
by foreign banks.
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. A Fund may use futures
contracts and related options for bona fide hedging purposes, to offset changes
in the value of securities held or
<PAGE>
39
expected to be acquired, to minimize fluctuations in foreign currencies, or to
gain exposure to a particular market or instrument. A 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.
GUARANTEED INVESTMENT CONTRACTS ("GICs") -- GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Fund on a monthly basis guaranteed
interest at either a fixed, variable or floating rate. A GIC provides that this
guaranteed interest will not be less than a certain minimum rate. A GIC is a
general obligation of the issuing insurance company and not a separate account.
The purchase price paid for a GIC becomes part of the general assets of the
issuer, and the contract is paid at maturity from the general assets of the
issuer.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance company. For this reason, an active secondary market in GICs
does not currently exist and GICs are considered to be illiquid investments.
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.
LOAN PARTICIPATIONS -- Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or agent for a syndicate
of lending banks, and sold by the lending bank or syndicate member
("intermediary bank"). In a loan participation, the borrower corporation will be
deemed to be the issuer of the participation interest except to the extent the
Fund derives its rights from the intermediary bank. Because the intermediary
bank does not guarantee a loan participation, a loan participation is subject to
the credit risks associated with the underlying corporate borrower. In the event
of bankruptcy or insolvency of the corporate borrower, a loan participation may
be subject to certain defenses that can be asserted by such borrower as a result
of improper conduct by the intermediary bank. In addition, in the event the
underlying corporate borrower fails to pay principal and interest
<PAGE>
40
when due, the Fund may be subject to delays, expenses and risks that are greater
than those that would have been involved if the Fund had purchased a direct
obligation of such borrower. Under the terms of a Loan Participation, the Fund
may be regarded as a creditor of the intermediary bank (rather than of the
underlying corporate borrower), so that the Fund may also be subject to the risk
that the intermediary bank may become insolvent.
The secondary market for loan participations is limited and any such
participation purchased by the Fund may be regarded as illiquid.
MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered
corporate or agency debt that differs from traditionally underwritten corporate
bonds only in the process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC obligations are not backed by the
full faith and credit of the U.S. Government as GNMA certificates are, but FNMA
and FHLMC securities are supported by the instrumentalities' right to borrow
from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS: CMOs are debt obligations or multiclass
pass-through certificates issued by agencies or instrumentalities of the U.S.
Government or by private originators or investors in mortgage loans. In a CMO,
series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a
<PAGE>
41
series of a CMO in a variety of ways. Each class of a CMO, often referred to as
a "tranche," is issued with a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal payments on the underlying
mortgage assets may cause CMOs to be retired substantially earlier then their
stated maturities or final distribution dates, resulting in a loss of all or
part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and thus is termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.
RISK FACTORS: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
MUNICIPAL FORWARDS -- Municipal forwards are forward commitments for the
purchase of tax-exempt bonds with a specified coupon to be delivered by an
issuer at a future date, typically exceeding 45 days but normally less than one
year after the commitment date. Municipal forwards are normally used as a
refunding mechanism for bonds that may only be redeemed on a designated future
date. A Fund will enter into municipal forwards when the price and yield of the
underlying bonds are believed to be favorable when compared to current prices
and yields. As with forward commitments, municipal forwards are subject to
market fluctuations due to changes in market interest rates between the
commitment date and the settlement date. Municipal forwards may be considered to
be illiquid investments.
To avoid any leveraging concerns, a Fund will maintain liquid, high grade
securities in a
<PAGE>
42
segregated account at least equal to the purchase price of the municipal
forward.
MUNICIPAL LEASE OBLIGATIONS -- Municipal lease obligations are securities issued
by state and local governments and authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. Depending upon the market for such securities, municipal lease
obligations may be illiquid.
MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. The payment of principal and interest
on private activity and industrial development bonds generally is dependent
solely on the ability of a facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as security for such payment.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
OBLIGATIONS OF SUPRANATIONAL ENTITIES -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a 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. A 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. A 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.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS -- Investments by a money market
fund are subject to limitations imposed under regulations adopted by the
Securities and Exchange Commission. Under these regulations, money market funds
may only acquire
<PAGE>
43
obligations that present minimal credit risk and that are "eligible securities,"
which means they are (i) rated, at the time of investment, by at least two
nationally recognized security rating organizations (one if it is the only
organization rating such obligation) in the highest rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest rating
category or, if unrated, determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term rating. In the case of taxable money market funds, investments in
second tier securities are subject to the further constraints in that (i) no
more than 5% of a Fund's assets may be invested in second tier securities and
(ii) any investment in securities of any one such issuer is limited to the
greater of 1% of the Fund's total assets or $1 million. A taxable money market
fund may also hold more than 5% of its assets in first tier securities of a
single issuer for three "business days" (that is, any day other than a Saturday,
Sunday or customary business holiday).
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 for
monitoring the Advisor's implementation of the guidelines and procedures.
SECURITIES LENDING -- In order to generate additional income, a 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. A 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.
SECURITIES OF FOREIGN ISSUERS -- There are certain risks connected with
investing in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less information on such
securities and their issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation of
capital invested abroad, and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable U.S. securities. The
value of a Fund's investments denominated in foreign currencies will depend on
the relative strengths of those currencies and the U.S. dollar, and a Fund may
be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on
<PAGE>
44
the sale of securities and net investment income and gains, if any, to be
distributed to shareholders by a Fund.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
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, FHLMC, 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., GNMA Securities), others are supported by the right of
the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank
Securities), while still others are supported only by the credit of the
instrumentality (e.g., FNMA Securities). 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.
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") and Coupon Under Book Entry Safekeeping
("CUBES").
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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking
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45
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 segregate
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, a 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.
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A-1
APPENDIX
I. BOND RATINGS
CORPORATE AND MUNICIPAL BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P") and
Moody's Investors Service, Inc. ("Moody's") corporate and municipal 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.
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.
MUNICIPAL NOTE RATINGS
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both. Short-term municipal securities rated MIG-2 and
VMIG-2 are of high quality. Margins of protection are ample although not so
large as in the preceding group.
<PAGE>
A-2
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment.
- - Amortization schedule (the larger the final
maturity relative to other maturities the more likely it will be treated as a
note).
- - Source of Payment (the more dependent the
issue is on the market for its refinancing, the more likely it will be treated
as a note).
Note rating symbols are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
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 liquidit y 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>
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<PAGE>
TRUST AND INVESTMENT SERVICES OFFICES OF SUNTRUST BANKS, INC.
AFFILIATE BANKS:
FLORIDA: (STATEWIDE TOLL FREE) 1-800-526-1177
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
200 S. Orange Avenue
Tower 10
Orlando, FL 32801
(407) 237-4380
1-800-432-4760, ext. 4380
SUNTRUST BANK, SOUTH FLORIDA, N.A.
501 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
(305) 765-7422
Boca Raton Office
800 S. Federal Highway
Boca Raton, FL 33435
(407) 243-6707
Coral Ridge Office
2626 E. Oakland Park Blvd.
Ft. Lauderdale, FL 33306
(305) 765-2155
Delray Beach Office
302 E. Atlantic Avenue
Delray Beach, FL 33483
(407) 243-6750
Hollywood Office
2001 Hollywood Blvd.
Hollywood, FL 33021
(305) 765-7062
Palm Beach Office
303 Royal Poinciana Plaza
Palm Beach, FL 33480
(407) 838-2855
PGA Office
2570 PGA Blvd.
Palm Beach Gardens, FL 33410
(407) 835-2802
SUNTRUST BANK, MIAMI, N.A.
777 Brickell Avenue
Miami, FL 33131
(305) 579-7450
SUNTRUST BANK, TAMPA BAY
315 E. Madison Street
Tampa, FL 33602
(813) 224-2517
SUNTRUST BANK, TREASURE COAST, N.A.
700 Virginia Avenue
Ft. Pierce, FL 34982
(407) 467-6459
Osceola Office
111 East Osceola Street
Stuart, FL 34994
(407) 223-6012
SUNTRUST BANK, EAST CENTRAL FLORIDA
Belnova Office
1590 S. Nova Road
Daytona Beach, FL 32114
(904) 258-2660
Bill France Office
299 Bill France Blvd.
Daytona Beach, FL 32114
(904) 258-2654
Deland Office
302 E. New York Avenue
Deland, FL 32724
(904) 822-5891
SUNTRUST BANK, NORTH FLORIDA, N.A.
200 W. Forsyth Street
Jacksonville, FL 32202
(904) 632-2534
SUNTRUST BANK, SOUTHWEST FLORIDA
12730 New Brittany Blvd.
Ft. Myers, FL 33907
(813) 277-2531
Pelican Bay Office
801 Laurel Oak Drive
Naples, FL 33963
(813) 598-0515
<PAGE>
SUNTRUST BANK, GOLF COAST
South Gate Office
3400 S. Tamiami Trail
Sarasota, FL 34230
(813) 951-3218
Port Charlotte Office
18501 Murdock Circle
Port Charlotte, FL 33949
(813) 625-9286
North Beneva Office
3577 Fruitville Road
Sarasota, FL 34237
(813) 951-3040
South Beneva Office
8181 S. Tamiami Trail
Sarasota, FL 34231
(813) 951-3053
Venice Office
200 Nokomis Avenue South
Venice, FL 34285
(813) 951-3053
SUNTRUST BANK, MID-FLORIDA, N.A.
210 Security Square
Winter Haven, FL 33880
(813) 297-6855
Okeechobee Office
815 S. Parrott Avenue
Okeechobee, FL 34974
(813) 763-6417
SUNTRUST BANK, NATURE COAST
One East Jefferson Street
Brooksville, FL 34601
(904) 754-5799
Crystal River Office
1502 SE Highway 19
Crystal River, FL 32629
(904) 795-8214
Seven Hills Office
1170 Mariner Blvd.
Spring Hill, FL 34609
(904) 754-5779
SUNTRUST BANK, NORTH CENTRAL FLORIDA
203 E. Silver Springs Blvd.
Ocala, FL 34470
(904) 368-6477
SUNTRUST BANK, TALLAHASSEE, N.A.
3522 Thomasville Road
Tallahassee, FL 32312
(904) 298-5030
SUNTRUST BANK, WEST FLORIDA
511 W. 23rd Street
Panama City, FL 32405
(904) 872-6087
GEORGIA:
SUNTRUST BANK, ATLANTA
55 Park Place
First Floor
Adams, GA 30303
(404) 588-7315
1-800-241-0901 Ext. 7315
SUNTRUST BANK, NORTHEAST GEORGIA, N.A.
101 N. Lumpkin Street
Athens, GA 30601
(706) 354-5346
GAINSVILLE BRANCH
104 Green Street
Gainsville, GA 30503
(770) 503-8674
SUNTRUST BANK, NORTHEAST GEORGIA, N.A.
100 East Second Avenue
Rome, GA 30161
(706) 236-4325
SUNTRUST BANK, AUGUSTA, N.A.
2815 Wrightsboro Road
Augusta, GA 30909
(706) 821-2015
SUNTRUST BANK, MIDDLE GEORGIA, N.A.
606 Cherry Street
Macon, GA 31208
(912) 755-5175
SUNTRUST BANK, WEST GEORGIA, N.A.
1246 First Avenue
Columbus, GA 31901
(706) 649-3631
SUNTRUST BANK, SAVANNAH, N.A.
33 Bull Street
Savannah, GA 31401
(912) 944-1165
<PAGE>
SUNTRUST BANK, SOUTH GEORGIA, N.A.
410 W. Broad Avenue
Albany, GA 31701
(912) 430-5468
Coffee County Branch
201 S. Peterson Avenue
Douglas, GA 31533
(912) 384-1820
SUNTRUST BANK, SOUTHEAST GEORGIA, N.A.
510 Gloucester Street
Brunswick, GA 31520
(912) 262-5322
SEA ISLAND ROAD BRANCH
701 Sea Island Road
St. Simons Island, GA 31522
(912) 638-3620
(912) 262-2227
TENNESSEE:
SUNTRUST BANK, NASHVILLE, N.A.
424 Church Street
4th Floor
Nashville, TN 37230
(615) 748-4477
1-800-932-2652
SUNTRUST BANK, CHATTANOOGA, N.A.
736 Market Street
Chattanooga, TN 37402
(615) 757-3085
TN WATS 1-800-572-7306, Ext. 3085
Bordering States WATS
1-800-874-1083, Ext. 3085
SUNTRUST BANK, EAST TENNESSEE, N.A.
700 East Hill Avenue
Knoxville, TN 37997
(615) 544-2181
1-800-225-0913, Ext. 2181
SUNTRUST BANK, NORTHEAST TENNESSEE
207 Mockingbird Lane
Johnson City, TN 37604
(615) 461-1005
SUNTRUST BANK, SOUTH CENTRAL TENNESSEE, N.A.
25 Public Square
Lawrenceburg, TN 38464
(615) 762-3511
ALABAMA:
SUNTRUST BANK, ALABAMA, N.A.
201 South Court Street
Florence, AL 35630
(205) 767-8463
<PAGE>
<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISORS
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
STI Capital Management, N.A. P.O. Box 3808
Orlando, FL 32802
SunTrust Bank, Chattanooga, N.A. 736 Market Street
Chattanooga, TN 37402
SunTrust Bank, Atlanta 25 Park Place
Atlanta, GA 30303
* DISTRIBUTOR
SEI Financial Services Company 680 E. Swedesford Road
Wayne, PA 19087
* ADMINISTRATOR
SEI Fund Resources 680 E. Swedesford Road
Wayne, PA 19087
* 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
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 2000 One Logan Square
Philadelphia, PA 19103
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
100487/10-95
DISTRIBUTOR
SEI Financial Services
Company
-- - - - - - - - - - - - - -
PROSPECTUS
INVESTOR SHARES
INVESTMENT GRADE BOND FUND
INVESTMENT GRADE TAX-EXEMPT
BOND FUND
U.S. GOVERNMENT
SECURITIES FUND
LIMITED-TERM FEDERAL MORTGAGE
SECURITIES FUND
SHORT-TERM BOND FUND
SHORT-TERM U.S. TREASURY
SECURITIES FUND
FLORIDA TAX-EXEMPT BOND FUND
GEORGIA TAX-EXEMPT
BOND FUND
TENNESSEE TAX-EXEMPT
BOND FUND
PRIME QUALITY MONEY
MARKET FUND
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
TAX-EXEMPT MONEY
MARKET FUND
INVESTMENT ADVISORS
TRUSCO CAPITAL MANAGEMENT, INC.
STI CAPITAL MANAGEMENT, N.A.
SUNTRUST BANK, CHATTANOOGA, N.A.
SUNTRUST BANK, ATLANTA
OCTOBER 1, 1996
ABCD
<PAGE>
STI CLASSIC FUNDS
FLEX SHARES
INVESTMENT GRADE BOND FUND
INVESTMENT GRADE TAX-EXEMPT BOND FUND
U.S. GOVERNMENT SECURITIES FUND
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
SHORT-TERM BOND FUND
SHORT-TERM U.S. TREASURY SECURITIES FUND
FLORIDA TAX-EXEMPT BOND FUND
GEORGIA TAX-EXEMPT BOND FUND
TENNESSEE TAX-EXEMPT BOND FUND
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
MID-CAP EQUITY FUND
BALANCED FUND
SUNBELT EQUITY FUND
INTERNATIONAL EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
INVESTMENT ADVISORS TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
STI CAPITAL MANAGEMENT, N.A.
SUNTRUST BANK, CHATTANOOGA
SUNTRUST BANK, ATLANTA
(THE "ADVISORS")
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios (each a "Fund" and, collectively, the
"Funds"). This Prospectus sets forth concisely the information about the Flex
Shares of the above-referenced Funds. Investors are advised to read this
Prospectus and retain it for future reference.
A Statement of Additional Information relating to the Funds 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, Pennsylvania 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 THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1996
<PAGE>
2
Throughout this Prospectus, the Investment Grade Bond Fund, Investment Grade
Tax-Exempt Bond Fund, Short-Term U.S. Treasury Securities Fund, Short-Term Bond
Fund, U.S. Government Securities Fund and Limited-Term Federal Mortgage
Securities Fund, which invest primarily in bonds and other fixed income
instruments, may be referred to as the "Bond Funds," and the Florida Tax-Exempt
Bond Fund, Georgia Tax-Exempt Bond Fund and Tennessee Tax-Exempt Bond Fund,
which invest primarily in tax-exempt bonds and other fixed income instruments,
may be referred to as the "State Tax-Exempt Bond Funds" and the Capital Growth
Fund, Value Income Stock Fund, Mid-Cap Equity Fund, Sunbelt Equity Fund.
International Equity Index Fund and International Equity Fund, which invest
primarily in equity securities, may be referred to as the "Equity Funds."
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary........................................................... 3
Financial Highlights...................................................... 7
Performance Information for Predecessor Collective Fund................... 9
The Trust................................................................. 9
Funds and Investment Objectives........................................... 9
Investment Policies and Strategies........................................ 11
General Investment Policies and Strategies................................ 24
Investment Risks.......................................................... 25
Investment Limitations.................................................... 27
Performance Information................................................... 27
Fundlink.................................................................. 28
Purchase of Fund Shares................................................... 28
Redemption of Fund Shares................................................. 30
Exchanges................................................................. 31
Dividends and Distributions............................................... 32
Tax Information........................................................... 32
STI Classic Funds Information............................................. 34
The Trust................................................................. 34
Board of Trustees......................................................... 34
Investment Advisors....................................................... 35
Portfolio Managers........................................................ 37
Banking Laws.............................................................. 38
Distribution.............................................................. 38
Administration............................................................ 39
Transfer Agent and Dividend Disbursing Agent.............................. 40
Custodian................................................................. 40
Legal Counsel............................................................. 40
Independent Public Accountants............................................ 40
Other Information......................................................... 40
Voting Rights............................................................. 40
Reporting................................................................. 40
Shareholder Inquiries..................................................... 40
Description of Permitted Investments...................................... 40
Appendix.................................................................. A-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT OF
ADDITIONAL INFORMATION 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.
<PAGE>
3
EXPENSE SUMMARY
FLEX SHARES
Bond Funds
The purpose of the following tables is to help you understand the various costs
and expenses that a shareholder will bear, directly or indirectly, in connection
with an investment in the Flex Shares of each Fund.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------------
BOND FUNDS
- ------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price)...................................................... None
Maximum Sales Charge Imposed
on Reinvested Dividends.............................................. None
Maximum Contingent Deferred
Sales Charge......................................................... 2.00%
Redemption Fees(1).................................................... None
Exchange Fee.......................................................... None
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) There is a $7.00 wire charge for redemptions for all funds processed from
retail accounts which require wires to particular banks.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LIMITED-TERM
INVESTMENT FEDERAL SHORT-TERM
INVESTMENT GRADE TAX- MORTGAGE SHORT-TERM U.S. TREASURY
GRADE BOND EXEMPT BOND U.S. GOVERNMENT SECURITIES BOND SECURITIES
FUND FUND SECURITIES FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers
& reimbursements)(1)............. .63% .61% .16% .43% .46% .22%
12b-1 Distribution & Service Fees
(after fee waivers &
reimbursements)(2)............... .39% .56% .28% .02% .00% .03%
Other Fund Expenses (after fee
waivers & reimbursements)(3)..... .62% .46% 1.22% .80% .74% .80%
- --------------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses
(after fee waivers &
reimbursements)(4)............... 1.64% 1.63% 1.66% 1.25% 1.20% 1.05%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. Each Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Investment Grade Bond Fund
-- .74%, Investment Grade Tax-Exempt Bond Fund -- .74%, U.S. Government
Securities Fund -- .74%, Limited-Term Federal Mortgage Securities Fund --
.65%, Short-Term Bond Fund -- .65% and Short-Term U.S. Treasury Securities
Fund -- .65%. See "Investment Advisors.".
(2) The Distributor is reimbursing, on a voluntary basis, a portion of its
expenses from each Fund. The Distributor reserves the right to terminate its
reimbursement at any time in its sole discretion. Absent such
reimbursements, 12b-1 Distribution & Service Fees would be as follows:
Investment Grade Bond Fund -- 1.00%, Investment Grade Tax-Exempt Bond Fund
-- 1.00%, U.S. Government Securities Fund -- 1.00%, Limited-Term Federal
Mortgage Securities Fund -- 1.00 %, Short-Term Bond Fund -- 1.00% and Short-
Term U.S. Treasury Securities Fund -- 1.00%. See "Distribution."
(3) Absent waivers and reimbursements, Other Fund Expenses would be as follows:
Investment Grade Bond Fund -- .75%, Investment Grade Tax-Exempt Bond Fund --
.51%, U.S. Government Securities Fund -- 1.12%, Limited-Term Federal
Mortgage Securities Fund -- 1.94%, Short-Term Bond Fund -- 2.41% and
Short-Term U.S. Treasury Securities Fund -- 1.32%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Investment Grade Bond Fund -- 2.49%, Investment Grade
Tax-Exempt Bond Fund -- 2.25%, U.S. Government Securities Fund -- 2.86%,
Limited-Term Federal Mortgage Securities Fund -- 3.59%, Short-Term Bond Fund
-- 4.06% and Short-Term U.S. Treasury Securities Fund -- 2.97%.
<PAGE>
4
EXPENSE SUMMARY
FLEX SHARES
State Tax-Exempt Bond Funds
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ----------------------------------------------------------------
STATE
TAX-EXEMPT
BOND FUNDS
- ----------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price).................................. None
Maximum Sales Charge Imposed
on Reinvested Dividends.......................... None
Maximum Contingent Deferred
Sales Charge..................................... 2.00%
Redemption Fees(1)................................ None
Exchange Fee...................................... None
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
(1)There is a $7.00 wire charge for redemptions for all funds processed from
retail accounts which require wires to particular banks.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
FLORIDA GEORGIA TENNESSEE
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
BOND FUND BOND FUND BOND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees (after fee waivers &
reimbursements)(1).............................. .38% .37% .00%
12b-1 Distribution & Service Fees (after fee
waivers & reimbursements)(2).................... .16% .30% .54%
Other Expenses (after fee waivers &
reimbursements)(3).............................. .81% .68% .81%
- -----------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (after fee waivers &
reimbursements)(4)(5)........................... 1.35% 1.35% 1.35%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. Each Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Florida Tax-Exempt Bond
Fund -- .65%, Georgia Tax-Exempt Bond Fund -- .65% and Tennessee Tax-Exempt
Bond Fund -- .65%. See "Investment Advisors."
(2) The Distributor is reimbursing, on a voluntary basis, a portion of its
expenses from each Fund. The Distributor reserves the right to terminate its
reimbursement at any time in its sole discretion. Absent such
reimbursements, 12b-1 Distribution & Service Fees would be as follows:
Florida Tax-Exempt Bond Fund -- 1.00%, Georgia Tax-Exempt Bond Fund -- 1.00%
and Tennessee Tax-Exempt Bond Fund -- 1.00%. See "Distribution."
(3) Absent waivers and reimbursements, Other Fund Expenses would be as follows:
Florida Tax-Exempt Bond Fund -- .89%, Georgia Tax-Exempt Bond Fund -- .70%
and Tennessee Tax-Exempt Bond Fund -- 1.09%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Florida Tax-Exempt Bond Fund -- 2.54%, Georgia
Tax-Exempt Bond Fund -- 2.35% and Tennessee Tax-Exempt Bond Fund -- 2.74%.
(5) Total Fund Operating Expenses for the Tennessee Tax-Exempt Bond Fund have
been restated to reflect current fees.
<PAGE>
5
EXPENSE SUMMARY
FLEX SHARES
Equity and Balanced Funds
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------
EQUITY
AND
BALANCED
FUNDS
- -------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price).................................. None
Maximum Sales Charge Imposed
on Reinvested Dividends.......................... None
Maximum Contingent Deferred
Sales Charge..................................... 2.00%
Redemption Fees(1)................................ None
Exchange Fee...................................... None
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
(1)There is a $7.00 wire charge for redemptions for all funds processed from
retail accounts which require wires to particular banks.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
VALUE
CAPITAL INCOME MID-CAP SUNBELT INTERNATIONAL INTERNATIONAL
GROWTH STOCK EQUITY BALANCED EQUITY EQUITY INDEX EQUITY
FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers &
reimbursements)(1).................... 1.03% .80% 1.00% .79% 1.02% .76% 1.06%
12b-1 Distribution & Service Fees (after
voluntary reductions &
reimbursements)(2).................... .76% .86% .46% .43% .16% .10% .00%
Other Fund Expenses (after fee waivers &
reimbursements)(3).................... .48% .34% .74% .79% 1.02% 1.24% 1.45%
- ------------------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (after fee
waivers & reimbursements)(4)(5)....... 2.27% 2.00% 2.20% 2.01% 2.20% 2.10% 2.51%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fund. Each Advisor reserves the right to terminate its waiver at any
time in its sole discretion. Absent such waivers and reimbursements,
Advisory Fees for the Funds would be as follows: Capital Growth Fund --
1.15%, Value Income Stock Fund -- .80%, Mid-Cap Equity Fund -- 1.15%,
Balanced Fund --.95%, Sunbelt Equity Fund -- 1.15%, International Equity
Index Fund -- .90% and International Equity Fund -- 1.25%. See "Investment
Advisors."
(2) The Distributor is reimbursing, on a voluntary basis, a portion of its
expenses from each Fund. The Distributor reserves the right to terminate its
reimbursement at any time in its sole discretion. Absent such
reimbursements, 12b-1 Distribution & Service Fees would be as follows:
Capital Growth Fund -- 1.00%, Value Income Stock Fund -- 1.00%, Mid-Cap
Equity Fund -- 1.00%, Balanced Fund -- 1.00%, Sunbelt Equity Fund -- 1.00%,
International Equity Index Fund -- 1.00% and International Equity Fund --
1.00%. See "Distribution."
(3) Absent waivers and reimbursements, Other Fund Expenses would be as follows:
Capital Growth Fund -- .53%, Value Income Stock Fund -- .35%, Mid-Cap Equity
Fund -- .89%, Balanced Fund -- 1.02%, Sunbelt Equity Fund -- 1.47%,
International Equity Index Fund -- 2.24% and International Equity Fund --
3.61%.
(4) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Capital Growth Fund -- 2.68%, Value Income Stock Fund
-- 2.15%, Mid-Cap Equity Fund -- 3.04%, Balanced Fund -- 2.97%, Sunbelt
Equity Fund -- 3.62%, International Equity Index Fund -- 4.14% and
International Equity Fund -- 5.86%.
(5) Total Operating Expenses for the Balanced Fund have been restated to reflect
current fees.
<PAGE>
6
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLES YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <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.
INVESTMENT GRADE BOND FUND................................................. $ 37 $ 52 $ 89 $ 194
INVESTMENT GRADE TAX-EXEMPT BOND FUND...................................... $ 37 $ 51 $ 89 $ 193
U.S. GOVERNMENT SECURITIES FUND............................................ $ 37 $ 52 $ 90 $ 197
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND.............................. $ 33 $ 40 $ 69 $ 151
SHORT-TERM BOND FUND....................................................... $ 32 $ 38 $ 66 $ 147
SHORT-TERM U.S. TREASURY SECURITIES FUND................................... $ 31 $ 34 $ 58 $ 129
FLORIDA TAX-EXEMPT BOND FUND............................................... $ 34 $ 43 $ 74 $ 162
GEORGIA TAX-EXEMPT BOND FUND............................................... $ 34 $ 43 $ 74 $ 162
TENNESSEE TAX-EXEMPT BOND FUND............................................. $ 34 $ 43 $ 74 $ 162
CAPITAL GROWTH FUND........................................................ $ 43 $ 71 $ 122 $ 261
VALUE INCOME STOCK FUND.................................................... $ 40 $ 63 $ 108 $ 233
MID-CAP EQUITY FUND........................................................ $ 42 $ 69 $ 118 $ 253
BALANCED FUND FUND......................................................... $ 40 $ 63 $ 108 $ 234
SUNBELT EQUITY FUND........................................................ $ 42 $ 69 $ 118 $ 253
INTERNATIONAL EQUITY INDEX FUND............................................ $ 41 $ 66 $ 113 $ 243
INTERNATIONAL EQUITY FUND.................................................. $ 45 $ 78 $ 134 $ 285
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF THE FUNDS AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. A person that purchases shares through
an account with a financial institution may be charged separate fees by the
financial institution. The rules of the Securities and Exchange Commission
require that the maximum sales charge be reflected in the above table. However,
certain investors may qualify for reduced sales charges. See "Purchase of Fund
Shares." Long-term Shareholders may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers, Inc.'s Rules of Fair Practice.
<PAGE>
7
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, independent
public accountants to the Trust, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information and which appear, along with the report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information regarding each Fund is contained in the Trust's Annual Report to
Shareholders and is available without charge by calling 1-800-428-6970.
For a Flex Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET ASSET NET DISTRIBUTIONS
VALUE INVESTMENT NET REALIZED AND FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME UNREALIZED GAINS INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------- ---------- ----------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------
INVESTMENT GRADE BOND FUND
------------------------------
FLEX SHARES
1996 (1).................... $10.33 $ 0.52 $ (0.26) $ (0.52) -- $ 10.07
-------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------------
FLEX SHARES
1996 (2).................... $11.30 $ 0.37 $ 0.18 $ (0.37) $ (0.37) $ 11.11
----------------------------------
U.S. GOVERNMENT SECURITIES FUND
----------------------------------
FLEX SHARES
1996 (1).................... $10.31 $ 0.52 $ (0.37) $ (0.52) $ (0.03) $ 9.91
-------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
-------------------------------------------------
FLEX SHARES
1996 (1).................... $10.14 $ 0.55 $ (0.15) $ (0.55) -- $ 9.99
-----------------------
SHORT-TERM BOND FUND
-----------------------
FLEX SHARES
1996 (3).................... $10.02 $ 0.47 $ (0.12) $ (0.47) $ (0.02) $ 9.88
------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
------------------------------------------
FLEX SHARES
1996 (4).................... $ 9.96 $ 0.48 $ (0.14) $ (0.48) -- $ 9.82
--------------------------------
FLORIDA TAX-EXEMPT BOND FUND
--------------------------------
FLEX SHARES
1996 (2).................... $10.19 $ 0.39 $ (0.06) $ (0.39) $ (0.05) $ 10.08
---------------------------------
GEORGIA TAX-EXEMPT BOND FUND
---------------------------------
FLEX SHARES
1996 (5).................... $ 9.72 $ 0.36 $ (0.14) $ (0.36) $ (0.02) $ 9.56
-----------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
-----------------------------------
FLEX SHARES
1996 (6).................... $ 9.59 $ 0.37 $ (0.18) $ (0.37) -- $ 9.41
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
RATIO OF EXPENSES (LOSS) TO AVERAGE
NET ASSETS RATIO OF RATIO OF NET TO AVERAGE NET NET ASSETS
END OF EXPENSES INVESTMENT INCOME ASSETS (EXCLUDING (EXCLUDING
TOTAL PERIOD TO AVERAGE (LOSS) TO AVERAGE WAIVERS AND WAIVERS AND
RETURN (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
--------- ----------- ---------- ----------------- ----------------- -----------------
<S> <C>
------------------------------
INVESTMENT GRADE BOND FUND
------------------------------
FLEX SHARES
1996 (1).................... 2.50%* $ 4,621 1.64%* 4.84%* 2.49%* 3.99%*
-------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------------
FLEX SHARES
1996 (2).................... 4.91%* $ 5,536 1.63%* 3.12%* 2.25%* 2.50%*
----------------------------------
U.S. GOVERNMENT SECURITIES FUND
----------------------------------
FLEX SHARES
1996 (1).................... 1.42%* $ 2,826 1.66%* 5.18%* 2.86%* 3.98%*
-------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
-------------------------------------------------
FLEX SHARES
1996 (1).................... 4.10%* $ 1,349 1.25%* 5.38%* 3.59%* 3.04%*
-----------------------
SHORT-TERM BOND FUND
-----------------------
FLEX SHARES
1996 (3).................... 3.73%* $ 966 1.20%* 4.77%* 4.06%* 1.91%*
------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
------------------------------------------
FLEX SHARES
1996 (4).................... 3.72%* $ 2,423 1.05%* 5.03%* 2.97%* 3.11%*
--------------------------------
FLORIDA TAX-EXEMPT BOND FUND
--------------------------------
FLEX SHARES
1996 (2).................... 3.27%* $ 2,692 1.35%* 3.79%* 2.54%* 2.60%*
---------------------------------
GEORGIA TAX-EXEMPT BOND FUND
---------------------------------
FLEX SHARES
1996 (5).................... 2.25%* $ 4,207 1.35%* 3.66%* 2.35%* 2.66%*
-----------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
-----------------------------------
FLEX SHARES
1996 (6).................... 1.98%* $ 2,017 1.34%* 3.80%* 2.74%* 2.40%*
<CAPTION>
PORTFOLIO
TURNOVER
RATE
----------
FLEX SHARES
1996 (1).................... 184.33%
FLEX SHARES
1996 (2).................... 513.90%
FLEX SHARES
1996 (1).................... 83.38%
FLEX SHARES
1996 (1).................... 83.01%
FLEX SHARES
1996 (3).................... 162.62%
FLEX SHARES
1996 (4).................... 94.00%
FLEX SHARES
1996 (2).................... 62.68%
FLEX SHARES
1996 (5).................... 60.02%
FLEX SHARES
1996 (6).................... 41.00%
</TABLE>
<PAGE>
8
FINANCIAL HIGHLIGHTS CONTINUED
<TABLE>
<CAPTION>
NET ASSET NET DISTRIBUTIONS
VALUE INVESTMENT NET REALIZED AND FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME UNREALIZED GAINS INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------- ---------- ----------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------
CAPITAL GROWTH FUND
----------------------
FLEX SHARES
1996 (2).................... $12.20 $ 0.02 $ 3.26 $ (0.05) $ (0.59) $ 14.84
--------------------------
VALUE INCOME STOCK FUND
--------------------------
FLEX SHARES
1996 (2).................... $11.59 $ 0.26 $ 2.65 $ (0.26) $ (1.16) $ 13.08
----------------------
MID-CAP EQUITY FUND
----------------------
FLEX SHARES
1996 (6).................... $11.13 -- $ 2.45 $ (0.02) $ (0.87) $ 12.69
----------------
BALANCED FUND
----------------
FLEX SHARES
1996 (7).................... $10.36 $ 0.24 $ 1.29 $ (0.25) $ (0.11) $ 11.53
---------------------
SUNBELT EQUITY FUND
---------------------
FLEX SHARES
1996 (6).................... $10.20 $ (0.07) $ 4.04 -- $ (0.20) $ 13.97
--------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------
FLEX SHARES
1996 (8).................... $10.24 -- $ 0.82 $ (0.10) $ (0.09) $ 10.87
--------------------------
INTERNATIONAL EQUITY FUND
--------------------------
FLEX SHARES
1996 (9).................... $10.44 $ 0.02 $ 0.91 -- -- $ 11.37
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
RATIO OF EXPENSES (LOSS) TO AVERAGE
NET ASSETS RATIO OF RATIO OF NET TO AVERAGE NET NET ASSETS
END OF EXPENSES INVESTMENT INCOME ASSETS (EXCLUDING (EXCLUDING
TOTAL PERIOD TO AVERAGE (LOSS) TO AVERAGE WAIVERS AND WAIVERS AND
RETURN (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
--------- ----------- ---------- ----------------- ----------------- -----------------
<S> <C>
----------------------
CAPITAL GROWTH FUND
----------------------
FLEX SHARES
1996 (2).................... 27.48%* $ 10,969 2.27%* (0.29%)* 2.68%* (0.70%)*
--------------------------
VALUE INCOME STOCK FUND
--------------------------
FLEX SHARES
1996 (2).................... 26.52%* $ 26,298 2.00%* 1.72%* 2.15%* 1.57%*
----------------------
MID-CAP EQUITY FUND
----------------------
FLEX SHARES
1996 (6).................... 23.00%* $ 5,029 2.20%* (0.37%)* 3.04%* (1.21%)*
----------------
BALANCED FUND
----------------
FLEX SHARES
1996 (7).................... 15.58%* $ 3,131 2.00%* 1.85%* 2.97%* 0.88%*
---------------------
SUNBELT EQUITY FUND
---------------------
FLEX SHARES
1996 (6).................... 39.86%* $ 2,705 2.20%* (1.43%)* 3.62%* (2.85%)*
--------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------
FLEX SHARES
1996 (8).................... 8.32%* $ 917 2.10%* (0.24%)* 4.14%* (2.28%)*
--------------------------
INTERNATIONAL EQUITY FUND
--------------------------
FLEX SHARES
1996 (9).................... 8.91%+ $ 953 2.51%* 1.08%* 5.86%* (2.27%)*
<CAPTION>
PORTFOLIO
TURNOVER
RATE
----------
FLEX SHARES
1996 (2).................... 156.46%
FLEX SHARES
1996 (2).................... 133.99%
FLEX SHARES
1996 (6).................... 115.62%
FLEX SHARES
1996 (7).................... 154.63%
FLEX SHARES
1996 (6).................... 106.27%
FLEX SHARES
1996 (8).................... 30.46%
FLEX SHARES
1996 (9).................... 113.34%
</TABLE>
* Annualized.
+ Cumulative since commencement of operations.
(1) Commenced operations on June 7, 1995.
(2) Commenced operations on June 1, 1995.
(3) Commenced operations on June 20, 1995.
(4) Commenced operations on June 22, 1995.
(5) Commenced operations on June 6, 1995.
(6) Commenced operations on June 5, 1995.
(7) Commenced operations on June 14, 1995.
(8) Commenced operations on June 8, 1995.
(9) Commenced operations on January 2, 1996.
<PAGE>
9
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUND
The International Equity Fund is the successor to a collective investment fund
previously managed by STI Capital Management, Inc. A substantial portion of the
assets of this collective investment fund was transferred to the Fund on
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. The Fund will be
somewhat smaller in asset size than the predecessor collective investment fund.
It is anticipated, however, that the Fund will reach the same or greater 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 for the period ended 9/30/95 (adjusted to reflect
current Fund expenses, net of voluntary waivers and reimbursements and with the
applicable maximum contingent deferred sales charge of 2.00%.)
<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 2.09% 9.35% 30.67%
</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 each non-Money Market Fund through three
separate classes (Trust Shares, Investor Shares and Flex Shares) and in each
Money Market Fund through two separate classes (Trust Shares and Investor
Shares), which provide for variations in distribution and service fees, transfer
agent fees, sales charges, voting rights and dividends. Except for differences
between classes, each share of each Fund represents an undivided, proportionate
interest in that Fund. This Prospectus relates to the Flex Shares of the Funds
described below.
FUNDS AND INVESTMENT OBJECTIVES
BOND FUNDS:
THE INVESTMENT GRADE BOND FUND seeks to provide as high a level of total return
through current income and capital appreciation as is consistent with the
preservation of capital primarily through investment in investment grade fixed
income securities.
THE INVESTMENT GRADE TAX-EXEMPT BOND FUND seeks to provide as high a level of
total return through federally tax-exempt current income and capital
appreciation as is consistent with the preservation of capital primarily through
investment in investment grade tax-exempt obligations.
THE U.S. GOVERNMENT SECURITIES FUND seeks to provide as high a level of current
income as is consistent with the preservation of
<PAGE>
10
capital by investing primarily in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
THE LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND seeks to provide as high a
level of current income as is consistent with the preservation of capital by
investing primarily in mortgage-related securities issued or guaranteed by U.S.
Government agencies and instrumentalities.
THE SHORT-TERM BOND FUND seeks to provide as high a level of current income,
relative to funds with like investment objectives, as is consistent with the
preservation of capital primarily through investment in short- to
intermediate-term investment grade fixed income securities.
THE SHORT-TERM U.S. TREASURY SECURITIES FUND seeks to provide as high a level of
current income, relative to funds with like investment objectives, as is
consistent with the preservation of capital through investment exclusively in
short-term U.S. Treasury securities.
STATE TAX-EXEMPT BOND FUNDS:
THE FLORIDA TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal income tax for Florida residents without undue investment risk.
THE GEORGIA TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal and state income tax for Georgia residents without undue
investment risk.
THE TENNESSEE TAX-EXEMPT BOND FUND seeks to provide current income exempt from
regular federal and state income tax for Tennessee residents without undue
investment risk.
EQUITY FUNDS:
THE CAPITAL GROWTH FUND seeks to provide capital appreciation by investing
primarily in a portfolio of common stocks, warrants and securities convertible
into common stock which in its Advisor's opinion are undervalued in the
marketplace at the time of purchase.
THE VALUE INCOME STOCK FUND seeks to provide current income with the secondary
goal of achieving capital appreciation by investing primarily in equity
securities.
THE MID-CAP EQUITY FUND (formerly known as the Aggressive Growth Fund) seeks to
provide capital appreciation by investing primarily in a diversified portfolio
of common stocks, preferred stocks and securities convertible into common stock
of small to mid-sized companies with above-average growth of earnings. Current
income will not be an important criterion of investment selection and any such
income should be considered incidental.
THE BALANCED FUND seeks to provide capital appreciation and current income by
investing in common and preferred stocks, warrants, securities convertible into
common stock and investment grade fixed income securities.
THE SUNBELT EQUITY FUND seeks to provide capital appreciation by investing
substantially all, and under normal market conditions at least 65%, of its
assets in common stocks, preferred stocks, warrants and securities convertible
into common stock of U.S. companies headquartered and/or conducting a
substantial portion of their operations in the southern region of the United
States. Current income will not be an important criterion of investment
selection and any such income should be considered incidental.
<PAGE>
11
THE INTERNATIONAL EQUITY INDEX FUND seeks to provide investment results that
correspond to the aggregate price and dividend performance of the securities
included in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australasia and Far East Index (the "MSCI EAFE-GDP Index"
or "EAFE-GDP Index"). 1
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 a Fund will achieve its investment objective.
The investment objectives of the Investment Grade Bond Fund, U.S. Government
Securities Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond
Fund, Short-Term U.S. Treasury Securities Fund, Capital Growth Fund, Value
Income Stock Fund, Mid-Cap Equity Fund, Balanced Fund, Sunbelt Equity Fund,
International Equity Index Fund and International Equity Fund are nonfundamental
and may be changed without a shareholder vote.
INVESTMENT POLICIES AND STRATEGIES
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund will invest only in those fixed income
obligations deemed investment grade obligations, i.e., rated BBB or better by
Standard & Poor's Corporation ("S&P") or Baa or better by Moody's Investors
Services, Inc. ("Moody's") or, if not rated by S&P or Moody's, of comparable
quality at the time of purchase as determined by the Fund's Advisor, including
corporate debt obligations; mortgage-backed securities, collateralized mortgage
obligations ("CMOs") and asset-backed securities; obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; obligations of supranational
entities and sponsored American Depositary Receipts ("ADRs") that are traded on
exchanges or listed on National Association of Securities Dealers Automated
Quotations ("NASDAQ"). Under normal circumstances, at least 65% of the Fund's
total assets will be invested in corporate and government bonds and debentures.
No more than 25% of the Fund's assets will be invested in securities rated BBB
by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable
quality at the time of purchase as determined by the Advisor.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies or
instrumentalities or, subject to a limit of 25% of the Fund's assets,
mortgage-backed securities issued by private issuers. These mortgage-backed
securities may be backed or collateralized by fixed, adjustable or floating rate
mortgages. The Fund may also invest in asset-backed securities which consist of
securities backed by company receivables, truck and auto loans, leases, credit
card receivables and home equity loans.
In order to reduce interest rate risk, and subject to a general limit of 25% of
the Fund's assets,
- ------------
1 "MSCI EAFE-GDP Index" is a registered service mark of Morgan Stanley Capital
International which does not sponsor and is in no way affiliated with the
International Equity Index Fund.
<PAGE>
12
the Fund may purchase floating or variable rate securities. Some floating or
variable rate securities will be subject to interest rate "caps" or "floors." It
may also buy securities on a when-issued basis, medium term notes, putable
securities and zero coupon securities. The Fund may also invest up to 10% of its
assets in restricted securities. The Fund may also engage in futures and options
transactions.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. In the case of mortgage related
securities and asset-backed securities, maturity will be determined based on the
expected average life of the security. The Fund may shorten its average weighted
maturity to as little as 90 days if deemed appropriate for temporary defensive
purposes. By so limiting the maturity of its investments, the Fund expects that
its net asset value will experience less price movement in response to changes
in interest rates than the net asset values of mutual funds investing in similar
credit quality securities with longer maturities.
The Fund's portfolio turnover rate was 184% for the fiscal year ended May 31,
1996. This rate of turnover will likely result in higher transaction costs and
higher levels of realized capital gains than if the turnover rate was lower.
INVESTMENT GRADE TAX-EXEMPT BOND FUND
The Investment Grade Tax-Exempt Bond Fund intends to be fully invested in
municipal securities the interest on which is exempt from regular federal income
taxes in the opinion of bond counsel to the issuer. The issuers of these
securities can be located in all fifty states, the District of Columbia, Puerto
Rico and other U.S. territories and possessions. It is a fundamental policy of
the Investment Grade Tax-Exempt Bond Fund to invest at least 80% of its total
assets in securities the income from which is exempt from regular federal income
tax and not treated as a preference item for purposes of the alternative minimum
tax. At least 65% of the Fund's assets will be invested in municipal bonds and
debentures, and at least 75% of its total assets invested in municipal bonds
will be in securities rated A or better by S&P or Moody's. Municipal securities
must be rated BBB or better by S&P or Baa or better by Moody's in the case of
bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, P-1, P-2 in
the case of tax-exempt commercial paper; and SP-1, SP-2, VMIG-1 or VMIG-2 in the
case of variable rate demand obligations. The Fund will only acquire securities
not rated by S&P or Moody's if, at the time of purchase, the Fund's Advisor
determines that such unrated obligations are of comparable quality to rated
obligations that may be acquired by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities and may
purchase municipal forwards, medium term notes, putable securities and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities subject to the alternative minimum tax.
The Fund may also invest up to 10% of its assets in restricted securities that
the Fund's Advisor determines are liquid under guidelines adopted by the Trust's
Board of Trustees and may engage in futures and options transactions.
Under normal market conditions, it is anticipated that the Fund's average
weighted
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13
maturity will range from 4 to 10 years. The Fund may shorten its average
weighted maturity to as little as 90 days if deemed appropriate for temporary
defensive purposes. By so limiting the maturity of its investments, the Fund's
net asset value is expected to experience less price movement in response to
changes in interest rates than the net asset values of mutual funds investing in
similar credit quality securities with longer maturities.
The Fund's portfolio turnover rate was 514% for the fiscal year ended May 31,
1996. This rate of turnover, if continued, will likely result in higher
transaction costs and higher levels of realized capital gains than if the
turnover rate was lower.
U.S. GOVERNMENT SECURITIES FUND
Under normal market conditions, the Fund will invest at least 65% of its assets
in obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, including mortgage-backed securities issued or guaranteed by
U.S. Government agencies such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home
Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities consisting of
CMOs and real estate mortgage investment conduits ("REMICs") purchased by the
Fund will be issued or guaranteed as to payment of principal and interest by the
U.S. Government, its agencies or instrumentalities or, if issued by private
issuers, rated in one of the two highest rating categories by a nationally
recognized statistical rating organization (an "NRSRO").
The principal governmental issuers or guarantors of mortgage-backed securities
are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and
credit of the U.S. Government while obligations of FNMA and FHLMC are supported
by the respective agency only. The Fund may purchase mortgage-backed securities
that are backed or collateralized by fixed, adjustable or floating rate
mortgages.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of a governmental entity and thus may bear a risk of nonpayment.
The timely payment of principal and interest normally is supported, at least
partially, by various forms of insurance or guarantees. There can be no
assurance, however, that such credit enhancement will support full payment of
the principal and interest on such obligations. The average maturity of the
Fund's investment portfolio will typically range from 7 to 14 years.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P or better, or that are deemed by the Fund's Advisor to be
of comparable quality; commercial paper rated at the time of purchase within the
two highest ratings categories of an NRSRO; bankers' acceptances; certificates
of deposit and time deposits; and U.S. Treasury obligations, which include
custodial receipts and repurchase agreements involving securities that
constitute permissible investments for the Fund. The Fund intends to invest in
privately issued, mortgage-backed securities only if they are rated in one of
the two highest rating categories by an NRSRO.
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The
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14
Fund may purchase floating or variable rate securities, and may engage in dollar
roll transactions.
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Under normal market conditions, the Limited-Term Federal Mortgage Securities
Fund will invest at least 65% of its assets in mortgage-related securities
issued or guaranteed by U.S. Government agencies such as GNMA, FNMA or FHLMC.
Obligations of GNMA are backed by the full faith and credit of the U.S.
Government while obligations of FNMA and FHLMC are supported by the respective
agency only. The Fund may purchase mortgage-backed securities that are backed or
collateralized by fixed, adjustable or floating rate mortgages. The Fund's
holdings of mortgage-backed securities will typically have an average life of
from one to five years.
Mortgage-backed securities consisting of CMOs and REMICs purchased by the Fund
will be either issued or guaranteed as to payment of principal and interest by
the U.S. Government, its agencies or instrumentalities or, if issued by private
issuers, rated in one of the two highest rating categories by an NRSRO.
Mortgage-backed securities that are not issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, including securities nominally
issued by a governmental entity (such as the Resolution Trust Corporation), are
not obligations of the U.S. Government and thus bear a risk of nonpayment. The
timely payment of principal and interest normally is supported, at least
partially, by various forms of insurance or guarantees. There can be no
assurance, however, that such credit enhancement will support full payment of
the principal and interest on such obligations.
With respect to the remaining 35% of its assets, the Fund may invest in
corporate or government bonds that carry a rating of Baa or better by Moody's or
BBB or better by S&P, or that are deemed by the Fund's Advisor to be of
comparable quality; asset backed securities; commercial paper rated at the time
of purchase in one of the two highest ratings categories by an NRSRO; bankers'
acceptances; certificates of deposit and time deposits; U.S. Treasury
obligations and custodial receipts; and repurchase agreements involving
securities that constitute permissible investments for the Fund.
The Fund may purchase securities on a forward commitment or when-issued basis,
which means that delivery and payment for such securities generally takes place
after the customary securities settlement period. The Fund may purchase floating
or variable rate securities, and may engage in dollar roll transactions. The
Fund may also purchase stripped mortgage-backed securities, but will limit such
purchases to 5% of its net assets.
SHORT-TERM BOND FUND
Under normal circumstances, the Short-Term Bond Fund will invest solely in
investment grade obligations rated BBB or better by S&P or Baa or better by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Advisor consisting of debt obligations of
U.S. and foreign corporations, mortgage-backed securities; CMOs; asset-backed
securities; obligations (including mortgage-backed securities) issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; and custodial receipts involving U.S. Treasury obligations
(including Separately Traded Registered Interest and Principal Securities
("STRIPS") and Coupon Under Book Entry System ("CUBES")).
<PAGE>
15
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in corporate and government bonds and debentures. No more than 25% of
the Fund's assets will be invested in securities rated BBB by S&P or Baa by
Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase by the Fund's Advisor.
The Fund may purchase, without limitation, mortgage-backed securities issued or
guaranteed as to the payment of principal and interest by the U.S. Government,
its agencies or instrumentalities and, subject to a limit of 25% of the Fund's
assets, mortgage-backed securities issued by private issuers. These
mortgage-backed securities may be backed or collateralized by fixed, adjustable
or floating rate mortgages. The Fund may also invest in asset-backed securities,
which consist of securities backed by company receivables, truck and auto loans;
leases; credit card receivables; and home equity loans. The Fund will purchase
mortgage-backed and asset-backed securities only if they are rated at least AA
by S&P or Aa by Moody's or, if not rated by S&P or Moody's, determined to be of
comparable quality at the time of purchase by the Fund's Advisor.
The Fund may purchase securities on a when-issued basis and may acquire floating
or variable rate securities, medium term notes, putable securities, and zero
coupon securities. The Fund may also purchase securities issued by foreign
governments and supranational agencies. The Fund may also invest in municipal
securities when the Fund's Advisor feels it is consistent with the Fund's
investment objective. The Fund will not invest in municipal securities unless
the Fund's Advisor believes that the yield will be higher than the yield for
comparable taxable investments in which the Fund is permitted to invest. The
following quality criteria apply to the Fund's investments in municipal
securities. The Fund's investments in municipal notes will be limited to those
obligations (i) where both principal and interest are backed by the full faith
and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or better
at the time of investment by Moody's, (iii) which are rated SP-2 or better at
the time of investment by S&P, or (iv) which, if not rated by S&P or Moody's,
are of equivalent quality to MIG-2, V-MIG-2, or SP-2 or better in the Advisor's
judgment. The Fund's investment in municipal bonds will be limited to bonds
rated BBB or better by S&P or Baa or better by Moody's, or, if not rated by S&P
or Moody's, deemed by the Fund's Advisor to be of comparable quality. For the
Fund's investments in other types of tax-exempt municipal investments, such as
participation interests in municipal lease/purchase agreements, the quality of
the underlying credit or of the bank providing a credit support arrangement
must, in the Fund's Advisor's opinion, be equivalent to the municipal note or
bond ratings stated above. The Fund is also authorized to invest up to 10% of
its assets in restricted securities, including Rule 144A securities, that the
Fund's Advisor determines are liquid under guidelines adopted by the Trust's
Board of Trustees. The Fund may also enter into bond futures contracts and
options on bond futures contracts and engage in securities lending.
The Fund intends to maintain a dollar-weighted average maturity of 3 years or
less, and the maximum remaining maturity for any security held by the Fund is 7
years. Under normal market conditions it is anticipated that the Fund's
dollar-weighted average maturity will range from 2 to 3 years. In the case of
mortgage related securities and asset-backed securities, maturity will be
determined based on the expected average life of the security. The Fund may
shorten its average weighted maturity to as little as 90 days if deemed
<PAGE>
16
appropriate for temporary defensive purposes. By so limiting the maturity of its
investments, the Fund expects that its net asset value will experience less
price movement in response to changes in interest rates than the net asset
values of mutual funds investing in similar credit quality securities with
longer maturities.
The Fund's turnover rate was 163% for the fiscal year ended May 31, 1996. This
rate of turnover, if continued, will likely result in higher transaction costs
and higher levels of realized capital gains than if the turnover rate was lower.
SHORT-TERM U.S. TREASURY SECURITIES FUND
The Short-Term U.S. Treasury Securities Fund will invest exclusively in
obligations issued by the U.S. Treasury with maximum remaining maturities of 3
years or less. U.S. Treasury securities are considered to be among the safest,
as to timely principal and interest payments, investments available. The Fund
will not invest in repurchase agreements. The Fund may borrow money for
temporary or emergency purposes in an amount not exceeding one-third of its
total assets, but has no present intention to do so.
Under normal market conditions, it is anticipated that the Fund's average
maturity will range from one to two years. Furthermore, for temporary defensive
purposes during periods when the Fund's Advisor determines that market
conditions warrant, the Short-Term U.S. Treasury Securities Fund may reduce its
average weighted maturity to less than one year.
FLORIDA TAX-EXEMPT BOND FUND
The Florida Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income tax based
on opinions from bond counsel to the issuers. The issuers of these securities
can be located in Florida, the District of Columbia, Puerto Rico and other U.S.
territories and possessions. It is a fundamental policy of the Fund to invest at
least 80% of its total assets in securities the income from which is exempt from
regular federal income tax and not treated as a preference item for purposes of
the alternative minimum tax. At least 65% of the Fund's assets will be invested
in Florida municipal bonds and debentures, and at least 75% of its total assets
invested in municipal bonds will be in securities rated A or better by S&P or
Moody's. Municipal securities must be rated BBB or better by S&P or Baa or
better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case
of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and
SP-1, SP-2 or VMIG-1, VMIG-2 in the case of variable rate demand obligations. No
more than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or
Baa by Moody's. The Fund will only acquire securities not rated by S&P or
Moody's if, at the time of purchase, the Fund's Advisor determines that such
unrated obligations are of comparable quality to rated obligations that may be
acquired by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities, and may
purchase municipal forwards, putable securities, medium term notes, and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities subject to the alternative minimum tax.
The Fund may also invest in futures and options,
<PAGE>
17
but has no present intention to do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
GEORGIA TAX-EXEMPT BOND FUND
The Georgia Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes and
substantially exempt from State of Georgia income taxes based on opinions from
bond counsel to the issuers. The issuers of these securities can be located in
Georgia, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. It is a fundamental policy of the Fund to invest at least 80% of
its total assets in securities the income from which is exempt from regular
federal income tax and not treated as a preference item for purposes of
alternative minimum tax. At least 65% of the Fund's assets will be invested in
Georgia municipal bonds and debentures, and at least 75% of its total assets
invested in municipal bonds will be in securities rated A or better by S&P or
Moody's. Municipal securities must be rated BBB or better by S&P or Baa or
better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case
of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and
SP-1, SP-2 or VMIG-1, VMIG-2 in the case of variable rate demand obligations. No
more than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or
Baa by Moody's. The Fund will only acquire securities not rated by S&P or
Moody's if, at the time of purchase, the Fund's Advisor determines that such
unrated obligations are of comparable quality to rated obligations that may be
acquired by the Fund.
The Fund may invest in commitments to purchase the above securities on a when-
issued or delayed delivery basis, floating or variable rate securities, and may
purchase municipal forwards, putable securities, medium term notes and zero
coupon securities. The Fund's Advisor has discretion to invest up to 20% of the
Fund's total assets in taxable debt securities rated at least BBB or better by
S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
repurchase agreements, and securities subject to the alternative minimum tax.
The Fund may also invest in futures and options, but has no present intention to
do so for other than hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
TENNESSEE TAX-EXEMPT BOND FUND
The Tennessee Tax-Exempt Bond Fund intends to be fully invested in municipal
securities the interest on which is exempt from regular federal income taxes and
substantially exempt from State of Tennessee income taxes based on opinions from
bond counsel to the issuers. The issuers of these securities can be located in
Tennessee, the District of Columbia, Puerto Rico and other U.S. territories and
possessions. It is a fundamental policy of the Fund to invest at least 80% of
its total assets in securities the income from which is exempt from regular
federal income tax and not treated as a preference item for purposes of the
alternative minimum tax. At least 65% of the Fund's assets
<PAGE>
18
will be invested in Tennessee municipal bonds and debentures, and at least 75%
of its total assets invested in municipal bonds will be in securities rated A or
better by S&P or Moody's. Municipal securities must be rated BBB or better by
S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2
in the case of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial
paper; and SP-1, SP-2, VMIG-1 or VMIG-2 in the case of variable rate demand
obligations. No more than 25% of the Fund's assets will be invested in bonds
rated BBB by S&P or Baa by Moody's. The Fund will only acquire securities not
rated by S&P or Moody's if, at the time of purchase, the Fund's Advisor
determines that such unrated obligations are of comparable quality to rated
obligations that may be acquired by the Fund. The Fund may invest in floating or
variable rate securities, commitments to purchase the above securities on a
when-issued or delayed delivery basis, and may purchase municipal forwards,
putable securities, medium term notes and zero coupon securities. The Fund's
Advisor has discretion to invest up to 20% of the Fund's total assets in taxable
debt securities rated at least BBB or better by S&P or Baa or better by Moody's
or, if not rated by S&P or Moody's, of comparable quality at the time of
purchase as determined by the Fund's Advisor, repurchase agreements, and
securities subject to the alternative minimum tax. The Fund may also invest in
futures and options, but has no present intention to do so for other than
hedging purposes.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years. The Fund may shorten its
average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes.
CAPITAL GROWTH FUND
The Capital Growth Fund invests primarily in a diversified portfolio of common
stocks, warrants, and securities convertible into common stocks which, in the
Fund's Advisor's opinion, are undervalued in the marketplace at the time of
purchase. In selecting securities for the Fund, its Advisor will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. Dividend and interest income should be
considered incidental to the growth of capital. The Fund's Advisor will rotate
the Capital Growth Fund's holdings between various market sectors based on
economic analysis of the overall business cycle. Under normal conditions, at
least 65% of the total assets of the Capital Growth Fund will be invested in
common stocks.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Capital Growth Fund not invested in the securities described above may be
invested in U.S. dollar denominated equity securities of foreign issuers
(including sponsored ADRs that are traded on exchanges or listed on NASDAQ);
securities issued by money market mutual funds; pay-in-kind securities; and
bonds. The bonds that the Capital Growth 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 invested in bonds rated below BBB by S&P or below Baa by
Moody's or securities not rated by S&P or Moody's of comparable quality (see
"Investment Risks, High Yield, Lower Rated Bonds"). In addition, the Fund may
invest up to 10% of its assets in restricted securities.
<PAGE>
19
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 156%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
VALUE INCOME STOCK FUND
The Value Income Stock Fund seeks to provide current income by structuring its
investments in an attempt to maintain the Fund's yield at a level above the
average dividend yield of the securities comprising the S&P 500 Stock Index.
Achieving such a yield will be the Fund's primary consideration when purchasing
securities. A secondary consideration of the Fund will be capital appreciation.
The Fund will invest at least 80% of its total assets in equity securities.
Investments will consist primarily of common stocks, and, under normal market
conditions, at least 65% of the Fund's assets will be invested in common stocks
issued by corporations which have a history of paying regular dividends,
although there can be no assurance that such corporations will continue to pay
dividends. Other equity securities in which the Fund may invest are convertible
debt securities, preferred stocks and warrants which are convertible into or
exchangeable for common stocks; and U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ). All of the common stocks in which the Fund invests are traded on
registered exchanges such as the New York or American Stock Exchange or on the
over-the-counter market in the United States (i.e., NASDAQ). The Fund may also
purchase debt securities (corporate debt obligations and U.S. Treasury
obligations) which 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 invested in
bonds rated below BBB by S&P or below Baa by Moody's or securities not rated by
S&P or Moody's of comparable quality. The Fund may also invest in futures and
options.
The Fund will invest primarily in stocks of companies operating in all aspects
of the U.S. and world economies that have a market capitalization of at least
$500 million, and that the Fund's Advisor believes possess fundamentally
favorable long-term characteristics. However, stocks of companies with smaller
market capitalizations and stocks that are out of favor in the financial
community and in which little opportunity for price appreciation is recognized
by the financial community may also be purchased if the Fund's Advisor believes
they are undervalued.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 134%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
MID-CAP EQUITY FUND
The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common
stocks, preferred stocks, and securities convertible into common stocks of small
to mid-size companies, (i.e., $50 million to $1 billion and $500 million to $5
billion, respectively, as measured by their market capitalization), with
above-average growth of earnings. Under normal conditions, at least 80% of the
total assets of the Fund will be invested in equity securities, and as a matter
of non-fundamental policy, the Fund will invest at least 65% of its assets in
mid-size companies. Current income will not be an important criterion of
investment selection and any such income should be considered incidental. In
selecting securities for
<PAGE>
20
the Fund, the Fund's Advisor will evaluate factors such as the issuer's
background, industry position, historical returns on equity and experience and
qualifications of the management team.
Most of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Fund not invested in the securities described above may be invested in U.S.
dollar denominated equity securities of foreign issuers (including sponsored
ADRs that are traded on exchanges or listed on NASDAQ); securities issued by
mutual funds; repurchase agreements; and bonds. The bonds that the Fund may
purchase, including any variable or floating rate instruments, must be rated B
or better by S&P or Moody's, provided that this requirement shall not apply to
the Fund's purchase of bonds issued by the government of Canada or by various
supranational entities, and provided further that no more than 10% of the Fund's
total assets will be invested in bonds rated below BBB by S&P or below Baa by
Moody's or securities not rated by S&P or Moody's of comparable quality. The
Fund may invest up to 10% of its assets in restricted securities.
The Fund's turnover rate for the fiscal year ended May 31, 1996 was 116%. This
rate of turnover, if continued, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
SUNBELT EQUITY FUND
The Sunbelt Equity Fund seeks to provide capital appreciation by investing
substantially all, and under normal market conditions at least 65%; of its
assets in common stocks; preferred stocks; warrants; and securities convertible
into common stock of U.S. companies headquartered and/or conducting a
substantial portion of their operations in (i.e., maintaining at least 50% of
their assets in or deriving at least 50% of their revenues and/or sales from)
the southern region of the United States. Current income will not be an
important criterion of investment selection and any such income should be
considered incidental. The Fund's Advisor will seek to identify and purchase
securities of companies that it believes to be undervalued and that possess a
strong balance sheet, a strong earnings record and adequate market liquidity.
Most of the common stocks in which the Fund invests are traded on registered
exchanges such as the New York or American Stock Exchange or on NASDAQ. The Fund
will invest no more than 10% of its assets in convertible securities rated lower
than BBB. The Fund may invest up to 10% of its total assets in restricted
securities. The Fund may also purchase futures and options for hedging purposes.
Obligations relating to futures contracts will be limited to not more than 20%
of the Fund's total assets.
The Fund will invest primarily in stocks of U.S. companies headquartered and/or
operating in the following U.S. states: Texas, Arkansas, Alabama, Mississippi,
Tennessee, Kentucky, Florida, Virginia, Georgia, North Carolina, South Carolina
and Louisiana. To the extent that the Fund's investments are not as
geographically dispersed across the U.S. as other funds with comparable
objectives, the impact of economic forces on and the relative economic
conditions of these states will be greater on the Fund.
BALANCED FUND
The Balanced Fund seeks to provide capital appreciation and current income
through investments in a diversified portfolio of common and preferred stocks,
warrants, securities convertible into common stocks, and
<PAGE>
21
investment grade fixed income securities. Under normal conditions, no more than
70% of the total assets of the Fund will be invested in common stocks and other
equity securities, and no more than 60% of the Fund's total assets will be
invested in bonds and other fixed income securities. The Fund will maintain at
least 25% of its total assets in senior fixed income securities.
In selecting equity securities for the Fund, the Fund's Advisor will evaluate
factors believed to affect capital appreciation such as the issuer's background,
industry position, historical returns on equity and experience and
qualifications of the management team. The Fund's Advisor will rotate the Fund's
holdings between various market sectors based on economic analysis of the
overall business cycle.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on NASDAQ. Assets of the Fund not invested in the securities
described above may be invested in U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ), securities issued by investment companies, and bonds.
The Fund will invest in investment grade fixed income securities rated BBB or
better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor,
including corporate debt obligations; mortgage-backed securities, collateralized
mortgage obligations and asset-backed securities; obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; and obligations of supranational
entities. No more than 25% of the Fund's assets will be invested in securities
rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of
comparable quality at the time of purchase as determined by the Fund's Advisor.
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies or
instrumentalities or, subject to a limit of 25% of the Fund's assets,
mortgage-backed securities issued by private issuers. These mortgage-backed
securities may be backed or collateralized by fixed, adjustable or floating rate
mortgages. The Fund may also invest in asset backed securities which consist of
securities backed by company receivables, truck and auto loans, leases, credit
card receivables and home equity loans.
In order to reduce interest rate risk, the Fund may purchase floating or
variable rate securities. It may also buy securities on a when-issued basis,
putable securities, pay-in-kind securities and zero coupon securities. The Fund
may also invest futures and options. Some floating or variable rate securities
will be subject to interest rate "caps" or "floors."
The Balanced Fund's turnover rate for the fiscal year ended May 31, 1996 was
148% for the equity portion of its portfolio and 164% for the fixed income
portion of its portfolio. These rates of turnover, if continued will likely
result in higher transaction costs and brokerage commissions and higher levels
of realized capital gains than if the turnover rate was lower.
INTERNATIONAL EQUITY INDEX FUND
The Fund will invest substantially all and, under normal market conditions, at
least 65% of its
<PAGE>
22
assets in common and preferred stocks; warrants; options; and securities
convertible into common stock of companies headquartered or based in the
approximately twenty foreign countries included in the EAFE-GDP Index. The Fund
will invest only in the 1088 or so companies included in the EAFE-GDP Index.
Because it is impractical to invest in every company included in the Index, the
Fund will select a representative sample of securities in each country using a
statistically-based optimization process. Morgan Stanley & Co. Incorporated
maintains the optimization computer programs which will be utilized to select
companies within each country.
The Fund will be constructed to have aggregate investment characteristics
similar to those of the EAFE-GDP Index. The Fund will invest in a statistically
selected sample of the securities included in the EAFE-GDP Index, although not
all countries nor all companies within a country will be represented in the
Fund's portfolio of securities at any time. The Fund expects to invest in
approximately 300 stocks so that the results fall within a targeted tracking
error range. From time to time, adjustments may be made in the Fund's portfolio
because of changes in the composition of the EAFE-GDP Index. No attempt will be
made to manage the portfolio using traditional economic, financial and market
analyses.
The Fund expects that there will be a close correlation between the Fund's
performance and that of the EAFE-GDP Index. A 1.00 correlation would indicate
perfect correlation, which would be achieved when the net asset value of the
Fund, including the value of its dividend and capital gains distributions,
increases or decreases in exact proportion to changes in the EAFE-GDP Index. The
correlation between the Fund and the EAFE-GDP Index is expected to be over 0.95
on an annual basis. The Fund's ability to track the EAFE-GDP Index, however, may
be affected by, among other things, transaction costs, changes in either the
composition of the EAFE-GDP Index or number of shares outstanding for the
component companies of the EAFE-GDP Index, and the timing and amount of
purchases and redemptions.
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 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. These contracts may be bought or sold to protect the Fund,
to some degree, against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar.
The Fund expects to be fully invested in the investments described above, but
may invest up to 35% of its total assets in U.S. and non-U.S. denominated money
market instruments; repurchase agreements; futures contracts, including stock
index futures contracts; and options on futures contracts. Obligations relating
to futures contracts will be limited to 20% of the Fund's total assets. The Fund
is also permitted to acquire floating and variable rate securities; purchase
securities on a when-issued basis; and purchase illiquid securities.
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23
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 portfolio's 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 or 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 S&P or below Baa by Moody's or not rated
by S&P or Moody's 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 its 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 its 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 Fund's portfolio turnover rate for the fiscal year ended May 31, 1996 was
113%. This rate of turnover, if continued, will likely result in higher
brokerage commissions and higher levels of realized capital gains than if the
turnover rate was lower.
<PAGE>
24
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes, during periods when its Advisor determines
that market conditions warrant, each Fund, except the Short-Term U.S. Treasury
Securities Fund, may hold a portion of its assets in cash and 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; time
deposits issued by banks or savings and loan associations; and commercial paper
rated in the highest rating category. A Fund may not be pursuing its investment
objective when it is engaged in temporary defensive investing. The Equity Funds
and the Balanced Fund may invest in money market instruments for liquidity
purposes.
The municipal bonds that the Investment Grade Tax-Exempt Bond Fund and State
Tax-Exempt Bond Funds may purchase include general obligation bonds, revenue or
special obligation bonds, and private activity and industrial development bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality while revenue or special obligation bonds are backed by a specific
project or facility. The State Tax-Exempt Bond Funds may also purchase
certificates of participation which represent an interest in an underlying
obligation or commitment such as an obligation issued in connection with a
leasing arrangement. The payment of principal and interest on private activity
and industrial development bonds generally is dependent solely on the ability of
the facility's user to meet its obligation and the pledge, if any, of real or
personal property as security for such payment.
The Advisor to a State Tax-Exempt Bond Fund or the Investment Grade Tax-Exempt
Bond Fund may buy or sell portfolio securities with the intention of generating
capital gains. Such gains will increase the Fund's total return and will be
taxable upon distribution to Shareholders. See "Tax Information."
In the event that a security owned by a Fund is downgraded below the stated
rating categories, its Advisor will review and take appropriate action with
regard to the security.
Each Fund may purchase securities issued by money market mutual funds. A Fund's
purchase of shares of other investment companies is limited by the Investment
Company Act of 1940 (the "1940 Act") and will ordinarily result in an additional
layer of charges and expenses.
Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its total assets. No Fund may purchase additional securities while
its outstanding borrowings exceed 5% of its assets.
It is a non-fundamental policy of each 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 in the usual course of business within seven days at a
price approximating its carrying value.
The Capital Growth Fund, Value Income Stock Fund, Mid-Cap Equity Fund, Balanced
Fund, Sunbelt Equity Fund and International Equity Fund may purchase restricted
securities, including Rule 144A securities, that its Advisor determines are
liquid pursuant to the guidelines established by the Trust's Board of Trustees.
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
<PAGE>
25
INVESTMENT RISKS
EQUITY SECURITIES
Investment in equity securities are generally subject to market risks that may
cause their prices to fluctuate over time. The values of convertible equity
securities are 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 a Fund invests will cause the net asset value of the Fund to
fluctuate.
FIXED INCOME SECURITIES
The market value of a 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 an NRSRO to 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 a Fund's securities will not affect cash
income derived from these securities but will affect the Fund's net asset value.
Fixed income securities rated BBB by S&P or Baa by Moody's (the lowest rating of
investment grade bonds) are deemed by these rating services to have speculative
characteristics.
Guarantees of a 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 or
the yield or value of a 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.
FOREIGN SECURITIES AND FOREIGN CURRENCY CONTRACTS
Investing in the securities of foreign companies involves 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
available for distribution to a 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 International Equity
Index Fund and International Equity Fund will seek to protect the value of its
respective investment securities against a decline in the value of a currency.
However, these forward foreign currency contracts will not eliminate
fluctuations
<PAGE>
26
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, they tend to limit any potential gain which might result should
the value of such currency increase.
HIGH YIELD, LOWER RATED BONDS
A 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 (E.G., 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 a 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 the issuer's 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.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to the risk of prepayment of the
underlying mortgages. During periods of declining interest rates, prepayment of
mortgages underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund generally will
reinvest the proceeds in securities with a yield that reflects prevailing
interest rates, which may be lower than the prepaid security.
MUNICIPAL SECURITIES
Since each State Tax-Exempt Bond Fund invests in municipal securities issued by
governmental entities of its specific state, the performance of each State
Tax-Exempt Bond Fund may be especially affected by factors pertaining to such
state's economy and other factors specifically affecting the ability of issuers
in that state to meet their obligations. As a result, the value of each State
Tax-Exempt Bond Fund's shares may fluctuate more widely than the value of shares
of a portfolio investing in securities relating to a number of different states.
The ability of state, county, or local governments to meet their obligations
will depend primarily on the availability of tax and other revenues to those
governments and on their fiscal conditions generally. Municipal securities may
be affected from time to time by economic, political, geographic and demographic
conditions. In addition, constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives may limit a
government's power to raise revenues or increase taxes and thus could adversely
affect an issuer's ability to meet financial obligations.
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 than interest bearing
obligations. A Fund will be required to include the imputed interest in zero
coupon obligations in its current income. Because each Fund distributes all of
its net investment income to
<PAGE>
27
Shareholders, a Fund may have to sell portfolio securities to distribute the
income attributable to these obligations and securities at a time when its
Advisor would not have chosen to sell such obligations or securities and which
may result in a taxable gain or loss.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a 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 a
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 a
Fund's outstanding shares, whichever is less.
Each 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 a
Fund would be invested in the securities of such issuer; provided, however, that
a 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 a 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 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.
It is a non-fundamental policy of the Investment Grade Tax-Exempt Bond Fund that
it will not invest more than 25% of its net assets in securities of one or more
issuers conducting their principal activities in the same state. In addition,
the Investment Grade Tax-Exempt Bond Fund and State Tax-Exempt Bond Funds will
not invest more than 25% of their respective total assets in securities the
interest on which is derived from revenues of similar type projects.
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 Funds may advertise performance (yield and total return).
These figures will be based on historical earnings and are not intended to
indicate future performance. The yield of a Fund refers to the annualized income
generated by an investment in that 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.
<PAGE>
28
The Investment Grade Tax-Exempt and State Tax-Exempt Bond Funds may also
advertise a "tax-equivalent yield," which is calculated by determining the rate
of return that would have been achieved on a fully taxable investment to produce
the after tax equivalent of the Fund's yield, assuming certain tax brackets for
a Shareholder.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment, including any sales charge imposed, for designated time
periods (including but not limited to, the period from which a 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.
The performance of the Trust's Investor Shares and Flex Shares will normally be
lower than for Trust Shares because Investor Shares and Flex Shares are subject
to distribution, services, and certain transfer agent fees not charged to Trust
Shares. Because of their differing sales charge and distribution expense
arrangements, the performance of Flex Shares in comparison to Investor Shares
will vary depending upon the investor's investment time horizon.
Each 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.
FUNDLINK
All purchases and redemptions of Flex Shares may be completed via FUNDLINK, a
telephone activated service that allows Shareholders to transfer money between
the STI Classic Funds and a Shareholder's SunTrust bank account(s). To initiate
a FUNDLINK transaction, Shareholders are provided a toll-free telephone number
(1-800-428-6970) to call the Trust's transfer agent. To utilize this service, a
Shareholder must contact an Investment Consultant of a SunTrust Banks, Inc.
affiliate bank and complete the appropriate application and authorization
agreements.
PURCHASE OF FUND SHARES
Flex Shares are sold at net asset value (without an initial sales charge) and
are subject to a deferred sales charge if redeemed within one year of purchase.
Flex Shares provide the benefit of permitting all investor dollars to be
invested from the initial time of purchase.
Flex Shares are sold on a continuous basis and may be purchased by contacting
the Trust's transfer agent, Federated Services Company (the "Transfer Agent"),
either by mail, by telephone or by wire. Flex Shares may also be purchased
through Investment Consultants of SunTrust Banks, Inc., affiliate banks which
serve as Shareholder Servicing Agents to the Trust. Furthermore, Flex Shares may
be purchased through SunTrust Securities, Inc., as well as, certain
correspondent banks of SunTrust Banks, Inc.
Shares may be purchased on days on which the New York Stock Exchange is open for
business (a "Business Day").
A purchase order for any of the Funds will be effective as of the Business Day
it is received by the Transfer Agent if the Transfer Agent receives the order
before 4:00 p.m. Eastern time. Purchases will be made in full and fractional
shares of a Fund calculated to three decimal places. All purchases made by check
should be in U.S. dollars and made payable to
<PAGE>
29
the "STI Classic Funds (Fund Name)." Third party checks, credit cards, credit
card checks and cash will not be accepted. When purchases are made by check,
redemptions will not be allowed until the investment being redeemed has been in
the account for 15 business days. Purchases by mail are considered received
after payment by check is converted into federal funds. The purchase price of
Flex Shares of a Fund is the net asset value next determined after a purchase
order is effective. The net asset value per share of a 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 each Fund.
Minimum initial and subsequent purchase amounts, respectively, for each Fund are
$10,000 and $1,000 ($100 via statement coupon). Purchases made pursuant to the
Systematic Investment Plan (described below) are subject to lower minimum
initial and subsequent purchase amounts. The minimum initial purchase amount for
retirement plans is $2,000. These minimums may be waived at the Distributor's
discretion such as for any one trust or fiduciary account including employee
benefit plans created under sections 401 or 457 of the Internal Revenue Code
including related plans of the same employer.
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.
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).
The Trust and the Transfer Agent maintain procedures, including identification
methods and other means, for ascertaining the identity of callers and
authenticity of instructions. If reasonable procedures are not employed, the
Trust and/or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent telephone transactions. Neither the 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.
Shares of the Funds are offered only to residents of states in which the shares
are eligible for purchase. Investors in certain states may be required to
purchase shares through institutions registered as brokers/dealers in such
states.
In deciding whether to purchase Investor Shares or Flex Shares, investors should
take into consideration their present and anticipated purchase amounts, and time
horizons. Investors should consider, based on the anticipated life of their
investment, whether the accumulated distribution fees and contingent deferred
sales charge on Flex Shares would be less than the initial sales charge plus
accumulated distribution on Investor Shares. Investors should also consider
whether, and to what extent, such differential would be offset by the higher
dividend distributions per share on the Investor Shares. To assist investors in
making this decision, an analysis program is available through a local SunTrust
Trust and Investment Consultant upon request.
<PAGE>
30
SYSTEMATIC INVESTMENT PLAN
Shares of each Fund may be purchased systematically through deductions from
checking or savings accounts maintained through SunTrust Banks, Inc. affiliate
banks. The Systematic Investment Plan is subject to subsequent minimum
maintained balance requirements. The minimum initial purchase amount for the
Systematic Investment Plan is $500. Since the minimum normal initial investment
amount for Flex Shares is $10,000 per Fund, it is expected that Systematic
Investment Plan purchases will total $10,000 per Fund within a two-year period.
The distributor maintains the right to terminate a Systematic Investment Plan
account if the account fails to reach this $10,000 total cumulative purchase
amount within the two-year period. Investors may purchase shares on a fixed
schedule (semi-monthly or monthly) with amounts from $50 up to $100,000. The
purchases will be effective on the Business Day that the Transfer Agent receives
the transmission.
CONTINGENT DEFERRED SALES CHARGE INFORMATION
Flex Shares of the Funds may be purchased at their net asset value. Shares
redeemed within the first year after purchase will be subject to a contingent
deferred sales charge ("CDSC") equal to 2.00% of the lesser of the net asset
value of the shares at the time of purchase or the net asset value of the shares
at the time of redemption.
The CDSC will not apply to shares purchased through reinvestment of dividends or
capital gain distributions; accordingly, no sales charge is imposed on increases
in net asset value above the initial purchase price. In determining whether a
particular redemption is subject to a CDSC, it is assumed that the redemption is
first of shares held for over one year or shares acquired through reinvestment
of dividends or other distributions. No CDSC will be charged on exchanges of
Flex Shares of any Fund for Flex Shares of any other Fund. See "Exchanges." In
determining the amount of the Flex Shares CDSC that applies, all purchases shall
be considered as having been made on the trade date.
The CDSC will not be imposed when a redemption occurs under the following
circumstances: (i) a total or partial distribution from a qualified plan, other
than an IRA, Keogh Plan, or a custodial account following retirement; (ii) a
total or partial distribution from an IRA, Keogh Plan, or a custodial account
after the beneficial owner or participant attains age 59 1/2; or (iii) from the
death or complete disability (as defined in the Internal Revenue Code or
evidenced by a certificate from the U.S. Social Security Administration) of the
beneficial owner or participant. The exemption from the CDSC for qualified
plans, an IRA, Keogh Plan, or a custodial account does not extend to account
transfers, rollovers and other redemptions made for purposes of reinvestment.
CDSCs are not charged in connection with redemptions by the Fund of accounts
with low balances.
REDEMPTION OF FUND SHARES
Shareholders may redeem their Flex Shares on any day that net asset value is
calculated. Flex Shares may ordinarily be redeemed by mail or telephone request
to the Transfer Agent. All redemption orders are effected at the net asset value
per share next determined after receipt of a valid redemption request, reduced
by any applicable CDSC. See "Sales Charge Information."
However, all or part of a shareholder's holdings of Flex Shares may be redeemed
in
<PAGE>
31
accordance with instructions and limitations pertaining to his or her account.
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 within five Business Days following receipt of the order.
Requests for redemptions from the Funds may be placed in writing or by telephone
directly to an Investment Consultant of a SunTrust Banks, Inc. affiliate bank,
through SunTrust Securities, Inc. and through certain correspondent banks of
SunTrust Banks, Inc. (or via FUNDLINK to the Transfer Agent). Redemptions placed
via telephone or FUNDLINK (1-800-428-6970) can only be placed for a minimum of
$1,000.
Redemption proceeds can be wired, distributed by check, or transferred to a
Shareholder's account via FUNDLINK. There will be a $7.00 wire charge for
redemptions processed from accounts which require wires to particular banks.
When Flex Shares are purchased by check the proceeds from the redemption of
those Shares are not available, and the Shares may not be exchanged, until the
Trust or its agents are reasonably certain that the purchase check has cleared,
which could take up to 15 Business Days.
A Shareholder may be required to redeem Flex Shares if the balance in a
Shareholder's Fund account drops below $10,000 as a result of redemptions, and,
the Shareholder does not increase its balance to at least $10,000 on 60 days'
written notice. 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 cases, an investor may incur brokerage costs in
converting such securities to cash.
Redemptions of $25,000 or greater for a Fund must be in writing and a signature
guarantee must accompany the written request.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan can be established for any Fund account with a
$10,000 minimum balance. Under the plan, redemptions can be automatically
processed (monthly, quarterly, semi-annually or annually) by check or through an
electronic transfer to a Shareholder's SunTrust Banks, Inc. affiliate bank
account with a minimum redemption amount of $50.
Because regular, systematic withdrawals of Flex Shares made within one year of
purchase will be subject to the CDSC, it may not be in the best interest of Flex
shareholders to participate in the Systematic Withdrawal Plan. Exceptions
relating to systematic withdrawals from qualified retirement plans were
previously referenced.
EXCHANGES
Flex Shares of the Funds may be exchanged at net asset value only for Flex
Shares of the other Funds of the Trust or for Investor Shares of the Money
Market Funds of the Trust. No CDSC will be imposed on redemptions of Money
Market Fund Shares acquired in an exchange, provided they are held for at least
one year from the initial purchase date of the Flex Shares or are exchanged back
into Flex Shares. Subsequent exchanges of Investor Shares of the Money Market
Funds (which were acquired in an exchange of Flex Shares) may be only for Flex
Shares of the Equity or Fixed Income Funds.
Flex Shares owned by qualifying investors may be exchanged for Trust Shares
(Shares for which SunTrust Banks, Inc. or one of its affiliates acts in a
fiduciary, agency, investment
<PAGE>
32
advisory or custodial capacity) at net asset value. Trust Shares acquired in an
exchange of Flex Shares will not be subject to a CDSC upon redemption.
Four exchanges may be made per calendar year. More than four exchanges in a year
may be considered an abuse of the exchange privilege. The Trust reserves the
right to charge a $10.00 fee for each exchange. A Shareholder with more than
four exchanges per year will be notified prior to the imposition of any such
fee. Exchanges may be requested through an Investment Consultant of a SunTrust
Banks, Inc. affiliate bank, SunTrust Securities, Inc. and certain correspondent
banks of SunTrust Banks, Inc. either by telephone or in writing (or via FUNDLINK
through the Transfer Agent). The minimum exchange amount is $1,000 subject to
account minimum initial purchase amounts and minimum maintained balance
requirements. This exchange offer is subject to change or termination by the
Trust at any time upon 60 days' notice.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (exclusive of capital gains) are declared
on each Business Day and paid monthly by each of the Bond and State Tax-Exempt
Bond Funds. Dividends from net investment income (exclusive of capital gains)
are declared and paid quarterly by the Equity Funds and Balanced Fund, except
that dividends are declared and paid annually by the International Equity Index
Fund and International Equity Fund. Each Fund's net realized capital gains
(including net short-term capital gains) are distributed at least annually. Net
income for dividend purposes consists of (i) interest accrued and original issue
discount earned on a Fund assets, (ii) plus the amortization of market discount
(except in the case of the Investment Grade Tax-Exempt Bond and State Tax-Exempt
Bond Funds) 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. Flex Shares invested in the
Bond and State Tax-Exempt Bond Funds are eligible to begin earning dividends
that are declared on the Business Day after the purchase order is effective and
continue to be eligible for dividends through and including the day the
redemption order is effective.
The net asset value of Flex Shares of the Funds will be reduced by the amount of
any dividend or distribution. Dividends and distributions are paid in the form
of additional Flex Shares of the same 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 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 Flex Shares in a Fund.
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 each Fund or
its Shareholders. In particular, no attempt has been made herein
<PAGE>
33
to provide information on the tax laws of Florida, Georgia or Tennessee.
Accordingly, Shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each 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. Each Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment companies.
TAX STATUS OF DISTRIBUTIONS: BOND AND STATE TAX-EXEMPT BOND FUNDS
Each 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 Funds will be taxable to
Shareholders as ordinary income whether received in cash or in additional
shares.
Each of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds
will distribute all of its net investment income (including net short-term
capital gains) to Shareholders. If, at the close of each quarter of its taxable
year, at least 50% of the value of a Fund's assets consist of obligations the
interest on which is excludable from gross income, the Fund may pay
exempt-interest dividends to its Shareholders. Those dividends constitute the
portion of the aggregate dividends as designated by the Fund, equal to the
excess of the excludable interest over certain amounts disallowed as deductions.
Exempt-interest dividends are excludable from a Shareholder's gross income for
regular federal income tax purposes, but may have alternative minimum tax
consequences. See the Statement of Additional Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Investment Grade Tax-Exempt Bond and State Tax-Exempt Bond Funds
to purchase sufficient amounts of tax-exempt securities to satisfy the Code's
requirements for the payment of exempt-interest dividends.
TAX STATUS OF DISTRIBUTIONS: ALL FUNDS
Dividends from net investment income will qualify for the dividends received
deduction for corporate Shareholders only to the extent such distributions are
derived from dividends paid by domestic corporations. Dividends from net capital
gains (the excess of net long-term capital gains over net short-term capital
loss) will be treated 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. Each
Fund will make annual reports to Shareholders of the federal income tax status
of all distributions. Dividends declared by a 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
<PAGE>
34
been paid by the Fund and received by the Shareholders on December 31, of that
year, if paid by the Fund any time during the following January.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by a Shareholder from a 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. Each 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 a Fund is considered tax
exempt in their particular states.
Income derived by a Fund from obligations of foreign issuers may be subject to
foreign withholding taxes. The International Equity Index and International
Equity Funds expect to elect to treat Shareholders as having paid their
proportionate share of such foreign taxes. The other Funds will not be able to
make this election.
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase shares of a "tax-exempt" Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or persons related to "substantial
users") of facilities financed by "private activity bonds" or certain industrial
development bonds should consult their tax advisors before purchasing shares.
For these purposes, the term "substantial user" is defined generally to include
a "non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of such bonds. See the Statement of
Additional Information.
A 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 Fund. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund 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>
35
INVESTMENT ADVISORS
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $66
billion as of December 31, 1995. SunTrust ranks among the twenty largest U.S.
banking companies. Its three principal subsidiaries--SunTrust Bank of Florida,
Inc., SunTrust Banks of Georgia, Inc. and SunTrust Banks of Tennessee, Inc.--
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 $47 billion as of December 31, 1995.
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the
Short-Term U.S. Treasury Securities, Short-Term Bond, U.S. Government Securities
and Sunbelt Equity Funds and joint advisor to the International Equity Index
Fund. As of June 30, 1996, Trusco had approximately $13.7 billion in assets
under management. The principal business address of Trusco is 50 Hurt Plaza,
Suite 1400, Atlanta, Georgia 30303.
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the
Limited-Term Federal Mortgage Securities, Investment Grade Bond, Investment
Grade Tax-Exempt Bond, Florida Tax-Exempt Bond, Capital Growth, Value Income
Stock, Mid-Cap Equity, Balanced and International Equity Funds and joint advisor
to the International Equity Index Fund. As of June 30, 1996, STI Capital had
discretionary management authority with respect to assets of approximately $11
billion. The principal business address of STI Capital is P.O. Box 3808,
Orlando, Florida 32802.
SunTrust Bank, Chattanooga, N.A. ("SunTrust Bank, Chattanooga") (formerly
American National Bank & Trust Company) serves as the Advisor to the Tennessee
Tax-Exempt Bond Fund. SunTrust Bank, Chattanooga had approximately $1.7 billion
in assets under management as of December 31, 1995. The principal business
address of SunTrust Bank, Chattanooga is 736 Market Street, Chattanooga,
Tennessee 37402.
SunTrust Bank, Atlanta (formerly Trust Company Bank) serves as the Advisor to
the Georgia Tax-Exempt Bond Fund. As of December 31, 1995, SunTrust Bank,
Atlanta had approximately $12.5 billion in assets under management. The
principal address for SunTrust Bank, Atlanta is 25 Park Place, Atlanta, Georgia
30303.
The Trust and the above Advisors have entered into advisory agreements (the
"Advisory Agreements"). Under the Advisory Agreements, the Advisors make the
investment decisions for the assets of the Fund(s) they advise and continuously
review, supervise and administer their Fund's respective investment program. The
Advisors discharge their 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 FUNDS
INVOLVE 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 all Funds, the Advisors may
execute brokerage or other agency transactions through affiliates of the
Advisors.
<PAGE>
36
For the services provided and expenses incurred pursuant to the Advisory
Agreements: Trusco is entitled to receive advisory fees computed daily and paid
monthly at the annual rate of 0.74%, 0.65%, 0.65% and 1.15% of the average daily
net assets of the U.S. Government Securities Fund, Short-Term U.S. Treasury
Securities Fund, Short-Term Bond Fund and Sunbelt Equity Fund, respectively; STI
Capital is entitled to receive advisory fees computed daily and paid monthly at
the annual rate of 0.65%, 0.74%, 0.74%, 0.65%, 1.15%, 0.95%, 1.15%, 0.80% and
1.25% of the average daily net assets of the Florida Tax-Exempt Bond Fund,
Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term
Federal Mortgage Securities Fund, Capital Growth Fund, Balanced Fund, Mid-Cap
Equity Fund, Value Income Stock Fund and International Equity Fund,
respectively. Trusco and STI Capital jointly are entitled to receive an advisory
fee computed daily and paid monthly at the annual rate of 0.90% of the average
daily net assets of the International Equity Index Fund; SunTrust Bank,
Chattanooga is entitled to receive advisory fees computed daily and paid monthly
at the annual rates of .65% of the average daily net assets of the Tennessee
Tax-Exempt Bond Fund; and SunTrust Bank, Atlanta is entitled to receive advisory
fees computed daily and paid monthly at the annual rate of .65% of the average
daily net assets of the Georgia Tax-Exempt Bond Fund.
Although the advisory fees for the Sunbelt Equity Fund, Capital Growth Fund,
Balanced Fund, Mid-Cap Equity Fund, Value Income Stock Fund and International
Equity Index Fund are higher than advisory fees paid by other mutual funds, the
Trust believes that the fees are comparable to the advisory fees paid by many
other mutual funds with similar investment objectives and policies. From time to
time, an Advisor may waive (either voluntarily or pursuant to applicable state
limitations) advisory fees payable by a Fund. Currently, the Advisors and the
Distributor have agreed to voluntary reductions in their respective fees as well
as reductions in service and distribution 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 any time.
For the fiscal year ended May 31, 1996: Trusco received advisory fees computed
daily and paid monthly at the annual rate of 0.22%, 0.46%, 1.02%, and 0.16% of
the average daily net assets of the Short-Term U.S. Treasury Securities Fund,
Short-Term Bond Fund, Sunbelt Equity Fund, and U.S. Government Securities Fund,
respectively; STI Capital received advisory fees computed daily and paid monthly
at the annual rate of 0.38%, 0.63%, 0.61%, 1.03%, 0.79%, 1.00%, 0.80%, 0.43% and
1.06%, of the average daily net assets of the Florida Tax-Exempt Bond Fund,
Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Capital
Growth Fund, Balanced Fund, Mid-Cap Equity Fund, Value Income Stock Fund,
Limited-Term Federal Mortgage Securities Fund and International Equity Fund,
respectively; Trusco and STI Capital jointly received an advisory fee computed
daily and paid monthly at the annual rate of 0.76% of the average daily net
assets of the International Equity Index Fund; SunTrust Bank, Chattanooga
received advisory fees computed daily and paid monthly at the annual rates of
0.00% of the average daily net assets of the Tennessee Tax-Exempt Bond Fund; and
SunTrust Bank, Atlanta received advisory fees computed daily and paid monthly at
the annual rate of 0.37% of the average daily net assets of the Georgia Tax-
Exempt Bond Fund.
<PAGE>
37
PORTFOLIO MANAGERS
Mr. Charles B. Leonard, CFA, First Vice President of Trusco, and Michael L.
Ford, an Associate of Trusco, have been responsible for the day-to-day
management of the U.S. Government Securities Fund since it commenced operations.
Mr. Leonard has been with Trusco since 1986 as the senior fixed income manager.
Mr. Ford has been with Trusco since April 1994. Prior to joining Trusco, Mr.
Ford served as a senior securities analyst with Liberty Capital Advisors from
January, 1992 to April, 1994 and has served as a securities analyst at Southern
Farm Bureau Life Insurance Company from 1990 to 1992.
Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA, have been responsible for
the day-to-day management of the Limited-Term Federal Mortgage Securities Fund
since it commenced operations. Mr. Denney has served as Executive Vice President
of STI Capital since 1983. Mr. West has served as a fixed income portfolio
manager with STI Capital since 1989. Mr. Denney has also been responsible for
the day-to-day management of the Investment Grade Bond Fund since it commenced
operations and the fixed income portion of the Balanced Fund since it commenced
operations.
Ms. Gay Cash has been responsible for the day-to-day management of the Georgia
Tax-Exempt Bond Fund since it commenced operations. Ms. Cash has served as a
Vice President of SunTrust Bank, Atlanta since January 1, 1987.
Mr. Ronald Schwartz, CFA, has been responsible for the day-to-day management of
the Florida Tax-Exempt Bond and Investment Grade Tax-Exempt Bond Funds since
each Fund commenced operations. Mr. Schwartz joined STI Capital in 1988 and
currently serves as a Senior Vice President. Mr. Schwartz, has also been
responsible for the day-to-day management of the Tennessee Tax-Exempt Bond Fund
since July, 1995. Mr. Schwartz serves as Vice President and Trust Investment
Officer of SunTrust Bank, Chattanooga.
Mr. Mills Riddick, CFA, has been responsible for the day-to-day management of
the Value Income Stock Fund since April, 1995. Mr. Riddick has been a value
portfolio manager at STI Capital since 1989.
Ms. Patricia Love has been responsible for the day-to-day management of the
Tennessee Tax-Exempt Bond Fund since September, 1995. Ms. Love serves as Vice
President and Trust Investment Officer of SunTrust Bank, Chattanooga. Ms. Love
is also a portfolio manager at STI Capital. Ms. Love has been with SunTrust
Bank, Chattanooga since 1993 and prior to that served as a portfolio analyst
with First City Texas from 1986 to 1993.
Mr. David Yealy has been responsible for the day-to-day management of the
Short-Term Bond and Short-Term U.S. Treasury Securities Funds since July 1996.
Mr. Yealy joined Trusco in 1991 and currently serves as a Vice President.
Mr. Anthony Gray has been responsible for the day-to-day management of the
Capital Growth Fund since it commenced operations. Mr. Gray has served as Chief
Executive Officer and Chief Investment Officer of STI Capital since 1979. Mr.
Gray has also been responsible for the day-to-day management of the equity
portion of the Balanced Fund since it commenced operations.
Mr. Thomas Edgar has been responsible for the day-to-day management of the
Mid-Cap Equity Fund since it commenced operations. Mr. Edgar has served as
Senior Vice President of STI Capital since 1990.
Mr. Dan Jaworski has been responsible for the day-to-day management of the
International Equity Fund since it commenced operations.
<PAGE>
38
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.
Mr. James Foster has been responsible for the day-to-day management of the
Sunbelt Equity Fund since it commenced operations. Mr. Foster has served as a
Vice President of Trusco since 1989.
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, currently
(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
Advisors believe that each may perform the services for STI Classic Funds
contemplated by their respective Advisory Agreements 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 Advisors from continuing to perform services for
STI Classic Funds. If the Advisors were prohibited from providing services to
STI Classic Funds, 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 Advisors, or their affiliates, would consider the
possibility of offering to perform additional services for STI Classic Funds. It
is not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which the Advisors, or such affiliates, might
offer to provide such services.
In addition, state securities laws on this 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
(the "Distribution Agreement") dated May 29, 1992. The Flex Shares of each Fund
have a distribution plan ("Flex Plan"). The Distribution Agreement and the Flex
Plan provide that the Flex Shares of the Funds may pay a distribution services
fee to the Distributor of up to .75% of the average daily net assets of the Flex
Shares of each Fund. Flex Shares are also subject to a service fee of up to .25%
of the average daily net assets of the Flex Shares of each Fund. This service
fee may be used for personal service and maintenance of shareholder accounts.
Asset-based sales charges are designed to permit an investor to purchase Fund
shares without the assessment of a front-end sales charge. The Distributor will
waive all or a portion of the distribution fee in order to limit
<PAGE>
39
the net expenses of the Flex Shares to the amounts set forth under "Expense
Summary." The Distributor may apply the distribution fee toward: (a)
compensation for its services in connection with distribution assistance or
provision of shareholder services; or (b) payments to financial institutions and
intermediaries such as banks (including SunTrust Banks, Inc.'s affiliate banks),
savings and loan associations, insurance companies, and investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services, reimbursement of expenses incurred in connection with
distribution assistance, or provision of Shareholder services.
The Flex Plan is characterized as a compensation plan since the distribution fee
will be paid to the Distributor without regard to the distribution or
shareholder service expenses incurred by the Distributor or the amount of
payments made to financial institutions and intermediaries. SunTrust Banks,
Inc.'s affiliate banks and certain correspondent banks may serve as shareholder
servicing agents to the Trust. A prospective investor may visit any one of the
Investment Services offices of the SunTrust Banks, Inc.'s affiliate banks, as
listed on the last pages of the Prospectus, SunTrust Securities, Inc. or certain
correspondent banks of SunTrust Banks, Inc. to receive copies of the
Prospectuses for the Flex Shares of the Trust and application forms. Trust
Shares of each Fund are offered without a sales charge or a distribution or
service fee primarily to institutional investors, including affiliates and
correspondents for the investment of funds in which they act in a fiduciary,
agency, investment advisory or custodial capacity. Investor Shares of each Fund
are offered subject to a sales load on purchases and a distribution fee. The
different sales charge option of the Investor Shares provides investors with an
alternative purchase arrangement to the Flex Shares. An investor may call
1-800-428-6970 to receive more information regarding Trust Shares or Investor
Shares. It is possible that financial institutions and intermediaries may offer
different classes of shares to their customers and thus receive different
compensation with respect to different classes of shares.
Each Fund may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
With respect to each of the Funds, the Distributor may, from time to time and at
its own expense, provide promotional incentives, in the form of cash or other
compensation, to certain financial institutions whose representatives have sold
or are expected to sell significant amounts of these Funds.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as Administrator of the Trust.
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.
The Administrator is entitled to a fee from each Fund, 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......................... 0.10%
over $1 billion to $5 billion........... 0.07%
over $5 billion to $8 billion........... 0.05%
over $8 billion to $10 billion.......... 0.045%
over $10 billion........................ 0.04%
</TABLE>
From time to time, the Administrator may waive (either voluntarily or pursuant
to applicable state limitations) all or a portion of the
<PAGE>
40
administration fee payable with respect to the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Federated Investors Tower Pittsburgh, Pennsylvania
15222-3779, 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, Georgia 30308, serves as custodian
of the assets of each Fund of the Trust except the International Equity Index
and International Equity Funds. Union 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, New York,
10286, serves as custodian for the International Equity Fund. The custodians
hold cash, securities and other assets of the Trust as required by the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
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 and audited financial
statements annually. The Trust furnishes proxy statements and other reports to
Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders may contact the Transfer Agent in order to obtain information on
account statements, procedures and other related information by calling
1-800-428-6970.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
<PAGE>
41
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 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.
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
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.
<PAGE>
42
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 -- Corporate debt obligations are debt instruments
issued by corporations with maturities exceeding 270 days. Such instruments may
include putable corporate bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Custodial receipts are 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 a 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 ("TRs"), Treasury Investment Growth Receipts
("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS").
Receipts are sold as zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments. See "Zero Coupon Obligations."
DERIVATIVES -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, swap agreements, and some mortgage-back securities (CMOs,
REMICs, and SMBs). See elsewhere in this "Description of Permitted Investments"
for discussions of these various instruments, and see "Investment Policies and
Strategies" for more information about any investment policies and limitations
applicable to their use.
DOLLAR ROLLS -- Dollar rolls are transactions in which securities are sold for
delivery in the current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering into dollar rolls include the risk
that the value of the security may change adversely over the term of the dollar
roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held.
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43
To avoid any leveraging concerns, the Fund will place U.S. Government or other
liquid, high grade assets in a segregated account in an amount sufficient to
cover its repurchase obligation.
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."
EURODOLLAR AND YANKEE BANK OBLIGATIONS -- Eurodollar bank obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
United States by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the United States
by foreign banks.
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. A Fund may also enter into a contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency, 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. A 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. A 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
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44
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.
GUARANTEED INVESTMENT CONTRACTS ("GICs") -- GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Fund on a monthly basis guaranteed
interest at either a fixed, variable or floating rate. A GIC provides that this
guaranteed interest will not be less than a certain minimum rate. A GIC is a
general obligation of the issuing insurance company and not a separate account.
The purchase price paid for a GIC becomes part of the general assets of the
issuer, and the contract is paid at maturity from the general assets of the
issuer.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance company. For this reason, an active secondary market in GICs
does not currently exist and GICs are considered to be illiquid investments.
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.
LOAN PARTICIPATIONS -- Loan participations are interests in loans to U.S.
corporations which are administered by the lending bank or agent for a syndicate
of lending banks, and sold by the lending bank or syndicate member
("intermediary bank"). In a loan participation, the borrower corporation will be
deemed to be the issuer of the participation interest except to the extent the
Fund derives its rights from the intermediary bank. Because the intermediary
bank does not guarantee a loan participation, a loan participation is subject to
the credit risks associated with the underlying corporate borrower. In the event
of bankruptcy or insolvency of the corporate borrower, a loan participation may
be subject to certain defenses that can be asserted by such borrower as a result
of improper conduct by the intermediary bank. In addition, in the event the
underlying corporate borrower fails to pay principal and interest when due, the
Fund may be subject to delays, expenses and risks that are greater than those
that would have been involved if the Fund had purchased a direct obligation of
such borrower. Under the terms of a Loan Participation, the Fund may be regarded
as a creditor of the intermediary bank (rather than of the underlying corporate
borrower), so that the Fund may also be subject to the risk that the
intermediary bank may become insolvent.
The secondary market for loan participations is limited and any such
participation purchased by the Fund may be regarded as illiquid.
MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered
corporate or agency debt that differs from traditionally underwritten corporate
bonds only in the process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
<PAGE>
45
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA"), and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA and FHLMC obligations are not backed by the
full faith and credit of the U.S. Government as GNMA certificates are, but FNMA
and FHLMC securities are supported by the instrumentalities' right to borrow
from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS: CMOs are debt obligations or multiclass
pass-through certificates issued by agencies or instrumentalities of the U.S.
Government or by private originators or investors in mortgage loans. In a CMO,
series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC
<PAGE>
46
guarantees the timely payment of interest, and also guarantees the payment of
principal as payments are required to be made on the underlying mortgage
participation certificates. FNMA REMIC Certificates are issued and guaranteed as
to timely distribution of principal and interest by FNMA.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes
that receive specified proportions of the monthly interest and principal
payments from a pool of mortgage securities. One class may receive all of the
interest payments and is thus termed an interest-only class ("IO"), while the
other class may receive all of the principal payments and thus is termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.
RISK FACTORS: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
MUNICIPAL FORWARDS -- Municipal forwards are forward commitments for the
purchase of tax-exempt bonds with a specified coupon to be delivered by an
issuer at a future date, typically exceeding 45 days but normally less than one
year after the commitment date. Municipal forwards are normally used as a
refunding mechanism for bonds that may only be redeemed on a designated future
date. A Fund will enter into municipal forwards when the price and yield of the
underlying bonds are believed to be favorable when compared to current prices
and yields. As with forward commitments, municipal forwards are subject to
market fluctuations due to changes in market interest rates between the
commitment date and the settlement date. Municipal forwards may be considered to
be illiquid investments.
To avoid any leveraging concerns, a Fund will maintain liquid, high grade
securities in a segregated account at least equal to the purchase price of the
municipal forward.
MUNICIPAL LEASE OBLIGATIONS -- Municipal lease obligations are securities issued
by state and local governments and authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. Depending upon the market for such securities, municipal lease
obligations may be illiquid.
MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for
<PAGE>
47
the construction, equipment, repair or improvement of privately operated
facilities.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. The payment of principal and interest
on private activity and industrial development bonds generally is dependent
solely on the ability of a facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as security for such payment.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
OPTIONS ON CURRENCIES -- The International Equity Index 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.
OBLIGATIONS OF SUPRANATIONAL ENTITIES -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
PAY-IN-KIND SECURITIES -- Pay-in-Kind securities are bonds or preferred stock
that pay interest or dividends in the form of additional bonds or preferred
stock.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a 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. A 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. A 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
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48
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 for monitoring the Advisor's
implementation of the guidelines and procedures.
SECURITIES LENDING -- In order to generate additional income, a 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. A 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.
SECURITIES OF FOREIGN ISSUERS -- There are certain risks connected with
investing in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less information on such
securities and their issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation of
capital invested abroad, and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable U.S. securities. The
value of a Fund's investments denominated in foreign currencies will depend on
the relative strengths of those currencies and the U.S. dollar, and a Fund may
be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Fund.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
SWAPS, CAPS, FLOORS and COLLARS -- Interest rate swaps, mortgage swaps, currency
swaps and other types of swap agreements such as caps, floors and collars are
designed to permit the purchaser to preserve a return or spread on a particular
investment or portion of its portfolio, and to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date. In a
typical interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times
<PAGE>
49
a "notional principal amount," in return for payments equal to a fixed rate
times the same amount, for a specific period of time. If a swap agreement
provides for payment in different currencies, the parties might agree to
exchange the notional principal amount as well. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specific interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on the Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements or reduce its exposure through
offsetting transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside liquid high grade securities in a
segregated account.
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, FHLMC, 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., GNMA securities), others are supported by the right of
the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank
securities), while still others are supported only by the credit of the
instrumentality (e.g., FNMA securities). 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.
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") and Coupon Under Book Entry Safekeeping
("CUBES").
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and
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50
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 -- Warrants are 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 segregate 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, a 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.
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A-1
APPENDIX
I. BOND RATINGS
CORPORATE AND MUNICIPAL BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P") and
Moody's Investors Service, Inc. ("Moody's") corporate and municipal 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 or 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. 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. Together with
bonds rated Aaa, they comprise what are generally known as high-grade bonds.
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 a 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.
MUNICIPAL NOTE RATINGS
Moody's highest rating for state and municipal and other short-term notes is
MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of
the best quality. They have strong protection from established cash flows of
funds for their servicing or from established and broad-based access to the
market for refinancing or both. Short-term municipal securities rated MIG-2 and
VMIG-2 are of high quality. Margins of protection are ample although not so
large as in the preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt rating.
The following criteria will be used in making that assessment.
- - Amortization schedule (the larger the final
maturity relative to other maturities the more likely it will be treated as a
note).
- - Source of Payment (the more dependent the
issue is on the market for its refinancing, the more likely it will be treated
as a note).
Note rating symbols are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
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+ (Exceptionally Strong Credit Quality) 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-1 (Strong
Credit Quality) is the second highest commercial paper rating assigned by Fitch
which reflects an assurance of timely
<PAGE>
A-3
payment only slightly less in degree than issues rated F-1+.
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>
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<PAGE>
INVESTMENT SERVICES OFFICES OF SUNTRUST BANKS, INC. AFFILIATE BANKS:
FLORIDA: (STATEWIDE TOLL FREE) 1-800-526-1177
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
200 S. Orange Avenue
Tower 10
Orlando, FL 32801
(407) 237-4380
1-800-432-4760, ext.4380
SUNTRUST BANK, SOUTH FLORIDA, N.A.
501 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
(305) 765-7422
Boca Raton Office
800 S. Federal Highway
Boca Raton, FL 33435
(407) 243-6707
Coral Ridge Office
2626 E. Oakland Park Blvd.
Ft. Lauderdale, FL 33306
(305) 765-2155
Delray Beach Office
302 E. Atlantic Avenue
Delray Beach, FL 33483
(407) 243-6750
Hollywood Office
2001 Hollywood Blvd.
Hollywood, FL 33021
(305) 765-7062
Palm Beach Office
303 Royal Poinciana Plaza
Palm Beach, FL 33480
(407) 835-2855
PGA Office
2570 PGA Blvd.
Palm Beach Gardens, FL 33410
(407) 835-2802
SUNTRUST BANK, MIAMI, N.A.
777 Brickall Avenue
Miami, FL 33131
(305) 579-7450
SUNTRUST BANK, TAMPA BAY
315 E. Madison Street
Tampa, FL 33602
(813) 224-2517
SUNTRUST BANK, TREASURE COAST, N.A.
700 Virginia Avenue
Ft. Pierce, FL 34982
(407) 467-6459
Osceola Office
111 East Osceola Street
Stuart, FL 34994
(407) 223-6012
SUNTRUST BANK, EAST CENTRAL FLORIDA
Belnova Office
1590 S. Nova Road
Daytona Beach, FL 32114
(904) 258-2660
Bill France Office
299 Bill France Blvd.
Daytona Beach, FL 32114
(904) 258-2654
Deland Office
302 E. New York Avenue
Deland, FL 32724
(904) 822-5891
SUNTRUST BANK, NORTH FLORIDA, N.A.
200 W. Forsyth Street
Jacksonville, FL 32202
(904) 632-2534
SUNTRUST BANK, SOUTHWEST FLORIDA
12730 New Brittany Blvd.
Ft. Meyers, FL 33907
(813) 277-2531
Pelican Bay Office
801 Laurel Oak Drive
Naples, FL 33963
(813) 598-0515
<PAGE>
SUNTRUST BANK, GULF COAST
South Gate Office
3400 S. Tamiami Trail
Sarasota, FL 34230
(813) 951-3218
Port Charlotte Office
18501 Murdock Circle
Port Charlotte, FL 33949
(813) 625-9286
North Beneva Office
3577 Fruitville Road
Sarasota, FL 34237
(813) 951-3040
South Beneva Office
8181 S. Tamiami Trail
Sarasota, FL 34231
(813) 951-3053
Venice Office
200 Nokomis Ave South
Venice, FL 34285
(813) 486-4417
SUNTRUST BANK, MID-FLORIDA, N.A.
210 Security Square
Winter Haven, FL 33880
(813) 297-6855
Okeechobee Office
815 S. Parrott Avenue
Okeechobee, FL 34974
(813) 763-6417
SUNTRUST BANK, NATURE COAST
One East Jefferson Street
Brooksville, FL 34601
(904) 754-5799
Crystal River Office
1502 SE Highway 19
Crystal River, FL 32629
(904) 795-8214
Seven Hills Office
1170 Mariner Blvd.
Spring Hill, FL 34609
(904) 754-5779
SUNTRUST BANK, NORTH CENTRAL FLORIDA
203 E. Silver Springs Blvd.
Ocala, FL 34470
(904) 368-6477
SUNTRUST BANK, TALLAHASSEE, N.A.
3522 Thomasville Road
Tallahassee, FL 32312
(904) 298-5030
SUNTRUST BANK, WEST FLORIDA
511 W. 23rd Street
Panama City, FL 32405
(904) 872-6087
GEORGIA:
SUNTRUST BANK, ATLANTA
55 Park Place
First Floor
Atlanta, GA 30303
(404) 588-7315
1-800-241-0901 Ext. 7315
SUNTRUST BANK, NORTHEAST GEORGIA, N.A.
101 N. Lumpkin Street
Athens, GA 30601
(704) 354-5346
Gainesville Branch
104 Green Street
Gainesville, GA 30503
(770) 503-8674
SUNTRUST BANK, NORTHWEST GEORGIA, N.A.
100 East Second Avenue
Rome, GA 30161
(706) 236-4325
SUNTRUST BANK, AUGUSTA, N.A.
2815 Wrightsboro Road
Augusta, GA 30909
(706) 821-2015
SUNTRUST BANK, MIDDLE GEORGIA, N.A.
606 Cherry Street
Macon, GA 31208
(912) 755-5175
SUNTRUST BANK, WEST GEORGIA, N.A.
1246 First Avenue
Columbus, GA 31901
(706) 649-3631
SUNTRUST BANK, SAVANNAH, N.A.
33 Bull Street
Savannah, GA 31401
(912) 944-1165
<PAGE>
SUNTRUST BANK, SOUTH GEORGIA, N.A.
410 W. Broad Avenue
Albany, GA 31701
(912) 430-5468
Coffee County Branch
201 S. Peterson Avenue
Douglas, GA 31533
(912) 384-1820
SUNTRUST BANK, SOUTHEAST GEORGIA, N.A.
510 Gloucester Street
Brunswick, GA 31520
(912) 262-5322
SEA ISLAND ROAD BRANCH
701 Sea Island Road
St. Simons Island, GA 31522
(912) 638-3620
(912) 262-2227
TENNESSEE:
SUNTRUST BANK, NASHVILLE, N.A.
424 Church Street
4th Floor
Nashville, TN 37230
(615) 748-4477
1-800-932-2652
SUNTRUST BANK, CHATTANOOGA, N.A.
736 Market Street
Chattanooga, TN 37402
(615) 737-3085
TN WATS 1-800-572-7306, Ext. 3085
Bordering States WATS
1-800-874-1083, Ext. 3085
SUNTRUST BANK, EAST TENNESSEE, N.A.
700 East Hill Avenue
Knoxville, TN 37997
(615) 544-2181
1-800-225-0913, Ext. 2181
SUNTRUST BANK, NORTHEAST TENNESSEE
207 Mockingbird Lane
Johnson City, TN 37604
(615) 461-1005
SUNTRUST BANK, SOUTH CENTRAL TENNESSEE, N.A.
25 Public Square
Lawrenceburg, TN 38464
615-762-3511
ALABAMA:
SUNTRUST BANK, ALABAMA, N.A.
201 South Court Street
Florence, AL 35630
(205) 767-8463
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<PAGE>
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<PAGE>
DISTRIBUTOR
SEI Financial Services
Company
...............................................................................
100159/10-95
PROSPECTUS
STI CLASSIC FUNDS
FLEX SHARES
A CLASS OF NO INITIAL SALES CHARGE FUNDS
INVESTMENT ADVISORS
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
SUNTRUST BANK, CHATTANOOGA, N.A.,
SUNTRUST BANK, ATLANTA
OCTOBER 1, 1996
Z
<PAGE>
STI CLASSIC FUNDS
INVESTMENT ADVISORS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
SUNTRUST BANK, CHATTANOOGA, N.A.
SUNTRUST BANK, ATLANTA, N.A.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's prospectuses dated
October 1, 1996. Prospectuses may be obtained through the Distributor, SEI
Financial Services Company, 680 E. Swedesford Road, Wayne, Pennsylvania 19087-
1658.
TABLE OF CONTENTS
PAGE
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . . . . . B-2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .B-15
INVESTMENT ADVISORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-18
THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-20
THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-21
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . .B-25
COMPUTATION OF YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-27
CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . . . . .B-31
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . .B-33
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . .B-34
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-35
FUND TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-38
TRADING PRACTICES AND BROKERAGE. . . . . . . . . . . . . . . . . . . . . . .B-39
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . .B-43
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .B-43
LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . . . . .B-44
5% AND 25% SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . .B-44
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-53
October 1, 1996
<PAGE>
THE TRUST
STI Classic Funds (the "Trust") is a diversified, open-end management investment
company established under Massachusetts law as a Massachusetts business trust
under a Declaration of Trust dated January 15, 1992. The Declaration of Trust
permits the Trust to offer separate series ("Funds") of units of beneficial
interest ("shares") and different classes of shares of each Fund. Shareholders
at present may purchase shares of the Trust's money market funds through two
separate classes (Trust Shares and Investor Shares) and shares of the Trust's
other funds through three separate classes (Trust Shares, Investor Shares and
Flex Shares), which provide for variations in sales charges, distribution costs,
transfer agent fees, voting rights and dividends. Except for these differences,
each Trust Share, Investor Share and Flex Share, if any, of each Fund represents
an equal proportionate interest in that portfolio. See "Description of Shares."
This Statement of Additional Information relates to the Trust Shares and
Investor Shares of the Trust's Prime Quality Money Market Fund, U.S. Government
Securities Money Market Fund and Tax-Exempt Money Market Fund (the "Money Market
Funds") and the Trust Shares, Investor Shares and Flex Shares of the Trust's
Investment Grade Bond Fund, Short-Term U.S. Treasury Securities Fund, Short-Term
Bond Fund, U.S. Government Securities Fund and Limited-Term Federal Mortgage
Securities Fund (the "Bond Funds"); Investment Grade Tax-Exempt Bond Fund,
Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund and Tennessee Tax-
Exempt Bond Fund (the "Tax-Exempt Bond Funds"); Capital Growth Fund, Value
Income Stock Fund, Mid-Cap Equity Fund, Sunbelt Equity Fund, International
Equity Index Fund and International Equity Fund (the "Equity Funds"); and the
Balanced Fund. These various series are collectively referred to herein as the
"Funds."
DESCRIPTION OF PERMITTED INVESTMENTS
VARIABLE RATE MASTER DEMAND NOTES
The Tax-Exempt Money Market Fund, Balanced Fund, Tax-Exempt Bond Funds and Value
Income Stock Fund may invest in variable rate master demand notes which may or
may not be backed by bank letters of credit. These notes permit the investment
of fluctuating amounts at varying market rates of interest pursuant to direct
arrangements between a Fund, as lender, and a borrower. Such notes provide that
the interest rate on the amount outstanding varies on a daily, weekly or monthly
basis depending upon a stated short-term interest rate index. Both the lender
and the borrower have the right to reduce the amount of outstanding indebtedness
at any time. There is no secondary market for the notes and it is not generally
contemplated that such instruments will be traded. The quality of the note or
the underlying credit must, in the opinion of the appropriate Advisor, be
equivalent to the ratings applicable to permitted investments for the particular
Fund. The appropriate Advisor will monitor on an ongoing basis the earning
power, cash flow and liquidity ratios of the issuers of such
B-3
<PAGE>
instruments and will similarly monitor the ability of an issuer of a demand
instrument to pay principal and interest on demand.
STRIPS
Each Fund may invest in Separately Traded Interest and Principal Securities
("STRIPS"), which are component parts of U.S. Treasury Securities traded through
the Federal Book-Entry System. An Advisor will only purchase STRIPS that it
determines are liquid or, if illiquid, do not violate the affected Fund's
investment policy concerning investments in illiquid securities. Consistent
with Rule 2a-7 under the Investment Company Act of 1940, as amended, (the "1940
Act"), the Money Market Funds' Advisor will only purchase STRIPS for Money
Market Funds that have a remaining maturity of 397 days or less; therefore, the
Money Market Funds currently may only purchase interest component parts of U.S.
Treasury Securities. While there is no limitation on the percentage of a Fund's
assets that may be comprised of STRIPS, the Money Market Funds' Advisor will
monitor the level of such holdings to avoid the risk of impairing shareholders'
redemption rights and of deviations in the value of shares of the Money Market
Funds.
U.S. GOVERNMENT AGENCY SECURITIES
Certain investments of each of the Funds except the Short-Term U.S. Treasury
Securities Fund may include U.S. Government Agency Securities. Agencies of the
United States Government which issue obligations consist of, among others, the
Export Import Bank of the United States, Farmers Home Administration, Federal
Farm Credit Bank, Federal Housing Administration, Government National Mortgage
Association ("GNMA"), Maritime Administration, Small Business Administration and
The Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued by, among others, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage Association ("FNMA")
and the United States Postal Service as well as government trust certificates.
Some of these securities are supported by the full faith and credit of the
United States Treasury (e.g., GNMA securities), others are supported by the
right of the issuer to borrow from the Treasury and still others are supported
only by the credit of the instrumentality (e.g., FNMA securities). 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 the value of the obligation prior to maturity.
MORTGAGE-BACKED SECURITIES
Each of the Funds except the Short-Term U.S. Treasury Securities Fund, Sunbelt
Equity Fund, Aggressive Growth Fund and International Equity Index Fund may
invest in mortgage-backed securities issued or guaranteed by U.S. Government
agencies or
B-4
<PAGE>
instrumentalities such as GNMA, FNMA and FHLMC. Obligations of GNMA are backed
by the full faith and credit of the United States Government. Obligations of
FNMA and FHLMC are not backed by the full faith and credit of the United States
Government but are considered to be of high quality since they are considered to
be instrumentalities of the United States. The market value and interest yield
of these mortgage-backed securities can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans with a maximum
maturity of 30 years. However, due to scheduled and unscheduled principal
payments on the underlying loans, these securities have a shorter average
maturity and, therefore, less principal volatility than a comparable 30-year
bond. Since prepayment rates vary widely, it is not possible to accurately
predict the average maturity of a particular mortgage-backed security. The
scheduled monthly interest and principal payments relating to mortgages in the
pool will be "passed through" to investors. Government mortgage-backed
securities differ from conventional bonds in that principal is paid back to the
certificate holders over the life of the loan rather than at maturity. As a
result, there will be monthly scheduled payments of principal and interest. In
addition, there may be unscheduled principal payments representing prepayments
on the underlying mortgages. Although these securities may offer yields higher
than those available from other types of U.S. Government securities,
mortgage-backed securities may be less effective than other types of securities
as a means of "locking in" attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, the value of these
securities likely will not rise as much as comparable debt securities due to the
prepayment feature. In addition, these prepayments can cause the price of a
mortgage-backed security originally purchased at a premium to decline in price
to its par value, which may result in a loss.
The Bond Funds, Prime Quality Money Market Fund and the Balanced Fund may also
invest in privately issued mortgage-backed securities. Two principal types of
mortgage-backed securities are collateralized mortgage obligations ("CMOs") and
real estate mortgage investment conduits ("REMICs"), which are rated in one of
the two highest categories by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"). CMOs are securities collateralized by
mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds
representing an interest in a pool of mortgages where the cash flow generated
from the mortgage collateral pool is dedicated to bond repayment), and
mortgage-backed bonds (general obligations of the issuers payable out of the
issuers' general funds and additionally secured by a first lien on a pool of
single family detached properties). Many CMOs are issued with a number of
classes or series which have different expected maturities. Investors
purchasing such CMOs are credited with their portion of the scheduled payments
of interest and principal on the underlying mortgages plus all unscheduled
prepayments of principal based on a predetermined priority schedule.
Accordingly, the CMOs in the longer maturity series are less likely than other
mortgage pass-throughs to be prepaid prior to their stated maturity. Although
some of the mortgages underlying CMOs may be supported by various types of
insurance, and some CMOs may be backed by GNMA certificates or other
B-5
<PAGE>
mortgage pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES
Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life. The
Advisors believe that the estimated average life is the most appropriate measure
of the maturity of a mortgage-backed security. Accordingly, in order to
determine whether such security is a permissible investment for a Fund, it will
be deemed to have a remaining maturity equal to its average life as estimated by
that Fund's Advisor. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns. The assumption is based upon current
interest rates, current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus different market
participants could produce somewhat different average life estimates with regard
to the same security. There can be no assurance that the average life as
estimated by an Advisor will be the actual average life.
STRIPPED MORTGAGE-BACKED SECURITIES
The Limited-Term Federal Mortgage Securities Fund may also invest in stripped
mortgage-backed securities, which are securities that are created when a U.S.
Government agency or a financial institution separates the interest and
principal components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security (IO) receives interest payments from the
same underlying security.
The prices of stripped mortgage-backed securities may be particularly affected
by changes in interest rates. As interest rates fall, prepayment rates tend to
increase, which tends to reduce prices of IOs and increase prices of POs.
Rising interest rates can have the opposite effect.
ASSET-BACKED SECURITIES
In addition to mortgage-backed securities, the Bond Funds, Prime Quality Money
Market Fund, Limited-Term Federal Mortgage Securities Fund and Balanced Fund may
invest in other asset-backed securities rated in one of the two highest rating
categories by S&P or Moody's, including company receivables, truck and auto
loans, leases and credit card receivables. The Bond Funds may invest in other
asset-backed securities that may be created in the future
B-6
<PAGE>
if the Advisor determines they are suitable. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the paydown characteristics of the underlying financial assets
which are passed through to the security holder.
REPURCHASE AGREEMENTS
Each of the Funds except the Short-Term U.S. Treasury Securities Fund may enter
into repurchase agreements. Repurchase agreements are agreements by which a
person (e.g., a Fund) obtains a security and simultaneously commits to return
the security to the seller (a primary securities dealer as recognized by the
Federal Reserve Bank of New York or a national member bank as defined in Section
3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days (usually not more than seven) from the date of purchase. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is, in effect, secured by the value of the
underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisors monitor
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the appropriate Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
the sale including accrued interest are less than the resale price provided in
the agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and required to return
the underlying security to the seller's estate.
MUNICIPAL SECURITIES
MUNICIPAL NOTES in which the Short-Term Bond Fund, Tax-Exempt Money Market Fund
and Tax-Exempt Bond Funds may invest, consist of general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. A Fund's investments in any of the
notes described above will be limited to those obligations (i) where both
principal and interest are backed by the full faith and credit of the United
States, (ii) which are rated MIG-2 or
B-7
<PAGE>
V-MIG-2 at the time of investment by Moody's, (iii) which are rated SP-2 at the
time of investment by S&P, or (iv) which, if not rated by S&P or Moody's, are in
the Advisor's judgement, of at least comparable quality to MIG-2, VMIG-2 or SP-
2.
MUNICIPAL BONDS must be rated at least BBB or better by S&P or at least Baa or
better by Moody's at the time of purchase for the Tax-Exempt Bond Funds or in
one of the two highest short-term rating categories by S&P or Moody's for the
Tax-Exempt Money Market Fund or, if not rated by S&P or Moody's, must be deemed
by the Advisor to have essentially the same characteristics and quality as bonds
having the above ratings. A Fund may purchase industrial development and
pollution control bonds if the interest paid is exempt from Federal income tax.
These bonds are issued by or on behalf of public authorities to raise money to
finance various privately-operated facilities for business and manufacturing,
housing, sports and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports and parking.
The payment of the principal and interest on such bonds is dependent solely on
the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
OTHER TYPES OF TAX-EXEMPT INSTRUMENTS which are permissible investments for the
Short-Term Bond Fund, Tax-Exempt Money Market Fund and Tax-Exempt Bond Funds
include floating rate notes. Investments in such floating rate instruments will
normally involve industrial development or revenue bonds which provide that the
rate of interest is set as a specific percentage of a designated base rate (such
as the prime rate) at a major commercial bank, and that the Fund can demand
payment of the obligation at all times or at stipulated dates on short notice
(not to exceed 30 days) at par plus accrued interest. Such obligations are
frequently secured by letters of credit or other credit support arrangements
provided by banks. The quality of the underlying credit or of the bank, as the
case may be, must, in the Advisor's opinion be equivalent to the long-term bond
or commercial paper ratings stated above. The Advisor will monitor the earning
power, cash flow and liquidity ratios of the issuers of such instruments and the
ability of an issuer of a demand instrument to pay principal and interest on
demand. The Funds may also purchase participation interests in municipal
securities (such as industrial development bonds and municipal lease/purchase
agreements). A participation interest gives a Fund an undivided interest in the
underlying municipal security. If it is unrated, the participation interest
will be backed by an irrevocable letter of credit or guarantee of a
credit-worthy financial institution or the payment obligations otherwise will be
collateralized by U.S. Government Securities. Participation interests may have
fixed, variable or floating rates of interest and may include a demand feature.
A participation interest without a demand feature or with a demand feature
exceeding seven days may be deemed to be an illiquid security subject to the
Funds' investment limitations restricting their purchases of illiquid
securities. A Fund may purchase other types of tax-exempt instruments as long
as they are of a quality equivalent to the bond or commercial paper ratings
stated above.
Opinions relating to the validity of municipal securities and to the exemption
of interest thereon from federal income tax are rendered by bond counsel to the
respective issuers at the time of
B-8
<PAGE>
issuance. Neither the Funds nor an Advisor will review the proceedings relating
to the issuance of municipal securities or the basis for such opinions.
STANDBY COMMITMENTS AND PUTS
The Prime Quality Money Market Fund, Tax-Exempt Money Market Fund, Balanced
Fund, Tax-Exempt Bond Funds and the Bond Funds may purchase securities at a
price which would result in a yield to maturity lower than that generally
offered by the seller at the time of purchase when they can simultaneously
acquire the right to sell the securities back to the seller, the issuer or a
third party (the "writer") at an agreed-upon price at any time during a stated
period or on a certain date. Such a right is generally denoted as a "standby
commitment" or a "put." The purpose of engaging in transactions involving puts
is to maintain flexibility and liquidity to permit the Funds to meet redemptions
and remain as fully invested as possible in municipal securities. The Funds
reserve the right to engage in put transactions. The right to put the
securities depends on the writer's ability to pay for the securities at the time
the put is exercised. A Fund would limit its put transactions to institutions
which the Advisor believes present minimal credit risks, and the Advisor would
use its best efforts to initially determine and continue to monitor the
financial strength of the sellers of the options by evaluating their financial
statements and such other information as is available in the marketplace. It
may, however be difficult to monitor the financial strength of the writers
because adequate current financial information may not be available. In the
event that any writer is unable to honor a put for financial reasons, a Fund
would be a general creditor (I.E., on a parity with all other unsecured
creditors) of the writer. Furthermore, particular provisions of the contract
between the Fund and the writer may excuse the writer from repurchasing the
securities; for example, a change in the published rating of the underlying
securities or any similar event that has an adverse effect on the issuer's
credit or a provision in the contract that the put will not be exercised except
in certain special cases, for example, to maintain portfolio liquidity. The
Fund could, however, at any time sell the underlying portfolio security in the
open market or wait until the portfolio security matures, at which time it
should realize the full par value of the security.
The securities purchased subject to a put may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could, of course, sell the portfolio
security. The maturity of the underlying security will generally be different
from that of the put. There will be no limit to the percentage of portfolio
securities that the Fund may purchase subject to a standby commitment or put,
but the amount paid directly or indirectly for all standby commitments or puts
which are not integral parts of the security as
B-9
<PAGE>
originally issued held in the Fund will not exceed 1/2 of 1% of the value of
the total assets of such Fund calculated immediately after any such put is
acquired.
FOREIGN SECURITIES
The Prime Quality Money Market Fund, Investment Grade Bond Fund, Short-Term Bond
Fund, Balanced Fund and each of the Equity Funds, except the Sunbelt Equity
Fund, may invest in U.S. dollar denominated obligations or securities of foreign
issuers. The International Equity Index and International Equity Funds will
invest primarily in certain obligations or securities of foreign issuers.
Possible investments include equity securities of foreign entities, obligations
of foreign branches of U.S. banks and of foreign banks, including, without
limitation, European Certificates of Deposit, European Time Deposits, European
Bankers' Acceptances, Canadian Time Deposits and Yankee Certificates of Deposit,
and investments in Canadian Commercial Paper and foreign securities.
Permissible investments may consist of obligations of foreign branches of U.S.
banks and of foreign banks, including European Certificates of Deposit, European
Time Deposits, Canadian Time Deposits and Yankee Certificates of Deposits,
Canadian Commercial Paper, and Europaper. In addition, each of the above-
mentioned Funds except for the Short-Term Bond Fund may invest in American
Depositary Receipts. These instruments may subject the Funds to investment
risks that differ in some respects from those related to investments in
obligations of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other income, possible seizure, nationalization, or
expropriation of foreign deposits, the possible establishment of exchange
controls or taxation at the source, greater fluctuations in value due to changes
in exchange rates, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. Such investments may also entail higher custodial fees and sales
commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar
securities or obligations. Foreign branches of U.S. banks and foreign banks
may be subject to less stringent reserve requirements than those applicable to
domestic branches of U.S. banks.
By investing in foreign securities, the International Equity Index and
International Equity Funds attempt to take advantage of differences between both
economic trends and the performance of securities markets in the various
countries, regions and geographic areas as prescribed by each Fund's investment
objective and policies. During certain periods the investment return on
securities in some or all countries may exceed the return on similar investments
in the United States, while at other times the investment return may be less
than that on similar U.S. securities. Shares of the International Equity Index
and International Equity Funds, when included in appropriate amounts in a
portfolio otherwise consisting of domestic securities, may provide a source of
increased diversification. The International Equity Index and International
Equity Funds seek increased diversification by combining securities from various
countries and geographic areas that offer different investment opportunities and
are affected by different
B-10
<PAGE>
economic trends. The international investments of the International Equity
Index and International Equity Funds may reduce the effect that events in any
one country or geographic area will have on its investment holdings. Of course,
negative movement by a Fund's investments in one foreign market represented in
its portfolio may offset potential gains from the Fund's investments in another
country's markets.
OBLIGATIONS OF SUPRANATIONAL AGENCIES
The Prime Quality Money Market Fund, U.S. Government Securities Fund, Investment
Grade Bond Fund, Balanced Fund and Short-Term Bond Fund may purchase obligations
of supranational agencies. Currently these Funds intend to invest only in
obligations issued or guaranteed by the Asian Development Bank, Inter-American
Development Bank, International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Coal and Steel Community, European
Economic Community, European Investment Bank and the Nordic Investment Bank.
WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS
The Tax-Exempt Money Market Fund, Balanced Fund, Bond Funds, Tax-Exempt Bond
Funds, Value Income Stock Fund, U.S. Government Securities Fund and the Limited-
Term Federal Mortgage Securities Fund may purchase when-issued securities, in
which case delivery and payment normally take place within 45 days (90 days with
respect to the Limited-Term Federal Mortgage Security Fund) after the date of
commitment to purchase. In addition, the Tax-Exempt Bond Funds may purchase
municipal forwards for which delivery of the underlying municipal security
normally occurs after 45 days but before one year after the commitment date.
The Funds will only make commitments to purchase when-issued securities and
municipal forwards with the intention of actually acquiring the securities, but
may sell them before the settlement date. When-issued securities are subject to
market fluctuation, and accrue no interest to the purchaser during this pre-
settlement period. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the purchaser enters into
the commitment. Purchasing municipal forwards and when-issued securities
entails leveraging and can involve a risk that the yields available in the
market when the delivery takes place may actually be higher than those obtained
in the transaction itself. In that case, there could be an unrealized loss at
the time of delivery.
Segregated accounts will be established with the appropriate Custodian, and a
Fund will maintain high quality, liquid assets in an amount at least equal in
value to its commitments to purchase when-issued securities and municipal
forwards. If the value of these assets declines, the Fund will place additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments.
B-11
<PAGE>
RESTRICTED SECURITIES
Restricted Securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Permitted investments for the Balanced Fund, Bond
Funds, Tax-Exempt Bond Funds and Equity Funds include restricted securities, and
each such Fund may invest up to 15% of its total assets in illiquid securities,
subject to each Fund's investment limitations on the purchase of illiquid
securities. Restricted Securities, including securities eligible for re-sale
under 1933 Act Rule 144A, that are determined to be liquid are not subject to
this limitation. This determination is to be made by a Fund's Advisor pursuant
to guidelines adopted by the Board of Trustees. Under these guidelines, the
particular Advisor will consider the frequency of trades and quotes for the
security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. In purchasing such Restricted
Securities, each Advisor intends to purchase securities that are exempt from
registration under Rule 144A under the 1933 Act.
SECURITIES LENDING
Each Fund may lend securities pursuant to agreements which require that the
loans be continuously secured by collateral at all times equal to 100% of the
market value of the loaned securities which consists of: cash, securities of
the U.S. Government or its agencies, or any combination of cash and such
securities. Such loans will not be made if, as a result, the aggregate amount
of all outstanding securities loans for a Fund exceed one-third of the value of
the Fund's total assets taken at fair market value. A Fund will continue to
receive interest on the securities lent while simultaneously earning interest on
the investment of the cash collateral in U.S. Government securities. However, a
Fund will normally pay lending fees to such broker-dealers and related expenses
from the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
appropriate Advisor to be of good standing and when, in the judgment of that
Advisor, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Funds may use the Distributor
or a broker-dealer affiliate of an Advisor as a broker in these transactions.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The Balanced Fund, Bond Funds, Tax-Exempt Bond Funds, International Equity Index
Fund, International Equity Fund and Value Income Stock Fund may invest in
futures contracts and options on futures. Although futures contracts by their
terms call for actual delivery or acceptance of the underlying securities, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery. Closing out an open futures position
B-12
<PAGE>
is done by taking an opposite position ("buying" a contract which has previously
been "sold" or "selling" a contract which has previously been "purchased") in an
identical contract to terminate the position. Brokerage commissions are
incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, a Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Funds may be required to make
delivery of the instruments underlying the futures contracts they hold. The
inability to close options and futures positions also could have an adverse
impact on the ability to effectively hedge the underlying securities.
The Funds will minimize the risk that they will be unable to close out a futures
contract by entering into futures contracts that are traded on national futures
exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in
a futures contract may result in immediate and substantial loss (or gain) to a
Fund. For example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit if
the contract were closed out. Thus, a purchase or sale of a futures contract
may result in losses in excess of the amount invested in the contract. However,
because the Funds will be engaged in futures transactions only for hedging
purposes, the Advisors do not believe that the Funds will generally be subject
to the risks of loss frequently associated with futures transactions. The Funds
presumably would have sustained comparable losses if, instead of the futures
contract, they had invested in the underlying financial instrument and sold it
after the decline. The risk of loss from the purchase of options is less as
compared with the purchase or sale of futures contracts because the maximum
amount at risk is the premium paid for the option.
Utilization of futures transactions by the Funds does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the fund securities being hedged. It is also
possible that the Funds could both lose money on futures contracts and
experience a decline in value of its fund securities. There is also the risk of
loss by the Funds of margin deposits in the event of the bankruptcy of a broker
with whom the Funds have an open position in a futures contract or related
option.
B-13
<PAGE>
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
OPTIONS
The Balanced Fund, Bond Funds, Tax-Exempt Bond Funds, International Equity Index
Fund, International Equity Fund and Value Income Stock Fund may write call
options on a covered basis only, and will not engage in option writing
strategies for speculative purposes. A call option gives the purchaser of such
option the right to buy, and the writer, in this case the Fund, the obligation
to sell the underlying security at the exercise price during the option period.
The advantage to the Funds of writing covered calls is that the Funds receive a
premium which is additional income. However, if the security rises in value,
the Funds may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security.
B-14
<PAGE>
If a call option expires unexercised, a Fund will realize a short-term capital
gain in the amount of the premium on the option, less the commission paid. Such
a gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, a
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security, and the proceeds
of the sale of the security plus the amount of the premium on the option, less
the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Funds will write call options only on a covered basis, which means that a
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Fund would be required to continue to hold a security which it might otherwise
wish to sell, or deliver a security it would want to hold. Options written by
the Funds will normally have expiration dates between one and nine months from
the date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written.
INVESTMENT COMPANY SHARES
Investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that Shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Corporation ("SEI"), the parent company of the Administrator and
the Distributor. However, the purchase of shares of the Funds by such banks or
by their customers will not be a consideration in determining which bank
obligations the Funds will purchase. The Funds will not purchase obligations
issued by the Advisors.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective.
INVESTMENT LIMITATIONS
The following are fundamental policies of each Fund and cannot be changed with
respect to a Fund without the consent of the holders of a majority of that
Fund's outstanding shares.
B-15
<PAGE>
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and, to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter or such longer
period as the Securities and Exchange Commission may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur
and is not for investment purposes. All borrowings in excess of 5% of the
value of a Fund's total assets will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.
4. Make loans, except that (a) a Fund may purchase or hold debt instruments in
accordance with its investment objective and policies; (b) a Fund may enter
into repurchase agreements, and (c) the Bond Funds, Balanced Fund, U.S.
Government Securities Fund, Limited-Term Federal Mortgage Securities Fund,
International Equity Index Fund, International Equity Fund and the Value
Income Stock Fund may engage in securities lending as described in the
Prospectuses and in this Statement of Additional Information.
5. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10% of
the Fund's total assets, taken at current value at the time of the
incurrence of such loan, except as permitted with respect to securities
lending.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts (except for financial futures
contracts) and interests in a pool of securities that are secured by
interests in real estate (except that each Bond Fund may purchase mortgage-
backed and other mortgage-related securities, including collateralized
mortgage obligations and REMICs). However, subject to their permitted
investment spectrum, any Fund may invest in companies which invest in real
estate commodities or commodities contracts.
B-16
<PAGE>
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a security.
9. Purchase securities of other investment companies except for money market
funds and CMOs and REMICs deemed to be investment companies and then only
as permitted by the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations thereunder, except that the Mid-Cap Equity, Sunbelt
Equity, Balanced, Georgia Tax-Exempt Bond, Florida Tax-Exempt Bond,
Tennessee Tax-Exempt Bond, U.S. Government Securities, Limited-Term Federal
Mortgage Securities, International Equity Index and International Equity
Funds' purchases of investment company shares are not limited to money
market funds. Under these rules and regulations, a Fund is prohibited
from acquiring the securities of other investment companies if, as a result
of such acquisition, the Fund owns more than 3% of the total voting stock
of the company; securities issued by any one investment company represent
more than 5% of the total assets of a Fund; or securities (other than
treasury stock) issued by all investment companies represent more than 10%
of the total assets of the Fund.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
NON-FUNDAMENTAL POLICIES
No Fund may purchase or retain securities of an issuer if, to the knowledge of
the Trust, an officer, trustee, partner or director of the Trust or any Advisor
of the Trust owns beneficially more than 1/2 of 1% of the shares or securities
of such issuer and all such officers, trustees, partners and directors owning
more than 1/2 of 1% of such shares or securities together own more than 5% of
such shares or securities.
No Fund may invest in warrants except that the Value Income Stock, Mid-Cap
Equity, Sunbelt Equity, Capital Growth, International Equity Index,
International Equity and Balanced Funds may each invest in warrants in an amount
not exceeding 5% of its net assets as valued at the lower of cost or market
value. Included in that amount, but not to exceed 2% of the Fund's net assets,
may be warrants not listed on the New York Stock Exchange or American Stock
Exchange.
No Fund may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of a Fund's assets (10% for the Prime Quality Money Market, U.S.
Government Securities Money Market and Tax-Exempt Money Market Funds). An
illiquid security is a security which cannot be disposed of promptly (within
seven days), and in the usual course of business without a
B-17
<PAGE>
loss, and includes repurchase agreements maturing in excess of seven days, time
deposits with a withdrawal penalty, non-negotiable instruments and instruments
for which no market exists.
No Fund may invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
No Fund may write or purchase puts, calls, options or combinations thereof,
except that the Balanced Fund, Bond Funds, Tax-Exempt Bond Funds, International
Equity Index Fund, International Equity Fund and Value Income Stock Fund may
write covered call options with respect to any or all parts of their Fund
securities and engage in futures transactions, and the Prime, Tax-Exempt Money
Market, Balanced, Short Term Bond and Tax-Exempt Bond Funds may purchase putable
securities. Funds may sell options previously purchased and enter into closing
transactions with respect to covered call options.
No Fund may invest in securities of issuers which together with predecessors
have a record of less than three years continuous operation or equity securities
of issuers which are not readily marketable if such investments will exceed 5%
of the Fund's total assets.
With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
The Prime Quality Money Market Fund may not invest in guaranteed investment
contracts.
INVESTMENT ADVISORS
The Trust and STI Capital Management, N.A., Trusco Capital Management, Inc.,
SunTrust Bank, Atlanta and SunTrust Bank, Chattanooga, N.A. (the "Advisors")
have entered into advisory agreements with the Trust (the "Advisory
Agreements"). The Advisory Agreements provide that each Advisor shall not be
protected against any liability to the Trust or its Shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
Each Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to an Advisor but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by certain states, the Advisor and/or the
Administrator will bear the amount of such excess. The Advisor will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
The continuance of each Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of
B-18
<PAGE>
the Trustees who are not parties to each Agreement or "interested persons" of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. Each Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable at any time without penalty by the
Trustees of the Trust or, with respect to the Funds, by a majority of the
outstanding shares of the Funds, on not less than 30 days' nor more than 60
days' written notice to the Advisor, or by the Advisor on 90 days' written
notice to the Trust.
For the fiscal years ended May 31, 1996, 1995, and 1994, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
Fees Paid Fees Waived
or Reimbursed
----------------------------------------------------------------------------------------
FUND 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund $ 3,868,222 $ 3,274,146 $2,855,556 $ 711,648 $ 636,033 $ 664,188
Florida Tax-Exempt Bond Fund(1) $ 107,618 $ 10,562 $ 0 $ 74,589 $ 45,986 $ 7,414
Georgia Tax-Exempt Bond Fund(2) $ 83,243 $ 35,579 $ 0 $ 65,351 $ 50,699 $ 12,260
Tennessee Tax-Exempt Bond Fund(3) $ 0 $ 0 $ 0 $ 45,935 $ 14,014 $ 2,016
Short-Term Bond Fund $ 361,936 $ 212,070 $ 114,825 $ 149,827 $ 118,030 $ 85,482
Investment Grade Tax-Exempt Bond $ 915,948 $ 627,607 $ 280,656 $ 203,762 $ 138,553 $ 69,202
Fund
U.S. Government Securities Fund(4) $ 16,097 $ 0 * $ 59,975 $ 7,817 *
Short-Term U.S. Treasury $ 36,729 $ 26,399 $ 124,578 $ 72,116 $ 64,786 $ 75,823
Securities Fund
Limited-Term Federal Mortgage $ 224,595 $ 78,778 * $ 119,538 $ 74,494 *
Securities Fund
Prime Quality Money Market Fund $ 5,346,850 $ 4,052,982 $3,099,410 $1,602,546 $1,215,895 $ 929,822
U.S. Government Securities Money $ 2,068,133 $ 1,729,860 $1,807,117 $ 577,384 $ 507,624 $ 474,434
Market Fund
Tax-Exempt Money Market Fund $ 1,422,777 $ 910,742 $ 492,172 $ 685,205 $ 583,588 $ 464,333
</TABLE>
B-19
<PAGE>
<TABLE>
<CAPTION>
Fees Paid Fees Waived
or Reimbursed
----------------------------------------------------------------------------------------
FUND 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Growth Fund $12,099,047 $11,023,563 $8,819,976 $1,408,275 $1,393,475 $1,255,835
Sunbelt Equity Fund $ 3,424,453 $ 2,353,943 $ 236,512 $ 465,317 $ 407,677 $ 143,666
Value Income Stock Fund $ 9,447,738 $ 6,976,518 $2,998,756 $ 0 $ 28,394 $ 426,576
International Equity Fund $ 746,780 * * $ 151,947 * *
International Equity Index Fund $ 740,676 $ 340,065 * $ 144,349 $ 135,043 *
Mid-Cap Equity Fund $ 2,057,932 $ 940,045 $ 52,988 $ 318,958 $ 195,873 $ 68,285
Balanced Fund $ 823,692 $ 652,949 $ 209,237 $ 166,361 $ 149,133 $ 118,661
</TABLE>
*Not in operation during the period.
1 STI Capital Management, advisor to the Florida Tax Exempt Bond Fund
reimbursed expenses of $7,846 for the fiscal year ended May 31, 1994.
2 SunTrust Bank, Atlanta, advisor to the Georgia Tax-Exempt Bond Fund
reimbursed expenses of $4,536 for the fiscal year ended May 31, 1994.
3 SunTrust Bank, Chattanooga, advisor to the Tennessee Tax-Exempt Bond Fund,
reimbursed expenses of $10,011 for the fiscal year ended May 31, 1994,
$19,803 for the fiscal year ended May 31, 1995 and $17,277 for the fiscal
year ended May 31, 1996.
4 Trusco Capital Management, Inc., advisor to the U.S. Government Securities
Fund, reimbursed expenses of $27,216.
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI") have entered into an Administration
Agreement (the "Administration Agreement") dated May 29, 1992. The
Administration Agreement provides that the Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder.
The Administrator, a Delaware business trust, has its principal business offices
at 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. SEI Financial
Management Corporation ("SFM"), a wholly-owned subsidiary of SEI Corporation
("SEI"), is the owner of all beneficial interest in the Administrator. SEI and
its subsidiaries and affiliates, including the Administrator, are leading
providers of funds evaluation services, trust accounting systems, and brokerage
and information services to financial institutions, institutional investors and
B-20
<PAGE>
money managers. The Administrator and its affiliates also serve as
administrator to the following other mutual funds: The Achievement Funds Trust;
The Advisors' Inner Circle Fund; The Arbor Fund; ARK Funds; Bishop Street Funds;
CoreFunds, Inc.; CrestFunds, Inc.; CUFUND; FMB Funds, Inc.; First American
Funds, Inc.; First American Investment Funds, Inc.; Inventor Funds, Inc; Marquis
Funds-Registered Trademark-; Monitor Funds; Morgan Grenfell Investment Trust;
The PBHG Funds, Inc.; The Pillar Funds; Rembrandt Funds-Registered Trademark-;
1784 Funds-Registered Trademark-; SEI Asset Allocation Trust; SEI Daily Income
Trust; SEI Index Funds; SEI Institutional Investments Trust; SEI Institutional
Managed Trust; SEI International Trust; SEI Liquid Asset Trust; SEI Tax Exempt
Trust; Stepstone Funds; and Turner Funds.
For the fiscal years ended May 31, 1996, 1995 and 1994, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
Fees Paid Fees Waived
----------------------------------------------------------------------------------------
FUND 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund $443,569 $404,413 $379,548 $ 0 $ 0 $ 0
Georgia Tax-Exempt Bond Fund $ 16,304 $ 10,140 $ 1,473 $ 0 $ 0 $ 0
Florida Tax-Exempt Bond Fund $ 19,989 $ 6,645 $ 885 $ 0 $ 0 $ 0
Tennessee Tax-Exempt Bond Fund $ 3,148 $ 1,648 $ 241 $ 0 $ 0 $ 0
Short-Term Bond Fund $ 56,317 $ 38,813 $ 24,575 $ 0 $ 0 $ 0
Investment Grade Tax-Exempt Bond Fund $108,204 $ 77,499 $ (8,955) $ 0 $ 1,745 $ 46,343
U.S. Government Securities Fund $ 7,311 $ 807 * $ 0 $ 0 *
Short-Term U.S. Treasury Securities $ 12,012 $ 10,761 $ 24,738 $ 0 $ 0 $ 0
Fund
Limited-Term Federal Mortgage $ 37,854 $ 17,962 * $ 0 $ 0 *
Securities Fund
Prime Quality Money Market Fund $315,880 $155,054 $131,571 $449,492 $465,158 $363,160
U.S. Government Securities Money Market $219,380 $129,165 $197,818 $ 72,463 $134,192 $ 83,382
Fund
Tax-Exempt Money Market Fund $274,701 $128,912 $ 93,437 $ 0 $ 79,032 $ 45,179
Capital Growth Fund $842,411 $826,735 $680,627 $ 0 $ 0 $ 17,482
Sunbelt Equity Fund $241,994 $183,657 $ 25,851 $ 0 $ 0 $ 0
</TABLE>
B-21
<PAGE>
<TABLE>
<CAPTION>
Fees Paid Fees Waived
----------------------------------------------------------------------------------------
FUND 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Value Income Stock Fund $845,706 $669,692 $340,218 $ 0 $ 0 $ 0
International Equity Fund $ 50,404 * * $ 0 * *
International Equity Index Fund $ 70,690 $ 40,223 * $ 0 $ 0 *
Mid-Cap Equity Fund $147,613 $ 75,507 $ 8,225 $ 0 $ 0 $ 0
Balanced Fund $ 74,634 $ 64,645 $ 27,056 $ 0 $ 0 $ 0
</TABLE>
*Not in operation during the period.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, and the Trust have entered into a distribution agreement (the "Distribution
Agreement") dated May 29, 1992. The Distributor will receive no compensation
for distribution of Trust Shares. In addition, the Investor Shares of the Funds
have a distribution plan ("Investor Plan"), and the Flex Shares of the Funds
have a distribution plan ("Flex Plan").
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees, or by a majority vote of the outstanding
securities of the Trust upon not more than 60 days' written notice by either
party.
For the fiscal years ended May 31, 1996, 1995 and 1994, the aggregate sales
charges payable to the Distributor with respect to the Investor Shares of the
Funds were as follows:
<TABLE>
<CAPTION>
Aggregate Sales
Charge Payable to Amount Retained by
FUND Distributor Distributor
-------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund $ 50,016 $ 61,948 $352,000 $ 143 $ 0 $ 0
Georgia Tax-Exempt Bond Fund $ 1,208 $ 1,495 $ 0 $ 6 $ 762 $ 0
Florida Tax-Exempt Bond Fund $ 1,386 $ 8,271 $ 1,000 $ 14 $ 0 $ 0
Tennessee Tax-Exempt Bond Fund $ 515 $ 0 $ 0 $ 0 $ 0 $ 0
Short-Term Bond Fund $ 1,204 $ 0 $ 6,000 $ 0 $ 0 $ 0
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Aggregate Sales
Charge Payable to Amount Retained by
FUND Distributor Distributor
-------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Tax-Exempt Bond Fund $ 12,005 $ 13,613 $ 61,000 $ 30 $ 2,133 $ 0
U.S. Government Securities Fund $ 7,279 $ 4,006 * $ 0 $ 0 *
Short-Term U.S. Treasury Securities Fund $ 2,641 $ 4,241 $ 3,000 $ 9 $ 0 $ 0
Limited-Term Federal Mortgage Securities $ 4,067 $ 1,541 * $ 50 $ 100 *
Fund
Capital Growth Fund $258,267 $373,314 $974,000 $ 243 $ 2,078 $ 1,000
Sunbelt Equity Fund $ 46,854 $135,566 $159,000 $ 61 $ 1,981 $ 0
Value Income Stock Fund $306,061 $406,633 $583,000 $ 3,104 $ 3,774 $ 0
International Equity Fund $ 29,032 * * $ 85 * *
International Equity Index Fund $ 19,058 $ 59,784 * $ 50 $ 1,620 *
Mid-Cap Equity Fund $ 91,344 $ 63,337 $ 24,000 $ 197 $ 858 $ 0
Balanced Fund $ 16,540 $ 37,732 $ 31,000 $ 22 $ 0 $ 0
</TABLE>
*Not in operation during the period.
For the fiscal years ended May 31, 1996 and 1995, the aggregate sales charges
payable to the Distributor with respect to the Flex
Shares of the Funds were as follows:
Aggregate Sales Charge Amount Retained by
FUND Payable to Distributor Distributor
1996 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investment Grade Bond Fund $ 4,329 $ 0
Georgia Tax-Exempt Bond Fund $ 2,896 $ 0
Florida Tax-Exempt Bond Fund $ 153 $ 0
Tennessee Tax-Exempt Bond Fund $ 1,008 $ 0
B-23
<PAGE>
Aggregate Sales Charge Amount Retained by
FUND Payable to Distributor Distributor
1996 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Short-Term Bond Fund $ 344 $ 0
Investment Grade Tax-Exempt
Bond Fund $ 2,782 $ 0
U.S. Government Securities Fund $ 1,067 $ 0
Short-Term U.S. Treasury
Securities Fund $ 3,687 $ 0
Limited-Term Federal Mortgage
Securities Fund $ 1,442 $ 0
Capital Growth Fund $ 6,283 $ 0
Sunbelt Equity Fund $ 324 $ 0
Value Income Stock Fund $ 10,574 $ 0
International Equity Fund $ 60 $ 0
International Equity Index Fund $ 392 $ 0
Mid-Cap Equity Fund $ 5,222 $ 0
Balanced Fund $ 713 $ 0
*Not in operation during the period.
INVESTOR SHARES AND FLEX SHARES DISTRIBUTION PLANS
The Distribution Agreement and the Investor Plan adopted by the Trust provide
that Investor Shares of the Fund will pay the Distributor fees of up to the
following respective levels: .20% of the average daily net assets of the Prime
Quality Money Market Fund; .17% of the average daily net assets of the U.S.
Government Securities Money Market Fund; .15% of the average daily net assets of
the Tax-Exempt Money Market Fund; .18% of the average daily net assets of the
Short-Term U.S. Treasury Securities Fund; .23% of the average daily net assets
of the Short-Term Bond Fund; .43% of the average daily net assets of the
Investment Grade Bond Fund; .43% of the average daily net assets of the
Investment Grade Tax-Exempt Bond Fund; .68% of the average daily net assets of
the Capital Growth Fund; .33% of the average daily net assets of the Value
Income Stock Fund; .43% of the average daily net assets of the Mid-Cap Equity
Fund; .43% of the average daily net assets of the Sunbelt Equity Fund; .28% of
the average daily net assets of the Balanced Fund; .18% of the average daily net
assets of the Florida Tax-Exempt Bond Fund; .18% of the average daily net assets
of the Georgia Tax-Exempt Bond Fund; .18% of the average daily net assets of the
Tennessee Tax-Exempt Bond Fund; .38% of the average daily net assets of the U.S.
Government Securities Fund; .38% of the average daily net assets of the
International Equity Index Fund; .33% of the average daily net assets of the
International Equity Fund; and .23% of the average daily net assets of the
Limited-Term Federal Mortgage Securities Fund.
B-24
<PAGE>
The Distribution Agreement and the Flex Plan adopted by the Trust provide that
each Flex Shares Fund will pay the Distributor a fee of up to .75% of the
average daily net assets of that Fund. The Distributor can use these fees to
compensate broker-dealers and service providers, including SunTrust and its
affiliates, which provide administrative and/or distribution services to
Investor Shares or Flex Shares Shareholders or their customers who beneficially
own Investor Shares or Flex Shares. In addition, Flex Shares are subject to a
service fee of up to .25% of the average daily net assets of the Flex Shares of
each Fund. This service fee will be used for services provided and expenses
incurred in maintaining shareholder accounts, responding to shareholder
inquiries and providing information on their investments.
Services for which broker-dealers and service providers may be compensated
include establishing and maintaining customer accounts and records; aggregating
and processing purchase and redemption requests from customers; placing net
purchase and redemption orders with the Distributor; automatically investing
customer account cash balances; providing periodic statements to customers;
arranging for wires; answering customer inquiries concerning their investments;
assisting customers in changing dividend options, account designations, and
addresses; performing sub-accounting functions; processing dividend payments
from the Trust on behalf of customers; and forwarding Shareholder communications
from the Trust (such as proxies, Shareholder reports, and dividend distribution
and tax notices) to these customers with respect to investments in the Trust.
Certain state securities laws may require those financial institutions providing
such distribution services to register as dealers pursuant to state law.
Although banking laws and regulations prohibit banks from distributing shares of
open-end investment companies such as the Trust, according to an opinion issued
to the staff of the SEC by the Office of the Comptroller of the Currency,
financial institutions are not prohibited from acting in other capacities for
investment companies, such as providing shareholder services. Should future
legislative, judicial or administrative action prohibit or restrict the
activities of financial institutions in connection with providing shareholder
services, the Trust may be required to alter materially or discontinue its
arrangements with such financial institutions.
The Trust has adopted the Investor Plan and the Flex Plan in each case in
accordance with the provisions of Rule 12b-1 under the 1940 Act, which Rule
regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares.
Continuance of the Investor Plan and the Flex Plan must be approved annually by
a majority of the Trustees of the Trust and by a majority of the Qualified
Trustees. The Investor Plan and the Flex Plan require that quarterly written
reports of amounts spent under the Investor Plan and the Flex Plan,
respectively, and the purposes of such expenditures be furnished to and reviewed
by the Trustees. The Investor Plan and the Flex Plan may not be amended to
increase materially the amount which may be spent thereunder without approval by
a majority of the outstanding shares of the affected class of shares of the
Trust. All material amendments of the Plans will require approval by a majority
of the Trustees of the Trust and of the Qualified Trustees.
B-25
<PAGE>
There is no sales charge on purchases of Flex Shares, but Flex Shares are
subject to a contingent deferred sales charge if they are redeemed within one
year of purchase. Pursuant to the Distribution Agreement and the Flex Plan,
Flex Shares are subject to an ongoing distribution and service fee calculated on
each of the Bond Funds', State Tax-Exempt Bond Funds', Equity Funds' and
Balanced Fund's aggregate average daily net assets attributable to its Flex
Shares.
For the fiscal years ended May 31, 1996, 1995, and 1994, the Funds paid the
following amounts pursuant to the Investor Plan:
<TABLE>
<CAPTION>
Distribution Fees
Amount Paid
-------------------------------
Fund 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Bond Fund $ 78,963 $ 54,455 $102,671
Georgia Tax-Exempt Bond Fund $ 5,001 $ 1,548 $ 1,256
Florida Tax-Exempt Bond Fund $ 6,021 $ 1,471 $ 765
Tennessee Tax-Exempt Bond Fund $ 1,266 $ 1,347 $ 277
Short-Term Bond Fund $ 5,067 $ 2,141 $ 3,297
Investment Grade Tax-Exempt Bond Fund $113,467 $107,645 $110,695
U.S. Government Securities Fund $ 4,218 $ 386 *-
Short-Term U.S. Treasury Securities Fund $ 8,499 $ 5,291 $ 9,246
Limited-Term Federal Mortgage Securities Fund $ 2,360 $ 241 *-
Prime Quality Money Market Fund $273,316 $179,128 $207,428
U.S. Government Securities Money Market Fund $ 44,107 $ 16,661 $ 43,328
Tax-Exempt Money Market Fund $ 80,845 $ 44,182 $ 56,471
Capital Growth Fund $912,685 $806,373 $847,998
Sunbelt Equity Fund $ 99,366 $ 49,826 $ 14,508
Value Income Stock Fund $304,282 $217,152 $136,086
International Equity Fund $ 0 *- *-
International Equity Index Fund $ 369 $ 1,649 *-
Mid-Cap Equity Fund $ 51,485 $ 8,123 $ 2,150
Balanced Fund $ 10,808 $ 3,233 $ 1,220
</TABLE>
B-26
<PAGE>
*Not in operation during the period.
For the fiscal years ended May 31, 1996, the Funds paid the following amounts
pursuant to the Flex Plan:
<TABLE>
<CAPTION>
Distribution Fees
Amount Paid
------------------------
Fund 1996
- ------------------------------------------------------------------------
<S> <C>
Investment Grade Bond Fund $ 9,277
Georgia Tax-Exempt Bond Fund $ 7,409
Florida Tax-Exempt Bond Fund $ 2,675
Tennessee Tax-Exempt Bond Fund $ 7,238
Short-Term Bond Fund $ 0
Investment Grade Tax-Exempt Bond Fund $21,786
U.S. Government Securities Fund $ 4,460
Short-Term U.S. Treasury Securities Fund $ 321
Limited-Term Federal Mortgage Securities Fund $ 169
Capital Growth Fund $37,344
Sunbelt Equity Fund $ 1,560
Value Income Stock Fund $99,703
International Equity Fund $ 0
International Equity Index Fund $ 580
Mid-Cap Equity Fund $10,115
Balanced Fund $ 6,985
*Not in operation during the period.
</TABLE>
B-27
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
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 and executive officers of the Trust and their dates of birth and their
principal occupations for the last five years are set forth below. Unless
otherwise noted, the principal business address for each officer listed below is
680 East Swedesford Road, Wayne, Pennsylvania 19087-1658.
DANIEL S. GOODRUM (7/11/26) - Trustee - 48 Cayuga Road, Fort Lauderdale, Florida
33308. Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman Audit
Committee and Director, Holy Cross Hospital; Executive Committee Member and
Director, Honda Classic Foundation; Director, Broward Community College
Foundation.
WILTON LOONEY (4/18/19) - Trustee - 2999 Circle 75 Parkway, Atlanta, Georgia
30339. President of Genuine Parts Company, 1961-1964; Chairman of the Board,
1964-1990; Honorary Chairman of the Board, 1990 to present. Rollins, Inc.; RPC
Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee - 1405 Trust Co. of Georgia Building,
Atlanta, Georgia 30303. Director and Chairman of Investment Committee and
member of Executive Committee, Cotton States Life and Health Insurance Company;
Director and Chairman of Investment Committee and member of Executive Committee,
Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia
Advisory Council.
F. WENDELL GOOCH (12/3/32) - Trustee - P.O. Box 190, Paoli, Indiana 47454.
President, Orange County Publishing Co., Inc., since October 1981. Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican since
January 1981, President, H & W Distribution, Inc. since July 1984. Current
Trustee on the Board of Trustees for the SEI Family of Funds and The Capitol
Mutual Funds. Executive Vice President, Trust Department, Harris Trust and
Savings Bank and Chairman of the Board of Directors of The Harris Trust Company
of Arizona before January 1981.
T. GORDY GERMANY (_______) - Trustee - 17 Windy Point, Alexander City, Alabama
35010. Retired President, Chairman, and CEO of Crawford & Company; held these
positions, 1973-1987. Member of the Board of Directors, 1970-1990, joined
company in 1948; spent entire career at Crawford, currently serves on Boards of
Norrell Corporation and Mercy Health Services, the latter being the holding
company of St. Joseph's Hospitals.
DR. BERNARD F. SLIGER (9/30/24) - Trustee - Florida State University, The Gus A.
Stavros Center, 250 South Woodward Avenue, Tallahassee, Florida 32306-4035.
Currently on sabbatical leave from Florida State University (1991-92); now
serves as visiting professor at the University of New Orleans. President of
Florida State University, 1976-91; previous 4 years EVP and Chief Academic
Officer. During educational career, taught at Florida State, Michigan State,
Louisiana State and Southern University. Spent 19 years as faculty member
B-28
<PAGE>
and administrator at Louisiana State University and served as Head of Economics
Department, member and Chairman of the Graduate Council, Dean of Academic
Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve
Bank of Atlanta, 1983-1988.
JESSE HALL (9/26/29) - Trustee(*) - 988 Winall Down Road, NE, Atlanta, Georgia
30318. Executive Vice President, SunTrust Banks, Inc., 1985-1994; Director of
Crawford & Company since 1979; Member, Atlanta Estate Planning Council, 1988-
1993.
DAVID G. LEE (4/16/52) - President, Chief Executive Officer - Senior Vice
President of the Administrator and Distributor since 1993. Vice President of
the Administrator and Distributor (1991-1993). President, GW Sierra Trust Funds
before 1991.
STEPHEN G. MEYER (7/12/65) - Controller, Chief Financial Officer - Vice
President & Controller of SEI Corporation since 1994. Director, Internal Audit
and Risk Management, SEI Corporation, 1992-1994. Senior Associate, Coopers &
Lybrand, 1990-1992. Internal Audit, Vanguard Group of Investment Prior to 1992.
RICHARD W. GRANT (10/25/45) - Secretary - 2000 One Logan Square, Philadelphia,
Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm). Counsel
to the Trust, Administrator and Distributor.
SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor since
1983.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President & General Counsel of SEI, the Administrator and the Distributor since
1994. Vice President of SEI, the Administrator and the Distributor, 1992-1994.
Associate, Morgan, Lewis & Bockius LLP (law firm) prior to 1992.
KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice
President, Assistant Secretary of SEI, the Administrator and Distributor since
1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
JOSEPH M. LYDON (9/27/59) - Vice President - Director/Operations of the
Distributor since 1995. ___________, Dremen Value Management L.P., 1989-1995.
TODD CIPPERMAN (_________) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston &
Strawn (law firm), 1991-1994.
BARBARA NUGENT (_________) - Vice President, Assistant Secretary
B-29
<PAGE>
JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 1800 M Street, N.W.
Washington, DC 20036. Partner, Morgan, Lewis & Bockius LLP (law firm) since
1995. Associate, Morgan, Lewis & Bockius LLP, 1993-1995. Associate, Ropes &
Gray (law firm), 1988-1993.
- ----------------------------
(*) Jesse S. Hall may be deemed to be an "interested person" of the Trust
as defined in the Investment Company Act of 1940.
The Trustees and officers of the Trust own, in the aggregate, less than 1% of
the outstanding shares of the Trust.
For the fiscal year end May 31, 1996, the Trust paid the following amounts to
Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
Aggregate Pension or Total Compensation
Compensation Retirement from Registrant and
From Registrant Benefits Estimated Annual Fund Complex Paid to
Name of Person, for Fiscal Year Accrued as Part Benefits Upon Directors for Fiscal
Position Ended 1996 of Fund Retirement Year Ended 1996
Expenses
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, $13,500 N/A N/A $13,500 for service on
Trustee two boards
Wilton Looney, $16,000 N/A N/A $16,000 for service on
Trustee two boards
Champney A. McNair, $13,500 N/A N/A $13,500 for service on
Trustee two boards
F. Wendell Gooch, $13,500 N/A N/A $13,500 for service on
Trustee two boards
T. Gordy Germany, $13,500 N/A N/A $13,500 for service on
Trustee two boards
Dr. Bernard F. Sliger, $13,500 N/A N/A $13,500 for service on
Trustee two boards
Jesse S. Hall, $13,500 N/A N/A $13,500 for service on
Trustee two boards
</TABLE>
COMPUTATION OF YIELD
The current yield of the Money Market Funds will be calculated daily based upon
the seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing
B-30
<PAGE>
shareholder account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing such net change by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7). Realized and unrealized gains and losses are not
included in the calculation of the yield. The effective compound yield of the
Funds is determined by computing the net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula: Effective Yield = [Base Period Return + 1)
365/7] - 1. The current and the effective yields reflect the reinvestment of
net income earned daily on portfolio assets.
For the 7-day period ended May 31, 1996, the Money Market Funds' current
effective and tax-equivalent yields were as follows:
B-31
<PAGE>
<TABLE>
<CAPTION>
7-DAY 7-DAY
7-DAY TAX-EQUIVALENT TAX-
FUND CLASS 7-DAY YIELD EFFECTIVE YIELD EQUIVALENT
YIELD EFFECTIVE
YIELD
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime Quality Investor 4.63% 4.74% N/A N/A
Money Market Fund Trust 4.80% 4.92% N/A N/A
U.S. Government Investor 4.45% 4.55% N/A N/A
Securities Money
Market Fund Trust 4.59% 4.70% N/A N/A
Tax-Exempt Money Investor 3.03% 3.08% 5.02% 5.10%
Market Fund Trust 3.15% 3.20% 5.22% 5.30%
</TABLE>
The yields of these Funds fluctuate, and the annualization of a week's dividend
is not a representation by the Trust as to what an investment in the Fund will
actually yield in the future. Actual yields will depend on such variables as
asset quality, average asset maturity, the type of instruments a Fund invests
in, changes in interest rates on money market instruments, changes in the
expenses of the Fund and other factors.
Yields are one basis upon which investors may compare the Funds with other money
market funds; however, yields of other money market funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
The Tax-Exempt Money Market and Tax-Exempt Bond Fund's "tax equivalent yield" is
calculated by determining the rate of return that would have to be achi eved on
a fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is
calculated according to the same formula except that a = interest exempt from
federal income tax earned during the period. This tax-exempt yield is then
translated into tax-equivalent yield according to the following formula:
TAX-EQUIVALENT YIELD = ( E ) + t
---------
1-P
E = tax-exempt yield
p = stated income tax rate
t = taxable yield
Tax equivalent yields assume the payment of federal income taxes at a rate of
39.6% and, for the Georgia Tax-Exempt Bond Fund, Georgia income taxes at a rate
of 6.0% and, for the Tennessee Tax-Exempt Bond Fund, Tennessee income taxes at a
rate of 6.0%.
<PAGE>
For the 30-day period ended May 31, 1996, the Tax-Equivalent yield for the Trust
Shares were as follows: for the Investment Grade Tax-Exempt Bond Fund - 6.5%,
Georgia Tax-Exempt Bond Fund - 8.40%, Florida Tax-Exempt Bond Fund - 7.68% and
Tennessee Tax-Exempt Bond Fund - 8.62%.
For the 30-day period ended May 31, 1996, the Tax-Equivalent Yields for the
Investor Shares of the Tax-Exempt Funds were as follows: for the Investment
Grade Tax-Exempt Bond Fund - 5.68%, Georgia Tax-Exempt Bond Fund -7.78%, Florida
Tax-Exempt Bond Fund - 7.05% and Tennessee Tax-Exempt Bond Fund - 7.92%.
For the 30-day period ended May 31, 1996, the Tax-Equivalent Yields for the Flex
Shares of the Tax-Exempt Funds were as follows: for the Investment Grade Tax-
Exempt Bond Fund - 5.12%, Georgia Tax-Exempt Bond Fund - 7.11%, Florida Tax-
Exempt Bond Fund - 6.54% and Tennessee Tax-Exempt Bond Fund - 7.32%.
The Bond, Short-Term U.S. Treasury, Tax-Exempt Bond and Equity Funds may
advertise a 30-day yield. In particular, yield will be calculated according to
the following formula:
6
Yield = (2 (a-b/cd + 1) - 1) where a = dividends and interest earned during the
period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
For the 30-day period ended May 31, 1996, yields on the Funds other than the
Money Market Funds were as follows:
FUND CLASS YIELD
- ------------------------------------------------------------------------------
Investment Grade Bond Fund Investor Class 5.47%
Trust Class 6.09%
Flex Shares 5.23%
Short-Term U.S. Treasury Investor Class 5.21%
Securities Fund Trust Class 5.42%
Flex Shares 5.02%
Short-Term Bond Fund Investor Class 5.42%
Trust Class 5.73%
Flex Shares 5.18%
U.S. Government Securities Fund Investor Class 5.59%
Trust Class 6.14%
Flex Shares 5.25%
B-33
<PAGE>
FUND CLASS YIELD
- ------------------------------------------------------------------------------
Limited-Term Federal Mortgage Investor Class 5.45%
Securities Fund Trust Class 5.78%
Flex Shares 5.24%
Florida Tax-Exempt Bond Fund Investor Class 4.26%
Trust Class 4.64%
Flex Shares 3.95%
Georgia Tax-Exempt Bond Fund Investor Class 4.23%
Trust Class 4.57%
Flex Shares 3.87%
Tennessee Tax-Exempt Bond Fund Investor Class 4.31%
Trust Class 4.69%
Flex Shares 3.98%
Capital Growth Fund Investor Class 0%
Trust Class .53%
Flex Shares 0%
Value Income Stock Fund Investor Class 1.87%
Trust Class 2.28%
Flex Shares 1.25%
Mid-Cap Equity Fund Investor Class .21%
Trust Class .66%
Flex Shares 0%
Balanced Fund Investor Class 2.43%
Trust Class 2.81%
Flex Shares 1.79%
Sunbelt Equity Fund Investor Class 0%
Trust Class 0%
Flex Shares 0%
International Equity Fund Investor Class N/A
Trust Class N/A
Flex Shares N/A
International Equity Index Fund Investor Class N/A
B-34
<PAGE>
FUND CLASS YIELD
- ------------------------------------------------------------------------------
Trust Class N/A
Flex Shares N/A
*Not in operation during the period.
CALCULATION OF TOTAL RETURN
From time to time, the Bond, Short-Term U.S. Treasury, Tax-Exempt Bond, Balanced
and Equity Funds may advertise total return. In particular, total return will
n
be calculated according to the following formula: P (1 + T) = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
From time to time, the Trust may include the names of clients of the Advisors in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. SunTrust
Bank's investment advisory affiliates, STI Capital Management, N.A. and Trusco
Capital Management, have been in the top 1% of the SEI Funds Evaluation database
for equity managers over the past ten years. SEI's database includes research
data on over 1,000 investment managers responsible for over $450 billion in
assets.
Based on the foregoing, the average annual total returns for the Funds from
inception through May 31, 1996 and for the one year period ended May 31, 1996
were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------
Fund Class One Year Since
Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prime Quality Money Market Fund Investor(1) 5.08% 3.79%
Trust(1) 5.25% 3.96%
U.S. Government Securities Money Investor(1) 4.99% 3.70%
Market Fund Trust(1) 5.14% 3.84%
Tax-Exempt Money Market Fund Investor(1) 3.16% 2.53%
Trust(1) 3.28% 2.65%
</TABLE>
B-35
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------
Fund Class One Year Since
Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Bond Fund Investor--Offering Price(2) (.38)% 4.81%
Investor--Net Asset Value(2) 3.50% 5.82%
Trust(3) 4.02% 6.07%
Flex--Offering Price(25) N/A .51%
Flex--Net Asset Value(25) N/A 2.50%
Investment Grade Tax-Exempt Bond Investor--Offering Price(4) 1.45% 7.05%
Fund
Investor--Net Asset Value(4) 5.40% 8.08%
Trust(5) 5.82% 5.63%
Flex--Offering Price(26) N/A 2.95%
Flex--Net Asset Value(26) N/A 4.91%
Short-Term U.S. Treasury Securities Investor--Offering Price(6) 3.58% 3.70%
Fund Investor--Net Asset Value(6) 4.52% 4.03%
Trust(7) 4.73% 4.19%
Flex--Offering Price(27) N/A 1.64%
Flex--Net Asset Value(27) N/A 3.74%
Short-Term Bond Fund Investor--Offering Price(8) 2.19% 3.62%
Investor--Net Asset Value(8) 4.23% 4.30%
Trust(7) 4.45% 4.66%
Flex--Offering Price(28) N/A 1.65%
Flex-Net Asset Value(28) N/A 3.73%
U.S. Government Securities Fund Investor--Offering Price(20) (1.38)% 3.52%
Investor--Net Asset Value(20) 2.47% 5.54%
Trust(21) 2.77% 6.21%
Flex-Offering Price(25) N/A (.54)%
Flex--Net Asset Value(25) N/A 1.42%
</TABLE>
B-36
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------
Fund Class One Year Since
Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited-Term Federal Mortgage Investor--Offering Price(22) 1.97% 4.99%
Fund Investor--Net Asset Value(22) 4.59% 6.45%
Trust(23) 4.84% 6.21%
Flex--Offering Price(25) N/A 2.09%
Flex--Net Asset Value(25) N/A 4.10%
Florida Tax-Exempt Bond Fund Investor--Offering Price(9) (.16)% 3.13%
Investor--Net Asset Value(9) 3.76% 4.82%
Trust(10) 3.87% 5.01%
Flex--Offering Price(26) N/A 1.29%
Flex--Net Asset Value(26) N/A 3.27%
Georgia Tax-Exempt Bond Fund Investor--Offering Price(11) (.24)% .81%
Investor--Net Asset Value(11) 3.69% 2.46%
Trust(9) 3.89% 2.57%
Flex--Offering Price(31) N/A .26%
Flex--Net Asset Value(31) N/A 2.26%
Tennessee Tax-Exempt Bond Fund Investor--Offering Price(11) (.58)% .30%
Investor--Net Asset Value(11) 3.28% 1.94%
Trust(12) 3.43% 1.94%
Flex--Offering Price(29) N/A .00%
Flex--Net Asset Value(29) N/A 1.98%
Capital Growth Fund Investor--Offering Price(4) 23.41% 12.87%
Investor--Net Asset Value(4) 28.18% 13.96%
Trust(13) 28.97% 13.86%
Flex--Offering Price(26) N/A 25.55%
Flex--Net Asset Value(26) N/A 27.56%
</TABLE>
B-37
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------
Fund Class One Year Since
Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Value Income Stock Fund Investor--Offering Price(14) 22.62% 17.08%
Investor--Net Asset Value(14) 27.39% 18.46%
Trust(15) 27.91% 17.89%
Flex--Offering Price(26) N/A 24.52%
Flex--Net Asset Value(26) N/A 26.60%
Mid-Cap Equity Fund Investor--Offering Price(16) 20.23% 12.84%
Investor--Net Asset Value(16) 24.93% 14.71%
Trust(17) 25.54% 15.35%
Flex--Offering Price(29) N/A 21.00%
Flex--Net Asset Value(29) N/A 23.03%
Balanced Fund Investor--Offering Price(18) 12.51% 7.60%
Investor--Net Asset Value(18) 16.88% 9.32%
Trust(19) 17.26% 9.80%
Flex--Offering Price(30) N/A 13.58%
Flex--Net Asset Value(30) N/A 15.67%
Sunbelt Equity Fund Investor--Offering Price(18) 37.21% 14.06%
Investor--Net Asset Value(18) 42.58% 15.89%
Trust(19) 43.19% 16.44%
Flex--Offering Price(29) N/A 37.90%
Flex--Net Asset Value(29) N/A 39.93%
International Equity Fund Investor--Offering Price(32) N/A 12.31%
Investor--Net Asset Value(32) N/A 23.34%
Trust(33) N/A 30.05%
Flex--Offering Price(32) N/A 17.65%
Flex--Net Asset Value(32) N/A 23.08%
</TABLE>
B-38
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------
Fund Class One Year Since
Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Index Fund Investor--Offering Price(24) 4.79% 3.52%
Investor--Net Asset Value(24) 8.90% 5.53%
Trust(24) 9.29% 5.99%
Flex--Offering Price(34) N/A 6.26%
Flex--Net Asset Value(34) N/A 8.31%
</TABLE>
<TABLE>
<S> <C> <C>
1 Commenced operations 6/8/92 11 Commenced operations 1/19/94 21 Commenced operations 7/31/94
2 Commenced operations 6/11/92 12 Commenced operations 1/27/94 22 Commenced operations 7/17/94
3 Commenced operations 7/16/92 13 Commenced operations 7/1/92 23 Commenced operations 6/7/94
4 Commenced operations 6/9/92 14 Commenced operations 2/17/93 24 Commenced operations 6/6/94
5 Commenced operations 10/21/93 15 Commenced operations 2/12/93 25 Commenced operations 6/2/95
6 Commenced operations 3/18/93 16 Commenced operations 2/1/94 26 Commenced operations 6/2/95
7 Commenced operations 3/15/93 17 Commenced operations 2/2/94 27 Commenced operations 6/23/95
8 Commenced operations 3/22/93 18 Commenced operations 1/4/94 28 Commenced operations 6/21/95
9 Commenced operations 1/18/94 19 Commenced operations 1/3/94 29 Commenced operations 6/6/95
10 Commenced operations 1/25/94 20 Commenced operations 6/9/94 30 Commenced operations 6/15/95
31 Commenced operations 6/7/95
32 Commenced operations 1/2/96
33 Commenced operations 12/1/95
34 Commenced operations 6/8/95
</TABLE>
*Not in operation during period.
Flex Shares of the Trust commenced operations after May 31, 1995.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is
closed on the days the following holidays are observed: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
It is currently the Trust's policy to pay for all redemptions in cash. The
Trust retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of readily marketable
securities held by the Funds in lieu of cash. Shareholders may incur brokerage
charges on the sale of any such securities so received in payment of
redemptions. A Shareholder will at all times be entitled to aggregate cash
redemptions from all Funds of the Trust during any 90-day period of up to the
lesser of $250,000 or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the NYSE is restricted, or during the existence of an emergency (as determined
by the Securities and Exchange Commission by rule or regulation) as a result of
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission has by order
permitted. The Trust also reserves the right to suspend sales of
B-39
<PAGE>
shares of a Fund for any period during which the NYSE, an Advisor, the
Administrator and/or, the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Money Market Funds is calculated daily by
the Administrator by adding the value of securities and other assets,
subtracting liabilities and dividing by the number of outstanding shares.
Securities will be valued by the amortized cost method which involves valuing a
security at its cost on the date of purchase and thereafter (absent unusual
circumstances) assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in general market rates of
interest on the value of the instrument. While this method provides certainty
in valuation, it may result in periods during which a security's value, as
determined by this method, is higher or lower than the price a Fund would
receive if it sold the instrument. During periods of declining interest rates,
the daily yield of a Fund may tend to be higher than a like computation made by
a company with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in a Fund
would be able to obtain a somewhat higher yield than would result from
investment in a company utilizing solely market values, and existing investors
in a Fund would experience a lower yield. The converse would apply in a period
of rising interest rates.
A Fund's use of amortized cost and the maintenance of a Fund's net asset value
at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940
Act, provided that certain conditions are met. The regulations also require the
Trustees to establish procedures which are reasonably designed to stabilize the
net asset value per share at $1.00 for the Funds. Such procedures include the
determination of the extent of deviation, if any, of the Funds current net asset
value per share calculated using available market quotations from the Funds
amortized cost price per share at such intervals as the Trustees deem
appropriate and reasonable in light of market conditions and periodic reviews of
the amount of the deviation and the methods used to calculate such deviation.
In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to
consider promptly what action, if any, should be initiated, and, if the Trustees
believe that the extent of any deviation may result in material dilution or
other unfair results to Shareholders, the Trustees are required to take such
corrective action as they deem appropriate to eliminate or reduce such dilution
or unfair results to the extent reasonably practicable. Such actions may
include the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends;
redeeming shares in kind; or establishing a net asset value per share by using
available market quotations. In addition, if the Funds incur a significant loss
or liability, the Trustees have the authority to reduce pro rata the number of
shares of the Funds in each Shareholder's account and to offset each
Shareholder's pro rata portion of such loss or liability from the Shareholder's
accrued but unpaid dividends or from future
B-40
<PAGE>
dividends while each other Fund must annually distribute at least 90% of its
investment company taxable income.
The securities of the Bond, Short-Term U.S. Treasury Securities and Equity Funds
are valued by the Administrator pursuant to valuations provided by an
independent pricing service. The pricing service relies primarily on prices of
actual market transactions as well as trader quotations. However, the service
may also use a matrix system to determine valuations of fixed income securities,
which system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures of the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees.
Although the methodology and procedures are identical, the net asset value per
share of Trust Shares, Flex Shares and Investor Shares of the Bond, Short-Term
U.S. Treasury Securities and Equity Funds may differ because of variations in
the distribution and service fees and transfer agent fees charged to Investor
Shares.
TAXES
FEDERAL INCOME TAX
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
a Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income, (ii) a Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of stocks or securities held for less than three months; (iii)
at the close of each quarter of a Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of a Fund's assets and that does not represent more than
10% of the outstanding voting securities of such issuer; and (iv) at the close
of each quarter of a Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RIC's) of any one issuer, or of two or more issuers
engaged in same or similar businesses if the Fund owns at least 20% of the
voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gains (the excess of net long-term capital gains over net short-term capital
loss), a Fund will be subject to a nondeductible 4% excise tax to the
B-41
<PAGE>
extent it fails to distribute by the end of any calendar year 98% of its
ordinary income for that year and 98% of its capital gain net income for the
one-year period ending on October 31 of that calendar year, plus certain other
amounts.
As noted in the Prospectus, the Tax-Exempt Money Market Fund, the Investment
Grade Tax-Exempt Bond Fund, and the State Tax-Exempt Bond Funds intend to pay
exempt-interest dividends. Exempt-interest dividends are excludable from a
Shareholder's gross income for regular federal income tax purposes, but may
nevertheless be subject to the alternative minimum tax (the "Alternative Minimum
Tax") imposed by Section 55 of the Code or the environmental tax (the
"Environmental Tax") imposed by Section 59A of the Code. The Alternative
Minimum Tax is imposed at the rate of 26% (with a maximum rate of 28%) in the
case of non-corporate taxpayers and at the rate of 20% in the case of corporate
taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The
Environmental Tax is imposed at the rate of 0.12% and applies only to corporate
taxpayers. The Alternative Minimum Tax and the Environmental Tax may be
imposed in two circumstances. First, exempt-interest dividends derived from
certain "private activity bonds" issued after August 7, 1986, will generally be
an item of tax preference (and therefore potentially subject to the Alternative
Minimum Tax and the Environmental Tax) for both corporate and non-corporate
taxpayers. Second, in the case of exempt-interest dividends received by
corporate Shareholders, all exempt-interest dividends, regardless of when the
bonds from which they are derived were issued or whether they are derived from
private activity bonds, will be included in the corporation's "adjusted current
earnings," as defined in Section 56(g) of the Code, in calculating the
corporation's alternative minimum taxable income for purposes of determining the
Alternative Minimum Tax and the Environmental Tax.
Any gain or loss recognized on a sale or redemption of Shares of a Fund by a
Shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise will be generally treated as a short-term capital gain or
loss. Any loss recognized by a Shareholder upon the sale or redemption of
shares of a tax-free Fund held for six months or less, however, will be
disallowed to the extent of any exempt-interest dividends received by the
Shareholder with respect to such shares. If shares on which a net capital gain
distribution has been received are subsequently sold or redeemed and such shares
have been held for six months or less, any loss recognized will be treated as a
long-term capital loss to the extent of the long-term capital gain distribution.
Interest on indebtedness incurred by Shareholders to purchase or carry shares of
a tax-free Fund will not be deductible for federal income tax purposes to the
extent that the Fund distributes exempt interest dividends during the taxable
year. The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Certain foreign corporations engaged in a trade or business in the United States
will be subject to a "branch profits tax" on their "dividend equivalent amount"
for the taxable year, which will include exempt-interest dividends. Certain
Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include
B-42
<PAGE>
exempt-interest dividends. Up to 85% (up to 50% for years prior to 1994) of the
Social Security benefits or railroad retirement benefits received by an
individual during any taxable year will be included in the gross income of such
individual if the individual's "modified adjusted gross income" (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.
A tax-free Fund may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
or private activity bonds. A "substantial user" is defined generally to include
certain persons who regularly use a facility in their trade or business. Such
entities or persons should consult their tax advisors before purchasing shares
of a tax-free Fund.
Issuers of bonds purchased by a tax-free fund (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date thereof if such
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
STATE TAXES
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to Shareholders and the ownership of shares may be subject to state and local
taxes.
FOREIGN TAXES
Dividends and interests received by a Fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on the Fund's securities. Tax conventions between certain
countries and the United States may reduce or eliminate these taxes. Foreign
countries generally do not impose taxes on capital gains with respect to
investments by foreign investors.
If the International Equity Index and International Equity Funds meet the
Distribution Requirement and if more than 50% of the value of such Funds' total
assets at the close of its taxable year consists of securities of foreign
corporations, the Funds will be eligible to, and will, file an election with the
Internal Revenue Service that will enable Shareholders, in effect, to receive
the benefit of the foreign tax credit with respect to any foreign and U.S.
possessions income taxes paid by the Funds. Pursuant to the election, each Fund
will treat those taxes as dividends paid to its Shareholders. Each Shareholder
will be required to include a proportionate share of those taxes in gross income
as income received from a foreign source and must treat the amount so included
as if the Shareholder had paid the foreign tax directly.
B-43
<PAGE>
The Shareholder may then either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against the Shareholders'
federal income tax. If the International Equity Index and International Equity
Funds make the election, such Fund will report annually to its Shareholders the
respective amounts per share of the Fund's income from sources within, and taxes
paid to, foreign countries and U.S. possessions.
The International Equity Index and International Equity Funds' transactions in
foreign currencies and forward foreign currency contracts will be subject to
special provisions of the Code that, among other things, may affect the
character of gains and losses realized by Funds (I.E., may effect whether gains
or losses are ordinary or capital), accelerate recognition of income to the fund
and defer Fund losses. These rules could therefore affect the character, amount
and timing of distributions to Shareholders. These provisions also may require
the Funds to mark-to-market certain types of the positions in its portfolio
(I.E., treat them as if they were closed out) which may cause the Funds to
recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the 90% and 98% distribution requirements for
avoiding income and excise taxes. Each Fund will monitor its transactions, will
make the appropriate tax elections, and will make the appropriate entries in the
books and records when it acquires any foreign currency or forward foreign
currency contract in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company and minimize the
imposition of income and excise taxes.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, an Advisor is responsible for placing the orders
to execute transactions for a Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
an Advisor generally seeks reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, an Advisor
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
B-44
<PAGE>
TRADING PRACTICES AND BROKERAGE
The Trust selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers provide transactions at best price and execution for the Trust. Best
price and execution includes many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry.
In some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Trust either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is
a spread (the difference between the buy and sell price) which is the equivalent
of a commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by an Advisor, brokerage business to brokers
or dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends, assisting in
determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by an Advisor in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used exclusively with respect to the fund
or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-
dealers who provide such brokerage and research services, the Trust believes
that the commissions paid to such broker-dealers are not, in general, higher
than commissions that would be paid to broker-dealers not providing such
services and that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In addition, portfolio
transactions which generate commissions or their equivalent are directed to
broker-dealers who provide daily portfolio pricing services to the Trust.
Subject to best price and execution, commissions used for pricing may or may not
be generated by the funds receiving the pricing service.
An Advisor may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest
B-45
<PAGE>
of each participant and will result in best price and execution. Transactions
involving commingled orders are allocated in a manner deemed equitable to each
account or fund. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or Fund may obtain, it is the opinion of each Advisor and the Trust's
Board of Trustees that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
Funds, at the request of the Distributor, give consideration to sales of shares
of the Trust as a factor in the selection of brokers and dealers to execute
Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of an Advisor, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of an Advisor is permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor or an affiliate of an Advisor to receive
and retain such compensation. These rules further require that commissions paid
to the Distributor by the Trust for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other renumeration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." In addition, the Trust may direct commission business to one or more
designated broker-dealers in connection with such broker/dealer's provision of
services to the Trust or payment of certain Trust expenses (e.g., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor, and will review these
procedures periodically.
For the fiscal year ended May 31, 1996, the Funds paid the following brokerage
commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
TOTAL $ TOTAL
AMOUNT OF $ AMOUNT TOTAL $
TOTAL $ BROKERED TOTAL $ AMOUNT OF BROKERAGE TOTAL AMOUNT OF
AMOUNT OF TRANSACTIONS OF BROKERAGE COMMISSIONS $ AMOUNT BROKERAGE
BROKERED THROUGH COMMISSIONS PAID TO OF BROKERAGE COMMISSIONS
TRANSACTIONS AFFILIATES FOR PAID IN FYE AFFILIATES IN TRANSACTIONS PAID
PORTFOLIO FOR FYE 5/31/96 FYE 5/31/96 5/31/96 FYE 5/31/96 FOR RESEARCH FOR RESEARCH
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prime Quality $18,165,470,547 $8,173,145,355 $ 0 $108,992 $ 0 $ 0
Money Market Fund
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
U.S. Government $ 6,938,095,040 $5,584,646,677 $ 0 $173,038 $ 0 $ 0
Securities Money
Market Fund
Tax-Exempt Money $1,394,861,574 $ 0 $ 0 $ 0 $ 0 $ 0
Market Fund
Investment Grade $3,917,308,841 $1,597,915,449 $ 0 $18,536 $ 0 $ 0
Bond Fund
Investment Grade $2,432,012,487 $604,899,058 $ 0 $3,392 $ 0 $ 0
Tax-Exempt Bond
Fund
Capital Growth $1,392,191,063 $1,426,392,445 $3,399,393 $34,827 $ 0 $ 0
Fund
Value Income $1,773,007,196 $1,662,823,629 $4,325,977 $37,379 $ 0 $ 0
Stock Fund
Short-Term Bond $394,165,379 $ 0 $ 0 $ 0 $ 0 $ 0
Fund
Short-Term U.S. $47,038,183 $ 0 $ 0 $ 0 $ 0 $ 0
Treasury
Securities Fund
Sunbelt Equity $818,595,159 $436,071,109 $904,698 $5,202 $ 0 $ 0
Fund
Balanced Fund $379,763,192 $207,714,650 $169,222 $4,280 $ 0 $ 0
Mid-Cap Equity $434,829,138 $283,836,941 $528,220 $18,224 $ 0 $ 0
Fund
Florida Tax- $147,449,991 $38,144,634 $ 0 $200 $ 0 $ 0
Exempt Bond Fund
Georgia Tax- $85,645,251 $9,916,819 $ 0 $135 $ 0 $ 0
Exempt Bond Fund
Tennessee Tax- $17,455,638 $5,454,080 $ 0 $69 $ 0 $ 0
Exempt Bond Fund
</TABLE>
B-47
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
U.S. Government $51,183,076 $ 0 $ 0 $ 0 $ 0 $ 0
Securities Fund
Limited-Term $253,894,488 $97,256,140 $ 0 $73 $ 0 $ 0
Federal Mortgage
Securities Fund
International $456,530,733 $27,781,590 $1,532,834 $71 $ 0 $ 0
Equity Fund
International $59,709,286 $0 $129,411 $0 $0 $0
Equity Index Fund
</TABLE>
For the fiscal years ended May 31, 1995 and 1994, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
TOTAL $ TOTAL $ AMOUNT OF
AMOUNT OF BROKERED
BROKERAGE COMMISSIONS
FUND COMMISSIONS PAID PAID TO AFFILIATES
- -------------------------------------------------------------------------------------
1995 1994 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth Fund $2,641,999 $2,636,443 $46,411 $212,766
Sunbelt Equity Fund $654,499 $173,919 $4,802 $7,229
Value Income Stock Fund $3,542,773 $2,235,841 $17,510 $162,405
International Equity
Index Fund $176,784 * $ 0 *
Mid-Cap Equity Fund $191,298 $58,527 $11,418 $5,267
International Equity Fund * * * *
Balanced Fund $140,109 $73,119 $4,063 $18,103
</TABLE>
*Not in operation during the period.
For the fiscal years ended May 31, 1996 and 1995, the portfolio turnover rate
for each of the non-money market Funds was as follows:
B-48
<PAGE>
<TABLE>
<CAPTION>
TURNOVER RATE
-------------------
FUND 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Investment Grade Bond Fund 184% 238%
Investment Grade Tax-Exempt Bond Fund 514% 592%
Short-Term U.S. Treasury Securities Fund 94% 88%
Short-Term Bond Fund 163% 201%
U.S. Government Securities Fund 83% 30%
Limited-Term Federal Mortgage Securities Fund 83% 68%
Florida Tax-Exempt Bond Fund 63% 105%
Georgia Tax-Exempt Bond Fund 60% 25%
Tennessee Tax-Exempt Bond Fund 41% 28%
Capital Growth Fund 156% 128%
Value Income Stock Fund 134% 126%
Mid-Cap Equity Fund 116% 66%
Balanced Fund 155% 157%
Sunbelt Equity Fund 106% 80%
International Equity Fund 113% *
International Equity Index Fund 30% 10%
</TABLE>
*Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares and classes of shares of the Funds each of which represents an equal
proportionate interest in that Fund with each other share. Shares are entitled
upon liquidation to a PRO RATA share in the net assets of the Funds.
Shareholders have no preemptive rights. The Declaration of Trust provides that
the Trustees of the Trust may create additional series of shares or classes of
series. All consideration received by the Trust for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears
B-49
<PAGE>
remote because the Trust's Declaration of Trust contains an express disclaimer
of Shareholder liability for obligations of the Trust and requires that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust property for
any Shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisors, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the
Trust unless it is determined in the manner provided in the Declaration of Trust
that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his willful misfeasance, bad faith, gross negligence or reckless disregard
of his duties.
5% AND 25% SHAREHOLDERS
As of July 5, 1996, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or
more of the shares of the Funds. Persons who owned of record or beneficially
more than 25% of a Fund's outstanding shares may be deemed to control the Fund
within the meaning of the Act. The Trust believes that most of the shares of
the Trust Class of the Funds were held for the record owner's fiduciary, agency
or custodial customers.
<TABLE>
<CAPTION>
TRUST SHARES
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Prime Obligation Money Market SunTrust Bank, Atlanta 1,017,340,735.9800 96.78%
Fund P.O. Box 105504
Atlanta, GA 30348
US Government Securities Money SunTrust Bank, Atlanta 320,058,711.3200 98.23%
Market Fund P.O. Box 105504
Atlanta, GA 30348
Tax Exempt Money Market Fund SunTrust Bank, Atlanta 273,617,174.8600 100.00%
P.O. Box 105504
Atlanta, GA 30348
Investment Grade Bond Fund Trustman 48,083,117.4740 80.69%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 3,440,058.7660 5.77%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-50
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Trustman 8,067,193.7390 13.54%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Investment Grade Tax Exempt Trustman 2,854,065.5280 26.61%
Bond Fund Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 2,571,660.2110 23.98%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 5,300,111.4770 49.41%
Mail Code 3144
P.O. Box 105504
Atlanta, GA 30348
Capital Growth Fund Trustman 51,607,779.7980 78.44%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 11,363,691.9550 17.27%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Value Income Stock Fund Trustman 70,173,646.4320 74.21%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 18,135,163.4630 19.18%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Short-Term U.S. Treasury Trustman 429,216.7160 43.59%
Securities Fund Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 257,751.4080 26.18%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 297,590.5360 30.23%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Short-Term Bond Fund Trustman 5,836,666.2750 63.15%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,004,117.0210 10.86%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 2,401,162.8160 25.98%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-51
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Sunbelt Equity Fund Trustman 20,649,993.7390 70.69%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,582,327.4770 5.42%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 6,977,764.6800 23.89%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Mid-Cap Equity Fund Trustman 12,293,386.9360 61.85%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 6,088,060.0450 30.63%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,495,048.9880 7.52%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Balanced Fund Trustman 9,475,264.5430 98.03%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Florida Tax-Exempt Bond Fund Trustman 403,555.6470 13.50%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 790,165.4270 26.43%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,796,356.2170 60.08%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Georgia Tax-Exempt Bond Fund Trustman 1,187,392.0830 49.37%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 653,344.7550 27.17%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 564,318.9730 23.46%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Tennessee Tax-Exempt Bond Fund Trustman 90,545.0710 46.63%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-52
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Trustman 21,867.1410 11.26%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 81,749.3740 42.10%
Mail Stop 3144
P.O. Box 105870
Atlanta, GA 30348-5870
International Equity Index Fund Trustman 5,851,225.2770 70.46%
Mail Stop 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 578,664.7100 6.97%
Mail Stop 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,874,150.7710 22.57%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
International Equity Fund Trustman 12,470,861.1530 66.75%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 5,570,530.5350 29.82%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
U.S. Government Securities Fund Trustman 396,590.0730 38.16%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 445,930.0890 42.91%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 196,765.0530 18.93%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Limited Term Federal Mortgage Trustman 5,100,466.6770 69.67%
Securities Fund Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 471,486.3110 6.44%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,749,245.0220 23.89%
Mail Code 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-53
<PAGE>
<TABLE>
<CAPTION>
INVESTOR SHARES
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Prime Quality Money Market Fund BHC Securities Inc 136,822,323.1200 62.23%
Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square
11th Floor
Philadelphia, PA 19103-7042
U.S. Government Securities BHC Securities Inc 16,793,888.1900 28.56%
Money Market Fund Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square
11th Floor
Philadelphia, PA 19103-7042
Tax Exempt Money Market Fund BHC Securities Inc 48,161,150.5900 50.25%
Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square
11th Floor
Philadelphia, PA 19103-7042
Rock-Tenn Company 8,002,157.2300 8.39%
P.O. Box 4098
Chattanooga, TN 30091-4098
Investment Grade Bond Fund BHC Securities Inc. 660,890.3710 18.32%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Investment Grade Tax-Exempt BHC Securities Inc. 466,047.6580 13.81%
Bond Fund Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Capital Growth Fund BHC Securities Inc. 1,703,780.4660 13.28%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Value Income Stock Fund BHC Securities Inc. 2,258,542.8990 22.71%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Short-Term U.S. Treasury BHC Securities Inc. 71,826.3790 16.78%
Securities Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Clarence A. Rittenhouse 57,816.3280 13.51%
Margaret S. Rittenhouse JT WROS
700 Golden Beach Blvd #126
Venice, FL 34285-3311
</TABLE>
B-54
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
International Investment 44,811.0180 10.47%
Conference Inc
9100 South Dadeland Blvd.
Suite 702
Miami, FL 33156-7815
Georgia Academy for Children 39,274.4700 9.18%
and Youth Prof
260 Peachtree Street
Suite 800
Atlanta, GA 30303-1237
Cal Sadler & Ronda Sadler JTTEN 27,155.9580 6.35%
P.O. Box 770482
Winter Garden, FL 34777-0482
Short-Term Bond Fund SunTrust Bank, Atlanta. Cust for 40,000.0000 14.59%
Rollover IRA of Dewey L. Haggard
549 Hollydale Court NW
Atlanta, GA 30342-3633
Atlanta Convention & Visitors 25,237.4270 9.21%
Bureau
233 Peachtree Street NE
Suite 2000
Atlanta, GA 30303-1508
Betty H. Anderson 13,901.6960 5.07%
207 Suburban Drive
Brunswick, GA 31520-2920
BHC Securities Inc. 53,504.9300 19.52%
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Rex Packaging Inc 14,230.5460 5.19%
Attn: Tom Wilson
P.O. Box 18247
Jacksonville, FL 32229-0247
Sunbelt Equity Fund BHC Securities Inc. 507,393.6580 24.41%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Mid-Cap Equity Fund Anthony R. Gray 76,591.8150 5.44%
460 Virginia Drive
Winter Park, FL 32789-5805
BHC Securities Inc. 485,406.6920 34.46%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
BHC Securities Inc. 86,221.8130 20.42%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-55
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Florida Tax-Exempt Bond Fund Philip O. Deputy 25,597.6670 6.39%
Antoinette M. Grasselli JTWROS
12534 S Lake Mary Jane Road
Orlando, FL 32832-6405
Mildred Meinhart Rast 23,898.860 5.96%
1303 South 8th Street
Leesburg, FL 34748-6822
BHC Securities Inc. 101,675.0800 25.37%
Trad House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Georgia Tax-Exempt Bond Fund Patrick J. Doran & 27,962.0110 7.81%
Norma R. Doran JTTEN
2024 Fisher Trail NE
Atlanta, GA 30345-3429
BHC Securities Inc. 128,066.4710 35.77%
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Tennessee Tax-Exempt Bond Fund Grace M. Bryan 18,894.1970 11.65%
P.O. Box 176
St. Joseph, TN 38481-0176
Ralph Laine 13,213.5310 8.15%
2823 Lumar Lane
Nashville, TN 37214-1834
Claude M. Pitman & 10,742.8000 6.62%
Mildred Pitman JTTEN
2730 New Lake Road
Spring City, TN 37381-5478
BHC Securities, Inc. 69,526.8140 42.87%
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
International Equity Index Fund BHC Securities Inc. 207,023.5460 40.22%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
International Equity Fund Anthony R. Gray 28,449.8200 9.39%
460 Virginia Drive
Winter Park, FL 32789-5805
BHC Securities Inc. 159,855.1590 52.78%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
U.S. Government Securities Fund BHC Securities, Inc. 191,709.4610 78.92%
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-56
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Limited Term Federal Mortgage BHC Securities Inc. 178,232.5950 70.48%
Securities Fund Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
FLEX SHARES
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
Investment Grade Bond Fund Jesse Palmer TTEE 24,963.9380 5.43%
The First National Bank
P.O. Box 647
Waynesboro, GA 30830
Investment Grade Tax-Exempt Donald D. Lorberbaum 33,237.3700 6.65%
Bond Fund 165 E. 72nd Street
Apt. 10G
New York, NY 10021
Short-Term U.S. Treasury Gene Lotti 20,101.7610 8.12%
Securities Fund Stella Lotti Jt WROS
2648 Van Buren Street
Hollywood, FL 33020-4818
Stuart's Sales & Service Inc. 33,367.3190 13.48%
401-K Profit Sharing Plan
3810 Hollywood Boulevard
Hollywood, FL 33021-6730
BHC Securities Inc. 20,952.1260 8.47%
FAO 21618707
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
BHC Securities Inc. 20,566.2080 8.31%
FAO 21523219
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
BHC Securities Inc. 19,478.3390 7.87%
FAO 21627702
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Short-Term Bond Fund Dorothy S. McAlpin, Trustee U/A 5,026.5160 5.12%
of William J. McAlpin
Dtd 09-16-89
382 Pineland Road NW
Atlanta, GA 30342-4021
Rex Miller TTEE 33,590.0600 34.21%
Nale Inc. 401(K) Profit Sharing Plan
P.O. Box 2410
Kennesaw, GA 30144-9106
</TABLE>
B-57
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
BHC Securities Inc. 6,914.7090 7.04%
FAO 21305136
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
BHC Securities Inc. 6,364.0270 6.48%
FAO 21707586
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
BHC Securities Inc. 5,255.5410 5.35%
FAO 21421126
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Sunbelt Equity Fund Rex Miller TTEE 19,124.8750 9.93%
Nale Inc. 401(K) Profit Sharing Plan
P.O. Box 2410
Kennesaw, GA 30144-9106
Balanced Fund BHC Securities Inc. 14,406.4070 5.31%
FAO 21616586
Attn: Mutual Funds
One Commerce Square
2005 Market Square
Philadelphia, PA 19103-7042
Braxton Greer TTEE 15,150.7640 5.59%
Banner Ford Inc. Cash or Deferred
Retirement Plan
1665 Scott Boulevard
Decatur, GA 30033
Rex Miller TTEE 19,539.3200 7.21%
Nale Inc. 401(K) Profit Sharing Plan
P.O. Box 2410
Kennesaw, GA 30144
Florida Tax-Exempt Bond Fund H. Lorene Kleinlein TTE 28,183.2200 10.53%
H. Lorene Kleinlein Trust
9519 Sun Point Drive
Boynton Beach, FL 33437-3343
Anthony Mason 20,515.8220 7.66%
1525 Lands End Road
Manalapan, FL 33462-4740
BHC Securities Inc. 15,795.8090 5.90%
FAO 21815996
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Georgia Tax-Exempt Bond Fund Yasmin N. Dharamsi 33,552.6820 7.60%
1255 Vineyard Drive
Conyers, GA 30208-2467
Tennessee Tax-Exempt Bond Fund SunTrust Bank Nashville NA 17,638.4770 8.21%
Collateral Account
FO Leslie Cappama
3606 Hamilton Church
Antioch, TN 37013-1417
</TABLE>
B-58
<PAGE>
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Allen Zang 10,981.5600 5.11%
Nancy Zang JT WROS
108 Savoy Circle
Nashville, TN 37205-5013
BHC Securities Inc. 21,381.3170 9.95%
FAO 21610240
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
BHC Securities Inc. 41,152.2630 19.15%
FAO 21627721
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
International Equity Index Fund Braxton Greer TTEE 6,159.4530 7.36%
Banner Ford Inc. Cash or Deferred
Retirement Plan
1665 Scott Boulevard
Decatur, GA 30033-5604
BHC Securities Inc. 4,248.7980 5.08%
FAO 21810258
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
International Equity Fund BHC Securities Inc. 9,425.0710 11.24%
FAO 21525567
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
U.S. Government Securities Fund Jesse Palmer TTEE 25,220.9870 8.81%
The First National Bank
P.O. Box 647
Waynesboro, GA 30830-0647
Ralph L. Struever 14,519.5660 5.07%
5350 Woodland Lakes Drive
Palm Beach Gardens, FL 33418
BHC Securities Inc. 19,933.7090 6.98%
FAO 21531479
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Limited-Term Federal Mortgage Viola T. High 10,319.2840 7.61%
Security Fund Richard T. High TEN ENT
254 British Woods Drive
Nashville, TN 37217-3339
BHC Securities Inc. 9,961.4900 7.35%
FAO 21838525
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
B-59
<PAGE>
EXPERTS
The financial statements as of May 31, 1996 have been audited by Arthur Andersen
LLP, Independent Public Accountants, as indicated in their report dated July 12,
1996 with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
B-60
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
STI Classic Funds:
We have audited the accompanying statements of net assets of the Value Income
Stock, Mid-Cap Equity, Capital Growth, Balanced, International Equity Index,
Sunbelt Equity, Tennessee Tax-Exempt Bond, Georgia Tax-Exempt Bond, Investment
Grade Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, Limited-Term
Federal Mortgage Securities, U.S. Government Securities, Prime Quality Money
Market, U.S. Government Securities Money Market and Tax-Exempt Money Market
Funds and the statements of assets and liabilities, including the schedule of
investments, of the International Equity, Investment Grade Tax-Exempt Bond and
Florida Tax-Exempt Bond, Funds of STI Classic Funds (the "Trust") as of May 31,
1996, and the related statements of operations, changes in net assets, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits to accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material mistatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 1996, by correspondence with the custodian and
brokers. Any audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinions.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Value Income Stock, Mid-Cap Equity, Capital Growth, Balanced, International
Equity Index, International Equity, Sunbelt Equity, Investment Grade
Tax-Exempt Bond, Florida Tax-Exempt Bond, Tennessee Tax-Emept Bond, Georgia
Tax-Exempt Bond, Investment Grade Bond, Short-Term Bond, Short-Term U.S.
Treasury Securities, Limited-Term Federal Mortgage Securities,
U.S.Government Securities, Prime Quality Money Market, U.S. Government
Securities Money Market and Tax-Exempt Money Market Funds of STI Classic
Funds as of May 31, 1996, the results of their operations, changes in their
net assets, and financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN, L.L.P.
Philadelphia, Pa.
July 12, 1996
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
VALUE INCOME STOCK FUND
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS (92.1%)
BANKS (7.5%)
AmSouth Bancorp 169,300 $ 6,433
Bank of Boston 162,500 8,105
Bankers Trust New York 283,000 21,260
Central Fidelity Banks 257,400 8,816
Crestar Financial 111,200 6,269
First American Bank 139,200 6,368
First American of Tennessee 160,900 7,059
First Virginia Banks 158,300 6,332
Fleet Financial Group 324,000 14,297
Great Western Financial 307,100 7,063
Magna Group 291,500 6,996
Summit Bancorp 170,554 6,204
----------
Total Banks 105,202
----------
CHEMICALS (6.6%)
Akzo 155,400 9,421
Ethyl 1,789,300 18,564
Imperial Chemical Industries 397,200 21,101
Lawter International 520,600 5,987
Nalco Chemical 618,500 19,637
Rohm & Haas 195,100 13,218
Witco Chemical 164,800 5,253
----------
Total Chemicals 93,181
----------
CONCRETE & MINERAL PRODUCTS (1.5%)
Tele Danmark A/S ADR 852,100 21,196
----------
ELECTRICAL SERVICES (3.7%)
Central & South West 502,000 13,868
Cinergy 563,008 16,679
General Public Utilities 203,700 6,824
Pacificorp 701,800 14,124
----------
Total Electrical Services 51,495
----------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS (15.5%)
B.A.T. Industries ADR 1,848,000 30,261
ConAgra 527,200 22,472
Dean Foods 460,200 11,217
Dial 251,100 7,219
Grand Metropolitan ADR 1,023,500 27,507
H.J. Heinz 376,200 12,509
Lance 265,800 4,419
Masco 879,200 27,475
Maytag 604,200 12,990
McCormick 934,000 21,249
Snap-On Tools 279,800 13,465
Unilever 181,100 13,673
Unilever ADR 98,300 13,258
----------
Total Food, Beverage, Tobacco
& Household 217,714
----------
ENERGY (7.5%)
Atlantic Richfield 110,500 13,219
Elf Aquitaine ADR 377,200 13,815
Occidental Petroleum 476,300 12,324
Pennzoil 336,000 14,532
Phillips Petroleum 314,800 13,064
Questar 380,700 12,468
Repsol 409,600 13,926
USX-Marathon Group 564,500 12,348
----------
Total Energy 105,696
----------
HEALTH CARE (6.4%)
Bausch & Lomb 473,700 20,369
Bristol-Myers Squibb 334,400 28,549
Pharmacia Upjohn ADR 545,700 22,306
Warner Lambert 341,400 19,118
----------
Total Health Care 90,342
----------
INSURANCE (7.1%)
American Financial Group 465,200 13,956
American General 448,000 15,904
ITT Hartford Group 551,400 28,535
Lincoln National 448,400 21,075
Marsh & McLennan 217,600 20,373
----------
Total Insurance 99,843
----------
F-1
<PAGE>
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
MACHINERY (5.6%)
Cooper Industries 544,700 $ 23,218
General Signal 715,400 27,364
Goulds Pumps 310,800 7,382
Tenneco 385,600 20,726
----------
Total Machinery 78,690
----------
MEDIA (4.2%)
American Greetings, Cl A 724,800 19,660
Houghton Mifflin 293,500 13,905
McGraw-Hill 415,600 19,481
Reader's Digest, Cl A 152,600 6,466
----------
Total Media 59,512
----------
METALS & MINING (2.9%)
Allegheny Ludlum 671,900 13,438
Reynolds Metals 380,200 20,531
USX-U.S. Steel Group 183,100 5,676
----------
Total Metals & Mining 39,645
----------
MISCELLANEOUS BUSINESS
SERVICES (3.9%)
Deluxe 377,500 13,684
Kelly Services, Cl A 398,800 11,864
Ogden 786,900 15,246
Xerox 91,600 14,416
----------
Total Miscellaneous Business
Services 55,210
----------
PAPER & PAPER PRODUCTS (3.8%)
International Paper 342,100 13,641
James River 815,900 20,296
Tambrands 410,300 18,925
----------
Total Paper & Paper Products 52,862
----------
RETAIL (2.7%)
Giant Food 228,900 7,897
J.C. Penney 273,000 14,162
May Department Stores 331,600 15,710
----------
Total Retail 37,769
----------
- ------------------------------------------------------------
SHARES/FACE MARKET
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
TECHNOLOGY (6.2%)
AMP 417,600 $ 17,591
GTE 452,300 19,336
ITT Industries 1,041,100 28,500
Philips Electronics ADR 602,500 21,163
----------
Total Technology 86,590
----------
TELEPHONES &
TELECOMMUNICATION (5.6%)
Alltel 618,800 19,492
Frontier 702,800 22,490
Southern New England
Telecommunications 467,300 20,152
Sprint 336,700 14,268
----------
Total Telephones &
Telecommunication 76,402
----------
TRANSPORTATION (1.4%)
Ryder System 686,800 20,089
----------
Total Common Stocks
(Cost $1,170,974,717) 1,291,438
----------
REPURCHASE AGREEMENTS (8.3%)
Deutsche Bank 5.33%, dated
05/31/96, matures 06/03/96,
repurchase price $57,449,239
(collateralized by various FHLB
discount notes, total par value
$15,275,000, 07/01/96-07/29/96;
various FHLMC obligations,
total par value $20,759,349,
5.494%-996.969%, 11/15/05-
11/15/23; and various FNMA
obligations, total par value
$43,981,328, 0.00%-8.40%,
02/25/08-03/25/24: total
market value $58,576,767) 57,424 57,424
F-2
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
VALUE INCOME STOCK FUND--CONCLUDED
- ------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- ------------------------------------------------------------
REPURCHASE AGREEMENTS--CONTINUED
Salomon Brothers 5.33%, dated
05/31/96, matures 06/03/96,
repurchase price $38,606,723
(collateralized by various
FHLMC obligations, total par
value $15,729,565, 6.00%-9.50%,
07/01/99-03/01/26; and various
FNMA obligations, total par
value $57,245,349, 6.00%-9.50%,
10/01/01-05/01/26: total
market value $39,635,606) $ 38,590 $ 38,590
Swiss Bank 5.33%, dated
05/31/96, matures 06/03/96,
repurchase price $19,932,895
(collateralized by various
FHLMC obligations, total par
value $7,263,678, 7.50%,
11/01/25-12/01/25; and
various U.S. Treasury
obligations, total par value
$11,207,000, 7.25%-13.25%,
02/15/05-05/15/20: total
market value $20,367,151) 19,924 19,924
----------
Total Repurchase Agreements
(Cost $115,937,362) 115,938
----------
Total Investments (100.4%)
(Cost $1,286,912,079) 1,407,376
----------
OTHER ASSETS AND LIABILITIES (-0.4%)
Total Other Assets and Liabilities, Net (6,082)
----------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 94,636,309 outstanding shares of
benefical interest 1,004,096
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 9,944,754 outstanding shares of
beneficial interest 106,927
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 2,009,853 outstanding shares of
beneficial interest 24,778
Undistributed net investment income 5,610
Accumulated net realized gain on
investments 139,419
Unrealized appreciation on investments 120,464
----------
Total Net Assets (100.0%) $1,401,294
==========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 13.15
==========
Net Asset Value, and Redemption Price
Per Share--Investor Shares $ 13.13
==========
Maximum Public Offering Price Per
Share--Investor Shares
($13.13 (DIVIDED BY) 96.25%) $ 13.64
==========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Flex Shares (1) $ 13.08
==========
(1)The Flex Shares have a contingent sales charge. For a description of a
possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-3
<PAGE>
MID-CAP EQUITY FUND (FORMERLY THE AGGRESSIVE GROWTH FUND)
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS (85.3%)
AEROSPACE & DEFENSE (2.2%)
General Dynamics 31,100 $ 1,917
Litton Industries* 52,000 2,412
Sundstrand 49,600 1,748
----------
Total Aerospace & Defense 6,077
----------
AUTOMOTIVE (1.6%)
Dana 37,800 1,266
Federal Signal 23,500 590
Magna International, Cl A 29,800 1,438
Sonoco Products 39,500 1,081
----------
Total Automotive 4,375
----------
BANKS (7.8%)
Bancorp Hawaii 29,500 1,073
Bank of Boston 34,100 1,701
Cal Fed Bancorp* 82,400 1,514
Crestar Financial 20,200 1,139
First Security 59,550 1,414
Merchantile Bancorp 28,400 1,335
Northern Trust 40,000 2,190
PNC Bank 37,965 1,153
Regions Financial 21,700 1,025
Republic New York 61,900 3,915
Signet Banking 39,700 1,027
SouthTrust 59,200 1,621
Summit Bancorp 67,900 2,470
----------
Total Banks 21,577
----------
BUILDING (1.5%)
Clayton Homes 58,200 1,120
Foster Wheeler 66,200 2,946
----------
Total Building 4,066
----------
CHEMICALS (1.9%)
Georgia Gulf 28,000 959
IMC Fertilizer Group 39,600 1,450
Olin 13,800 1,277
Witco Chemical 49,500 1,578
----------
Total Chemicals 5,264
----------
ELECTRICAL SERVICES (2.7%)
Aes* 42,700 1,185
Illinova 124,900 3,279
Nipsco Industries 42,700 1,590
Wisconsin Energy 48,500 1,358
----------
Total Electrical Services 7,412
----------
ENERGY (4.1%)
Anadarko Petroleum 40,400 2,171
Apache 44,900 1,285
Kerr-McGee 36,200 2,127
Mapco 17,000 982
Lyondell Petrochemical 26,600 688
Valero Energy 47,100 1,295
Noble Affiliates 50,800 1,721
Questar 34,900 1,143
----------
Total Energy 11,412
----------
ENVIRONMENTAL SERVICES (0.8%)
Laidlaw, Cl B 47,000 476
Molten Metal Technology* 57,300 1,748
----------
Total Environmental Services 2,224
----------
FINANCIAL SERVICES (2.6%)
Bear Stearns 59,975 1,447
Charles Schwab 75,100 1,821
Franklin Resources 49,100 2,878
Green Tree Financial 33,000 1,081
----------
Total Financial Services 7,227
----------
FOOD, BEVERAGE,TOBACCO &
HOUSEHOLD PRODUCTS (5.0%)
Dial 67,900 1,952
First Brands 81,300 2,012
Hubbell, Cl B 30,520 2,132
IBP 57,500 1,574
McCormick 65,700 1,495
Nine West Group* 26,300 1,279
Solectron* 43,800 1,900
Tyson Foods 64,800 1,587
----------
Total Food, Beverage,Tobacco
& Household 13,931
----------
F-4
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
MID-CAP EQUITY FUND (FORMERLY THE AGGRESSIVE GROWTH FUND) -- CONTINUED
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
HEALTH CARE (9.2%)
Apria Healthcare Group* 26,800 $ 784
Biogen* 42,600 2,577
Cardinal Health 28,100 1,795
Chiron* 17,700 1,859
Elan ADR* 26,100 1,638
Healthcare & Retirement* 26,900 972
HEALTHSOUTH Rehabilitation* 82,400 2,884
Ivax 64,100 1,763
Mylan Laboratories 55,700 1,058
Nellcor* 23,300 1,270
R.P. Scherer* 22,500 945
Stryker 37,000 1,915
Sunglass Hut International * 45,800 1,259
Tenet Healthcare* 57,300 1,232
Teva Pharmaceuticals ADR 41,900 1,875
Varian Associates 31,200 1,778
----------
Total Health Care 25,604
----------
INSURANCE (5.5%)
AFLAC 55,800 1,681
Aon 48,900 2,463
Equifax 62,500 1,547
Healthcare Compare* 33,700 1,630
Pacificare Health Systems, Cl B* 27,300 2,259
Progressive of Ohio 43,900 2,030
Sunamerica 44,600 2,498
Transatlantic Holdings 17,900 1,150
----------
Total Insurance 15,258
----------
LEISURE (2.8%)
Circus Circus Enterprises* 59,600 2,481
HFS* 36,200 2,258
Mirage Resorts* 37,100 2,110
Wendy's International 48,000 864
----------
Total Leisure 7,713
----------
MACHINERY (4.0%)
Agco 52,300 1,576
American Standard* 75,300 2,231
General Signal 40,600 1,553
Goulds Pumps 28,100 667
Smith International* 12,600 397
Trinity Industries 30,900 1,070
Tyco International 37,800 1,493
York International 38,300 2,025
----------
Total Machinery 11,012
----------
MEDIA (1.6%)
Chris-Craft Industries* 18,722 765
Interpublic Group 30,400 1,410
Omnicom Group 32,200 1,405
TCA Cable Television 27,300 771
----------
Total Media 4,351
----------
METALS & MINING (1.3%)
Alumax* 39,600 1,317
Potash of Saskatchewan 33,300 2,214
----------
Total Metals & Mining 3,531
----------
PAPER & PAPER PRODUCTS (1.1%)
Bowater 21,800 858
Tambrands 20,200 932
Westvaco 40,800 1,306
----------
Total Paper & Paper Products 3,096
----------
PRINTING & PUBLISHING (1.7%)
American Greetings, Cl A 100,800 2,734
Belo, Cl A 36,000 1,377
Houghton Mifflin 11,400 540
----------
Total Printing & Publishing 4,651
----------
RAILROADS (0.8%)
Illinois Central 72,750 2,173
----------
F-5
<PAGE>
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
RETAIL (7.9%)
Cintas 13,200 $ 706
Dollar General 26,300 730
Federated Department Stores* 85,400 2,957
Fisher Scientific International 43,500 1,778
Hannaford Brothers 72,100 2,280
Kohls* 42,100 1,394
Lone Star Steakhouse & Saloon* 33,700 1,361
Office Depot* 73,400 1,881
Outback Steakhouse* 100,100 3,791
Price/Costco* 107,000 2,140
Staples* 141,800 2,836
----------
Total Retail 21,854
----------
TECHNOLOGY (15.3%)
ADC Telecommunications* 24,200 1,113
Adobe Systems 31,500 1,169
America Online* 48,800 2,757
Analog Devices* 79,525 2,197
Atmel* 58,200 2,066
Avnet 29,900 1,540
Borland International* 48,800 656
Cabletron Systems* 10,100 735
Cadence Design Systems* 19,950 1,132
CUC International* 35,400 1,310
Dell Computer* 25,800 1,429
Diebold 45,600 1,739
Electronic Arts* 27,500 870
EMC* 68,500 1,516
Fiserv* 26,000 816
Informix* 77,300 1,758
Linear Technology 46,800 1,615
Mentor Graphics* 51,000 912
Molex 42,337 1,349
Network General * 81,400 1,933
Octel Communications * 15,000 368
Olsten 42,300 1,301
Parametric Technology* 52,400 2,397
Reynolds & Reynolds 22,200 1,107
Seagate Technology* 64,000 3,760
Stratacom* 28,600 1,555
Symantec* 43,600 687
U.S. Robotics* 28,000 2,569
----------
Total Technology 42,356
----------
TELEPHONES &
TELECOMMUNICATION (3.4%)
360 Communications* 68,300 1,579
Century Telephone Enterprises 34,100 1,108
Frontier 84,800 2,714
Southern New England Telecom 34,400 1,484
Telephone & Data Systems 21,300 929
Worldcom* 34,100 1,667
----------
Total Telephones &
Telecommunication 9,481
----------
TRANSPORTATION (0.5%)
Atlantic Southeast Airlines 51,500 1,365
----------
Total Common Stocks
(Cost $215,086,805) 236,010
----------
CONVERTIBLE BOND (0.7%)
Broadband Tech, Convertible to
24.108 shares (B)
5.000%, 05/15/01 $2,000 2,000
----------
Total Convertible Bond
(Cost $2,000,000) 2,000
----------
F-6
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
MID-CAP EQUITY FUND (FORMERLY THE AGGRESSIVE GROWTH FUND) -- CONCLUDED
- ------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- ------------------------------------------------------------
REPURCHASE AGREEMENT (15.2%)
Deutsche Bank 5.33%, dated
05/31/96, matures 06/03/96,
repurchase price $42,138,594
(collateralized by FHLB discount
note, par value $15,895,000, 0.00%,
07/01/96, various FHLMC
obligations, total par value
$11,493,334, 0.00%-8.2055%,
10/15/08-07/15/19, and various
FNMA obligations, total par
value $29,123,728, 0.00%-7.5075%,
12/25/06-10/25/23: total
market value $42,962,287) 42,120 $ 42,120
----------
Total Repurchase Agreement
(Cost $42,119,885) 42,120
----------
Total Investments (101.2%)
(Cost $259,206,690) 280,130
----------
OTHER ASSETS AND LIABILITIES (-1.2%)
Total Other Assets and Liabilities, Net (3,225)
----------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 19,896,278 outstanding shares of
benefical interest 216,555
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 1,410,060 outstanding shares of
beneficial interest 15,667
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 396,479 outstanding shares of
beneficial interest 4,840
Undistributed net investment income 249
Accumulated net realized gain on
investments 18,671
Unrealized appreciation on investments 20,923
----------
Total Net Assets (100.0%) $276,905
========
Net Asset Value, Offering Price and Redemption
Price Per Share--Trust Shares $ 12.76
========
Net Asset Value and Redemption Price
Per Share--Investor Shares $ 12.74
========
Maximum Public Offering Price Per Share--
Investor Shares ($12.74 (DIVIDED BY) 96.25%) $ 13.24
========
Net Asset Value, Offering Price and Redemption
Price Per Share--Flex Shares (1) $ 12.69
========
(1) The Flex Shares have a contingent sales charge. For a description of a
possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-7
<PAGE>
CAPITAL GROWTH FUND
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS (93.0%)
AEROSPACE & DEFENSE (3.9%)
Allied Signal 317,500 $ 17,383
General Dynamics 54,000 3,328
Lockheed Martin 68,000 5,704
United Technologies 182,600 19,972
----------
Total Aerospace & Defense 46,387
----------
AUTOMOTIVE (3.5%)
General Motors 222,900 12,287
General Motors, Cl E 266,700 15,035
Goodyear Tire & Rubber 137,600 6,949
Lear* 202,200 7,810
----------
Total Automotive 42,081
----------
BANKS (3.5%)
Bank of Boston 170,700 8,514
BayBanks 1,900 205
Chase Manhattan Bank 377,900 26,453
CoreStates Financial 41,300 1,626
Cullen/Frost Bankers 65,100 3,353
Signet Banking 59,700 1,545
Wells Fargo 565 136
----------
Total Banks 41,832
----------
BUILDING (1.4%)
American Standard* 345,300 10,230
Foster Wheeler 136,000 6,052
----------
Total Building 16,282
----------
CHEMICALS (2.9%)
Air Products & Chemicals 103,300 6,146
Dow Chemical 36,400 3,044
E.I. du Pont de Nemours 118,400 9,442
Hercules 233,200 13,234
Morton International 74,200 2,820
----------
Total Chemicals 34,686
----------
ELECTRICAL EQUIPMENT (4.2%)
Emerson Electric 75,000 6,422
General Electric 348,500 28,838
General Signal 393,000 15,032
----------
Total Electrical Equipment 50,292
----------
ENERGY (5.5%)
Amoco 231,000 16,748
Atlantic Richfield 50,100 5,993
Dresser Industries 148,400 4,341
Enron 130,200 5,208
Halliburton 25,100 1,396
Kerr-McGee 96,500 5,669
Mobil 112,400 12,687
Schlumberger 60,600 5,053
Texaco 35,000 2,931
Union Texas Petroleum 261,700 4,874
----------
Total Energy 64,900
----------
ENVIRONMENTAL SERVICES (0.7%)
Molten Metal Technology* 196,100 5,981
WMX Technologies 81,100 2,859
----------
Total Environmental Services 8,840
----------
FINANCIAL SERVICES (0.8%)
FHLMC 118,500 9,791
----------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS (10.5%)
Bush Boake Allen* 144,400 3,574
Coca Cola 162,600 7,480
Colgate-Palmolive 59,700 4,701
CPC International 207,900 14,371
Dial 50,000 1,438
Gillette 66,400 3,926
JP Foodservice* 114,700 2,695
Kellogg 36,400 2,648
Newell 230,400 6,912
PepsiCo 550,200 18,294
Philip Morris 218,950 21,758
F-8
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
CAPITAL GROWTH FUND--CONTINUED
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS--CONTINUED
Procter & Gamble 232,900 $ 20,466
Ralston-Ralston Purina Group 101,500 6,217
Sara Lee 114,800 3,831
Sysco 163,700 5,586
----------
Total Food, Beverage,
Tobacco & Household 123,897
----------
HEALTH CARE (12.1%)
Abbott Laboratories 111,800 4,821
Allergan 3,200 123
American Home Products 57,800 3,092
Astra, Cl A ADR 100,100 4,555
Boston Scientific* 84,200 3,610
Bristol-Myers Squibb 98,300 8,392
Columbia/HCA Healthcare 297,564 16,031
HEALTHSOUTH Rehabilitation* 117,700 4,120
Johnson & Johnson 283,194 27,576
Medtronic 47,100 2,649
Merck 339,482 21,939
Pfizer 100,300 7,096
Pharmacia Upjohn ADR 50,800 2,076
Schering Plough 42,800 2,509
SmithKline Beecham 285,600 14,566
Tenet Healthcare* 349,100 7,506
Varian Associates 78,300 4,463
Vencor* 243,370 7,697
----------
Total Health Care 142,821
----------
INSURANCE (6.2%)
American International Group 163,450 15,405
Chubb 120,400 5,614
General Re 55,000 8,030
ITT Hartford Group 127,400 6,593
MGIC Investment 91,000 5,346
PMI Group 145,400 6,289
Sphere Drake Holdings 306,000 2,984
Travelers 308,697 12,811
Washington National 374,600 9,927
----------
Total Insurance 72,999
----------
LEISURE (6.6%)
ITT* 177,700 10,929
Carnival 716,800 21,325
Marriott 177,900 8,450
Mattel 207,300 5,649
McDonald's 397,100 19,110
Walt Disney 201,066 12,215
Wendy's International 55,000 990
----------
Total Leisure 78,668
----------
MACHINERY (0.8%)
Deere 215,400 8,966
----------
MEDIA (3.2%)
Hollinger International 235,300 2,912
McGraw-Hill 34,000 1,594
Tele-Communications, Cl A* 858,200 16,199
Viacom, Cl B* 377,721 16,006
World Color Press* 41,800 982
----------
Total Media 37,693
----------
METALS & MINING (0.8%)
Alumax* 24,700 821
Aluminum Company of America 137,800 8,492
Worthington Industries 22,100 445
----------
Total Metals & Mining 9,758
----------
MISCELLANEOUS (2.5%)
Eastman Kodak 73,200 5,444
Tyco International 598,700 23,649
----------
Total Miscellaneous 29,093
----------
PAPER & PAPER PRODUCTS (0.3%)
Kimberly Clark 51,100 3,724
----------
RETAIL (6.3%)
Federated Department Stores* 342,200 11,849
General Nutrition* 128,900 1,998
Home Depot 534,032 27,302
Intimate Brands 198,100 4,284
Melville 40,200 1,633
Office Depot* 279,400 7,160
F-9
<PAGE>
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
RETAIL--CONTINUED
Price/Costco* 84,100 $ 1,682
Safeway* 58,300 1,968
Staples* 149,100 2,982
Wal-Mart Stores 513,700 13,292
----------
Total Retail 74,150
----------
TECHNOLOGY (11.6%)
AMP 8,600 362
Arrow Electronics* 150,800 7,427
Automatic Data Processing 73,000 2,801
Bay Networks* 140,800 4,083
Cisco Systems* 268,600 14,706
CompuServe* 7,500 186
Ericsson Telephone ADR 254,700 5,874
First Data 41,900 3,342
Hewlett Packard 92,000 9,821
IBM 125,600 13,408
Informix* 61,700 1,404
Intel 65,500 4,945
Microsoft* 147,900 17,563
Motorola 206,100 13,757
Oracle* 300,950 9,969
Scientific-Atlanta 726,800 13,718
Xerox 92,100 14,494
----------
Total Technology 137,860
----------
TELEPHONES & TELECOMMUNICATION (3.5%)
Airtouch Communications* 94,100 2,999
Alltel 44,800 1,411
AT&T 468,358 29,214
BellSouth 61,900 2,515
Cellular Communications, Cl A* 70,000 3,763
Pacific Telesis Group 48,100 1,605
----------
Total Telephones &
Telecommunication 41,507
----------
TRANSPORTATION (2.1%)
Burlington Northern Santa Fe 100,200 8,492
Conrail 21,800 1,531
Southwest Airlines 126,800 3,471
Union Pacific 162,700 11,409
----------
Total Transportation 24,903
----------
Total Common Stocks
(Cost $966,088,933) 1,101,130
----------
PREFERRED STOCKS (2.5%)
AIR TRANSPORTATION (0.6%)
Continental Airline Financial,
8.50% (A) 110,000 7,205
----------
BROADCASTING, NEWSPAPERS &
ADVERTISING (0.3%)
SFX Broadcasting, Ser D (B) 70,000 3,614
----------
CONTAINERS & PACKAGING (0.2%)
Crown Cork & Seal 43,000 1,962
----------
PAPER & PAPER PRODUCTS (0.4%)
International Paper CV, 5.25% 100,000 4,775
----------
PETROLEUM & FUEL PRODUCTS (0.4%)
Occidental Petroleum (B) 80,000 4,890
----------
TELEPHONES &
TELECOMMUNICATION (0.2%)
TCI Communications CV, $2.125 50,000 2,300
----------
WHOLESALE (0.4%)
Westinghouse Electric, Convertible
to 0.885 Shares (B) 300,000 5,138
----------
Total Preferred Stocks
(Cost $27,955,615) 29,884
----------
F-10
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
CAPITAL GROWTH FUND--CONCLUDED
- ------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- ------------------------------------------------------------
CONVERTIBLE BONDS (2.2%)
Baker Hughes
Zero Coupon, 05/05/08 $ 6,500 $ 4,436
Continental Airlines Convertible
to 16.5590 Shares
6.750%, 04/15/06 3,100 3,418
Mariott, LYON (A) (B)
Zero Coupon, 03/25/11 5,000 2,638
Molten Metal Technology,
Convertible to 25.8065 Shares (B)
5.500%, 05/01/06 2,000 1,985
Noble Affiliates
4.250%, 11/01/03 2,500 2,603
Tele Communications International,
Convertible to 36.63 Shares
4.500%, 02/15/06 4,000 3,610
Tenet Healthcare
6.000%, 12/01/05 4,500 4,770
WMX Technologies
2.000%, 01/24/05 2,000 1,962
----------
Total Convertible Bonds
(Cost $25,430,492) 25,422
----------
REPURCHASE AGREEMENTS (1.6%)
Salomon Brothers 5.33%, dated
05/31/96, matures 06/03/96,
repurchase price $14,986,982
(collateralized by FHLMC
obligation, par value $11,200,000,
7.7291%, 06/15/23; and various
FNMA obligations, total par
value $123,624,662, 5.90%-9.50%,
07/01/22-02/25/23: total
market value $16,138,834) 14,980 14,980
Swiss Bank 5.33%, dated
05/31/96, matures 06/03/96,
repurchase price $3,513,875
(collateralized by U.S.
Treasury Bond, par value
$2,778,000, 9.875%, 11/15/15:
market value $3,604,137) 3,512 3,512
----------
Total Repurchase Agreements
(Cost $18,492,644) 18,492
----------
Total Investments (99.3%)
(Cost $1,037,967,684) 1,174,928
----------
OTHER ASSETS AND LIABILITIES (0.7%)
Total Other Assets and Liabilities, Net 8,617
----------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 65,851,300 outstanding shares of
benefical interest 740,420
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 12,833,227 outstanding shares of
beneficial interest 146,753
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 739,091 outstanding shares of
beneficial interest 10,094
Undistributed net investment income 3,296
Accumulated net realized gain on
investments 146,022
Unrealized appreciation on investments 136,960
----------
Total Net Assets (100.0%) $1,183,545
==========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 14.90
==========
Net Asset Value and Redemption Price
Per Share--Investor Shares $ 14.89
==========
Maximum Public Offering Price Per Share--
Investor Shares ($14.89 (DIVIDED BY) 96.25%) $ 15.47
==========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Flex Shares (1) $ 14.84
==========
(1) The Flex Shares have a contingent sales charge. For a description of a
possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-11
<PAGE>
BALANCED FUND
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCKS (55.7%)
AEROSPACE & DEFENSE (2.3%)
Allied Signal 18,800 $ 1,029
General Dynamics 3,200 197
Lockheed Martin 4,000 336
United Technologies 10,900 1,192
--------
Total Aerospace & Defense 2,754
--------
AUTOMOTIVE (2.1%)
General Motors 13,300 733
General Motors, Cl E 15,200 857
Goodyear Tire & Rubber 8,200 414
Lear* 11,800 456
--------
Total Automotive 2,460
--------
BANKS (2.4%)
Bank of Boston 6,400 319
BayBanks 3,300 356
Chase Manhattan Bank 22,400 1,568
CoreStates Financial 2,500 98
Cullen/Frost Bankers 3,900 201
Signet Banking 3,900 101
Wells Fargo 900 217
--------
Total Banks 2,860
--------
BUILDING (0.9%)
American Standard* 18,700 554
Foster Wheeler 12,000 534
--------
Total Building 1,088
--------
CHEMICALS (1.7%)
Air Products & Chemicals 5,800 345
Dow Chemical 1,400 117
E.I. du Pont de Nemours 6,700 534
Hercules 13,400 760
Morton International 6,000 228
--------
Total Chemicals 1,984
--------
ELECTRICAL EQUIPMENT (2.5%)
Emerson Electric 4,700 402
General Electric 20,500 1,696
General Signal 23,300 891
--------
Total Electrical Equipment 2,989
--------
ENERGY (3.0%)
Amoco 13,700 993
Atlantic Richfield 2,800 335
Dresser Industries 8,800 257
Enron 7,700 308
Halliburton 1,500 84
Kerr-McGee 5,700 335
Mobil 6,700 756
Schlumberger 3,600 300
Union Texas Petroleum 9,400 175
--------
Total Energy 3,543
--------
ENVIRONMENTAL SERVICES (0.6%)
Molten Metal Technology* 13,600 415
WMX Technologies 8,100 286
--------
Total Environmental Services 701
--------
FINANCIAL SERVICES (0.5%)
FHLMC 6,900 570
--------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS (6.1%)
Bush Boake Allen* 5,300 131
Coca Cola 9,500 437
Colgate-Palmolive 3,500 276
CPC International 13,500 933
Gillette 4,200 248
JP Foodservice * 8,900 209
Kellogg 2,000 146
Newell 13,700 411
PepsiCo 33,300 1,107
Philip Morris 12,700 1,262
F-12
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
BALANCED FUND--CONTINUED
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS--CONTINUED
Procter & Gamble 13,900 $ 1,221
Ralston-Ralston Purina Group 6,000 368
Sara Lee 5,700 190
Sysco 9,800 334
--------
Total Food, Beverage, Tobacco
& Household 7,273
--------
HEALTH CARE (7.4%)
Abbott Laboratories 6,600 285
American Home Products 2,600 139
Astra, Cl A ADR 3,600 164
Boston Scientific* 8,000 343
Bristol-Myers Squibb 5,600 478
Columbia/HCA Healthcare 17,040 918
Healthcare & Retirement* 6,000 217
HEALTHSOUTH Rehabilitation* 12,284 430
Johnson & Johnson 16,800 1,636
Medtronic 3,200 180
Merck 20,100 1,299
Pfizer 6,000 425
Pharmacia Upjohn ADR 3,000 123
Schering Plough 2,600 152
SmithKline Beecham 16,900 862
Tenet Healthcare* 22,000 473
Varian Associates 6,100 348
Vencor* 12,400 392
--------
Total Health Care 8,864
--------
INSURANCE (3.8%)
American International Group 9,700 914
Chubb 11,800 550
General Re 3,200 467
ITT Hartford Group 7,600 393
MGIC Investment 5,900 347
PMI Group 9,700 420
Sphere Drake Holdings 21,000 205
Travelers 18,300 759
Washington National 19,500 517
--------
Total Insurance 4,572
--------
LEISURE (4.8%)
Carnival 39,000 1,160
ITT* 10,500 646
Marriott 9,500 451
Mattel 11,750 320
McDonald's 29,700 1,429
Viacom, Cl B* 21,544 913
Walt Disney 11,195 680
Wendy's International 10,000 180
--------
Total Leisure 5,779
--------
MACHINERY (0.4%)
Deere 12,400 516
--------
MEDIA (0.5%)
Tele-Communications, Cl A* 34,000 642
--------
METALS (0.6%)
Alumax* 1,400 47
Aluminum Company of America 7,900 487
Worthington Industries 12,000 242
--------
Total Metals 776
--------
MISCELLANEOUS BUSINESS SERVICES (1.5%)
Eastman Kodak 5,400 402
Tyco International 35,600 1,406
--------
Total Miscellaneous Business Services 1,808
--------
PAPER & PAPER PRODUCTS (0.2%)
Kimberly Clark 3,000 219
--------
RETAIL (3.7%)
Federated Department Stores* 19,400 672
General Nutrition* 7,600 118
Home Depot 31,700 1,621
Intimate Brands 10,500 227
Melville 2,400 98
Office Depot* 11,100 284
Price/Costco* 12,700 254
Safeway 7,000 236
Staples* 4,700 94
Wal-Mart Stores 30,500 789
--------
Total Retail 4,393
--------
F-13
<PAGE>
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
TECHNOLOGY (7.1%)
AMP 3,600 $ 152
Arrow Electronics* 10,500 517
Automatic Data Processing 4,270 164
Bay Networks* 8,300 241
Cisco Systems* 16,100 881
Ericsson Telephone ADR 15,100 348
First Data 4,400 351
Hewlett Packard 5,500 587
IBM 8,800 939
Intel 3,400 257
Microsoft* 8,800 1,045
Motorola 12,200 814
Oracle* 17,900 593
Scientific-Atlanta 38,600 729
Xerox 5,400 850
--------
Total Technology 8,468
--------
TELEPHONES &
TELECOMMUNICATION (2.0%)
Airtouch Communications* 8,600 274
Alltel 4,100 129
AT&T 27,800 1,734
BellSouth 3,500 142
Pacific Telesis Group 2,900 97
--------
Total Telephones &
Telecommunication 2,376
--------
TRANSPORTATION (1.3%)
Burlington Northern Santa Fe 6,300 534
Conrail 1,400 98
Southwest Airlines 8,300 227
Union Pacific 9,700 680
--------
Total Transportation 1,539
--------
UTILITIES (0.3%)
Texas Utilities 8,200 335
--------
Total Common Stocks
(Cost $58,836,551) 66,509
--------
- ------------------------------------------------------------
SHARES/FACE MARKET
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
PREFERRED STOCKS (1.0%)
AIR TRANSPORTATION (0.3%)
Continental Airline
Financial, 8.50% 5,000 $ 328
--------
CONTAINERS & PACKAGING (0.4%)
Crown Cork & Seal 11,800 538
--------
PETROLEUM & FUEL PRODUCTS (0.3%)
Occidental Petroleum (B) 6,000 367
--------
Total Preferred Stocks
(Cost $1,172,700) 1,233
--------
CORPORATE OBLIGATIONS (12.0%)
Aristar Financial
7.500%, 07/01/99 $1,000 1,014
AT&T Capital
5.500%, 02/09/98 1,000 985
Capital One Bank
6.660%, 08/17/98 500 497
Capital One Bank, MTN
6.490%, 08/15/97 1,000 998
Ford Motor Credit, MTN
6.110%, 12/28/01 1,000 953
General Electric Capital
6.660%, 05/01/18 1,000 988
International Lease Finance
8.125%, 01/15/98 1,000 1,023
Merrill Lynch
7.375%, 05/15/06 1,500 1,481
Paine Webber
6.250%, 06/15/98 3,500 3,442
Salomon
6.700%, 12/01/98 1,000 994
Sears, MTN
7.360%, 08/15/97 1,000 1,013
Societe Generale - NY
7.400%, 06/01/06 1,000 990
--------
Total Corporate Obligations
(Cost $14,561,130) 14,378
--------
F-14
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
BALANCED FUND--CONCLUDED
- ------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- ------------------------------------------------------------
CONVERTIBLE BONDS (1.0%)
Pennzoil, 4.75%
4.750%, 10/01/03 $ 800 $ 870
Time Warner Finance, $1.24
Zero Coupon, 06/22/13 900 372
--------
Total Convertible Bonds
(Cost $1,216,874) 1,242
--------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS (5.5%)
FHLMC
8.000%, 06/01/02 730 749
FNMA
8.500%, 04/01/17 904 924
GNMA
6.500%, 12/15/23 2,458 2,275
9.000%, 11/15/17 2,500 2,653
--------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $6,639,387) 6,601
--------
U.S. TREASURY OBLIGATIONS (21.7%)
U.S. Treasury Bonds
7.500%, 11/15/16 4,000 4,142
8.125%, 08/15/19 3,750 4,144
U.S. Treasury Notes
5.625%, 01/31/98 250 248
7.500%, 10/31/99 1,500 1,542
6.250%, 08/31/00 4,500 4,436
7.500%, 11/15/01 750 777
7.500%, 05/15/02 3,500 3,637
5.750%, 08/15/03 7,500 7,060
--------
Total U.S. Treasury Obligations
(Cost $26,837,668) 25,986
--------
REPURCHASE AGREEMENT (4.0%)
Merrill Lynch 5.31%, dated
05/31/96, matures 06/03/96,
repurchase price $4,754,406
(collateralized by FHLMC ARM,
par value $8,062,000, 7.86%,
04/01/24: total market value
$4,929,158) 4,752 4,752
--------
Total Repurchase Agreement
(Cost $4,752,303) 4,752
--------
Total Investments (100.9%)
(Cost $114,016,613) 120,701
--------
OTHER ASSETS AND LIABILITIES (-0.9%)
Total Other Assets and Liabilities, Net (1,036)
--------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 9,665,824 outstanding shares of
benefical interest 97,978
Fund shares of the Investor Class (unlimited
authorization--no par value) based on
422,202 outstanding shares of
beneficial interest 4,229
Fund shares of the Flex Class (unlimited
authorization--no par value) based on
271,519 outstanding shares of
beneficial interest 2,980
Undistributed net investment income 527
Accumulated net realized gain on
investments 7,267
Unrealized appreciation on investments 6,684
--------
Total Net Assets (100.0%) $119,665
========
F-15
<PAGE>
- ----------------------------------------------------------
- ----------------------------------------------------------
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 11.55
========
Net Asset Value and Redemption
Price Per Share--Investor Shares $ 11.60
========
Maximum Public Offering Price Per
Share--Investor Shares
($11.60 (DIVIDED BY) 96.25%) $ 12.05
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Flex Shares (1) $ 11.53
========
(1) The Flex Shares have a contingent sales charge. For a description of a
possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-16
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
INTERNATIONAL EQUITY INDEX FUND
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
FOREIGN COMMON STOCKS (97.6%)
AUSTRALIA (2.4%)
Amcor 13,361 $ 91
Broken Hill Proprietary 39,869 601
Coles Myer 40,644 149
CRA 9,418 153
CSR 27,994 102
Lend Lease 9,731 152
Mount Isa Mines Holdings 42,910 61
National Australia Bank 38,256 359
Newscorp 33,881 190
Pacific Dunlop 68,655 148
Western Mining 25,702 195
Westpac Banking 36,880 172
--------
Total Australia 2,373
--------
AUSTRIA (1.7%)
Bank of Austria 5,549 517
Creditanstalt Bankverein 4,114 290
Ea - Generali 720 236
Oest El Wirtsch , Cl A 3,274 250
OMV 2,270 235
Wienerberger Baustoff 570 118
--------
Total Austria 1,646
--------
BELGIUM (1.8%)
Bekaert 150 128
Delhaize Freres 2,100 107
Electrabel 1,000 215
Fortis 1,400 189
Generale Banque 470 163
Groupe Bruxelles Lambert 700 93
Kredietbank 540 157
Petrofina 600 179
Royale Belge 500 101
Solvay, Cl A 275 165
Tractabel 350 155
Union Minere* 680 51
--------
Total Belgium 1,703
--------
DENMARK (1.0%)
Carlsberg, Cl B 1,540 86
D/S 1912, Cl B 6 132
D/S Svendborg, Cl B 5 163
Danisco 3,040 147
Novo Nordisk, Cl B 1,490 205
Sophus Berendsen, Cl B 410 55
Tele Danmark, Cl B 3,958 195
--------
Total Denmark 983
--------
FINLAND (0.5%)
Merita* 16,000 34
Nokia, Cl K 3,700 161
Outokumpu Oy Akt, Cl A 3,500 62
UPM - Kymmene 11,900 229
--------
Total Finland 486
--------
FRANCE (10.9%)
Accor 1,197 173
Air Liquide 2,497 435
Alcatel Alsthom 4,183 381
Axa 5,898 335
Banque National Paris, Cl A 4,950 186
Bouygues 1,800 196
Carrefour 669 367
Carrefour Bonus Rights* 668 184
Cie Bancaire 1,660 182
Cie de Saint Gobain 3,826 489
Cie Financiara Paribas 4,093 249
Cie Generale des Eaux 2,945 315
Compagnie de Suez 5,063 196
CSF Thomson 7,000 183
Elf Aquitaine 8,312 602
Elf Sanofi 4,123 317
Eridania Beghin - Say 1,709 268
Groupe Danone 2,414 353
Havas 3,700 317
Lafarge Coppee 2,218 146
Legrand 950 168
L'Oreal 2,213 674
Louis Vuitton - Moet Hennessy 3,837 932
Lyonnaise des Eaux Dumez 2,050 199
Michelin, Cl B 4,244 214
Pernod - Ricard 3,729 245
Peugeot 2,290 319
Pinault - Printemps Redoute 550 170
F-17
<PAGE>
- -----------------------------------------------------------------
MARKET
SHARES VALUE (000)
- -----------------------------------------------------------------
FRANCE--CONTINUED
Promodes 650 $ 170
Rhone - Poulenc, Cl A 13,550 338
Schneider 6,627 307
Societe Generale 2,630 280
Total Compaigne, Cl B 6,920 501
Unibail 1,850 192
--------
Total France 10,583
--------
GERMANY (16.4%)
Aachener & Munchener Bete 216 136
Allianz 1,208 2,002
Asko Deutche Kaufhaus 156 106
BASF 2,755 766
Bayer 3,211 1,076
Bayerische Hypotheken und
Wechselbank 9,900 250
Bayerische Vereinsbank 9,760 275
Biersdorf 167 152
Bremer Vulkan Verbund* 788 2
Colonia Konzern 156 102
Daimler - Benz* 2,123 1,166
Degussa 399 137
Deutsche Bank 26,770 1,258
Dresdner Bank Frankfurt 20,600 517
Heidelberger Zement 299 196
Hochtief 676 297
Karstadt 1,025 402
Kaufhof 821 284
Linde 341 218
Lufthansa 2,108 325
Man Muenchen 531 137
Mannesmann 1,103 384
Munchener Ruckvers 356 631
Preussag 1,261 321
RWE 15,240 600
SAP 2,800 381
Schering 4,610 347
Siemens 25,340 1,421
Strabag 90 9
Thyssen 1,351 250
Veba 19,110 1,001
Viag 1,133 440
Volkswagen 1,061 374
--------
Total Germany 15,963
--------
HONG KONG (1.0%)
Cathay Pacific Airways 45,000 83
Cheung Kong Holdings 18,000 133
China Light & Power 15,000 71
Hang Seng Bank 14,900 156
Hong Kong Telecommunications 92,000 171
Hutchison Whampoa 22,000 141
Sun Hung Kai Properties 14,000 143
Swire Pacific, Cl A 9,000 80
--------
Total Hong Kong 978
--------
ITALY (9.0%)
Assicurazioni Generali 67,575 1,607
Banca Commerciale Italiana 68,500 145
Banco Ambrosian 37,000 104
Benetton Group 14,500 178
Credito Italiano 245,000 305
Edison 52,000 303
Fiat 275,000 971
Fiat Non-Convertible 42,000 78
Fidis 44,000 125
Finanziaria Autogrill* 640 1
Istituto Bancario san Paolo di Torino 75,000 459
Istituto Nazionale 323,919 486
Italgas 80,000 289
Mediobanca 41,400 287
Montedison* 182,000 111
Olivetti* 252,500 158
Parmalat Finanziaria 102,800 129
Pirelli 120,000 198
RAS 34,835 369
Sirti 19,500 125
SME Meridonale di Electric 31,640 36
Telecom Italia 410,000 821
Telecom Italia di Risp 88,000 149
Telecom Italia Mobile 515,946 1,103
Telecom Italia Mobile di Risp 154,164 213
--------
Total Italy 8,750
--------
JAPAN (33.8%)
Ajinomoto 16,000 193
Asahi Bank 37,000 446
Asahi Chemical Industries 46,000 334
Asahi Glass 31,000 374
F-18
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
INTERNATIONAL EQUITY INDEX FUND--CONTINUED
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
JAPAN--CONTINUED
Bank of Tokyo - Mitsubushi* 24,800 $ 589
Bank of Yokohama 11,000 94
Bridgestone 21,000 366
Chiba Bank 12,000 104
Chiyoda 5,000 56
Citizen Watch 17,000 139
Cosmo Oil 48,000 313
Dai-Ichi Kangyo Bank 45,000 814
Dai Nippon Printing 25,000 464
Daiei 11,000 135
Daimaru 17,000 124
Daiwa Kosho Lease 11,000 115
Daiwa Securities 24,000 323
Ebara 11,000 167
Fanuc 4,300 168
Fuji Bank 42,000 915
Fuji Photo Film 9,000 280
Fujitsu 22,000 200
Furukawa Electric 39,000 230
Hankyu 48,000 287
Hitachi 54,000 501
Honda Motor 16,000 386
Industrial Bank of Japan 38,000 980
Ito Ham Foods 1,000 8
Ito Yokado 5,000 284
Itochu 31,000 223
Japan Air Lines* 49,000 396
Japan Energy 41,000 159
Joyo Bank 13,000 102
Jusco 5,000 148
Kansai Electric Power 13,800 319
Kao 23,000 307
Kawasaki Steel 46,000 171
Kinki Nippon Railway 26,780 198
Kirin Brewery 21,000 261
Kobe Steel* 60,000 166
Komatsu 13,000 124
Kubota 37,000 248
Kyocera 4,000 274
Marui 6,000 124
Matsushita Electric 33,000 569
Mitsubishi 21,000 288
Mitsubishi Chemical 45,000 223
Mitsubishi Electric 62,000 425
Mitsubishi Estate 35,000 490
Mitsubishi Heavy Industries 65,000 560
Mitsubishi Materials 47,000 275
Mitsubishi Steel* 13,000 71
Mitsubishi Trust & Banking 23,000 384
Mitsui 23,000 212
Mitsui Trust & Banking 28,000 309
Mitsukoshi 16,000 177
Murata Manufacturing 3,000 110
NEC 32,000 353
New Oji Paper 39,000 341
Nichido Fire & Marine Insurance 15,750 128
Nippon Express 38,000 381
Nippon Oil 36,000 239
Nippon Paper Industries 30,000 202
Nippon Sharyo 5,000 50
Nippon Steel 88,000 299
Nippon Yusen 27,000 159
Nippondenso 26,000 562
Nissan Motor 45,000 371
NKK* 24,000 70
Nomura Securities 35,000 662
Obayashi 44,000 406
Odakyu Electric Railway 24,720 165
Olympus Optical 8,000 82
Osaka Gas 44,000 172
Ricoh 20,000 202
Sakura Bank 48,000 525
Sankyo 16,000 380
Sanyo Electric 32,000 191
Sega Enterprises 1,600 75
Sekisui Chemical 16,000 190
Sekisui House 7,000 82
Seven Eleven 7,000 428
Sharp 16,000 261
Shimizu 21,000 241
Shin - Etsu Chemical 9,450 189
Shizuoka Bank 13,000 169
Skylark 3,000 61
Sony 6,000 382
Sumitomo Bank 58,000 1,145
F-19
<PAGE>
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
JAPAN--CONTINUED
Sumitomo Chemical 47,000 $ 235
Sumitomo Metal 42,000 130
Taisei 61,000 461
Takeda Chemical 33,000 548
Teijin 28,000 145
Tobu Railway 23,000 149
Tohoku Electric Power 8,600 196
Tokai Bank 29,000 363
Tokio Marine & Fire Insurance 34,000 441
Tokyo Electric Power 16,600 426
Tokyo Electronics 5,000 154
Tokyo Gas 36,000 137
Tokyu 42,000 315
Toppan Printing 11,000 157
Toray 38,000 257
Tostem 5,000 146
Toto 18,000 265
Toyo Seikan Kaisha 5,000 179
Toyoda Automatic Loom 8,000 162
Toyota Motor 65,000 1,489
Yamaichi Securities 28,000 203
Yamanouchi Pharmaceutical 18,000 389
Yasuda Trust & Banking 20,000 121
--------
Total Japan 32,933
--------
NETHERLANDS (2.7%)
ABN-Amro Holdings 3,850 212
Akzo Nobel 970 117
International Nederlanden 4,477 369
Koninklijke 5,370 194
Koninklijke Nederlanden
Papierfabriek 2,724 68
Philips Electronics 3,742 133
Royal Dutch Petroleum 7,190 1,091
Unilever 1,850 252
Wolters Kluwer 1,761 197
--------
Total Netherlands 2,633
--------
NORWAY (1.0%)
Bergesen, Cl A 5,700 111
Hafslund Nycomed, Cl B 5,900 41
Kvaerner 2,250 88
Norsk Hydro 12,200 579
Nycomed, Cl B* 5,900 119
Uni Storebrand* 16,012 77
--------
Total Norway 1,015
--------
SPAIN (3.8%)
Argentaria Bancaria de Espana 4,616 193
Autopistas CESA 12,879 139
Banco Bilbao Vizcaya 7,937 300
Banco Central Hispano 5,523 111
Banco de Santander 5,066 231
Dragados Construccion 6,786 91
Empresa Nacional de Electricidad 10,736 667
Fomento de Construcciones Contratas 958 77
Gas Natural 1,322 233
Iberdola 37,946 385
Mapfre 1,018 50
Repsol 12,707 435
Telefonica de Espana 37,645 676
Union Electrica Fenosa 26,994 164
--------
Total Spain 3,752
--------
SWEDEN (1.9%)
Asea, Cl A 1,950 202
Astra, Cl A 14,150 647
Electrolux, Cl B 1,300 66
Ericsson, Cl B 18,400 412
Skandinaviska Enskilda Banken 13,500 106
Skanska, Cl B 2,500 81
Stora Kopparbergs Bergslags, Cl A 5,000 67
Svenska Cellulosa, Cl B 7,000 137
Swedish Match 4,500 15
Volvo, Cl B 4,500 95
--------
Total Sweden 1,828
--------
SWITZERLAND (2.0%)
Asea Brown Boveri 60 72
Ciba - Geigy 320 353
Nestle 372 420
Roche Holdings, Genusshein 34 261
Roche Holdlings, Bearer 12 146
F-20
<PAGE>
STATEMENT OF NET ASSETS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
INTERNATIONAL EQUITY INDEX FUND--CONCLUDED
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
SWITZERLAND--CONTINUED
Sandoz Pharmaceutical, Cl R 300 $ 312
Schweizerische Bankgesellschaft 200 187
Schweizerische Bankverein 1,300 231
--------
Total Switzerland 1,982
--------
UNITED KINGDOM (7.7%)
Abbey National 32,519 279
B.A.T. Industries 36,624 295
Barclays Bank 28,563 333
Bass 17,787 225
Blue Circle Industries 46,936 256
British Gas 20,778 61
British Petroleum 93,113 802
British Telecommunications 55,837 308
BTR 47,897 209
Cable & Wireless 29,090 200
General Electric 61,851 357
Glaxo Wellcome 31,899 416
Grand Metropolitan 39,465 266
Great Universal Stores 14,129 149
Guinness 42,734 308
Hanson Trust 128,670 373
HSBC Holdings HK$10 22,268 338
HSBC Holdings, Ordinary 12,295 187
Imperial Chemical 15,754 208
Marks & Spencer 48,514 348
National Power 11,877 96
Reuters Holdings 24,899 290
Rio Tinto Zinc 20,914 326
RMC Group 6,371 99
Sainsbury, J. 22,515 138
SmithKline Beecham, Cl A 24,760 252
Unilever 13,002 242
Vodafone Groupe 36,942 146
--------
Total United Kingdom 7,507
--------
Total Foreign Common Stocks
(Cost $86,238,260) 95,115
--------
- ------------------------------------------------------------
SHARES/FACE MARKET
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
FOREIGN PREFERRED STOCKS (1.2%)
AUSTRALIA (0.1%)
Newscorp 22,401 $ 109
--------
AUSTRIA (0.2%)
Creditanstalt Bankverein 3,876 211
--------
FINLAND (0.1%)
Nokia, Cl A 2,600 113
--------
GERMANY (0.7%)
RWE 8,480 262
SAP 2,130 295
Volkswagen 197 53
--------
Total Germany 610
--------
ITALY (0.1%)
Fiat 42,800 80
--------
Total Foreign Preferred Stocks
(Cost $1,032,723) 1,123
--------
CASH EQUIVALENT (0.2%)
Highmark Diversified Money
Market Fund (A)
4.670% $ 257 257
--------
Total Cash Equivalent
(Cost $256,765) 257
--------
Total Investments (99.0%)
(Cost $87,527,748) 96,495
--------
OTHER ASSETS AND LIABILITIES (1.0%)
Total Other Assets and Liabilities, Net 999
--------
NET ASSETS:
Fund shares of the Trust Shares
(unlimited authorization --
no par value) based on
8,304,051 outstanding shares
of beneficial interest 81,977
F-21
<PAGE>
- ------------------------------------------------------------
MARKET
VALUE (000)
- ------------------------------------------------------------
Fund shares of the Investor Shares
(unlimited authorization --
no par value) based on
514,693 outstanding shares
of beneficial interest $ 5,175
Fund shares of the Flex Shares
(unlimited authorization --
no par value) based
on 84,360 outstanding shares
of beneficial interest 878
Undistributed net investment income 232
Accumulated net realized gain
on investments 269
Net unrealized appreciation
on investments 8,967
Net unrealized depreciation on
foreign currency and translation
of other assets and liabilities in
foreign currency (4)
--------
Total Net Assets (100.0%) $ 97,494
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Trust Shares $ 10.96
========
Net Asset Value and Redemption
Price Per Share-- Investor Shares $ 10.88
========
Maximum Public Offering
Price Per Share -- Investor Shares
($10.88 (DIVIDE) 96.25%) $ 11.30
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Flex Shares (1) $ 10.87
========
(1) The Flex Shares have a contingent sales charge. For a description
of a possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-22
<PAGE>
SCHEDULE OF INVESTMENTS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
FOREIGN COMMON STOCKS (95.7%)
ARGENTINA (0.8%)
Compania Inversiones Telefonica 30,000 $ 1,755
--------
AUSTRALIA (3.6%)
Comalco 420,000 2,463
Leighton Holdings 560,000 1,881
Newscorp 125,779 706
QBE Insurance 88,632 506
Queensland Nickel 900,000 2,191
--------
Total Australia 7,747
--------
BRAZIL (2.2%)
Telecom Brasileiras ADR 43,800 2,820
Usiminas ADR 180,000 1,947
--------
Total Brazil 4,767
--------
CANADA (3.5%)
Alcan Aluminum 60,000 1,965
Bank of Montreal 85,000 2,022
CAE 224,988 1,946
Noranda 83,000 1,793
--------
Total Canada 7,726
--------
CROATIA (0.2%)
Pliva GDR* 14,700 454
--------
DENMARK (1.8%)
Novo Nordisk, Cl B 12,700 1,745
Sophus Berendsen, Cl B 16,000 2,130
--------
Total Denmark 3,875
--------
FINLAND (6.5%)
Cultor, Ser 2 117,700 5,571
Finnair, Ser 1 220,000 1,760
Konecranes International* 50,000 1,221
Metra, Cl B 27,800 1,304
Tietotehdas, Cl B 50,000 2,271
UPM - Kymmene 110,000 2,120
--------
Total Finland 14,247
--------
FRANCE (6.0%)
B.I.S.* 11,135 $ 1,445
Christian Dior 42,350 5,986
Lagardere Groupe 87,500 2,377
Michelin, Cl B 40,000 2,018
Societe Generale 11,000 1,171
--------
Total France 12,997
--------
GERMANY (3.8%)
Hoechst 3,000 1,003
Mannesmann 3,500 1,217
Siemens 32,000 1,795
Veba 59,600 3,121
Wella 2,000 1,066
--------
Total Germany 8,202
--------
HONG KONG (2.7%)
Cheung Kong Holdings 300,000 2,220
Esprit Asia Holdings 1,066,000 355
HSBC Holdings 142,000 2,147
Swire Pacific, Cl A 125,000 1,111
--------
Total Hong Kong 5,833
--------
INDONESIA (1.3%)
Asahimas Flat Glass 800,000 926
Indorama Synthetic, F 364,500 1,016
Tambang Timah, F 500,000 986
--------
Total Indonesia 2,928
--------
IRELAND (0.2%)
CRH - Dublin 36,661 346
--------
ISRAEL (0.8%)
Comverse Technology* 40,700 1,196
Koor Industries ADR 30,700 553
--------
Total Israel 1,749
--------
F-23
<PAGE>
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
ITALY (2.4%)
Cartiere Burgo 336,000 $ 2,084
Instituto Mobiliare Italiano 130,000 1,063
Saipem 500,000 2,051
--------
Total Italy 5,198
--------
JAPAN (15.2%)
Amway Japan ADR 87,900 2,110
Canon 282,000 5,543
Dai Nippon Printing 177,000 3,282
Fuji Photo Film 108,000 3,365
Mitsubishi Heavy Industries 475,000 4,092
Nippon Television Network 11,000 3,121
Omron 119,000 2,416
Paris Miki 51,700 2,267
Sanyo Shinpan Finance 13,300 911
Sony 95,400 6,077
--------
Total Japan 33,184
--------
MEXICO (4.0%)
Alfa, Cl A 270,000 4,381
Panamerican Beverages, Cl A 103,000 4,326
--------
Total Mexico 8,707
--------
NETHERLANDS (8.6%)
ABN - Amro Holding 46,000 2,537
Dutch State Mines 17,500 1,797
Fortis AMEV 56,000 4,364
Hollandsche Beton Groep 11,000 2,054
IHC Caland 24,200 1,117
International Nederlanden 55,000 4,528
VNU 140,000 2,295
--------
Total Netherlands 18,692
--------
NEW ZEALAND (0.3%)
Fletcher Challenge Building
Division 297,500 604
--------
PANAMA (1.2%)
Banco Latinamericano
de Exportaciones 44,800 $ 2,570
--------
PERU (1.8%)
Credicorp 102,707 1,900
Telefonica del Peru, Cl B 971,569 1,923
--------
Total Peru 3,823
--------
PHILIPPINES (2.0%)
Benpres Holdings GDR* 519,961 4,290
--------
SOUTH AFRICA (0.7%)
Rembrandt Group 173,000 1,540
--------
SOUTH KOREA (0.6%)
Korea Chemical 10,000 1,253
--------
SPAIN (3.4%)
Repsol 36,000 1,232
Telefonica de Espana 349,000 6,268
--------
Total Spain 7,500
--------
SWEDEN (8.5%)
Avesta Sheffield* 170,200 1,733
Cardo 80,000 1,754
Dahl International* 45,000 616
Ericsson, Cl B 108,100 2,419
Gettinge, Cl B 213,300 3,900
Pharmacia & Upjohn 50,000 2,044
SKF, Cl B 70,000 1,571
Svedala Industrial 236,800 4,541
--------
Total Sweden 18,578
--------
F-24
<PAGE>
SCHEDULE OF INVESTMENTS
============================================================
STI CLASSIC FUNDS MAY 31, 1996
INTERNATIONAL EQUITY FUND--CONCLUDED
- ------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------
SWITZERLAND (4.0%)
Asea Brown Boveri 1,315 $ 1,575
Ciba - Geigy 2,100 2,314
Sandoz Pharmaceutical 1,300 1,351
SMH 13,700 2,127
Societe Generale de Surveillance 640 1,444
--------
Total Switzerland 8,811
--------
UNITED KINGDOM (9.6%)
Astec 457,000 1,063
Bank of Ireland 301,055 2,128
B.A.T. Industries 520,000 4,184
British Airport Authority 200,000 1,522
CRH - Dublin 139,545 1,330
Grand Metropolitan 205,000 1,382
National Power 150,000 1,212
Orange ADR* 283,000 5,377
Rank Organisation 207,000 1,643
Unilever 55,000 1,023
--------
Total United Kingdom 20,864
--------
Total Foreign Common Stocks
(Cost $194,622,776) $208,240
--------
Total Investments (95.7% of Net Assets)
(Cost $194,622,776) $208,240
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-25
<PAGE>
STATEMENT OF NET ASSETS
==================================================================
STI CLASSIC FUNDS MAY 31, 1996
SUNBELT EQUITY FUND
- ------------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ------------------------------------------------------------------
COMMON STOCKS (96.3%)
AEROSPACE & DEFENSE (1.1%)
Tech-Sym * 146,316 $ 4,993
--------
AIR TRANSPORTATION (3.9%)
Atlantic Southeast Airlines 190,960 5,060
Comair 318,408 8,358
Southwest Airlines 139,901 3,830
--------
Total Air Transportation 17,248
--------
BANKS (2.8%)
CCB Financial 64,475 3,353
Eagle Bancshares 78,426 1,314
First Tennessee National 125,577 4,223
Hibernia, Cl A 230,693 2,538
Texas Regional Bancshares, Cl A 43,740 1,072
--------
Total Banks 12,500
--------
BUILDING & CONSTRUCTION (1.0%)
Beazer Homes USA* 89,605 1,534
Centex 89,994 2,711
--------
Total Building & Construction 4,245
--------
BUILDING & CONSTRUCTION SUPPLIES (1.4%)
American Buildings* 111,881 3,440
NCI Building Systems* 78,427 2,686
--------
Total Building & Construction Supplies 6,126
--------
BUILDING-MOBILE HOMES (2.9%)
Clayton Homes 167,943 3,233
Oakwood Homes 65,759 3,189
Palm Harbor Homes* 100,222 2,781
Redman Industries* 175,439 3,838
--------
Total Building-Mobile Homes 13,041
--------
COMMUNICATIONS EQUIPMENT (1.3%)
Glenayre Technologies* 113,833 5,606
--------
COMPUTER SOFTWARE & SERVICES (5.1%)
Harbinger* 102,328 2,456
Landmark Graphics* 148,237 2,779
National Data 115,701 4,368
Nichols Research* 129,689 4,182
Optical Data Systems* 47,458 1,092
SCB Computer Technology* 82,993 1,743
Sterling Commerce* 64,475 2,829
Sterling Software* 40,622 3,270
--------
Total Computer Software & Services 22,719
--------
ELECTRONICS (0.7%)
SCI Systems* 73,747 3,319
--------
ENVIRONMENTAL SERVICES (1.0%)
USA Waste Services* 147,491 4,351
--------
FINANCE-MORTGAGE (0.6%)
Triad Guaranty* 80,530 2,879
--------
FINANCE-REIT (1.7%)
Equity Inns 259,867 3,086
Felcor Suite Hotels 104,828 3,237
Winston Hotels 115,953 1,333
--------
Total Finance-REIT 7,656
--------
FINANCIAL SERVICES (3.2%)
Capital One Financial 110,620 3,360
Medaphis* 284,812 10,752
--------
Total Financial Services 14,112
--------
FOOD, BEVERAGE & TOBACCO (1.0%)
Tyson Foods 174,961 4,287
--------
HOTELS & LODGING (1.1%)
Promus Hotel* 175,392 4,823
--------
INSURANCE (3.9%)
Compdent* 135,960 6,594
Jefferson-Pilot 65,080 3,343
Provident* 92,296 3,311
United Finance 136,100 4,134
--------
Total Insurance 17,382
--------
F-26
<PAGE>
STATEMENT OF NET ASSETS
================================================================
STI CLASSIC FUNDS MAY 31, 1996
SUNBELT EQUITY FUND--CONTINUED
- ----------------------------------------------------------------
MARKET
SHARES VALUE (000)
- ----------------------------------------------------------------
LEISURE (1.1%)
Play By Play Toys & Novelties* 92,182 $ 1,302
Varsity Spirit 209,341 3,506
--------
Total Leisure 4,808
--------
LUMBER & WOOD PRODUCTS (0.6%)
American Homestar* 119,786 2,665
--------
MACHINERY (4.5%)
Agco 92,182 2,777
Blount International 330,327 10,983
Greenfield Industries 116,591 4,401
Roper Industries 40,601 1,908
--------
Total Machinery 20,069
--------
MEASURING DEVICES (3.1%)
Input/Output 344,567 13,912
--------
MEDICAL PRODUCTS & SERVICES (4.7%)
Gulf South Medical Supply* 210,931 10,072
Phycor* 116,439 6,317
Quorum Health Group* 186,951 4,791
--------
Total Medical Products & Services 21,180
--------
METAL PRODUCTS & SERVICES (2.5%)
Citation* 283,174 4,177
Imco Recycling 110,745 2,575
Wolverine Tube* 113,942 4,159
--------
Total Metal Products & Services 10,911
--------
MISCELLANEOUS BUSINESS SERVICES (2.8%)
Norrell 106,725 4,416
PMT Services* 231,008 7,854
--------
Total Miscellaneous Business Services 12,270
--------
MISCELLANEOUS CONSUMER SERVICES (1.9%)
Accustaff* 240 8
Central Parking 85,827 2,661
Service International 101,849 5,691
--------
Total Miscellaneous Consumer Services 8,360
--------
OIL & GAS-DRILLING (4.2%)
Diamond Offshore Drilling* 120,600 5,774
Ensco International* 107,975 3,280
Global Marine* 383,022 4,692
Sonat Offshore Drilling 92,709 4,914
--------
Total Oil & Gas-Drilling 18,660
--------
OIL & GAS-EXPLORATION (1.9%)
Nuevo Energy* 148,647 4,608
Stone Energy* 214,614 3,997
--------
Total Oil & Gas-Exploration 8,605
--------
OIL & GAS-INTEGRATED (1.6%)
Louisiana Land & Exploration 73,838 3,978
Union Pacific Resources Group 119,934 3,088
--------
Total Oil & Gas-Integrated 7,066
--------
OIL & GAS-MACHINERY & EQUIPMENT (1.8%)
Baker Hughes 70,386 2,208
Tidewater 135,956 5,608
--------
Total Oil & Gas-Machinery &
Equipment 7,816
--------
OIL & GAS-MARKETING (0.9%)
World Fuel Services 230,924 4,128
--------
OIL & GAS-SERVICES (2.6%)
Global Industries* 92,183 2,858
Offshore Logistics* 92,182 1,337
Pride Petroleum Service* 255,444 4,406
Production Operators 79,513 2,902
--------
Total Oil & Gas-Services 11,503
--------
PAPER & PAPER PRODUCTS (2.5%)
Inbrand* 262,435 7,643
Rock Tenn, Cl A 176,973 3,495
--------
Total Paper & Paper Products 11,138
--------
PRINTING & PUBLISHING (0.5%)
Cadmus Communications 144,169 2,379
--------
F-27
<PAGE>
===================================================================
- -------------------------------------------------------------------
MARKET
SHARES VALUE (000)
- -------------------------------------------------------------------
RETAIL (9.0%)
Autozone* 203,852 $ 7,160
Bombay* 253,132 1,962
Books-A-Million* 367,876 4,368
Claire's Stores 222,839 5,571
Discount Auto Parts* 219,123 5,642
Dollar General 161,548 4,483
Food Lion, Cl A 11,187 86
Friedman's, Cl A* 148,271 4,189
Movie Gallery* 139,340 4,250
Sports & Recreation* 222,153 2,110
--------
Total Retail 39,821
--------
RETAIL-RESTAURANT (3.3%)
Brinker International* 184,260 3,086
Cracker Barrel Old Country Stores 127,591 3,381
Longhorn Steaks* 93,233 2,401
Luby's Cafeterias 147,490 3,632
O'Charleys* 112,066 1,401
Sonic* 29,876 717
--------
Total Retail-Restaurant 14,618
--------
SEMI-CONDUCTORS/INSTRUMENTS (0.7%)
AVX 92,123 2,004
Kemet* 53,241 1,185
--------
Total Semi-Conductors/Instruments 3,189
--------
STEEL & STEEL WORKS (0.6%)
Maverick Tube* 204,034 2,678
--------
TELEPHONES & TELECOMMUNICATION (1.3%)
Harris 52,056 3,364
Premiere Technologies* 37,418 1,768
U.S. Long Distance* 22,407 804
--------
Total Telephones & Telecommunication 5,936
--------
TRANSPORTATION SERVICES (1.3%)
United Transnet* 222,334 5,642
--------
TRUCK & PARTS-HEAVY DUTY (1.8%)
Miller Industries* 256,869 8,059
--------
TRUCKING (2.5%)
American Freightways* 458,778 5,849
M.S. Carriers* 46,096 887
MTL* 84,290 1,465
USA Truck* 233,217 2,682
--------
Total Trucking 10,883
--------
WHOLESALE (5.9%)
Barnett* 188,947 4,535
Isolyser* 317,432 4,365
Kent Electronics* 183,645 6,519
Richfood Holdings 129,056 4,323
Serologicals* 63,717 1,657
Watsco 161,176 4,855
--------
Total Wholesale 26,254
--------
Total Common Stocks (Cost $329,210,358) 427,837
--------
CONVERTIBLE BONDS (3.0%)
Food Lion, Convertible to
126.582 shares (B) 5.000%, 06/01/03 $1,873 1,981
HEALTHSOUTH Rehabilitation,
Convertible to 26.5781 shares
5.000%, 04/01/01 4,413 8,407
Pride Petroleum Services,
Convertible to 81.6327 shares
6.250%, 02/15/06 1,872 2,979
--------
Total Convertible Bonds
(Cost $11,611,272) 13,367
--------
F-28
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
SUNBELT EQUITY FUND--CONCLUDED
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
REPURCHASE AGREEMENT (0.1%)
Swiss Bank 5.27%, dated 05/31/96,
matures 06/03/96, repurchase
price $432,113 (collateralized by
U.S. Treasury Bond, par value
$746,000, 8.75%, 05/15/20:
market value $888,829) 432 $ 432
--------
Total Repurchase Agreement
(Cost $431,924) 432
--------
Total Investments (99.4%)
(Cost $341,253,554) 441,636
--------
OTHER ASSETS AND LIABILITIES (0.6%)
Total Other Assets and Liabilities, Net 2,501
--------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 29,227,841 outstanding shares of
benefical interest 298,601
Fund shares of the Investor Class (unlimited
authorization--no par value) based on
2,078,593 outstanding shares of
beneficial interest 20,386
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 193,565 outstanding shares of
beneficial interest 2,386
Accumulated net realized gain on
investments 22,383
Unrealized appreciation on investments 100,381
--------
Total Net Assets (100.0%) $444,137
========
Net Asset Value, Offering Price and
Redemption Price Per Share--Trust Shares $ 14.11
========
Net Asset Value and Redemption Price
Per Share--Investor Shares $ 13.95
========
Maximum Public Offering Price Per
Share--Investor Shares
($13.95 (DIVIDED BY) 96.25%) $ 14.49
========
Net Asset Value, Offering Price and
Redemption Price Per Share--Flex Shares (1) $ 13.97
========
(1) The Flex Shares have a contingent sales charge. For a
description of a possible sales charge, see notes to the
financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-29
<PAGE>
SCHEDULE OF INVESTMENTS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
MUNICIPAL BONDS (89.8%)
ARIZONA (2.0%)
Phoenix, GO, Ser A
5.000%, 07/01/19 $1,600 $ 1,400
Phoenix, Ser B Callable
07/01/05 @ 100
5.500%, 07/01/08 2,000 2,005
--------
Total Arizona 3,405
--------
FLORIDA (12.8%)
Dade County, Water & Sewer
Systems, RB (FGIC)
6.250%, 10/01/10 1,000 1,064
Jacksonville, Electric Authority
Revenue, RB, Callable
10/01/00 @ 101.50
6.750%, 10/01/05 1,000 1,085
Okeechobee Correctional Facility,
COP (AMBAC)
5.800%, 03/01/03 1,000 1,041
Palm Beach County, Solid Waste
Resource Recovery Revenue, RB
Callable 12/01/04 @ 100 (MBIA)
6.000%, 12/01/06 1,500 1,575
Reedy Creek, Improvement District
Utility Revenue Ser 1991-1, RB,
Pre-Refunded 10/01/01 @ 101
(MBIA) 6.500%, 10/01/16 3,000 3,274
State Board of Education Capital
Outlay, Ser C, Pre-Refunded
06/01/02 @ 101 6.625%, 06/01/22 3,000 3,304
State Bond Finance Department,
Environmental Department,
Preservation 2000 Project,
Ser A (MBIA) 5.000%, 07/01/03 3,000 2,993
5.000%, 07/01/04 5,000 4,956
Volusia County, Master Lease
Program, COP, Callable
08/01/01 @ 102 (FSA)
6.625%, 08/01/06 2,000 2,210
--------
Total Florida 21,502
--------
GEORGIA (0.9%)
Downtown Savannah Authority,
Chatham County Detention
Project, Ser A, RB, Pre-Refunded
01/01/99 @ 102 6.400%, 01/01/01 1,415 1,509
--------
ILLINOIS (2.6%)
Chicago, GO, Callable 07/01/07
@ 100 (AMBAC) 5.900%, 01/01/09 1,680 1,705
Chicago, Motor Fuel Tax Revenue,
RB, Pre-Refunded 01/01/01
@ 102 (AMBAC) 7.100%, 01/01/11 1,500 1,665
Chicago, Wastewater Transmission
Revenue, RB (FGIC) 5.375%, 01/01/13 1,100 1,046
--------
Total Illinois 4,416
--------
IOWA (0.7%)
LeClaire, Electric Authority
Revenue, RB, Mandatory
Put 09/01/96 @ 100
4.125%, 09/01/26 1,185 1,186
--------
LOUISIANA (1.2%)
State Refunding GO, Ser A (FGIC)
6.000%, 08/01/00 2,000 2,085
--------
MARYLAND (3.8%)
Stadium Authority, Sports
Facility, RB
5.300%, 03/01/07 1,205 1,194
5.300%, 03/01/08 1,000 983
5.400%, 03/01/10 1,125 1,098
State Industrial Development
Authority, Bon Secours Health
Systems Project, RB (MBIA)
5.500%, 08/15/20 1,940 1,814
Worcester County, Public
Improvements Project, RB
5.400%, 08/01/11 1,315 1,262
--------
Total Maryland 6,351
--------
F-30
<PAGE>
SCHEDULE OF INVESTMENTS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONCLUDED
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
MICHIGAN (5.5%)
Detroit, School District, Ser A,
GO (AMBAC)
6.250%, 05/01/06 $1,040 $ 1,106
6.500%, 05/01/07 1,165 1,258
6.500%, 05/01/08 2,305 2,481
6.500%, 05/01/09 2,455 2,642
Underground Storage Tank
Financial Assurance Authority,
Ser I, RB (AMBAC)
5.000%, 05/01/01 1,750 1,757
--------
Total Michigan 9,244
--------
MINNESOTA (14.4%)
Burnsville, Independent School
District #191, Ser A, GO
4.875%, 02/01/13 1,450 1,269
State GO
4.750%, 05/01/00 4,710 4,734
4.750%, 05/01/01 2,430 2,436
5.000%, 08/01/01 4,000 4,055
State RB, Ser A, (AMBAC)
5.000%, 06/30/99 6,445 6,509
5.000%, 06/30/00 5,000 5,031
--------
Total Minnesota 24,034
--------
MISSISSIPPI (1.7%)
State GO, Callable 12/01/04 @ 100
6.400%, 12/01/07 2,595 2,767
--------
MISSOURI (1.4%)
State Environmental Improvements
Energy Resource Authority,
Pollution Control, RB
5.750%, 12/01/02 2,305 2,391
--------
NEW JERSEY (2.1%)
State GO, Ser E
5.000%, 07/15/00 3,475 3,518
--------
NEW YORK (10.4%)
Battery Park City Authority, RB,
Pre-Refunded 05/01/99 @ 100
6.500%, 05/01/20 10,000 10,563
State Dorm Authority, State
University Educational Facilities,
RB (FGIC)
5.875%, 05/15/11 2,000 2,060
State GO, Pre-Refunded 03/01/00
@ 102 (AMBAC)
7.100%, 03/01/20 1,650 1,821
State Local Assistance Corporation,
Ser A, RB, Pre-Refunded
04/01/01 @ 102
7.000%, 04/01/16 1,065 1,186
Triborough Bridge & Tunnel
Authority, Ser B, RB
5.000%, 01/01/14 2,000 1,828
--------
Total New York 17,458
--------
OHIO (3.4%)
Cleveland, Waterworks First
Mortgage, Ser F-92 A, RB,
Pre-Refunded 01/01/02
@ 102 (AMBAC)
6.500%, 01/01/21 3,250 3,567
State Building Authority, State
Correctional Facilities, Ser C,
RB, Callable 10/01/1996 @ 102
8.400%, 04/01/97 2,000 2,064
--------
Total Ohio 5,631
--------
OKLAHOMA (2.7%)
State Industrial Authority Health
Systems, Integris Baptist Medical
Center, RB, (AMBAC)
6.000%, 08/15/10 1,000 1,025
Tulsa, Hospital Revenue, RB,
Pre-Refunded 06/01/03 @ 102
7.200%, 06/01/17 3,000 3,439
--------
Total Oklahoma 4,464
--------
F-31
<PAGE>
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
PUERTO RICO (14.4%)
Commonwealth Highway &
Transportation Authority,
Ser Z, RB (FSA)
6.000%, 07/01/18 $10,500 $ 10,920
Commonwealth Public
Improvements, RB, Pre-Refunded
07/01/02 @ 101.50
6.800%, 07/01/21 7,000 7,805
Commonwealth Unlimited
Tax GO (MBIA)
6.500%, 07/01/07 1,500 1,661
Electric & Power Authority, Ser K, RB,
Pre-Refunded 07/01/97 @ 102
9.250%, 07/01/06 2,500 2,690
Electric Power Authority, Ser W,
RB (MBIA)
6.000%, 07/01/01 1,000 1,049
--------
Total Puerto Rico 24,125
--------
SOUTH CAROLINA (0.7%)
State Public Service Authority, Ser B,
RB, Pre-Refunded 07/01/01 @ 102
7.100%, 07/01/21 1,000 1,120
--------
TEXAS (2.7%)
Alief, Independent School
District, GO (PSFG)
5.000%, 02/15/13 1,025 935
5.000%, 02/15/14 1,025 923
State Unlimited GO, College
Student Loan, Callable
08/01/02 @ 100 (F)
6.200%, 08/01/04 1,420 1,491
Wylie, Independent School
District, GO, Callable
08/15/11 @ 100 (PSFG)
6.900%, 08/15/13 1,100 1,213
--------
Total Texas 4,562
--------
VIRGINIA (4.6%)
Southeastern Public Service
Authority, Ser A (MBIA)
5.000%, 07/01/07 5,700 5,493
State Transportation Board,
U.S. Route 58 Corridor
Project, Ser A, RB
5.250%, 05/15/12 2,250 2,129
--------
Total Virginia 7,622
--------
WASHINGTON (1.8%)
Tacoma, Department of Public
Utilities, RB, Callable
07/01/96 @ 102
8.600%, 01/01/97 2,000 2,048
9.000%, 01/01/00 1,000 1,023
--------
Total Washington 3,071
--------
Total Municipal Bonds
(Cost $151,156,212) 150,461
--------
CASH EQUIVALENT (4.5%)
SEI Tax Exempt Trust Institutional
Tax Free Portfolio 7,509 7,509
--------
Total Cash Equivalent
(Cost $7,509,478) 7,509
--------
Total Investments (94.3% of Net Assets)
(Cost $158,665,690) 157,970
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-32
<PAGE>
SCHEDULE OF INVESTMENTS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
FLORIDA TAX-EXEMPT BOND FUND
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
MUNICIPAL BONDS (91.2%)
FLORIDA (72.8%)
Brevard County, Health Facilities,
Wuesthoff Memorial Hospital
Project, RB (MBIA)
6.250%, 04/01/06 $ 930 $ 996
Brevard County, School Board,
COP, Ser A (AMBAC)
5.400%, 07/01/12 1,000 963
Dade County, Aviation Revenue,
Ser A, RB, Callable 10/01/05
@ 102 (AMBAC)
6.000%, 10/01/09 500 517
Dade County, Seaport Revenue,
RB (MBIA)
6.200%, 10/01/07 750 801
6.200%, 10/01/08 750 797
Dade County, Water & Sewer
System, RB (FGIC)
6.250%, 10/01/07 755 815
6.250%, 10/01/09 750 803
Deerfield Beach, Water & Sewer
Revenue, RB (FGIC)
6.125%, 10/01/06 250 267
Florida Keys, Aqueduct Authority
Revenue, RB, Pre-Refunded
09/01/01 @ 101 (AMBAC)
6.750%, 09/01/21 170 187
Gainesville Utility Systems,
Ser A, RB
5.750%, 10/01/09 500 511
Gulf Breeze, Local Government
Lien, Ser B, RB, Mandatory
Tender 12/01/08 (FGIC)
5.650%, 12/01/15 460 466
Gulf Breeze, Local Government
Lien, Ser B, RB, Mandatory
Tender 12/01/09 (FGIC)
5.750%, 12/01/15 410 416
Hillsborough County, Capital
Improvement Revenue,
RB (FGIC)
5.900%, 08/01/04 300 320
Hillsborough County, School
Board Revenue, COP, Callable
07/01/06 @ 100 (MBIA)
5.875%, 07/01/08 1,000 1,025
Hillsborough County, Tampa
Port Authority, RB, ETM,
Callable 06/01/05 @ 102
(FSA) (F)
5.600%, 06/01/07 500 500
Hillsborough County, University
Community Hospital,
RB (MBIA)
6.500%, 08/15/19 145 156
Indian Trace Community, Water
Management Split Benefit,
Ser A-1, RB, Callable 05/01/05
@ 102 (MBIA)
5.500%, 05/01/07 455 458
Jacksonville, Water & Sewer
Revenue, RB, Callable
10/01/06 @ 102 (MBIA)
5.125%, 10/01/15 500 454
Key West, Sewer Revenue, Ser A,
RB, Pre-Refunded 10/01/96
@ 103 (FGIC)
7.125%, 10/01/26 500 520
Lakeland, Electric & Water
Revenue, RB
6.650%, 10/01/98 100 105
Lakeland, Hospital Systems,
Lakeland Regional Medical
Center Project, RB Callable
11/15/06 @ 102 (MBIA)
5.000%, 11/15/11 1,570 1,444
Miami, Health Facilities, Mercy
Hospital Project, Ser A,
RB Callable 8/15/04 @ 102 (AMBAC)
5.125%, 08/15/20 1,700 1,500
North Broward, Hospital District
Revenue, RB (MBIA)
5.950%, 01/01/01 1,000 1,045
F-33
<PAGE>
===================================================================
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
Orange County, Health
Facilities Authority,
Pre-Refunded Municipal
Certificates, RB, ETM
5.700%, 10/01/12 $ 500 $ 504
Orange County, Public Facilities
Revenue, Ser A, RB, Callable
10/01/04 @ 102 (AMBAC)
5.650%, 10/01/07 200 204
Orlando, Community Water &
Electric Revenue, RB, ETM
9.625%, 10/01/03 450 578
Orlando, Community Water &
Electric Revenue, Ser D, RB
6.750%, 10/01/17 500 563
Orlando, Parking Facilities
Revenue, Ser A, RB Callable
10/01/04 @ 101 (FGIC)
5.000%, 10/01/12 1,000 911
Palm Beach, Health Facilities
Revenue, JFK Medical Center
Project, RB, Pre-Refunded
12/01/03 @ 102 (FSA)
5.750%, 12/01/14 365 389
Pinellas County, Morton Plant
Health Systems Project, RB,
Callable 11/15/03 @ 102
(MBIA)
5.500%, 11/15/08 1,500 1,494
Plant City, Utility System
Revenue, RB, Callable
10/01/04 @ 101 (MBIA)
6.000%, 10/01/15 400 410
Reedy Creek, Utility Revenue,
Ser 1991-1, RB, Pre-Refunded
10/01/01 @ 101 (MBIA)
6.250%, 10/01/11 240 259
Sarasota, Sarasota-Manatee
Airport Authority, Ser B,
Callable 08/01/96 @ 102
7.700%, 08/01/06 200 205
South Miami, Health Facilities
Revenue, Baptist Health
Systems, RB, Callable
10/01/05 @ 102 (MBIA)
5.250%, 10/01/09 1,000 963
State Board of Education
Capital Outlay, RB
6.600%, 06/01/98 125 130
State Board of Education
Capital Outlay, Ser B, GO,
Callable 06/01/02 @ 101
5.900%, 06/01/12 450 452
State Board of Education
Capital Outlay, Ser B, RB,
Callable 06/01/02 @ 101
6.000%, 06/01/15 170 171
State Board of Education, Public
Education Administration
Cap, Ser B, GO Pre-Refunded
06/01/97 @ 102
7.750%, 06/01/16 425 450
State Board of Education, Ser C,
GO, ETM, Pre-Refunded
06/01/97 @ 102
7.100%, 07/01/07 190 196
State Board of Education,
Ser E, GO, Callable
06/01/05 @ 101
5.000%, 06/01/20 2,000 1,750
State Board of Finance
Department, General Services
Revenue, Preservation 2000
Project, Ser A, RB (AMBAC)
5.300%, 07/01/04 460 466
State Department of Natural
Resources, Preservation 2000
Project, Ser A, RB,
Callable 07/01/01 @ 102 (AMBAC)
6.750%, 07/01/06 80 88
State Pollution Control, Ser N,
GO, Callable 07/01/96 @ 102
8.000%, 07/01/97 420 427
F-34
<PAGE>
SCHEDULE OF INVESTMENTS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
FLORIDA TAX-EXEMPT BOND FUND--CONCLUDED
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
State Transportation Authority,
GO, Pre-Refunded 07/01/00
@ 102
7.375%, 07/01/11 $ 100 $ 112
State Turnpike Authority Revenue,
Ser A, RB, Callable 07/01/03
@ 101 (FGIC)
5.000%, 07/01/16 500 444
State Turnpike Authority, Ser A,
RB, Pre-Refunded 07/01/02
@ 101 (FGIC)
6.350%, 07/01/22 970 1,056
-------
Total Florida 27,288
-------
PUERTO RICO (18.4%)
Commonwealth, GO (MBIA)
4.500%, 07/01/03 2,100 2,061
Commonwealth, GO,
Pre-Refunded 07/01/98 @ 102
8.000%, 07/01/06 500 546
Commonwealth, Highway &
Transportation Authority,
Ser Y, RB (FSA)
5.000%, 07/01/16 750 678
Commonwealth, Highway &
Transportation Authority,
Ser Z, RB (MBIA)
6.250%, 07/01/14 2,000 2,140
Electric Power Authority
Revenue, Ser S, RB
5.500%, 07/01/00 200 206
Public Buildings Authority
Revenue, Guaranteed
Government Facilities, Ser A,
RB (AMBAC)
6.250%, 07/01/14 750 798
Public Buildings Authority
Revenue, Public Education
& Health Facilities, RB
5.300%, 07/01/03 475 479
-------
Total Puerto Rico 6,908
-------
Total Municipal Bonds
(Cost $34,552,846) 34,196
-------
CASH EQUIVALENTS (3.8%)
AIM Management Institutional
Tax-Free Portfolio 1,352 1,352
SEI Tax-Exempt
Trust Institutional Tax-Free
Portfolio 102 102
-------
Total Cash Equivalents
(Cost $1,454,437) 1,454
-------
Total Investments (95.0% of Net Assets)
(Cost $36,007,283) 35,650
=======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-35
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
TENNESSEE TAX-EXEMPT BOND FUND
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
MUNICIPAL BONDS (98.0%)
TENNESSEE (74.7%)
Chattanooga, Health Facilities
Board, Memorial Hospital
Project, Ser A, RB (MBIA)
6.300%, 09/01/05 $ 20 $ 21
Chattanooga, GO, Callable
08/01/02 @ 102
5.900%, 08/01/05 50 52
Chattanooga-Hamilton County,
Erlanger Medical Center Project,
RB (FSA)
5.600%, 10/01/08 50 50
Hamilton County, GO, Callable
07/01/04 @ 102
5.500%, 07/01/08 100 100
Harpeth Valley, Utility District
Revenue, RB, Callable
09/01/03 @ 102
5.625%, 09/01/07 100 100
Jackson, Water & Sewer Utilities
Revenue, RB, Callable 07/01/06
@ 100 (AMBAC)
5.250%, 07/01/11 200 190
Johnson City, Water & Sewer
Regulation System, GO, Callable
05/01/06 @ 100 (AMBAC)
5.800%, 05/01/09 100 101
Kingsport, GO
5.500%, 09/01/02 50 52
Knox County, First Utility District
Sewer Revenue, RB, ETM
7.250%, 12/01/05 55 64
Knox County, Health Facilities
Board, Mercy Health Systems,
Ser B, RB, Callable 09/01/05
@ 100 (AMBAC)
5.875%, 09/01/15 50 50
Knoxville, Natural Gas Revenue,
Ser E, Callable 03/01/03 @ 100
5.900%, 03/01/10 100 100
Madison County, Ser A, GO,
Callable 08/01/01 @ 102
6.000%, 08/01/05 40 41
Madison County, Water Revenue,
RB, Callable 02/01/08 @ (MBIA)
5.500%, 02/01/09 250 244
Memphis-Shelby County, Airport
Authority, RB, Callable 09/01/05
@ 100 (MBIA)
5.550%, 09/01/08 50 50
Memphis-Shelby County, Airport
Authority, Ser B, RB (MBIA) (F)
6.500%, 02/15/09 85 90
Metro Government, Nashville &
Davidson County, Electric System
Revenue, RB
5.625%, 05/15/14 200 194
Metro Government, Nashville &
Davidson County, Water & Sewer
Revenue, RB, ETM
6.500%, 12/01/14 225 242
Metro Government, Nashville &
Davidson County, Convention
Center Project, GO, ETM
6.250%, 03/01/10 200 214
Metro Government, Nashville &
Davidson County, Electric
Revenue, RB, ETM
6.000%, 07/01/04 100 107
Metro Government, Nashville &
Davidson County, Correctional
Facility Impovements, RB,
Callable 09/01/01 @ 102
7.000%, 09/01/11 100 108
Metro Government, Nashville &
Davidson County, Water &
Sewer, RB, Callable 01/01/04
@ 100 (AMBAC)
5.900%, 01/01/07 100 103
Metro Government, Nashville &
Davidson County, Vanderbilt
University Hospital, RB, ETM,
Callable 07/01/06 @ 100
6.100%, 07/01/10 100 107
Metro Government, Nashville &
Davidson County, Vanderbilt
University, Ser A, RB
5.500%, 01/01/06 125 126
F-36
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
TENNESSEE TAX-EXEMPT BOND FUND--CONCLUDED
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
TENNESSEE --CONTINUED
Shelby County, GO
5.100%, 03/01/13 $300 $ 281
Shelby County, School Boards,
GO, Callable 03/01/02 @ 101
5.800%, 03/01/10 300 301
Shelby County, Ser A, GO
5.500%, 03/01/10 300 293
Sullivan County, Health Facilities
Board, Holston Valley Health,
RB, Callable 02/15/05
@ 100 (MBIA)
5.750%, 02/15/13 50 49
State GO, Ser C
5.000%, 03/01/04 100 100
State GO, Ser A, Callable
03/01/07 @ 100
5.500%, 03/01/09 50 50
State Local Development Authority,
State Loan Program, Ser A, RB,
Callable 03/01/04 @ 100
7.000%, 03/01/12 50 54
State Metropolitan Nashville Airport,
Ser B, RB, Pre-Refunded 07/01/01
@ 102 (FGIC)
7.750%, 07/01/06 100 115
State Housing Development Agency,
Ser A, RB (AMBAC)
6.550%, 01/01/08 50 52
State School Board Authority, Higher
Education Facilities, Ser A, RB,
Callable 05/01/02 @ 101.5
5.800%, 05/01/04 150 155
Williamson County, Rural School,
GO, Callable 09/01/06 @ 100
5.400%, 09/01/07 50 49
------
Total Tennessee 4,005
------
PUERTO RICO (23.3%)
Commonwealth, GO, Pre-Refunded
07/01/98 @ 102
8.000%, 07/01/06 500 547
Commonwealth, GO, Callable
07/01/05 @ 100 (MBIA)
5.500%, 07/01/13 175 170
Commonwealth, Highway &
Transportation Authority,
Ser Z, RB (MBIA)
6.250%, 07/01/15 500 533
------
Total Puerto Rico 1,250
------
Total Municipal Bonds
(Cost $5,287,821) 5,255
------
CASH EQUIVALENT (0.7%)
SEI Tax-Exempt Trust
Institutional Tax-Free Portfolio 36 36
------
Total Cash Equivalent
(Cost $36,106) 36
------
Total Investments (98.7%)
(Cost $5,323,927) 5,291
------
OTHER ASSETS AND LIABILITIES, NET (1.3%)
Total Other Assets and Liabilities, Net 72
------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 193,781 outstanding shares of
benefical interest 1,813
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 161,737 outstanding shares of
beneficial interest 1,528
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 214,422 outstanding shares of
beneficial interest 2,056
Accumulated net realized loss on investments (1)
Unrealized depreciation on investments (33)
------
Total Net Assets (100.0%) $5,363
======
F-37
<PAGE>
- -------------------------------------------------------------------
- -------------------------------------------------------------------
NET ASSETS--CONTINUED:
Net Asset Value, Offering Price and Redemption
Price Per Share--Trust Shares $ 9.40
======
Net Asset Value Redemption Price
Per Share--Investor Shares $ 9.42
======
Maximum Public Offering Price Per Share--
Investor Shares ($9.42 (DIVIDED BY) 96.25%) $ 9.79
======
Net Asset Value, Offering Price and Redemption
Price Per Share--Flex Shares (1) $ 9.41
======
(1) The Flex Shares have a contingent sales charge. For a
description of a possible sales charge, see notes to the
financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-38
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
GEORGIA TAX-EXEMPT BOND FUND
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
MUNICIPAL BONDS (93.0%)
GEORGIA (93.0%)
Albany-Dougherty County, Georgia
Hospital Authority, Ser B,
Anticipation Cerificate,
Pre-Refunded 09/01/00 @ 102
(AMBAC)
7.500%, 09/01/20 $ 255 $ 287
Athens, Water & Sewer Revenue,
RB (ETM)
5.700%, 07/01/00 165 172
Atlanta, Airport Facilities Revenue,
Callable Anytime @ 100 (AMBAC)
6.300%, 01/01/07 500 501
Augusta, Water & Sewer Revenue,
RB, Callable 05/01/02 @ 102
6.200%, 05/01/03 130 138
Bibb County, GO
7.000%, 01/01/04 985 1,102
Cherokee County, School District,
GO, Callable 06/01/02 @ 102
6.375%, 06/01/07 605 645
Clayton County, Water & Sewer
Authority, RB (AMBAC)
5.350%, 05/01/09 1,500 1,463
Cobb County & Marietta, Coliseum &
Exhibit Hall Authority, RB (MBIA)
5.500%, 10/01/12 940 920
Cobb County & Marietta, Water
Authority, RB
5.100%, 11/01/04 1,000 1,003
Cobb County, GO
5.000%, 02/01/03 1,025 1,025
Columbus, Water & Sewer, RB (FGIC)
6.300%, 05/01/07 300 318
Dalton-Whitfield County, Hospital
Authority, RB, Pre-Refunded
07/01/00 @ 102
7.000%, 07/01/03 355 391
DeKalb County, Development
Authority, Emory University
Project, RB
5.375%, 11/01/05 650 657
DeKalb County, Development Authority,
Emory University Project, Ser A, RB
5.200%, 11/01/08 500 485
DeKalb County, RB, Pre-Refunded
01/01/02 @ 102
6.350%, 01/01/05 510 555
DeKalb County, School District,
Ser A, GO
6.250%, 07/01/11 1,250 1,345
DeKalb County, Water & Sewer
Authority, RB, Callable
10/01/03 @ 102
5.125%, 10/01/14 1,455 1,309
East Point Building Authority, RB
(AMBAC)
4.800%, 02/01/07 535 506
Fayette County, School District, GO
6.250%, 03/01/07 450 487
Fayette County, Water Authority,
RB (MBIA) (ETM)
8.550%, 10/01/01 300 352
Forsyth County, GO
6.500%, 07/01/06 1,000 1,097
Fulton County, Hospital Authority,
Northside Hospital Project, Ser B,
RB, Pre-Refunded 10/01/02
@ 102 (MBIA)
6.625%, 10/01/16 575 638
6.600%, 10/01/11 1,250 1,386
Gwinnett County, Recreation
Authority, RB
5.875%, 02/01/07 1,390 1,442
Gwinnett County, School District,
Ser B
6.400%, 02/01/07 1,000 1,087
Hall County, GO
6.300%, 12/01/05 675 728
Henry County, School District,
Ser B, GO (MBIA)
5.500%, 08/01/01 350 361
Henry County, School District,
Ser A, GO
6.150%, 08/01/06 150 159
F-39
<PAGE>
===================================================================
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
GEORGIA--CONTINUED
Henry County, GO
6.300%, 08/01/08 $ 300 $ 321
Henry County, Water & Sewer
Authority, GO
4.700%, 02/01/04 120 116
Housing Authority, Single Family
Mortgage, Ser B, Sub-series B-1, RB
5.550%, 12/01/07 550 553
Medical Center Hospital Authority,
Columbus Regional Healthcare
System, RB
6.000%, 08/01/06 1,000 1,049
Metropolitan Atlanta Rapid Transit
Authority, Sinking Fund
07/01/08 @ 100
7.000%, 07/01/11 875 973
Paulding County, School District,
Ser A
6.625%, 02/01/08 500 553
Private Colleges & Universities
Facilities Authority, Emory
University Project, Ser C, RB,
Callable 10/01/02 @ 102
5.900%, 10/01/04 305 320
Private Colleges & Universities
Facilities Authority, Spelman
College Project, RB (FGIC)
6.000%, 06/01/09 475 487
Rockdale County, School District, RB,
Pre-Refunded 01/01/99 @ 102
6.400%, 01/01/05 150 160
Savannah, Water & Sewer
Revenue, RB
6.450%, 12/01/04 1,000 1,099
State GO, Ser B, Pre-Refunded
07/01/99 @ 102
6.800%, 07/01/06 460 498
State GO, Ser C
6.500%, 04/01/08 1,000 1,107
Vidalia, Water & Sewer Revenue,
RB (ETM)
6.000%, 07/01/07 605 642
-------
Total Georgia 28,437
-------
Total Municipal Bonds
(Cost $29,017,611) 28,437
-------
CASH EQUIVALENTS (5.5%)
AIM Management Institutional
Tax-Free Portfolio 424 424
SEI Tax-Exempt Trust
Institutional Tax-Free Portfolio 1,241 1,241
-------
Total Cash Equivalents
(Cost $1,664,716) 1,665
-------
Total Investments (98.5%)
(Cost $30,682,327) 30,102
-------
OTHER ASSETS AND LIABILITIES (1.5%)
Total Other Assets and Liabilities, Net 473
-------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 2,400,749 outstanding shares of
benefical interest 23,200
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 356,968 outstanding shares of
beneficial interest 3,478
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 440,098 outstanding shares of
beneficial interest 4,281
F-40
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
GEORGIA TAX-EXEMPT BOND FUND--CONCLUDED
- -------------------------------------------------------------------
MARKET
VALUE (000)
- -------------------------------------------------------------------
NET ASSETS--CONTINUED:
Accumulated net realized gain on
investments $ 196
Unrealized depreciation on investments (580)
-------
Total Net Assets (100.0%) $30,575
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--Trust Shares $ 9.56
=======
Net Asset Value and Redemption Price
Per Share--Investor Shares $ 9.58
=======
Maximum Public Offering Price Per Share--
Investor Shares ($9.58 (DIVIDED BY) 96.25%) $ 9.95
=======
Net Asset Value, Offering Price and Redemption
Price Per Share--Flex Shares (1) $ 9.56
=======
(1) The Flex Shares have a contingent sales charge. For a
description of a possible sales charge, see notes to the
financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-41
<PAGE>
===================================================================
INVESTMENT GRADE BOND FUND
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (52.0%)
U.S. Treasury Bonds
7.500%, 11/15/16 $65,000 $ 67,310
8.125%, 08/15/19 37,500 41,444
U.S. Treasury Notes
5.625%, 01/31/98 16,000 15,860
7.500%, 10/31/99 27,600 28,379
6.250%, 08/31/00 56,000 55,201
7.500%, 11/15/01 11,000 11,394
7.500%, 05/15/02 50,500 52,471
5.750%, 08/15/03 64,500 60,716
--------
Total U.S. Treasury Obligations
(Cost $340,493,441) 332,775
--------
CORPORATE OBLIGATIONS (29.0%)
Aristar Financial
7.500%, 07/01/99 11,000 11,157
Associates of North America, MTN
8.470%, 01/12/00 6,000 6,316
AT&T Capital
5.500%, 02/09/98 14,000 13,786
Capital One Bank
6.660%, 08/17/98 7,000 6,956
Capital One Bank, MTN
6.490%, 08/15/97 19,850 19,800
Ford Motor Credit, MTN
6.110%, 12/28/01 13,000 12,383
General Electric Capital
6.660%, 05/01/18 21,000 20,737
International Lease Finance, MTN
8.125%, 01/15/98 15,000 15,346
Merrill Lynch
7.375%, 05/15/06 23,000 22,713
Paine Webber
6.250%, 06/15/98 5,500 5,409
Salomon
6.700%, 12/01/98 20,000 19,874
Sears, MTN
7.360%, 08/15/97 15,000 15,187
Societe Generale, New York
7.400%, 06/01/06 16,500 16,335
--------
Total Corporate Obligations
(Cost $187,719,112) 185,999
--------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (15.9%)
FHLMC
8.000%, 06/01/02 10,232 10,484
FNMA
8.500%, 04/01/17 18,099 18,484
GNMA
9.000%, 11/15/17 34,172 36,255
6.500%, 12/15/23 39,335 36,397
--------
Total U.S. Government Agency Obligations
(Cost $102,434,144) 101,620
--------
ASSET-BACKED SECURITIES (0.1%)
Merrill Lynch, Ser 1993-1, A2
5.125%, 07/15/98 394 394
--------
Total Asset-Backed Securities
(Cost $394,377) 394
--------
REPURCHASE AGREEMENT (4.5%)
Deutsche Bank
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$28,939,456 (collateralized by
various U.S. Treasury obligations,
total par value $53,881,000,
0.00%-9.125%, 08/22/96-
08/15/20: total market
value $29,506,244) 28,927 28,927
--------
Total Repurchase Agreement
(Cost $28,926,752) 28,927
--------
Total Investments (101.5%)
(Cost $659,967,826) 649,715
--------
F-42
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
INVESTMENT GRADE BOND FUND--CONCLUDED
- -------------------------------------------------------------------
MARKET
VALUE (000)
- -------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.5%)
Total Other Assets and Liabilities, Net $ (9,425)
--------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 59,555,941 outstanding shares of
benefical interest 615,859
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 3,592,421 outstanding shares of
beneficial interest 37,624
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 458,624 outstanding shares of
beneficial interest 4,759
Undistributed net investment income 157
Accumulated net realized loss
on investments (7,856)
Unrealized depreciation on investments (10,253)
--------
Total Net Assets (100.0%) $640,290
========
Net Asset Value, Offering Price and Redemption
Price Per Share--Trust Shares $ 10.07
========
Net Asset Value and Redemption
Price Per Share--Investor Shares $ 10.06
========
Maximum Public Offering Price Per
Share--Investor Shares
($10.06 (DIVIDED BY) 96.25%) $ 10.45
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Flex Shares (1) $ 10.07
========
(1) The Flex Shares have a contingent sales charge. For a
description of a possible sales charge, see notes to the
financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-43
<PAGE>
===================================================================
SHORT-TERM BOND FUND
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (57.5%)
U.S. Treasury Bond
6.125%, 05/15/98 $ 2,000 $ 1,996
U.S. Treasury Notes
6.000%, 08/31/97 3,750 3,749
7.250%, 02/15/98 7,500 7,622
4.750%, 09/30/98 10,000 9,668
4.750%, 10/31/98 9,000 8,684
5.500%, 02/28/99 18,000 17,588
7.500%, 11/15/01 5,000 5,179
-------
Total U.S. Treasury Obligations
(Cost $55,153,402) 54,486
-------
CORPORATE OBLIGATIONS (27.5%)
Associates of North America
5.790%, 01/19/01 750 714
Associates of North America, MTN
5.980%, 12/19/00 1,250 1,200
Chrysler Financial
6.440%, 06/23/99 1,000 989
Dow Capital BV
5.750%, 09/15/97 1,250 1,247
Federal Express
6.250%, 04/15/98 750 743
Ford Motor Credit
6.250%, 11/08/00 1,500 1,453
General Electric Capital Callable &
Putable 4/14/98 @ 100 (C)(D)
6.650%, 04/14/08 2,000 2,005
General Motors Acceptance
8.170%, 01/02/00 1,672 1,715
Household Netherlands BV
6.125%, 03/01/03 2,035 1,915
International Lease Finance
5.625%, 03/01/98 1,000 985
6.125%, 11/01/99 1,500 1,464
Norwest
6.125%, 10/15/00 1,000 965
NYNEX Credit, MTN
6.900%, 06/15/99 2,000 2,005
Pacific
5.880%, 10/15/97 1,000 993
Philip Morris
9.000%, 05/15/98 1,500 1,564
Puget Sound Power & Light, MTN
7.875%, 10/01/97 1,250 1,275
RJR Nabisco
8.300%, 04/15/99 1,000 1,033
Sears Roebuck Acceptance, MTN
6.300%, 10/18/00 1,250 1,209
6.150%, 11/15/05 750 722
Tenneco Credit
10.000%, 08/01/98 1,750 1,864
-------
Total Corporate Obligations
(Cost $26,548,543) 26,060
-------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS (5.2%)
FHLMC
6.500%, 04/01/98 1,135 1,125
8.000%, 01/01/00 1,318 1,325
FNMA
8.500%, 11/01/01 2,395 2,456
-------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $4,962,568) 4,906
-------
ASSET-BACKED SECURITIES (4.6%)
Premier Auto Trust Series,
Ser 1995-3, Cl A4
6.100%, 07/06/99 3,000 2,997
Union Pacific Equipment Trust
7.060%, 05/15/03 1,500 1,479
-------
Total Asset-Backed Securities
(Cost $4,520,923) 4,476
-------
CERTIFICATE OF DEPOSIT (1.5%)
Wachovia Bank
5.400%, 02/20/01 1,500 1,404
-------
Total Certificate of Deposit
(Cost $1,474,542) 1,404
-------
F-44
<PAGE>
STATEMENT OF NET ASSETS
===================================================================
STI CLASSIC FUNDS MAY 31, 1996
SHORT-TERM BOND FUND--CONCLUDED
- -------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- --------------------------------------------------------------------
CASH EQUIVALENT (2.7%)
SEI Daily Income Trust Prime
Obligation Portfolio $2,584 $ 2,584
-------
Total Cash Equivalent
(Cost $2,583,673) 2,584
-------
Total Investments (99.0%)
(Cost $95,243,651) 93,916
-------
OTHER ASSETS AND LIABILITIES (1.0%)
Total Other Assets and Liabilities, Net 906
-------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 9,240,587 outstanding shares of
benefical interest 91,971
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 273,195 outstanding shares of
beneficial interest 2,729
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 97,806 outstanding shares of
beneficial interest 983
Undistributed net investment income 90
Accumulated net realized gain on
investments 377
Unrealized depreciation on investments (1,328)
-------
Total Net Assets (100.0%) $94,822
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 9.86
=======
Net Asset Value and Redemption Price
Per Share--Investor Shares $ 9.88
=======
Maximum Public Offering Price Per
Share--Investor Shares
($9.88 (DIVIDED BY) 98.00%) $ 10.08
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--
Flex Shares (1) $ 9.88
=======
(1) The Flex Shares have a contingent sales charge. For a
description of a possible sales charge, see notes to the
financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-45
<PAGE>
====================================================================
SHORT-TERM U.S. TREASURY SECURITIES FUND
- --------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- --------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (93.1%)
U.S. Treasury Bond
6.125%, 05/15/98 $2,250 $ 2,245
U.S. Treasury Notes
7.500%, 01/31/97 300 303
6.375%, 06/30/97 2,000 2,010
6.000%, 08/31/97 2,650 2,649
7.250%, 02/15/98 900 915
5.125%, 06/30/98 2,250 2,201
5.875%, 08/15/98 1,400 1,388
5.500%, 11/15/98 1,600 1,569
5.000%, 01/31/99 1,900 1,836
6.375%, 05/15/99 500 499
-------
Total U.S. Treasury Obligations
(Cost $15,734,275) 15,615
-------
CASH EQUIVALENT (3.0%)
SEI Daily Income Trust Treasury II
Portfolio 501 501
-------
Total Cash Equivalent
(Cost $500,598) 501
-------
Total Investments (96.1%)
(Cost $16,234,873) 16,116
-------
OTHER ASSETS AND LIABILITIES (3.9%)
Total Other Assets and Liabilities, Net 648
-------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 1,031,587 outstanding shares of
benefical interest 10,430
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 426,165 outstanding shares of
beneficial interest 4,283
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 245,766 outstanding shares of
beneficial interest 2,454
Undistributed net investment income 52
Accumulated net realized loss on
investments (337)
Unrealized depreciation on investments (118)
-------
Total Net Assets (100.0%) $16,764
=======
Net Asset Value, Offering Price and Redemption
Price Per Share--Trust Shares $ 9.84
=======
Net Asset Value and Redemption Price
Per Share--Investor Shares $ 9.84
=======
Maximum Public Offering Price Per
Share--Investor Shares
($9.84 (DIVIDED BY) 99.00%) $ 9.94
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--
Flex Shares (1) $ 9.82
=======
(1) The Flex Shares have a contingent sales charge. For a
description of a possible sales charge, see notes to the
financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-46
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- -------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (37.6%)
U.S. Treasury Notes
8.750%, 10/15/97 $ 600 $ 621
8.125%, 02/15/98 5,800 5,976
8.875%, 11/15/98 1,600 1,689
8.875%, 02/15/99 4,300 4,557
9.125%, 05/15/99 4,200 4,495
7.125%, 09/30/99 2,200 2,238
7.500%, 10/31/99 4,300 4,421
7.125%, 02/29/00 3,960 4,027
6.125%, 07/31/00 1,000 981
-------
Total U.S. Treasury Obligations
(Cost $29,422,934) 29,005
-------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (59.1%)
FHLMC
6.830%, 09/29/97 3,000 3,038
6.000%, 07/01/00 5,315 5,103
8.000%, 06/01/02 1,461 1,498
7.000%, 10/01/02 4,736 4,716
8.000%, 12/01/02 4,053 4,121
FHLMC REMIC, Ser 1637-E
5.750%, 02/15/19 2,699 2,605
FNMA
8.500%, 04/01/17 1,357 1,386
FNMA REMIC, Ser 92-68J
7.500%, 10/25/05 4,200 4,227
FNMA REMIC, Ser 93-95PC
5.500%, 12/25/05 7,000 6,861
FNMA REMIC, Ser G96-1PC
7.000%, 05/01/26 4,921 4,922
FNMA REMIC, Ser 1992-134G
6.000%, 11/25/18 5,586 5,372
GNMA
9.000%, 11/15/17 1,666 1,768
-------
Total U.S. Government Agency Obligations
(Cost $45,647,939) 45,617
-------
CASH EQUIVALENT (0.7%)
SEI Liquid Asset Trust Prime
Obligation Portfolio 548 548
-------
Total Cash Equivalent
(Cost $548,340) 548
-------
REPURCHASE AGREEMENT (7.4%)
J.P. Morgan
5.24%, dated 05/31/96, matures
06/03/96, repurchase price
$5,760,404 (collateralized by
various FNMA obligations,
total par value $6,210,000,
6.00%-7.00%, 05/01/11: total
market value $5,874,449) 5,758 5,758
-------
Total Repurchase Agreement
(Cost $5,757,890) 5,758
-------
Total Investments (104.8%)
(Cost $81,377,103) 80,928
-------
OTHER ASSETS AND LIABILITIES, NET (-4.8%)
Investment Securities Purchased Payable (4,924)
Other Assets and Liabilities,Net 1,227
-------
Total Other Assets and Liabilities,Net (3,697)
-------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 7,347,381 outstanding shares of
benefical interest 73,656
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 251,847 outstanding shares of
beneficial interest 2,534
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 135,071 outstanding shares of
beneficial interest 1,369
Accumulated net investment loss (2)
F-47
<PAGE>
- -------------------------------------------------------------
MARKET
VALUE (000)
- -------------------------------------------------------------
NET ASSETS--CONTINUED:
Accumulated net realized gain on
investments $ 122
Unrealized depreciation on investments (448)
-------
Total Net Assets (100.0%) $77,231
=======
Net Asset Value, Offering Price and Redemption
Price Per Share--Trust Shares $ 9.99
=======
Net Asset Value and Redemption
Price Per Share--Investor Shares $ 9.97
=======
Maximum Public Offering Price Per Share--
Investor Shares ($9.97 (DIVIDE) 97.50%) $ 10.23
=======
Net Asset Value, Offering Price and Redemption
Price Per Share--Flex Shares (1) $ 9.99
=======
(1) The Flex Shares have a contingent sales charge. For a description of a
possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-48
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
- -------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (37.5%)
U.S. Treasury Bond
6.875%, 08/15/25 $1,000 $ 976
U.S. Treasury Notes
8.500%, 04/15/97 100 102
7.875%, 04/15/98 150 154
7.125%, 10/15/98 500 509
7.750%, 11/30/99 200 207
8.500%, 11/15/00 1,000 1,071
7.750%, 02/15/01 100 104
8.000%, 05/15/01 200 211
7.500%, 11/15/01 600 621
7.500%, 05/15/02 100 104
7.875%, 11/15/04 275 292
7.500%, 02/15/05 1,000 1,041
7.625%, 02/15/25 400 425
------
Total U.S. Treasury Obligations
(Cost $5,992,435) 5,817
------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS (54.9%)
FHLMC
7.000%, 01/01/09 153 151
7.000%, 04/01/09 511 503
7.000%, 04/01/09 164 162
FHLMC CMO
7.000%, 08/01/10 1,004 986
FNMA REMIC, Ser G93-40, Cl VC
6.500%, 08/25/10 261 242
FNMA, Ser 1990-143, Cl J
8.750%, 12/25/20 140 146
GNMA
7.500%, 10/20/09 83 83
8.250%, 01/15/12 123 127
7.000%, 11/15/22 436 415
8.000%, 02/15/23 42 43
8.500%, 03/15/23 91 93
7.500%, 04/15/23 146 143
7.500%, 05/20/23 1,000 948
7.500%, 09/15/23 922 903
7.000%, 01/15/24 179 171
7.500%, 04/15/24 958 939
7.000%, 06/15/24 953 908
8.000%, 08/15/24 120 122
8.000%, 09/15/24 29 29
8.000%, 10/15/24 38 39
8.000%, 11/15/24 42 43
8.500%, 12/15/24 78 80
8.500%, 02/15/25 41 42
7.000%, 12/15/25 495 472
7.000%, 12/20/25 248 235
7.000%, 03/15/26 509 485
-------
Total U.S. Agency Mortgage-Backed Obligations
(Cost $8,763,727) 8,510
-------
CASH EQUIVALENTS (7.5%)
SEI Daily Income Trust
Government II Portfolio 730 730
SEI Daily Income Trust
Treasury II Portfolio 431 431
-------
Total Cash Equivalents
(Cost $1,160,595) 1,161
-------
Total Investments (99.9%)
(Cost $15,916,757) 15,488
-------
OTHER ASSETS AND LIABILITIES (0.1%)
Total Other Assets and Liabilities, Net 11
-------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 1,037,259 outstanding shares of
benefical interest 10,588
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 241,893 outstanding shares of
beneficial interest 2,453
F-49
<PAGE>
- -------------------------------------------------------------
MARKET
VALUE (000)
- -------------------------------------------------------------
NET ASSETS--CONTINUED:
Fund shares of the Flex Class (unlimited
authorization--no par value) based
on 285,283 outstanding shares of
beneficial interest $ 2,930
Accumulated net realized loss on
investments (44)
Unrealized depreciation on investments (428)
-------
Total Net Assets (100.0%) $15,499
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 9.91
=======
Net Asset Value and Redemption
Price Per Share--Investor Shares $ 9.90
=======
Maximum Public Offering Price Per Share--
Investor Shares ($9.90 (DIVIDE) 96.25%) $ 10.29
=======
Net Asset Value, Offering Price and Redemption
Price Per Share--Flex Shares (1) $ 9.91
=======
(1) The Flex Shares have a contingent sales charge. For a description of a
possible sales charge, see notes to the financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-50
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
PRIME QUALITY MONEY MARKET FUND
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
COMMERCIAL PAPER (55.0%)
Arco Coal Australia
5.310%, 07/10/96 $20,429 $ 20,312
Associates of North America
5.300%, 06/17/96 35,000 34,918
AT&T
5.300%, 06/27/96 1,300 1,295
5.300%, 08/05/96 2,700 2,674
Banc One Funding
5.310%, 06/11/96 28,951 28,908
5.310%, 06/14/96 7,419 7,405
5.320%, 07/10/96 8,703 8,653
Bankers Trust (C)
5.550%, 02/14/97 20,000 20,000
BellSouth Telephone
5.300%, 06/13/96 10,000 9,982
Beneficial Finance
5.300%, 06/05/96 25,000 24,985
Cargill
5.290%, 07/01/96 20,000 19,912
5.350%, 06/14/96 4,500 4,491
Cargill Financial Services
5.400%, 06/03/96 16,399 16,394
Carolina Power & Light
5.300%, 09/03/96 1,782 1,757
Caterpillar Finance Australia
5.300%, 06/03/96 2,238 2,237
Colgate-Palmolive
5.280%, 06/25/96 1,200 1,196
5.320%, 07/22/96 25,400 25,209
Commoloco
5.320%, 07/10/96 20,000 19,885
Dow Chemical
5.300%, 06/06/96 2,200 2,198
5.300%, 06/18/96 1,000 998
Dresser Industries
5.300%, 06/03/96 1,486 1,486
5.320%, 06/03/96 3,300 3,299
5.290%, 06/24/96 1,271 1,267
Eaton
5.400%, 01/03/97 7,570 7,325
5.380%, 01/13/97 13,711 13,248
Exxon Imperial
5.300%, 06/12/96 12,110 12,090
5.280%, 06/18/96 1,226 1,223
First Chicago Financial
5.330%, 06/03/96 20,000 19,994
Ford Motor Credit
5.300%, 06/26/96 1,000 996
5.310%, 06/07/96 2,500 2,498
Gannett
5.300%, 06/14/96 8,775 8,758
General Electric Capital
5.290%, 06/17/96 1,410 1,407
General Re
5.320%, 06/27/96 7,100 7,073
General Telephone Northwest
5.290%, 06/12/96 2,376 2,372
Golden Peanut
5.230%, 06/10/96 2,000 1,997
GTE Northwest
5.320%, 06/14/96 16,883 16,851
H.J. Heinz
5.300%, 06/10/96 1,600 1,598
Hanson Finance
5.380%, 07/17/96 10,000 9,931
5.390%, 07/29/96 20,000 19,826
5.400%, 08/09/96 5,000 4,948
5.370%, 08/19/96 2,500 2,471
IBM Credit
5.300%, 06/03/96 6,650 6,648
5.280%, 06/03/96 2,000 2,000
5.290%, 06/13/96 3,300 3,294
International Lease Finance
5.300%, 06/12/96 1,210 1,208
John Hancock Capital
5.300%, 07/11/96 2,800 2,784
Kansas City Power & Light
5.290%, 06/11/96 1,830 1,827
5.290%, 06/12/96 1,500 1,498
Marsh & McLennan
5.320%, 07/12/96 17,000 16,897
McGraw Hill
5.230%, 07/09/96 5,000 4,972
F-51
<PAGE>
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
COMMERCIAL PAPER--CONTINUED
New England Power
5.300%, 06/11/96 $ 1,796 $ 1,793
5.300%, 06/13/96 6,475 6,464
5.290%, 06/18/96 2,275 2,269
5.320%, 06/19/96 5,300 5,286
5.350%, 06/20/96 8,000 7,977
5.350%, 06/21/96 7,703 7,680
Panasonic Finance
5.350%, 06/03/96 2,000 1,999
5.350%, 06/04/96 1,268 1,268
5.310%, 06/07/96 10,000 9,991
5.300%, 07/16/96 10,000 9,934
Philip Morris
5.400%, 06/03/96 26,845 26,837
PPG Industries
5.300%, 07/11/96 18,000 17,894
Progress Capital
5.300%, 06/03/96 15,800 15,795
5.300%, 06/05/96 1,600 1,599
5.320%, 06/07/96 2,100 2,098
5.290%, 06/10/96 7,000 6,991
Sony Capital
5.280%, 06/05/96 12,147 12,140
5.320%, 06/21/96 2,892 2,884
South Carolina Electric & Gas
5.320%, 06/07/96 1,000 999
5.400%, 07/12/96 2,500 2,485
Southern California Edison
5.300%, 09/05/96 10,035 9,893
Transamerica
5.310%, 06/14/96 26,375 26,324
Unilever
5.330%, 12/12/96 4,000 3,885
Walt Disney
5.320%, 07/08/96 1,000 995
5.220%, 07/17/96 10,000 9,933
Weyerhauser
5.300%, 06/04/96 1,500 1,499
5.320%, 06/10/96 2,700 2,696
5.310%, 06/10/96 3,725 3,720
5.300%, 06/12/96 19,050 19,019
WMX Technologies
5.330%, 11/01/96 $23,050 $ 22,528
5.330%, 11/05/96 15,000 14,651
Xerox
5.300%, 06/19/96 2,021 2,016
----------
Total Commercial Paper
(Cost $696,736,514) 696,737
----------
CORPORATE OBLIGATIONS (19.4%)
American General Finance
5.800%, 04/01/97 1,000 1,000
Associates of North America
4.625%, 11/30/96 3,000 2,992
Banc One Milwaukee (C)
5.420%, 05/14/97 25,000 24,984
BankAmerica
7.500%, 03/15/97 2,850 2,889
Bankers Trust New York
8.000%, 03/15/97 5,642 5,736
Beneficial, MTN
8.700%, 08/15/96 9,000 9,057
9.375%, 02/17/97 1,500 1,544
Caterpillar Financial Services, MTN
4.640%, 09/30/96 1,000 997
Caterpillar Financial Services,
MTN (C)
5.400%, 06/14/96 1,000 1,000
5.394%, 07/23/96 15,000 15,000
CoreStates Capital (C)
5.410%, 11/26/96 30,000 30,000
5.430%, 12/03/96 10,000 10,000
Dean Witter Discover, MTN (C)
5.618%, 11/22/96 15,000 15,010
Ford Motor
5.200%, 01/01/97 9,800 9,799
Ford Motor Credit
5.625%, 03/03/97 4,500 4,511
8.875%, 08/01/96 2,400 2,413
Ford Motor Credit, MTN
9.050%, 07/23/96 2,000 2,010
F-52
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
PRIME QUALITY MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
CORPORATE OBLIGATIONS--CONTINUED
Ford Motor Credit, MTN (C)
5.600%, 05/20/97 $ 2,000 $ 1,999
Ford Motor, Global Note
7.875%, 10/15/96 2,500 2,525
General Electric Capital Callable
& Putable 12/15/96 @ 100
7.980%, 12/15/07 5,500 5,582
General Electric Capital, MTN
6.877%, 03/21/97 10,000 10,092
General Electric Capital,
MTN (C)(D)
5.390%, 07/26/96 575 575
Household Finance
7.625%, 12/15/96 5,000 5,058
7.500%, 03/15/97 2,800 2,839
Household Finance, MTN
4.551%, 08/16/96 2,521 2,515
International Lease Finance
4.750%, 07/15/96 5,000 4,996
7.900%, 10/01/96 3,675 3,702
6.375%, 11/01/96 7,010 7,030
NationsBank
7.500%, 02/15/97 1,600 1,619
Pacific Gas & Electric, MTN
4.900%, 12/09/96 4,500 4,480
PHH
8.000%, 01/01/97 1,450 1,468
Philip Morris
8.750%, 12/01/96 1,300 1,323
7.500%, 03/15/97 3,255 3,297
9.750%, 05/01/97 1,500 1,550
Society Bank Cleveland
7.125%, 04/15/97 2,000 2,020
Toyota Motor Credit, MTN (C)
5.360%, 06/13/96 16,270 16,269
Virginia Electric & Power
7.250%, 03/01/97 7,000 7,081
Waste Management
7.875%, 08/15/96 3,000 3,013
Xerox Credit, MTN
5.810%, 03/17/97 $18,000 $ 18,016
----------
Total Corporate Obligations
(Cost $245,990,716) 245,991
----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (3.7%)
FHLMC
5.100%, 01/13/97 1,000 1,000
FHLMC Gold Balloon,
Pool #M90081
7.000%, 01/15/97 16,546 16,649
FNMA MTN
6.490%, 06/10/98 7,500 7,505
FNMA (C)
5.465%, 09/27/96 6,000 6,001
SLMA (C)
5.370%, 06/02/96 5,000 4,979
5.370%, 12/20/96 10,000 10,000
Tennessee Valley Authority
4.600%, 12/15/96 500 499
----------
Total U.S. Government Agency Obligations
(Cost $46,632,963) 46,633
----------
U.S. TREASURY OBLIGATION (5.0%)
U.S. Treasury Note
6.875%, 02/28/97 62,000 62,776
----------
Total U.S. Treasury Obligation
(Cost $62,775,537) 62,776
----------
BANK NOTES (1.2%)
Comerica Bank of Detroit (C)
5.390%, 12/31/96 10,000 9,990
Huntington National Bank (C)
5.390%, 11/13/96 5,000 5,000
----------
Total Bank Notes
(Cost $14,990,111) 14,990
----------
F-53
<PAGE>
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
REPURCHASE AGREEMENTS (15.8%)
Deutsche Bank
5.33%, dated 05/31/96, matures
06/03/96, repurchase price
$131,189,359 (collateralized by
FHLB obligation, par value
$15,505,000, 0.00%, 07/01/96,
various FHLMC obligations,
total par value
$90,241,632, 0.00%-928.25%,
07/15/07-03/15/24, and
various FNMA obligations,
par value $117,530,748, 0.00%-
11.198%, 08/25/05-03/25/24:
total market value
$133,756,481), $131,131 $ 131,131
Swiss Bank
5.33%, dated 05/31/96, matures
06/03/96, repurchase price
$26,824,249 (collateralized by
U.S. Treasury Bond, par value
$21,201,000, 9.875%, 11/15/15:
total market value $27,505,870) 26,812 26,812
UBS Securities
5.33%, dated 05/31/96, matures
06/03/96, repurchase price
$42,342,759 (collateralized by
FHLMC obligation, par value
$45,105,000, 7.00%, 12/15/07:
total market value $43,595,735)
42,324 42,324
----------
Total Repurchase Agreements
(Cost $200,267,414) $ 200,267
----------
Total Investments (100.1%)
(Cost $1,267,393,255) 1,267,394
----------
OTHER ASSETS AND LIABILITIES (-0.1%)
Total Other Assets and Liabilities, Net (898)
----------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization--no par value) based
on 1,051,048,972 outstanding shares
of benefical interest 1,051,049
Fund shares of the Investor Class (unlimited
authorization--no par value) based
on 215,731,965 outstanding shares
of beneficial interest 215,732
Accumulated net realized loss
on investments (285)
----------
Total Net Assets (100.0%) $1,266,496
==========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 1.00
==========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Investor Shares $ 1.00
==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-54
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (35.2%)
U.S. Treasury Bills
5.145%, 11/29/96 $25,000 $ 24,353
5.190%, 12/12/96 10,000 9,720
5.400%, 04/03/97 5,000 4,771
U.S. Treasury Notes
6.250%, 08/31/96 10,000 10,018
7.500%, 01/31/97 50,000 50,769
6.875%, 02/28/97 25,000 25,313
6.875%, 03/31/97 10,000 10,103
--------
Total U.S. Treasury Obligations
(Cost $135,046,455) 135,047
--------
REPURCHASE AGREEMENTS (64.7%)
Barclay's
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$17,009,913 (collateralized by
various U.S. Treasury obligations,
total par value $69,332,000, 0.00%-
11.25%, 02/15/15-08/15/19: total
market value $17,343,717) 17,002 17,002
Deutsche Bank
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$90,221,797 (collateralized by
various U.S. Treasury obligations,
total par value $87,539,000, 0.00%-
12.00%, 11/21/96-05/15/21: total
market value $91,986,687) 90,182 90,182
Merrill Lynch
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$17,012,807 (collateralized by
various GNMA obligations, total
par value $33,290,000, 6.50%-
9.50%, 08/15/09-05/15/26: total
market value $17,349,017) 17,005 17,005
Salomon Brothers
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$16,954,509 (collateralized by
various U.S. Treasury obligations,
total par value $83,327,000, 5.75%-
9.125%, 10/31/00-05/15/18: total
market value $17,317,855) 16,947 16,947
Swiss Bank
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$17,456,231 (collateralized by
U.S. Treasury Note, par value
$17,364,000, 6.875%, 02/28/97:
market value $17,816,219) $17,449 $ 17,449
Union Bank of Switzerland
5.27%, dated 05/31/96, matures
06/03/96, repurchase price
$90,158,025 (collateralized by
various U.S. Treasury STRIPS,
total par value $142,042,000,
02/15/00-11/15/04: total market
value $91,921,160) 90,119 90,119
--------
Total Repurchase Agreements
(Cost $248,704,059) 248,704
--------
Total Investments (99.9%)
(Cost $383,750,514) 383,751
--------
OTHER ASSETS AND LIABILITIES (0.1%)
Total Other Assets and Liabilities, Net 350
--------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 325,493,550 outstanding shares of
benefical interest 325,493
Fund shares of the Investor Class (unlimited
authorization--no par value) based on
58,617,308 outstanding shares of
beneficial interest 58,617
Accumulated net realized loss
on investments (9)
--------
Total Net Assets (100.0%) $384,101
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Investor Shares $ 1.00
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-55
<PAGE>
TAX-EXEMPT MONEY MARKET FUND
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
MUNICIPAL BONDS (99.7%)
ALABAMA (1.4%)
McIntosh, Industrial Development
Board, Ciba-Geigy Project,
Ser A, VRDN (C)(D)(E)
3.600%, 06/05/96 $3,500 $3,500
Special Care Facilities, Montgomery
Hospital Revenue,
VRDN (FGIC) (C)(D)
3.500%, 06/05/96 1,600 1,600
--------
Total Alabama 5,100
--------
ALASKA (3.1%)
Anchorage, TAN
4.250%, 12/13/96 1,500 1,507
Valolez, TECP (E)
3.400%, 06/18/96 9,900 9,900
--------
Total Alaska 11,407
--------
ARIZONA (4.2%)
Cochise County, Electric Power
Cooperative Project, RB Putable
09/01/96 @ 100 (C)(D)(E)(F)
3.900%, 09/01/24 2,000 2,000
Maricopa County, Pollution
Control Authority,
Ser A, VRDN (C)(D)(E)
3.600%, 06/05/96 4,000 4,000
Pima County, Industrial
Development Authority, Tucson
Electric Project, VRDN (C)(D)(E)(F)
3.750%, 06/05/96 3,400 3,400
Pima County, Industrial
Development Authority, Tuscon
Electric Project,
Ser A, VRDN (C)(D)(E)
3.500%, 06/05/96 6,000 6,000
--------
Total Arizona 15,400
--------
CALIFORNIA (1.7%)
Contra Costa County, Multi-Family
Mortgage, Delta Square Project,
Ser A, VRDN (C)(D)(E)
3.500%, 06/06/96 $4,200 $ 4,200
Higher Education Loan Authority,
VRDN (C)(D)(E)
3.600%, 06/05/96 1,900 1,900
--------
Total California 6,100
--------
COLORADO (1.1%)
Highlands Ranch, Metropolitan
District #2, GO, Pre-Refunded
06/15/96 @ 100 (G)
6.700%, 06/15/01 2,000 2,002
Jefferson County, COP (MBIA)
5.450%, 12/01/96 1,000 1,010
North Glen, Castle Garden
Retirement Center, VRDN (C)(D)(E)
3.500%, 06/06/96 1,200 1,200
--------
Total Colorado 4,212
--------
DELAWARE (0.5%)
State Educational Development
Authority, VRDN (C)(D)(E)
3.875%, 06/06/96 1,875 1,875
--------
FLORIDA (8.5%)
Collier County, Housing Finance
Authority, VRDN (C)(D)(E)
3.600%, 06/05/96 2,400 2,400
Dade County, Power & Light
Project, VRDN (C)(D)(E)
3.600%, 06/03/96 2,200 2,200
Housing Finance Agency,
VRDN (C)(D)(E)(F)
3.750%, 06/05/96 8,900 8,900
Housing Finance Agency,
Multi-Family Housing,
VRDN (C)(D)(E)
3.600%, 06/05/96 4,400 4,400
Jacksonville, TECP (E)
3.150%, 08/09/96 3,000 3,000
F-56
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
FLORIDA--CONTINUED
Monroe County, Industrial
Development Authority, Beverly
Enterprises Project,
VRDN (C)(D)(E)
3.600%, 06/05/96 $2,300 $ 2,300
Palm Beach County, Norton
Gallery Project, VRDN (C)(D)(E)
3.600%, 06/05/96 3,000 3,000
Saint Lucie County, Pollution
Control Board, Power & Light
Project, VRDN (C)(D)(E)
3.600%, 06/03/96 5,000 5,000
--------
Total Florida 31,200
--------
GEORGIA (7.4%)
Burke County, Development
Authority, TECP (E)
3.250%, 06/03/96 4,000 4,000
Cobb County, Industrial
Development Authority,
VRDN (C)(D)(E)
3.700%, 06/05/96 1,030 1,030
Cobb County, TAN
4.000%, 12/31/96 6,000 6,014
Dekalb County, TRAN
3.750%, 12/31/96 5,000 5,014
Fulton County, Industrial
Development Authority,
American Red Cross Project,
VRDN (C)(D)(E)
3.650%, 06/06/96 1,600 1,600
Fulton County, School District, RB,
Pre-Refunded 05/01/97 @ 103 (G)
7.625%, 05/01/17 3,000 3,195
Lafayette, Industrial Development
Authority, Blue-Bird Project,
Ser 1991, VRDN (C)(D)(E)
3.650%, 06/06/96 1,000 1,000
Monroe County, Industrial
Development Authority, Forsyth
Inns Project, VRDN (C)(D)(E)
3.700%, 06/05/96 2,525 2,525
Municipal Electric Authority,
VRDN (FGIC) (C)(D)
3.650%, 06/06/96 $3,000 $ 3,000
--------
Total Georgia 27,378
--------
HAWAII (0.8%)
State Housing Finance &
Development Authority,
VRDN (C)(D)(E)
3.800%, 06/05/96 3,000 3,000
--------
IDAHO (0.8%)
Nez Pierce County, Pollution
Control Board, VRDN (C)(D)(E)
3.550%, 06/05/96 1,000 1,000
Nez Pierce County, Pollution
Control Board, Potlatch
Corporation Project,
VRDN (C)(D)(E)
3.600%, 06/05/96 2,000 2,000
--------
Total Idaho 3,000
--------
ILLINOIS (4.9%)
Chicago, Board of Education, COP (E)
3.700%, 12/01/96 3,000 3,000
Cook County, VRDN (C)(D)
3.650%, 06/05/96 4,900 4,900
Decatur, GO (AMBAC)
3.850%, 10/01/96 1,030 1,030
Savanna, Industrial Development
Authority, Metform Project,
Ser B, VRDN (C)(D)(E)
3.750%, 06/05/96 1,400 1,400
Savanna, Industrial Development
Authority, Ser A, VRDN (C)(D)(E)
3.700%, 06/05/96 500 500
State Anti-Pollution Authority, GO
5.250%, 11/01/96 1,400 1,411
F-57
<PAGE>
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
ILLINOIS--CONTINUED
State Health Facilities Authority,
University of Chicago Hospital
Project, Ser C,
VRDN (MBIA) (C)(D)
3.600%, 06/05/96 $4,000 $ 4,000
State Health Facilities Authority,
Streeterville Project,
VRDN (C)(D)(E)
3.600%, 06/05/96 2,000 2,000
--------
Total Illinois 18,241
--------
INDIANA (2.2%)
Allen County, Industrial Economic
Development, Mattel Power
Wheels Project, VRDN (C)(D)(E)(F)
3.900%, 06/05/96 1,500 1,500
Fort Wayne, Economic Development
Authority, ND Tech Project,
VRDN (C)(D)(E)(F)
3.700%, 06/05/96 1,000 1,000
Indianapolis, Industrial Economic
Development Authority,
VRDN (C)(D)(E)
3.750%, 06/05/96 2,000 2,000
Jasper County, Pollution Control
Board, Northern Indiana Public
Service Project, Ser C,
VRDN (C)(D)(E)
3.700%, 06/03/96 2,200 2,200
State Bond Bank Advance Funding
Notes (E)
4.250%, 07/08/96 1,250 1,251
--------
Total Indiana 7,951
--------
IOWA (0.7%)
West Des Moines, Commercial
Development Authority,
Greyhound Lines Project,
VRDN (C)(D)(E)
3.700%, 06/05/96 2,500 2,500
--------
KANSAS (0.5%)
Burlington, Pollution Control
Authority, Kansas City Power &
Light Project, Ser B, TECP (E)
3.650%, 08/08/96 $2,000 $ 2,000
--------
KENTUCKY (1.2%)
Lexington-Fayette Urban County,
Government Residential Facilities,
Richmond Place Project,
RB Mandatory Put 04/01/97
@ 100 (E)
4.500%, 04/01/15 1,000 1,000
Pendleton County, VRDN (C)(D)(E)
3.966%, 07/01/96 1,000 1,000
State League of Cities,
VRDN (C)(D)(E)
3.700%, 06/05/96 1,380 1,380
State Turnpike Authority, RB,
Pre-Refunded 07/01/96 @ 102 (G)
7.400%, 01/01/97 1,025 1,048
--------
Total Kentucky 4,428
--------
LOUISIANA (2.0%)
Lake Charles, Harbor & Terminal
District Authority, Reynolds
Metals Project, VRDN (C)(D)(E)
3.500%, 06/05/96 3,000 3,000
Port Authority, Occidental
Petroleum Project, VRDN (C)(D)(E)
3.600%, 06/05/96 4,500 4,500
--------
Total Louisiana 7,500
--------
MARYLAND (3.5%)
Baltimore County, Gas &
Electric, TECP (E)
3.200%, 06/04/96 5,000 5,000
Baltimore County, Allied Signal
Project, VRDN (C)(D)(E)
3.700%, 06/05/96 1,000 1,000
F-58
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
MARYLAND--CONTINUED
Health & Higher Education
Authority, Pooled Loan Program,
Ser B, VRDN (C)(D)(E)
3.700%, 06/05/96 $5,000 $ 5,000
Montgomery County, TECP (E)
3.250%, 06/05/96 2,000 2,000
--------
Total Maryland 13,000
--------
MICHIGAN (4.0%)
State Housing Finance Authority,
VRDN (C)(D)(E)(F)
3.800%, 06/05/96 1,000 1,000
State Housing Development
Authority, VRDN (C)(D)(E)
3.625%, 06/06/96 3,000 3,000
State Industrial Development
Authority, VRDN (C)(D)(E)
3.600%, 06/05/96 3,000 3,000
Pollution Control Board,
Underground Storage Tanks
Project, VRDN (C)(D)(E)
4.000%, 06/05/96 4,900 4,900
State Strategic Fund, Dow
Chemical Project, TECP (E)
3.550%, 06/17/96 2,900 2,900
--------
Total Michigan 14,800
--------
MINNESOTA (0.3%)
Hennepin County, Waste
Treatment Authority, GO
4.400%, 10/01/96 1,000 1,003
--------
MISSISSIPPI (0.6%)
State GO
4.500%, 12/01/96 2,300 2,309
--------
MISSOURI (3.8%)
Environmental Improvement
Authority, RB Putable
06/01/96 @ 100 (E)
4.000%, 06/01/14 1,000 1,000
Environmental Improvement
Authority, Utilicorp United
Project, VRDN (C)(D)(E)
3.750%, 06/05/96 $ 700 $ 700
Improvement & Energy Resource
Authority, Kansas City Power &
Light Project, TECP (E)
3.750%, 11/06/96 5,000 5,000
Industrial Development Authority,
Bachman Machine Project,
Ser A, VRDN (C)(D)(E)(F)
3.950%, 06/05/96 140 140
Industrial Development Authority,
Excelsior Manufacturing Project,
Ser B, VRDN (C)(D)(E)(F)
3.950%, 06/05/96 40 40
Industrial Development Authority,
Milbank Systems Project, Ser B,
VRDN (C)(D)(E)(F)
3.950%, 06/05/96 115 115
Industrial Development Authority,
Precision Stainless Project,
Ser I, VRDN (C)(D)(E)(F)
3.950%, 06/05/96 80 80
Industrial Development Authority,
Plastic Enterprises Project,
Ser A, VRDN (C)(D)(E)(F)
3.950%, 06/05/96 415 415
Saint Louis, Industrial Development
Authority, Multi-Family Housing,
Sugar Pines Apartments Project,
VRDN (C)(D)(E)
3.600%, 06/06/96 1,200 1,200
State Custody Receipt, Third Street
Building Project, VRDN (C)(D)
3.900%, 06/05/96 2,000 2,000
State Ecomonic Development
Authority, Milbank System
Project, Ser C, VRDN (C)(D)(E)
3.950%, 06/05/96 200 200
F-59
<PAGE>
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
MISSOURI--CONTINUED
State Health & Educational
Facilities Authority, Sisters
of Mercy Health Systems Project,
RB 3.600%, 12/01/96 $1,000 $ 1,000
State VRDN
3.650%, 06/06/96 2,125 2,125
--------
Total Missouri 14,015
--------
NEBRASKA (0.6%)
Higher Education Authority,
Student Loan Program,
Ser C, VRDN (SLMA) (C)(D)
3.700%,06/05/96 2,300 2,300
--------
NEVADA (1.4%)
Clark County, Nevada Power
Project, Ser A, VRDN (C)(D)(E)(F)
3.700%, 06/05/96 5,000 5,000
--------
NEW HAMPSHIRE (2.8%)
State Housing Finance Authority,
Multi-Family Housing,
Fairways Project, VRDN (C)(D)(E)
3.750%, 06/05/96 5,000 5,000
State Housing Finance Authority,
Ser A, RB Putable 01/15/97
@ 100 (F) 3.650%, 07/01/26 1,500 1,500
State Pollution Control
Authority, VRDN (C)(D)(E)
3.700%, 06/05/96 800 800
State Business Finance
Authority, TECP (E)
3.750%, 06/12/96 3,000 3,000
--------
Total New Hampshire 10,300
--------
NEW MEXICO (2.4%)
Educational Assistance Foundation,
Student Loan Program, VRDN
(AMBAC)
3.800%, 06/06/96 $3,950 $ 3,950
Mortgage Finance Authority,
Single-Family Mortgage,
Ser A, RB Mandatory Put 12/31/96
@ 100 (GNMA)
3.250%, 01/01/28 5,000 4,987
--------
Total New Mexico 8,937
--------
NEW YORK (1.4%)
Suffolk County, Ser I, TAN (E)
4.000%, 08/15/96 5,000 5,007
--------
NORTH DAKOTA (1.4%)
Mercer County, Solid Waste
Disposal Authority, United
Power Project, RB Optional Put
12/01/96 @ 100 (F)
3.650%, 12/01/18 5,000 5,000
--------
OHIO (1.6%)
State Air Quality Development
Authority, JMG Limited
Partnership, Ser A,
VRDN (C)(D)(E)(F)
3.600%, 06/05/96 3,000 3,000
State Pollution Control Authority,
Duquesne Project, VRDN (C)(D)(E)
3.750%, 06/05/96 3,000 3,000
--------
Total Ohio 6,000
--------
OREGON (0.3%)
State Housing & Community
Services, Single-Family Mortgage
Program, Ser C, RB (F)
3.850%, 05/15/97 1,000 1,000
--------
F-60
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
PENNSYLVANIA (6.5%)
Allegheny County Health Center
Development Ser B, TECP (E)
3.700%, 06/10/96 $5,000 $ 5,000
Beaver County, Industrial
Development Authority,
Duquesne Light Company
Project, Ser B, VRDN (C)(D)(E)
3.650%, 06/05/96 1,000 1,000
Delaware County, Industrial
Development Authority,
Philadelphia Electric Project,
Ser C, TECP (FGIC)
3.250%, 06/05/96 6,000 6,000
Philadelphia School District,
Ser 1995, TRAN
4.500%, 06/28/96 3,000 3,001
Philadelphia, Ser A, TRAN
4.500%, 06/27/96 4,000 4,002
State TAN
4.500%, 06/28/96 5,000 5,003
--------
Total Pennsylvania 24,006
--------
RHODE ISLAND (3.0%)
State TAN (E)
4.500%, 06/28/96 5,000 5,003
Student Loan Authority,
VRDN (C)(D)(E)(F)
3.650%, 06/05/96 6,000 6,000
--------
Total Rhode Island 11,003
--------
SOUTH CAROLINA (1.4%)
State Public Service Authority,
Ser C, RB
3.800%, 01/01/97 2,000 2,006
York County, Pollution Control
Authority, North Carolina
Electric Power Project,
Ser N-5, VRDN (C)(D)(E)
3.250%, 09/15/96 3,000 3,000
--------
Total South Carolina 5,006
--------
TENNESSEE (4.0%)
Covington, Industrial Development
Board, Charms Project,
VRDN (C)(D)(E)
3.700%, 06/05/96 $3,000 $ 3,000
Hamilton County, Industrial
Development Board, Tennessee
Aquarium Project, VRDN (C)(D)(E)
3.650%, 06/06/96 3,000 3,000
Memphis-Shelby County, Industrial
Development Board, Ponderosa
Fibres American Project,
VRDN (C)(D)(E)
3.800%, 06/06/96 1,800 1,800
Nashville & Davidson County,
Government Health & Education
Authority, Vanderbilt University
Project, Ser B, VRDN (C)(D)
3.700%, 05/01/97 1,400 1,400
Nashville & Davidson County,
Industrial Development
Authority, Multi-Family
Mortgage, Chimneytop II
Project, VRDN (C)(D)(E)
3.700%, 06/05/96 1,325 1,325
State School Board Authority,
VRDN (C)(D)
3.600%, 06/05/96 750 750
State School Board Authority,
Ser B, BAN, VRDN (C)(D)
3.600%, 06/05/96 1,400 1,400
State School Board Authority,
VRDN (C)(D)
3.600%, 06/05/96 2,200 2,200
--------
Total Tennessee 14,875
--------
F-61
<PAGE>
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
TEXAS (7.9%)
Brazos River, TECP (E)(F)
3.700%, 08/08/96 $2,790 $ 2,790
Brazos River, Dow Chemical
Project, TECP (E)
3.450%, 08/23/96 2,700 2,700
Harris County, Health Facility
Authority, TECP (E)
3.200%, 06/10/96 3,000 3,000
Harris County, Industrial
Development Authority,
Lubrizol Project, VRDN (C)(D)(E)
3.600%, 06/05/96 1,600 1,600
Harris County, Toll Roads,
Ser H, VRDN (C)(D)
3.600%, 06/05/96 5,500 5,500
Harris County, Housing Finance
Corporation, Ser 1985,
VRDN (C)(D)(E)
3.875%, 06/06/96 1,000 1,000
Houston, TECP (E)
3.250%, 06/11/96 5,000 5,000
Lone Star, Airport Improvement,
VRDN (C)(D)
3.650%, 06/03/96 1,700 1,700
State Public Finance Authority,
Ser C, GO
6.400%, 10/01/96 1,000 1,009
State TAN (E)
4.750%, 08/30/96 5,000 5,008
--------
Total Texas 29,307
--------
UTAH (4.3%)
Davis County, School District, TAN
4.250%, 06/28/96 6,500 6,502
Salt Lake County, Solid Waste
Disposal Authority, Kennecott
Copper Project, Ser A,
VRDN (C)(D)(E)(F)
3.800%, 06/05/96 6,400 6,400
Tooele County, Hazardous Waste
Treatment, Westinghouse
Project, Ser A, TECP (E)
3.650%, 07/23/96 $3,000 $ 3,000
--------
Total Utah 15,902
--------
VERMONT (2.7%)
State TECP (E)
3.400%, 06/14/96 10,000 10,000
--------
VIRGINIA (2.4%)
Chesterfield County, Industrial
Development Authority, Allied
Signal Project, VRDN (C)(D)(E)
3.750%, 06/05/96 3,000 3,000
Commonwealth, Ser 1994,
VRDN (C)(D)
3.750%, 06/06/96 3,000 3,000
Front Royal & Warren County,
Industrial Development Authority,
Pen Tab Industries Project,
VRDN (C)(D)(E)(F)
3.900%, 06/06/96 3,000 3,000
--------
Total Virginia 9,000
--------
WASHINGTON (0.5%)
Port of Seattle, VRDN (C)(D)
3.500%, 06/05/96 1,800 1,800
--------
WEST VIRGINIA (1.1%)
Marshall County, Pollution Control
Authority, Allied Signal Project,
VRDN (C)(D)(E)
3.750%, 06/05/96 2,000 2,000
Marshall County, PPG Industries
Project, VRDN (C)(D)(E)
3.800%, 06/06/96 2,000 2,000
--------
Total West Virginia 4,000
--------
F-62
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
TAX-EXEMPT MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
WISCONSIN (0.8%)
State VRDN (C)(D)
3.600%, 06/06/96 $3,000 $ 3,000
--------
Total Municipal Bonds
(Cost $367,861,479) 367,862
--------
CASH EQUIVALENT (1.1%)
SEI Tax-Exempt Trust Institutional
Tax-Free Portfolio 3,966 3,966
--------
Total Cash Equivalent
(Cost $3,965,853) 3,966
--------
Total Investments (100.8%)
(Cost $371,827,332) 371,828
--------
OTHER ASSETS AND LIABILITIES (-0.8%)
Total Other Assets and Liabilities, Net (2,992)
--------
- -------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------
NET ASSETS:
Fund shares of the Trust Class (unlimited
authorization --no par value) based
on 273,619,007 outstanding shares of
benefical interest $273,619
Fund shares of the Investor Class (unlimited
authorization--no par value) based on
95,230,640 outstanding shares of
beneficial interest 95,231
Accumulated net realized loss on
investments (14)
--------
Total Net Assets (100.0%) $368,836
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Trust Shares $ 1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Investor Shares $ 1.00
========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 101.
F-63
<PAGE>
STATEMENT OF NET ASSETS
=============================================================
STI CLASSIC FUNDS MAY 31, 1996
KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS
ADR American Depository Receipt
AMBAC Security insured by the American Municipal
Bond Assurance Company
ARM Adjustable Rate Mortgage
BAN Bond Anticipation Note
Cl Class
CMO Collateralized Mortgage Obligation
COP Certificate of Participation
CV Convertible Security
ETM Escrowed to Maturity
F Foreign Registry Shares
FGIC Security insured by the Financial Guaranty
Insurance Corporation
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FSA Security insured by Financial Security
Assurance
GDR Global Depository Receipt
GECC General Electric Capital Corporation
GMAC General Motors Acceptance Corporation
GNMA Government National Mortgage Association
GO General Obligation
MBIA Security insured by the Municipal Bond
Insurance Association
MTN Medium Term Note
PSFG Permanent School Fund Guarantee
RB Revenue Bond
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
Ser Series
SLMA Student Loan Marketing Association
STRIPS Separately Traded Registered Interest and
Principal Security
TAN Tax Anticipation Note
TECP Tax Exempt Commercial Paper
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
* Non-income producing securities
(A) Zero Coupon Bond
(B) Private Placement Security
(C) Variable rate security. The rate reported on the
Statement of Net Assets is the rate in effect on
May 31, 1996
(D) Put and demand features exist requiring the
issuer to repurchase the instrument prior to
maturity
(E) Securities are held in connection with a letter
of credit issued by a major bank
(F) Income on security may be subject to the
Alternative Minimum Tax
(G) Collateralized by U.S. Government Securities
F-64
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-65
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<CAPTION>
------------- ---------- ----------
INTERNATIONAL INVESTMENT FLORIDA
EQUITY GRADE TAX-EXEMPT TAX-EXEMPT
FUND BOND FUND BOND FUND
------------ ---------- ----------
<S> <C> <C> <C>
Assets:
Investments at Market Value
(Cost $194,622,776, $158,665,690, $36,007,283, respectively)................. $208,240 $157,970 $ 35,650
Cash and Foreign Currency...................................................... 12,765 -- --
Receivables for Investment Securities Sold..................................... -- 6,359 --
Receivables for Capital Shares Sold............................................ 493 5,660 1,459
Other Assets................................................................... 622 2,546 578
-------- -------- -------
Total Assets................................................................... 222,120 172,535 37,687
-------- -------- -------
Liabilities:
Payables for Investment Securities Purchased................................... 3,488 3,970 --
Payables for Capital Shares Repurchased........................................ 512 285 --
Accrued Expenses............................................................... 413 177 43
Distribution Payable........................................................... -- 535 137
Other Liabilities.............................................................. -- 98 --
-------- -------- -------
Total Liabilities.............................................................. 4,413 5,065 180
-------- -------- -------
Net Assets:
Fund Shares of the Trust Shares (Unlimited Authorization -- No Par Value)
Based on 18,703,354, 11,214,957, 3,059,386, respectively Outstanding Shares
of Beneficial Interest....................................................... 195,165 123,950 31,003
Fund Shares of the Investor Shares (Unlimited Authorization -- No Par Value)
Based on 302,894, 3,367,080, 399,731, respectively Outstanding Shares
of Beneficial Interest....................................................... 3,247 36,440 3,971
Fund Shares of the Flex Shares (Unlimited Authorization -- No Par Value)
Based on 83,847, 498,358, 267,043, respectively Outstanding Shares
of Beneficial Interest....................................................... 908 5,632 2,741
Undistributed Net Investment Income............................................ 986 2 4
Accumulated Net Realized Gain on Investments................................... 4,059 2,142 145
Accumulated Net Realized Loss on Foreign Currency Transactions................. (265) -- --
Net Unrealized Appreciation (Depreciation) on Investments...................... 13,617 (696) (357)
Net Unrealized Depreciation on Foreign Currency and
Translation of Other Assets and Liabilities in Foreign Currency.............. (10) -- --
-------- -------- --------
Total Net Assets............................................................... $217,707 $167,470 $ 37,507
======== ======== ========
Net Asset Value, Offering Price and Redemption Price Per Share -- Trust Shares... $ 11.40 $ 11.10 $ 10.06
======== ======== ========
Net Asset Value and Redemption Price Per Share -- Investor Shares................ $ 11.38 $ 11.12 $ 10.07
======== ======== ========
Maximum Public Offering Price Per Share -- Investor Shares
($11.38 (DIVIDED BY) 96.25%), ($11.12 (DIVIDED BY) 96.25%),
($10.07 (DIVIDED BY) 96.25%).................................................... $ 11.82 $ 11.55 $ 10.46
======== ======== ========
Net Asset Value,Offering and Redemption Price Per Share--Flex Shares (1)......... $ 11.37 $ 11.11 $ 10.08
======== ======== ========
</TABLE>
(1) Flex Class has a contingent deferred sales charge. For a description of a
possible sales charge, see notes to the Financial Statements
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-66
<PAGE>
STATEMENT OF OPERATIONS (000)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1996
<TABLE>
<CAPTION>
MID-CAP CAPITAL INTERNATIONAL
VALUE INCOME EQUITY GROWTH BALANCED EQUITY
STOCK FUND FUND FUND FUND INDEX FUND
---------- --------- --------- ---------- -----------
06/01/95- 06/01/95- 06/01/95- 06/01/95- 06/01/95-
05/31/96 05/31/96 05/31/96 05/31/96 05/31/96
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income:
Interest Income ........................................ $ 4,145 $ 1,718 $ 4,354 $ 3,136 $ 34
Dividend Income ........................................ 40,342 2,105 19,620 972 2,008
Less Foreign Taxes Withheld ............................ -- -- -- -- (182)
-------- ------- -------- ------- ------
Total Investment Income ................................ 44,487 3,823 23,974 4,108 1,860
-------- ------- -------- ------- ------
Expenses:
Investment Advisory Fees ............................... 9,448 2,377 13,507 990 885
Investment Advisory Fees Waived ........................ -- (319) (1,409) (166) (144)
Contribution from Advisor .............................. -- -- -- -- --
Administrator Fees ..................................... 846 148 842 75 71
Transfer Agent Fees-- Trust Class of Shares ............ 14 15 10 15 15
Transfer Agent Fees-- Investor Class of Shares ......... 131 31 218 23 24
Transfer Agent Fees-- Flex Class of Shares ............. 26 16 19 13 13
Transfer Agent Out of Pocket Fees ...................... 74 16 95 8 10
Printing Expenses ...................................... 99 22 109 10 10
Custody Fees ........................................... 43 9 48 3 132
Professional Fees ...................................... 76 19 90 9 8
Trustee Fees ........................................... 18 3 22 2 2
Registration Fees ...................................... 144 51 132 12 4
Distribution Fees -- Investor Class of Shares .......... 363 55 1,188 12 18
Distribution Fees Waived-- Investor Class of Shares .... (60) (4) (275) (1) (18)
Distribution Fees-- Flex Class of Shares ............... 116 22 49 16 6
Distribution Fees Waived-- Flex Class of Shares ........ (17) (12) (12) (9) (6)
Insurance and Other Fees ............................... 52 6 53 5 22
Amortization of Deferred Organization Costs ............ 13 3 10 3 8
-------- ------- -------- ------- ------
Total Expenses ......................................... 11,386 2,458 14,696 1,020 1,060
-------- ------- -------- ------- ------
Net Investment Income (Loss) ........................... 33,101 1,365 9,278 3,088 800
-------- ------- -------- ------- ------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain on Securities Sold ................... 196,134 29,513 224,050 11,091 1,134
Net Realized Loss on Foreign Currency Transactions ..... -- -- -- -- --
Net Change in Unrealized Depreciation on Foreign Currency
and Translation of Other Assets and Liabilities in
Foreign Currency ..................................... -- -- -- -- (7)
Net Change in Unrealized Appreciation (Depreciation)
on Investments ....................................... 60,796 12,518 63,301 1,891 6,362
-------- ------- -------- ------- ------
Net Increase in Net Assets from Operations ............. $290,031 $43,396 $296,629 $16,070 $8,289
======== ======= ======== ======= ======
</TABLE>
*Commencement of operations
Amounts designated as "--" are either $0 or round to $0.
F-67
<PAGE>
================================================================================
<TABLE>
<CAPTION>
INTERNATIONAL SUNBELT INTERNATIONAL GRADE FLORIDA TENNESSEE
EQUITY EQUITY TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND BOND FUND BOND FUND BOND FUND
------------ --------- ------------------- ---------- -----------
06/01/95- 06/01/95- 06/01/95- 06/01/95- 06/01/95-
05/31/96 05/31/96 05/31/96 05/31/96 05/31/96
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income:
Interest Income .................................... $ 192 $ 443 $7,184 $1,438 $226
Dividend Income .................................... 2,079 2,293 -- -- --
Less Foreign Taxes Withheld ........................ (235) -- -- -- --
------- -------- ------ ------ --------
Total Investment Income ............................ 2,036 2,736 7,184 1,438 226
------- -------- ------ ------ --------
Expenses:
Investment Advisory Fees ........................... 899 3,890 1,120 182 29
Investment Advisory Fees Waived .................... (152) (465) (204) (76) (29)
Contribution from Advisor .......................... -- -- -- -- (18)
Administrator Fees ................................. 50 242 108 20 3
Transfer Agent Fees -- Trust Class of Shares ....... 7 15 15 16 16
Transfer Agent Fees -- Investor Class of Shares .... 9 58 45 15 14
Transfer Agent Fees -- Flex Class of Shares ........ 6 13 14 13 12
Transfer Agent Out of Pocket Fees .................. 6 26 14 3 2
Printing Expenses .................................. 9 34 15 4 --
Custody Fees ....................................... 113 14 6 1 --
Professional Fees .................................. 10 28 13 3 1
Trustee Fees ....................................... 1 5 2 1 --
Registration Fees .................................. 83 30 30 10 1
Distribution Fees -- Investor Class of Shares ...... 3 107 175 7 2
Distribution Fees Waived -- Investor Class
of Shares ........................................ (3) (7) (61) (1) (1)
Distribution Fees-- Flex Class of Shares ........... 2 10 39 17 14
Distribution Fees Waived-- Flex Class of Shares .... (2) (9) (17) (14) (5)
Insurance and Other Fees ........................... 8 17 9 1 --
Amortization of Deferred Organization Costs ........ 1 3 10 1 --
------- -------- ------ ------ ------
Total Expenses ..................................... 1,050 4,011 1,333 203 41
------- -------- ------ ------ ------
Net Investment Income (Loss) ....................... 986 (1,275) 5,851 1,235 185
------- -------- ------ ------ ------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain on Securities Sold ............... 4,059 39,898 5,634 220 13
Net Realized Loss on Foreign Currency Transactions.. (265) -- -- -- --
Net Change in Unrealized Depreciation on Foreign
Currencyand Translation of Other Assets and
Liabilities in
Foreign Currency ................................. (10) -- -- -- --
Net Change in Unrealized Appreciation (Depreciation)
on Investments .................................... 13,617 84,777 (3,672) (723) (96)
------- -------- ------ ------ ------
Net Increase in Net Assets from Operations .......... $18,387 $123,400 $7,813 $ 732 $102
======= ======== ====== ====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-68
<PAGE>
STATEMENT OF OPERATIONS (000) (concluded)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1996
<TABLE>
<CAPTION>
SHORT-TERM
GEORGIA INVESTMENT U.S. TREASURY LIMITED-TERM
TAX-EXEMPT GRADE BOND SHORT-TERM SECURITIES FEDERAL MORTGAGE
BOND FUND FUND BOND FUND FUND BOND FUND
---------- ---------- ----------- -------------- ----------------
06/01/95- 06/01/95- 06/01/95- 06/01/95- 06/01/95-
05/31/96 05/31/96 05/31/96 05/31/96 05/31/96
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income:
Interest Income .................................. $1,144 $40,504 $4,745 $1,037 $3,533
Dividend Income .................................. -- -- -- -- --
------ ------- ------ ------ ------
Total Investment Income .......................... 1,144 40,504 4,745 1,037 3,533
------ ------- ------ ------ ------
Expenses:
Investment Advisory Fees ......................... 149 4,580 512 109 344
Investment Advisory Fees Waived .................. (65) (711) (150) (72) (119)
Administrator Fees ............................... 16 444 56 12 38
Administrator Fees Waived ........................ -- -- -- -- --
Transfer Agent Fees-- Trust Class of Shares ...... 16 15 14 16 13
Transfer Agent Fees-- Investor Class of Shares ... 15 54 18 17 14
Transfer Agent Fees-- Flex Class of Shares ....... 13 14 12 12 12
Transfer Agent Out of Pocket Fees ................ 3 46 7 3 8
Printing Expenses ................................ 3 58 8 2 5
Custody Fees ..................................... 1 26 3 -- 2
Professional Fees ................................ 2 51 7 1 6
Trustee Fees ..................................... -- 9 1 -- 1
Registration Fees ................................ 7 98 16 6 13
Distribution Fees -- Investor Class of Shares .... 6 152 6 10 3
Distribution Fees Waived -- Investor Class
of Shares ...................................... (1) (73) (1) (2) (1)
Distribution Fees-- Flex Class of Shares ......... 24 24 6 12 7
Distribution Fees Waived -- Flex Class
of Shares ...................................... (17) (15) (6) (12) (7)
Insurance and Other Fees ......................... 1 28 4 -- 2
Amortization of Deferred Organization Costs ...... -- 10 8 8 11
------ ------- ------ ------ -------
Total Expenses ................................... 173 4,810 521 122 352
------ ------- ------ ------ -------
Net Investment Income .............................. 971 35,694 4,224 915 3,181
------ ------- ------ ------ -------
Net Realized and Unrealized Gain (Loss) on
Investments.......................................
Net Realized Gain (Loss) on Securities Sold ...... 330 19,716 1,358 95 389
Net Change in Unrealized Depreciation
on Investments ................................. (789) (32,383) (2,395) (294) (1,359)
------ ------- ------ ------ -------
Net Increase in Net Assets from Operations ......... $ 512 $23,027 $3,187 $ 716 $ 2,211
====== ======= ====== ====== =======
</TABLE>
Amounts designated as "--" are either $0 or round to $0.
F-69
<PAGE>
================================================================================
<TABLE>
<CAPTION>
TAX-EXEMPT
U.S. PRIME QUALITY U.S. GOVERNMENT MONEY
GOVERNMENT MONEY MARKET SECURITIES MONEY MARKET
SECURITIES FUND FUND MARKET FUND FUND
--------------- ------------- ---------------- ----------
06/01/95- 06/01/95- 06/01/95- 06/01/95-
05/31/96 05/31/96 05/31/96 05/31/96
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Income:
Interest Income ................................ $698 $60,664 $22,883 $14,248
Dividend Income ................................ -- -- -- --
---- ------- ------- -------
Total Investment Income ........................ 698 60,664 22,883 14,248
---- ------- ------- -------
Expenses:
Investment Advisory Fees ....................... 76 6,950 2,646 2,108
Investment Advisory Fees Waived ................ (60) (1,603) (578) (685)
Administrator Fees ............................. 7 765 292 275
Administrator Fees Waived ...................... -- (450) (73) --
Transfer Agent Fees-- Trust Class of Shares .... 16 16 16 16
Transfer Agent Fees-- Investor Class of Shares.. 13 48 29 25
Transfer Agent Fees-- Flex Class of Shares ..... 14 -- -- --
Transfer Agent Out of Pocket Fees .............. 3 70 27 25
Printing Expenses .............................. 1 95 38 38
Custody Fees ................................... -- 43 18 17
Professional Fees .............................. 1 83 30 32
Trustee Fees ................................... -- 14 3 6
Registration Fees .............................. 6 200 63 72
Distribution Fees -- Investor Class of Shares... 5 382 97 139
Distribution Fees Waived -- Investor Class
of Shares .................................... (1) (108) (53) (59)
Distribution Fees -- Flex Class of Shares ...... 16 -- -- --
Distribution Fees Waived-- Flex Class
of Shares .................................... (12) -- -- --
Insurance and Other Fees ....................... 1 17 7 12
Amortization of Deferred Organization Costs .... 10 10 10 10
---- ------- ------- -------
Total Expenses ................................. 96 6,532 2,572 2,031
---- ------- ------- -------
Net Investment Income ............................ 602 54,132 20,311 12,217
---- ------- ------- -------
Net Realized and Unrealized Gain (Loss) on
Investments....................................
Net Realized Gain (Loss) on Securities Sold .... (24) (82) 90 9
Net Change in Unrealized Depreciation
on Investments .............................. (557) -- -- --
---- ------- ------- -------
Net Increase in Net Assets from Operations ....... $ 21 $54,050 $20,401 $12,226
==== ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-70
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1996
<TABLE>
<CAPTION>
VALUE INCOME MID-CAP EQUITY
STOCK FUND FUND CAPITAL GROWTH FUND BALANCED FUND
--------------------- -------------------- -------------------- ---------------------
06/01/95- 06/01/94- 06/01/95- 06/01/94- 06/01/95- 06/01/94- 06/01/95- 06/01/94-
05/31/96 05/31/95 05/31/96 05/31/95 05/31/96 05/31/95 05/31/96 05/31/95
---------- --------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income .................. $ 33,101 $27,417 $ 1,365 $ 848 $ 9,278 $ 13,878 $3,088 $ 2,894
Net Realized Gain (Loss) on
Investments .......................... 196,134 63,692 29,513 3,443 224,050 (25,085) 11,091 (2,649)
Net Realized Gain (Loss) on Foreign
Currency Transactions ................ -- -- -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Foreign Currency
and Translation of Other Assets and
Liabilities in Foreign Currency ...... -- -- -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments ........ 60,796 72,296 12,518 9,545 63,301 81,722 1,891 7,258
---------- ---------- -------- --------- ---------- ---------- --------- --------
Increase in Net Assets from Operations 290,031 163,405 43,396 13,836 296,629 70,515 16,070 7,503
---------- ---------- -------- --------- ---------- ---------- --------- --------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ......................... (29,124) (23,754) (1,285) (718) (9,644) (11,234) (2,933) (2,702)
Investor Shares ...................... (2,618) (1,920) (30) (14) (570) (928) (115) (97)
Flex Shares .......................... (206) -- (1) -- (5) -- (31) --
Capital Gains:
Trust Shares ......................... (92,363) (38,976) (13,072) -- (41,659) (30,893) (904) --
Investor Shares ...................... (9,853) (3,570) (922) -- (7,343) (5,364) (44) --
Flex Shares .......................... (1,106) -- (167) -- (227) -- (18) --
---------- ---------- -------- --------- ---------- ---------- --------- --------
Total Distributions .................... (135,270) (68,220) (15,477) (732) (59,448) (48,419) (4,045) (2,799)
---------- ---------- -------- --------- ---------- ---------- --------- --------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued .......... 371,542 468,283 133,402 86,594 187,108 394,468 54,735 44,516
Reinvestment of Cash Distributions ... 111,671 58,468 13,361 546 48,431 40,271 3,784 2,692
Cost of Shares Repurchased ........... (369,739) (195,046) (44,487) (31,035) (439,271) (362,047) (47,301) (53,242)
---------- ---------- -------- --------- ---------- ---------- --------- --------
Increase (Decrease) in Net Assets
From Trust Share Transactions ........ 113,474 331,705 102,276 56,105 (203,732) 72,692 11,218 (6,034)
---------- ---------- -------- --------- ---------- ---------- --------- --------
Investor Shares:
Proceeds from Shares Issued .......... 31,177 32,292 10,027 4,519 21,971 25,080 1,315 2,054
Reinvestment of Cash Distributions ... 12,291 5,319 948 14 7,818 6,057 155 93
Cost of Shares Repurchased ........... (19,420) (13,939) (2,010) (875) (34,867) (43,510) (844) (891)
---------- ---------- -------- --------- ---------- ---------- --------- --------
Increase (Decrease) in Net Assets
From Investor Share Transactions ... 24,048 23,672 8,965 3,658 (5,078) (12,373) 626 1,256
---------- ---------- -------- --------- ---------- ---------- --------- --------
Flex Shares:
Proceeds from Shares Issued .......... 24,893 -- 5,125 -- 10,505 -- 3,359 --
Reinvestment of Cash Distributions ... 1,301 -- 163 -- 230 -- 49 --
Cost of Shares Repurchased ........... (1,416) -- (450) -- (641) -- (428) --
---------- ---------- -------- --------- ---------- ---------- --------- --------
Increase in Net Assets From Flex
Share Transactions ................... 24,778 -- 4,838 -- 10,094 -- 2,980 --
---------- ---------- -------- --------- ---------- ---------- --------- --------
Increase (Decrease) in Net Assets
From Share Transactions ............ 162,300 355,377 116,079 59,763 (198,716) 60,319 14,824 (4,778)
---------- ---------- -------- --------- ---------- ---------- --------- --------
Total Increase (Decrease) in
Net Assets ....................... 317,061 450,562 143,998 72,867 38,465 82,415 26,849 (74)
---------- ---------- -------- --------- ---------- ---------- --------- --------
Net Assets:
Beginning of Period .................... 1,084,233 633,671 132,907 60,040 1,145,080 1,062,665 92,816 92,890
---------- ---------- -------- --------- ---------- ---------- --------- --------
End of Period .......................... $1,401,294 $1,084,233 $276,905 $132,907 $1,183,545 $1,145,080 $119,665 $ 92,816
========== ========== ======== ========= ========== ========== ========= ========
Shares Issued and Redeemed(1):
Trust Shares:
Shares Issued ........................ 9,898 43,588 10,952 8,666 13,624 33,987 4,974 4,636
Shares Issued in Lieu of Cash
Distributions ...................... 9,282 5,715 1,144 54 3,617 3,668 346 283
Shares Redeemed ...................... (30,154) (18,063) (3,620) (3,090) (32,204) (31,242) (4,335) (5,520)
---------- ----------- -------- --------- ---------- ---------- --------- --------
Net Trust Share Transactions ........... 9,026 31,240 8,476 5,630 (14,963) 6,413 985 (601)
---------- ----------- -------- --------- ---------- ---------- --------- --------
Investor Shares:
Shares Issued ........................ 2,522 2,985 824 448 1,605 2,153 119 212
Shares Issued in Lieu of Cash
Distributions ...................... 1,023 521 82 1 585 555 14 10
Shares Redeemed ...................... (1,569) (1,297) (165) (86) (2,576) (3,751) (76) (92)
---------- ----------- -------- --------- ---------- ---------- --------- --------
Net Investor Share Transactions ........ 1,976 2,209 741 363 (386) (1,043) 57 130
---------- ----------- -------- --------- ---------- ---------- --------- --------
Flex Shares:
Shares Issued ........................ 2,014 -- 419 -- 768 -- 305 --
Shares Issued in Lieu of Cash
Distributions ...................... 108 -- 14 -- 17 -- 5 --
Shares Redeemed ...................... (113) -- (37) -- (46) -- (38) --
---------- ----------- -------- --------- ---------- ---------- --------- --------
Net Flex Share Transactions ............ 2,009 -- 396 -- 739 -- 272 --
========== =========== ======== ========= ========== ========== ======== ========
</TABLE>
*Commencement of operations.
Amounts designated as "--" are either $0 or round to $0.
F-71
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
EQUITY EQUITY
INDEX FUND FUND SUNBELT EQUITY FUND
----------------------- ------------- -----------------------
06/01/95- 06/06/94-* 12/01/95-* 06/01/95- 01/03/94-*
05/31/96 05/31/95 05/31/96 05/31/96 05/31/95
--------- ---------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Operations:
Net Investment Income .................. $ 800 $ 583 $ 986 $ (1,275) $ (390)
Net Realized Gain (Loss) on
Investments .......................... 1,134 28 4,059 39,898 (10,446)
Net Realized Gain (Loss) on Foreign
Currency Transactions ................ -- 42 (265) -- --
Net Change in Unrealized Appreciation
(Depreciation) on Foreign Currency
and Translation of Other Assets and
Liabilities in Foreign Currency ...... (7) 3 (10) -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments ........ 6,362 2,605 13,617 84,777 20,987
------- ------- -------- -------- --------
Increase in Net Assets from
Operations ......................... 8,289 3,261 18,387 123,400 10,151
------- ------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ......................... (1,048) (143) -- -- --
Investor Shares ...................... (59) (4) -- -- --
Flex Shares .......................... (7) -- -- -- --
Capital Gains:
Trust Shares ......................... (743) (31) -- (5,188) (999)
Investor Shares ...................... (43) (2) -- (426) (89)
Flex Shares .......................... (6) -- -- (20) --
------- ------- -------- -------- --------
Total Distributions .................... (1,906) (180) -- (5,634) (1,088)
------- ------- -------- -------- --------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued .......... 62,965 96,472 212,805 132,237 168,189
Reinvestment of Cash Distributions ... 1,417 115 -- 4,956 948
Cost of Shares Repurchased ........... (68,891) (10,101) (17,640) (92,700) (46,896)
------- ------- -------- -------- --------
Increase (Decrease) in Net Assets
From Trust Share Transactions ........ (4,509) 86,486 195,165 44,493 122,241
------- ------- -------- -------- --------
Investor Shares:
Proceeds from Shares Issued .......... 3,017 4,324 3,467 5,187 10,546
Reinvestment of Cash Distributions ... 101 5 -- 426 89
Cost of Shares Repurchased ........... (1,782) (490) (220) (7,209) (5,208)
------- ------- -------- -------- --------
Increase (Decrease) in Net Assets
From Investor Share Transactions ... 1,336 3,839 3,247 (1,596) 5,427
------- ------- -------- -------- --------
Flex Shares:
Proceeds from Shares Issued .......... 992 -- 911 2,489 --
Reinvestment of Cash Distributions ... 13 -- -- 20 --
Cost of Shares Repurchased ........... (127) -- (3) (123) --
------- ------- -------- -------- --------
Increase in Net Assets From Flex
Share Transactions ................... 878 -- 908 2,386 --
------- ------- -------- -------- --------
Increase (Decrease) in Net Assets
From Share Transactions ............ (2,295) 90,325 199,320 45,283 127,668
------- ------- -------- -------- --------
Total Increase (Decrease) in
Net Assets ....................... 4,088 93,406 217,707 163,049 136,731
------- ------- -------- -------- --------
Net Assets:
Beginning of Period .................... 93,406 -- -- 281,088 144,357
------- ------- -------- -------- --------
End of Period .......................... $97,494 $93,406 $217,707 $444,137 $281,088
======= ======= ======== ======== ========
Shares Issued and Redeemed(1):
Trust Shares:
Shares Issued ........................ 5,971 9,758 20,338 10,848 17,356
Shares Issued in Lieu of Cash
Distributions ...................... 134 12 -- 437 96
Shares Redeemed ...................... (6,536) (1,035) (1,635) (7,882) (4,848)
------- ------- -------- -------- --------
Net Trust Share Transactions ........... (431) 8,735 18,703 3,403 12,604
------- ------- -------- -------- --------
Investor Shares:
Shares Issued ........................ 286 438 324 428 1,095
Shares Issued in Lieu of Cash
Distributions ...................... 10 1 -- 38 9
Shares Redeemed ...................... (170) (51) (21) (614) (537)
------- ------- -------- -------- --------
Net Investor Share Transactions ........ 126 388 303 (148) 567
------- ------- -------- -------- --------
Flex Shares:
Shares Issued ........................ 95 -- 84 202 --
Shares Issued in Lieu of Cash
Distributions ...................... 1 -- -- 2 --
Shares Redeemed ...................... (12) -- -- (10) --
------- ------- -------- -------- --------
Net Flex Share Transactions ............ 84 -- 84 194 --
======= ======= ======== ======== ========
<CAPTION>
FLORIDA TENNESSEE
INVESTMENT GRADE TAX-EXEMPT TAX-EXEMPT
TAX EXEMPT BOND FUND BOND FUND BOND FUND
---------------------- ---------------------- --------------------
06/01/95- 06/01/94- 06/01/95- 06/01/94- 06/01/95- 06/01/94-
05/31/96 05/31/95 05/31/96 05/31/95 05/31/96 05/31/95
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income .................. $ 5,851 $ 4,295 $ 1,235 $ 395 $ 185 $ 103
Net Realized Gain (Loss) on Investments 5,634 2,511 220 85 13 (11)
Net Realized Gain (Loss) on Foreign
Currency Transactions ................ -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Foreign Currency
and Translation of Other Assets and
Liabilities in Foreign Currency ...... -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments ........ (3,672) 3,246 (723) 421 (96) 99
-------- -------- -------- -------- ------- -------
Increase in Net Assets from Operations 7,813 10,052 732 901 102 191
-------- -------- -------- -------- ------- -------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ......................... (4,292) (2,582) (996) (264) (80) (45)
Investor Shares ...................... (1,492) (1,658) (171) (130) (54) (58)
Flex Shares .......................... (120) -- (65) -- (51) --
Capital Gains:
Trust Shares ......................... (3,335) (17) (111) -- -- --
Investor Shares ...................... (1,295) (11) (21) -- -- --
Flex Shares .......................... (137) -- (10) -- -- --
-------- -------- -------- -------- ------- -------
Total Distributions .................... (10,671) (4,268) (1,374) (394) (185) (103)
-------- -------- -------- -------- ------- -------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued .......... 87,347 51,898 30,124 8,390 414 1,263
Reinvestment of Cash Distributions ... 4,062 1,220 228 83 36 29
Cost of Shares Repurchased ........... (42,946) (23,091) (9,139) (1,914) (264) (274)
-------- -------- -------- -------- ------- -------
Increase (Decrease) in Net Assets
From Trust Share Transactions ........ 48,463 30,027 21,213 6,559 186 1,018
-------- -------- -------- -------- ------- -------
Investor Shares:
Proceeds from Shares Issued .......... 4,535 6,818 1,865 1,793 668 398
Reinvestment of Cash Distributions ... 2,347 1,410 127 97 35 45
Cost of Shares Repurchased ........... (10,550) (14,915) (1,235) (990) (333) (436)
-------- -------- -------- -------- ------- -------
Increase (Decrease) in Net Assets
From Investor Share Transactions ... (3,668) (6,687) 757 900 370 7
-------- -------- -------- -------- ------- -------
Flex Shares:
Proceeds from Shares Issued .......... 6,823 -- 2,844 -- 2,235 --
Reinvestment of Cash Distributions ... 222 -- 50 -- 36 --
Cost of Shares Repurchased ........... (1,413) -- (153) -- (215) --
-------- -------- -------- -------- ------- -------
Increase in Net Assets From Flex
Share Transactions ................... 5,632 -- 2,741 -- 2,056 --
-------- -------- -------- -------- ------- -------
Increase (Decrease) in Net Assets
From Share Transactions ............ 50,427 23,340 24,711 7,459 2,612 1,025
-------- -------- -------- -------- ------- -------
Total Increase (Decrease) in
Net Assets ....................... 47,569 29,124 24,069 7,966 2,529 1,113
-------- -------- -------- -------- ------- -------
Net Assets:
Beginning of Period .................... 119,901 90,777 13,438 5,472 2,834 1,721
-------- -------- -------- -------- ------- -------
End of Period .......................... $167,470 $119,901 $ 37,507 $ 13,438 $ 5,363 $ 2,834
======== ======== ======== ======== ======= =======
Shares Issued and Redeemed(1):
Trust Shares:
Shares Issued ........................ 7,736 4,811 2,945 857 43 137
Shares Issued in Lieu of Cash
Distributions ...................... 362 113 22 9 4 3
Shares Redeemed ...................... (3,816) (2,168) (902) (199) (28) (29)
-------- -------- -------- -------- ------- -------
Net Trust Share Transactions ........... 4,282 2,756 2,065 667 19 111
-------- -------- -------- -------- ------- -------
Investor Shares:
Shares Issued ........................ 401 630 182 183 70 43
Shares Issued in Lieu of Cash
Distributions ...................... 208 131 12 10 4 5
Shares Redeemed ...................... (934) (1,389) (120) (101) (35) (47)
-------- -------- -------- -------- ------- -------
Net Investor Share Transactions ........ (325) (628) 74 92 39 1
-------- -------- -------- -------- ------- -------
Flex Shares:
Shares Issued ........................ 603 -- 277 -- 233 --
Shares Issued in Lieu of Cash
Distributions ...................... 20 -- 5 -- 4 --
Shares Redeemed ...................... (125) -- (15) -- (23) --
-------- -------- -------- -------- ------- -------
Net Flex Share Transactions ............ 498 -- 267 -- 214 --
======== ======== ======== ======== ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-72
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) (concluded)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<CAPTION>
GEORGIA
TAX-EXEMPT INVESTMENT GRADE SHORT-TERM BOND
BOND FUND BOND FUND FUND
---------------------- --------------------- -----------------------
06/01/95- 06/01/94- 06/01/95- 06/01/94- 06/01/95- 06/01/94-
05/31/96 05/31/95 05/31/96 05/31/95 05/31/96 05/31/95
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income ........................ $ 971 $ 598 $ 35,694 $ 32,705 $ 4,224 $ 2,786
Net Realized Gain (Loss) on Investments ...... 330 (92) 19,716 (17,663) 1,358 (854)
Net Change in Unrealized Appreciation
(Depreciation) on Investments (789) 488 (32,383) 38,279 (2,395) 2,073
------- ------- -------- -------- -------- -------
Increase in Net Assets from Operations ... 512 994 23,027 53,321 3,187 4,005
------- ------- -------- -------- -------- -------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................... (747) (459) (33,703) (30,731) (4,065) (2,639)
Investor Shares ............................ (139) (137) (1,908) (1,979) (133) (144)
Flex Shares ................................ (88) -- (114) -- (26) --
Capital Gains:
Trust Shares ............................... (26) -- -- (181) (124) --
Investor Shares ............................ (6) -- -- (12) (4) --
Flex Shares ................................ (4) -- -- -- (1) --
------- ------- -------- -------- -------- -------
Total Distributions ...................... (1,010) (596) (35,725) (32,903) (4,353) (2,783)
------- ------- -------- -------- -------- -------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ................ 17,893 12,139 203,235 209,252 60,843 34,765
Reinvestment of Cash Distributions ......... 215 107 26,403 28,634 2,588 1,886
Cost of Shares Redeemed .................... (7,944) (3,723) (161,583) (174,411) (32,113) (11,630)
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets From
Trust Share Transactions 10,164 8,523 68,055 63,475 31,318 25,021
------- ------- -------- -------- -------- -------
Investor Shares:
Proceeds from Shares Issued ................ 661 1,052 8,832 6,058 642 1,244
Reinvestment of Cash Distributions ......... 109 104 1,510 1,695 90 110
Cost of Shares Redeemed .................... (596) (1,260) (7,248) (10,879) (606) (1,189)
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets From
Investor Share Transactions ................ 174 (104) 3,094 (3,126) 126 165
------- ------- -------- -------- -------- -------
Flex Shares:
Proceeds from Shares Issued ................ 4,355 -- 5,179 -- 1,014 --
Reinvestment of Cash Distributions ......... 75 -- 88 -- 22 --
Cost of Shares Redeemed .................... (150) -- (508) -- (53) --
------- ------- -------- -------- -------- -------
Increase in Net Assets From Flex
Share Transactions ......................... 4,280 -- 4,759 -- 983 --
------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets From
Share Transactions ....................... 14,618 8,419 75,908 60,349 32,427 25,186
------- ------- -------- -------- -------- -------
Total Increase (Decrease) in Net Assets .. 14,120 8,817 63,210 80,767 31,261 26,408
------- ------- -------- -------- -------- -------
Net Assets:
Beginning of Period .......................... 16,455 7,638 577,080 496,313 63,561 37,153
------- ------- -------- -------- -------- -------
End of Period ................................ $30,575 $16,455 $640,290 $577,080 $ 94,822 $63,561
======= ======= ======== ======== ======== =======
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued .............................. 1,832 1,295 19,682 21,353 6,066 3,561
Shares Issued in Lieu of Cash Distributions 22 11 2,550 2,923 258 193
Shares Redeemed ............................ (823) (398) (15,629) (17,890) (3,190) (1,201)
------- ------- -------- -------- -------- -------
Net Trust Share Transactions ............. 1,031 908 6,603 6,386 3,134 2,553
------- ------- -------- -------- -------- -------
Investor Shares:
Shares Issued .............................. 68 113 856 618 64 128
Shares Issued in Lieu of Cash Distributions 11 11 146 173 9 11
Shares Redeemed ............................ (61) (135) (701) (1,115) (60) (121)
------- ------- -------- -------- -------- -------
Net Investor Share Transactions .......... 18 (11) 301 (324) 13 18
------- ------- -------- -------- -------- -------
Flex Shares:
Shares Issued .............................. 448 -- 499 -- 101 --
Shares Issued in Lieu of Cash Distributions 8 -- 8 -- 2 --
Shares Redeemed ............................ (15) -- (49) -- (5) --
------- ------- -------- -------- -------- -------
Net Flex Share Transactions .............. 441 -- 458 -- 98 --
======= ======= ======== ======== ======== =======
</TABLE>
*Commencement of operations
Amounts designated as "--" are either $0 or round to $0.
F-73
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM U.S. TREASURY LIMITED-TERM FEDERAL U.S. GOVERNMENT
SECURITIES FUND MORTGAGE SECURITIES FUND SECURITIES FUND
------------------------ ------------------------ -----------------------
06/01/95- 06/01/94- 06/01/95- 06/07/94-* 06/01/95- 06/09/94-*
05/31/96 05/31/95 05/31/96 05/31/95 05/31/96 05/31/95
--------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income ........................ $ 915 $ 679 $ 3,181 $ 1,515 $ 602 $ 69
Net Realized Gain (Loss) on Investments ...... 95 (160) 389 (267) (24) 6
Net Change in Unrealized Appreciation
(Depreciation) on Investments .............. (294) 375 (1,359) 910 (557) 130
------- ------- -------- -------- ------- ------
Increase in Net Assets from Operations ... 716 894 2,211 2,158 21 205
------- ------- -------- -------- ------- ------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................... (551) (415) (3,012) (1,573) (453) (54)
Investor Shares ............................ (308) (264) (68) (8) (68) (15)
Flex Shares ................................ (56) -- (37) -- (81) --
Capital Gains:
Trust Shares ............................... -- -- -- -- (18) --
Investor Shares ............................ -- -- -- -- (3) --
Flex Shares ................................ -- -- -- -- (5) --
------- ------- -------- -------- ------- ------
Total Distributions ...................... (915) (679) (3,117) (1,581) (628) (69)
------- ------- -------- -------- ------- ------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ................ 5,744 7,487 46,841 50,881 9,824 3,385
Reinvestment of Cash Distributions ......... 334 271 1,846 1,254 144 15
Cost of Shares Redeemed .................... (5,409) (11,026) (16,287) (10,879) (2,556) (224)
------- ------- -------- -------- ------- ------
Increase (Decrease) in Net Assets From
Trust Share Transactions 669 (3,268) 32,400 41,256 7,412 3,176
------- ------- -------- -------- ------- ------
Investor Shares:
Proceeds from Shares Issued ................ 966 4,263 2,404 633 2,290 562
Reinvestment of Cash Distributions ......... 278 260 51 7 50 8
Cost of Shares Redeemed .................... (4,147) (2,291) (533) (27) (456) (2)
------- ------- -------- -------- ------- ------
Increase (Decrease) in Net Assets From
Investor Share Transactions ................ (2,903) 2,232 1,922 613 1,884 568
------- ------- -------- -------- ------- ------
Flex Shares:
Proceeds from Shares Issued ................ 2,603 -- 1,538 -- 3,019 --
Reinvestment of Cash Distributions ......... 39 -- 27 -- 59 --
Cost of Shares Redeemed .................... (188) -- (196) -- (148) --
------- ------- -------- -------- ------- ------
Increase in Net Assets From Flex
Share Transactions ......................... 2,454 -- 1,369 -- 2,930 --
------- ------- -------- -------- ------- ------
Increase (Decrease) in Net Assets From
Share Transactions ....................... 220 (1,036) 35,691 41,869 12,226 3,744
------- ------- -------- -------- ------- ------
Total Increase (Decrease) in Net Assets .. 21 (821) 34,785 42,446 11,619 3,880
------- ------- -------- -------- ------- ------
Net Assets:
Beginning of Period .......................... 16,743 17,564 42,446 -- 3,880 --
------- ------- -------- -------- ------- ------
End of Period ................................ $16,764 $16,743 $ 77,231 $ 42,446 $15,499 $3,880
======= ======= ======== ======== ======= ======
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued .............................. 579 765 4,639 5,110 952 342
Shares Issued in Lieu of Cash
Distributions ............................ 34 28 182 126 14 2
Shares Redeemed ............................ (547) (1,122) (1,610) (1,101) (249) (23)
------- ------- -------- -------- ------- ------
Net Trust Share Transactions ............. 66 (329) 3,211 4,135 717 321
------- ------- -------- -------- ------- ------
Investor Shares:
Shares Issued .............................. 97 433 238 64 225 56
Shares Issued in Lieu of Cash
Distributions ............................ 28 27 5 1 5 1
Shares Redeemed ............................ (418) (234) (53) (3) (45) --
------- ------- -------- -------- ------- ------
Net Investor Share Transactions .......... (293) 226 190 62 185 57
------- ------- -------- -------- ------- ------
Flex Shares:
Shares Issued .............................. 262 -- 152 -- 294 --
Shares Issued in Lieu of Cash
Distributions ............................ 4 -- 2 -- 6 --
Shares Redeemed ............................ (19) -- (19) -- (15) --
------- ------- -------- -------- ------- ------
Net Flex Share Transactions .............. 247 -- 135 -- 285 --
======= ======= ======== ======== ======= ======
<CAPTION>
PRIME QUALITY U.S. GOVERNMENT SECURITIES TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
---------------------- ------------------------- -------------------
- -
06/01/95- 06/01/94- 06/01/95- 06/01/94- 06/01/95- 06/01/94-
05/31/96 05/31/95 05/31/96 05/31/95 05/31/96 05/31/95
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income ........................ $54,132 $ 38,348 $ 20,311 $ 15,936 $ 12,217 $8,400
Net Realized Gain (Loss) on Investments ...... (82) 71 90 (98) 9 (14)
Net Change in Unrealized Appreciation
(Depreciation) on Investments .............. -- -- -- -- -- --
---------- ---------- ---------- --------- --------- --------
Increase in Net Assets from Operations ... 54,050 38,419 20,401 15,838 12,226 8,386
---------- ---------- ---------- --------- --------- --------
Distributions to Shareholders:
Net Investment Income:
Trust Shares ............................... (44,689) (32,217) (17,516) (14,171) (9,342) (6,323)
Investor Shares ............................ (9,442) (6,118) (2,795) (1,765) (2,872) (2,044)
Flex Shares ................................ -- -- -- -- -- --
Capital Gains:
Trust Shares ............................... -- -- -- -- -- --
Investor Shares ............................ -- -- -- -- -- --
Flex Shares ................................ -- -- -- -- -- --
---------- ---------- ---------- --------- --------- --------
Total Distributions ...................... (54,131) (38,335) (20,311) (15,936) (12,214) (8,367)
---------- ---------- ---------- --------- --------- --------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued ................ 2,131,623 2,066,213 1,156,411 1,082,598 719,678 493,579
Reinvestment of Cash Distributions ......... 1,223 538 60 14 3 1
Cost of Shares Redeemed .................... (1,881,171) (1,851,031) (1,265,169) (957,634) (661,491) (422,164)
---------- ---------- ---------- --------- --------- --------
Increase (Decrease) in Net Assets From
Trust Share Transactions ................... 251,675 215,720 (108,698) 124,978 58,190 71,416
---------- ---------- ---------- --------- --------- --------
Investor Shares:
Proceeds from Shares Issued ................ 1,012,310 1,019,462 231,451 338,408 322,435 235,805
Reinvestment of Cash Distributions ......... 8,255 5,689 2,414 1,594 2,480 1,523
Cost of Shares Redeemed .................... (962,468) (996,964) (221,906) (325,755) (317,341) (211,360)
---------- ---------- ---------- --------- --------- --------
Increase (Decrease) in Net Assets From
Investor Share Transactions ................ 58,097 28,187 11,959 14,247 7,574 25,968
---------- ---------- ---------- --------- --------- --------
Flex Shares:
Proceeds from Shares Issued ................ -- -- -- -- -- --
Reinvestment of Cash Distributions ......... -- -- -- -- -- --
Cost of Shares Redeemed .................... -- -- -- -- -- --
---------- ---------- ---------- --------- --------- --------
Increase in Net Assets From Flex
Share Transactions ......................... -- -- -- -- -- --
---------- ---------- ---------- --------- --------- --------
Increase (Decrease) in Net Assets From
Share Transactions ....................... 309,772 243,907 (96,739) 139,225 65,764 97,384
---------- ---------- ---------- --------- --------- --------
Total Increase (Decrease) in Net Assets .. 309,691 243,991 (96,649) 139,127 65,776 97,403
---------- ---------- ---------- --------- --------- --------
Net Assets:
Beginning of Period .......................... 956,805 712,814 480,750 341,623 303,060 205,657
---------- ---------- ---------- --------- --------- --------
End of Period ................................ $1,266,496 $ 956,805 $ 384,101 $ 480,750 $ 368,836 $303,060
========== ========= ========== ========= ========= ========
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued .............................. 2,131,623 2,066,213 1,156,411 1,082,598 719,678 493,579
Shares Issued in Lieu of Cash
Distributions ............................ 1,223 538 60 14 3 1
Shares Redeemed ............................ (1,881,171) (1,851,031) (1,265,169) (957,634) (661,491) (422,164)
---------- ---------- ---------- --------- --------- --------
Net Trust Share Transactions ............. 251,675 215,720 (108,698) 124,978 58,190 71,416
---------- ---------- ---------- --------- --------- --------
Investor Shares:
Shares Issued .............................. 1,012,310 1,019,462 231,451 338,408 322,435 235,805
Shares Issued in Lieu of Cash
Distributions ............................ 8,255 5,689 2,414 1,594 2,480 1,523
Shares Redeemed ............................ (962,468) (996,964) (221,906) (325,755) (317,341) (211,360)
---------- ---------- ---------- --------- --------- --------
Net Investor Share Transactions .......... 58,097 28,187 11,959 14,247 7,574 25,968
---------- ---------- ---------- --------- --------- --------
Flex Shares:
Shares Issued .............................. -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed ............................ -- -- -- -- -- --
---------- ---------- ---------- --------- --------- --------
Net Flex Share Transactions .............. -- -- -- -- -- --
========== ========== ========== ========= ========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-74
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1996
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAIN
NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM ASSET VALUE
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITOL GAIN END OF PERIOD
------------------- ---------- ---------------- --------------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
1996 $11.59 $0.35 $ 2.71 $(0.34) $(1.16) $13.15
1995 10.54 0.32 1.56 (0.32) (0.51) 11.59
1994 10.23 0.29 0.70 (0.32) (0.36) 10.54
1993(1) 10.00 0.11 0.16 (0.04) -- 10.23
Investor Shares
1996 $11.58 $0.30 $ 2.71 $(0.30) $(1.16) $13.13
1995 10.52 0.28 1.56 (0.27) (0.51) 11.58
1994 10.23 0.26 0.67 (0.27) (0.37) 10.52
1993(2) 9.73 0.09 0.44 (0.03) -- 10.23
Flex Shares
1996(3) $11.59 $0.26 $ 2.65 $(0.26) $(1.16) $13.08
MID-CAP EQUITY FUND (A)
Trust Shares
1996 $11.00 $0.08 $ 2.63 $(0.08) $(0.87) $12.76
1995 9.85 0.08 1.15 (0.08) -- 11.00
1994(4) 10.00 0.02 (0.16) (0.01) -- 9.85
Investor Shares
1996 $10.99 $0.03 $ 2.62 $(0.03) $(0.87) $12.74
1995 9.84 0.03 1.15 (0.03) -- 10.99
1994(5) 10.00 0.01 (0.17) -- -- 9.84
Flex Shares
1996(6) $11.13 -- $ 2.45 $(0.02) $(0.87) $12.69
CAPITAL GROWTH FUND
Trust Shares
1996 $12.18 $0.12 $ 3.32 $(0.13) $(0.59) $14.90
1995 11.99 0.16 0.57 (0.14) (0.40) 12.18
1994 11.95 0.16 0.31 (0.17) (0.26) 11.99
1993(7) 10.36 0.12 1.57 (0.10) -- 11.95
Investor Shares
1996 $12.17 $0.03 $ 3.32 $(0.04) $(0.59) $14.89
1995 11.98 0.09 0.57 (0.07) (0.40) 12.17
1994 11.93 0.09 0.31 (0.09) (0.26) 11.98
1993(8) 10.00 0.06 1.93 (0.06) -- 11.93
Flex Shares
1996(3) $12.20 $0.02 $ 3.26 $(0.05) $(0.59) $14.84
BALANCED FUND
Trust Shares
1996 $10.26 $0.33 $ 1.41 $(0.34) $(0.11) $11.55
1995 9.76 0.33 0.49 (0.32) -- 10.26
1994(9) 10.00 0.11 (0.29) (0.06) -- 9.76
Investor Shares
1996 $10.30 $0.30 $ 1.41 $(0.30) $(0.11) $11.60
1995 9.79 0.28 0.51 (0.28) -- 10.30
1994(10) 10.00 0.03 (0.24) -- -- 9.79
Flex Shares
1996(11) $10.36 $0.24 $ 1.29 $(0.25) $(0.11) $11.53
INTERNATIONAL EQUITY
INDEX FUND
Trust Shares
1996 $10.24 $0.10 $ 0.84 $(0.13) $(0.09) $10.96
1995(12) 10.00 0.08 0.19 (0.02) (0.01) 10.24
Investor Shares
1996 $10.20 $0.05 $ 0.85 $(0.13) $(0.09) $10.88
1995(12) 10.00 0.05 0.17 (0.01) (0.01) 10.20
Flex Shares
1996(13) $10.24 -- $ 0.82 $(0.10) $(0.09) $10.87
</TABLE>
* Annualized.
+ Cumulative since inception.
(1) Commenced operations on February 12, 1993.
(2) Commenced operations on February 17, 1993.
(3) Commenced operations on June 1, 1995.
(4) Commenced operations on February 2, 1994.
(5) Commenced operations on February 1, 1994.
(6) Commenced operations on June 5, 1995.
F-75
<PAGE>
================================================================================
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS) TO
NET ASSETS RATIO OF NET INVESTMENTS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
TOTAL END OF EXPENSES TO INCOME (LOSS) TO (EXCLUDING WAIVERS EXCLUDING WAIVERS TURNOVER
RETURN (B) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
----------- ------------ ------------------ ------------------- ------------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
1996 27.91% $1,244,399 0.92% 2.86% 0.92% 2.86% 133.99%
1995 19.06% 991,977 0.95% 3.16% 0.95% 3.16% 125.71%
1994 9.95% 573,082 0.88% 3.21% 0.97% 3.12% 149.28%
1993(1) 9.05%* 137,761 0.80%* 4.32%* 0.96%* 4.16%* 34.71%
Investor Shares
1996 27.39% $ 130,597 1.30% 2.47% 1.37% 2.40% 133.99%
1995 18.71% 92,256 1.30% 2.80% 1.41% 2.69% 125.71%
1994 9.27% 60,589 1.25% 2.80% 1.44% 2.61% 149.28%
1993(2) 19.42%* 24,779 1.15%* 4.51%* 1.63%* 4.04%* 34.71%
Flex Shares
1996(3) 26.52%* $ 26,298 2.00%* 1.72%* 2.15%* 1.57%* 133.99%
MID-CAP EQUITY FUND (A)
Trust Shares
1996 25.54% $ 253,905 1.15% 0.70% 1.29% 0.56% 115.62%
1995 12.56% 125,562 1.15% 0.88% 1.32% 0.71% 65.63%
1994(4) (1.39%)+ 57,036 1.15%* 1.20%* 1.68%* 0.67%* 7.99%
Investor Shares
1996 24.93% $ 17,971 1.60% 0.25% 1.96% (0.11%) 115.62%
1995 11.96% 7,345 1.60% 0.43% 2.27% (0.24%) 65.63%
1994(5) (1.60%)+ 3,004 1.60%* 0.74%* 4.60%* (2.26%)* 7.99%
Flex Shares
1996(6) 23.00%* $ 5,029 2.20%* (0.37%)* 3.04%* (1.21%)* 115.62%
CAPITAL GROWTH FUND
Trust Shares
1996 28.97% $ 981,498 1.15% 0.90% 1.27% 0.78% 156.46%
1995 6.63% 984,205 1.15% 1.38% 1.28% 1.25% 127.79%
1994 3.87% 891,870 1.15% 1.25% 1.29% 1.11% 123.87%
1993(7) 17.90%* 507,692 1.15%* 1.43%* 1.28%* 1.30%* 95.02%
Investor Shares
1996 28.18% $ 191,078 1.80% 0.24% 2.08% (0.04%) 156.46%
1995 5.93% 160,875 1.80% 0.73% 2.10% 0.43% 127.79%
1994 3.26% 170,795 1.80% 0.64% 2.11% 0.33% 123.87%
1993(8) 20.49%* 131,858 1.80%* 0.81%* 2.06%* 0.55%* 95.02%
Flex Shares
1996(3) 27.48%* $ 10,969 2.27%* (0.29%)* 2.68%* (0.70%)* 156.46%
BALANCED FUND
Trust Shares
1996 17.26% $ 111,638 0.95% 3.00% 1.09% 2.86% 154.63%
1995 8.72% 89,051 0.95% 3.44% 1.11% 3.28% 156.61%
1994(9) (1.78%)+ 90,579 0.95%* 2.76%* 1.25%* 2.46%* 105.65%
Investor Shares
1996 16.88% $ 4,896 1.25% 2.70% 1.89% 2.06% 154.63%
1995 8.29% 3,765 1.25% 3.17% 1.80% 2.62% 156.61%
1994(10) (2.10%)+ 2,311 1.25%* 2.46%* 4.91%* (1.20%)* 105.65%
Flex Shares
1996(11) 15.58%* $ 3,131 2.00%* 1.85%* 2.97%* 0.88%* 154.63%
INTERNATIONAL EQUITY
INDEX FUND
Trust Shares
1996 9.29% $ 90,980 1.05% 0.84% 1.19% 0.70% 30.46%
1995(12) 2.69%+ 89,446 1.05%* 1.13%* 1.31%* 0.87%* 10.37%
Investor Shares
1996 8.90% $ 5,597 1.45% 0.48% 2.06% (0.13%) 30.46%
1995(12) 2.18%+ 3,960 1.45%* 0.67%* 2.44%* (0.32%)* 10.37%
Flex Shares
1996(13) 8.32%+ $ 917 2.10%* (0.24%)* 4.14%* (2.28%)* 30.46%
</TABLE>
(7) Commenced operations on July 1, 1992.
(8) Commenced operations on June 9, 1992.
(9) Commenced operations on January 3, 1994.
(10) Commenced operations on January 4, 1994.
(11) Commenced operations on June 14, 1995.
(12) Commenced operations on June 6, 1994.
(13) Commenced operations on June 8, 1995.
(A) During the fiscal year ended May 31,1996, the
Aggressive Growth Fund changed its name to the Mid-Cap Equity Fund.
(B) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-76
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1996
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED AND DISTRIBUTIONS
NET ASSET VALUE INVESTMENT UNREALIZED FROM DISTRIBUTIONS NET ASSET
BEGINNING INCOME GAINS (LOSSES) NET INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------------- ----------- ---------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
Trust Shares
1996(1) $10.00 $ 0.05 $ 1.35 -- -- $11.40
Investor Shares
1996(2) $10.44 $ 0.04 $ 0.90 -- -- $11.38
Flex Shares
1996(2) $10.44 $ 0.02 $ 0.91 -- -- $11.37
SUNBELT EQUITY FUND
Trust Shares
1996 $10.03 $(0.04) $ 4.32 -- $(0.20) $14.11
1995 9.70 (0.01) 0.38 -- (0.04) 10.03
1994(3) 10.00 -- (0.30) -- -- 9.70
Investor Shares
1996 $9.96 $(0.11) $ 4.30 -- $(0.20) $13.95
1995 9.69 (0.05) 0.36 -- (0.04) 9.96
1994(4) 10.00 (0.02) (0.29) -- -- 9.69
Flex Shares
1996(5) $10.20 $(0.07) $ 4.04 -- $(0.20) $13.97
INVESTMENT GRADE
TAX-EXEMPT BOND FUND
Trust Shares
1996 $11.28 $ 0.45 $ 0.19 $(0.45) $(0.37) $11.10
1995 10.68 0.46 0.60 (0.46) -- 11.28
1994(6) 11.37 0.22 (0.34) (0.22) (0.35) 10.68
Investor Shares
1996 $11.30 $ 0.41 $ 0.19 $(0.41) $(0.37) $11.12
1995 10.69 0.42 0.61 (0.42) -- 11.30
1994 10.79 0.33 0.25 (0.33) (0.35) 10.69
1993(7) 10.00 0.35 0.82 (0.35) (0.03) 10.79
Flex Shares
1996(8) $11.30 $ 0.37 $ 0.18 $(0.37) $(0.37) $11.11
FLORIDA TAX-EXEMPT
BOND FUND
Trust Shares
1996 $10.18 $ 0.46 $(0.07) $(0.46) $(0.05) $10.06
1995 9.75 0.44 0.43 (0.44) -- 10.18
1994(9) 10.00 0.13 (0.25) (0.13) -- 9.75
Investor Shares
1996 $10.18 $ 0.44 $(0.06) $(0.44) $(0.05) $10.07
1995 9.75 0.42 0.43 (0.42) -- 10.18
1994(10) 10.00 0.13 (0.25) (0.13) -- 9.75
Flex Shares
1996(8) $10.19 $ 0.39 $(0.06) $(0.39) $(0.05) $10.08
TENNESSEE TAX-EXEMPT
BOND FUND
Trust Shares
1996 $9.50 $ 0.43 $(0.11) $(0.42) $ -- $ 9.40
1995 9.22 0.44 0.28 (0.44) -- 9.50
1994(11) 10.00 0.12 (0.77) (0.13) -- 9.22
Investor Shares
1996 $9.53 $ 0.41 $(0.10) $(0.42) $ -- $ 9.42
1995 9.23 0.44 0.29 (0.43) -- 9.53
1994(12) 10.00 0.13 (0.77) (0.13) -- 9.23
Flex Shares
1996(5) $9.59 $ 0.37 $(0.18) $(0.37) $ -- $ 9.41
</TABLE>
* Annualized.
+ Cumulative since inception.
(1) Commenced operations on December 1, 1995.
(2) Commenced operations on January 2, 1996.
(3) Commenced operations on January 3, 1994.
(4) Commenced operations on January 4, 1994.
(5) Commenced operations on June 5, 1995.
F-77
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS) TO
NET ASSETS RATIO OF NET INVESTMENTS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
TOTAL END OF EXPENSES TO INCOME (LOSS) TO (EXCLUDING WAIVERS EXCLUDING WAIVERS TURNOVER
RETURN (B) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
----------- ------------ ------------------ ------------------- ------------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
Trust Shares
1996(1) 14.00%+ $213,306 1.46%* 1.36%* 1.65%* 1.17%* 113.34%
Investor Shares
1996(2) 9.00%+ $ 3,448 1.81%* 1.73%* 3.14%* 0.40%* 113.34%
Flex Shares
1996(2) 8.91%+ $ 953 2.51%* 1.08%* 5.86%* (2.27)%* 113.34%
SUNBELT EQUITY FUND
Trust Shares
1996 43.19% $412,430 1.15% (0.34%) 1.28% (0.47%) 106.27%
1995 3.81% 258,908 1.15% (0.12%) 1.30% (0.27%) 80.03%
1994(3) (2.99%)+ 128,280 1.15%* (0.19%)* 1.58%* (0.62%)* 21.42%
Investor Shares
1996 42.58% $ 29,002 1.60% (0.79%) 1.93% (1.12%) 106.27%
1995 3.20% 22,180 1.60% (0.57%) 1.98% (0.95%) 80.03%
1994(4) (3.10%)+ 16,077 1.60%* (0.63%)* 2.04%* (1.07%)* 21.42%
Flex Shares
1996(5) 39.86%* $ 2,705 2.20%* (1.43%)* 3.62%* (2.85%)* 106.27%
INVESTMENT GRADE
TAX-EXEMPT BOND FUND
Trust Shares
1996 5.82% $124,507 0.75% 4.01% 0.89% 3.87% 513.90%
1995 10.21% 78,208 0.75% 4.34% 0.91% 4.18% 591.91%
1994(6) (1.10%)+ 44,595 0.75%* 3.46%* 0.95%* 3.26%* 432.46%
Investor Shares
1996 5.40% $ 37,427 1.15% 3.61% 1.42% 3.34% 513.90%
1995 9.91% 41,693 1.15% 3.88% 1.43% 3.60% 591.91%
1994 5.37% 46,182 1.14% 2.96% 1.51% 2.59% 432.46%
1993(7) 11.88%* 15,844 1.12%* 3.61%* 1.83%* 2.90%* 344.87%
Flex Shares
1996(8) 4.91%* $ 5,536 1.63%* 3.12%* 2.25%* 2.50%* 513.90%
FLORIDA TAX-EXEMPT
BOND FUND
Trust Shares
1996 3.87% $ 30,790 0.65% 4.49% 0.88% 4.26% 62.68%
1995 9.26% 10,118 0.65% 4.63% 1.13% 4.15% 105.01%
1994(9) (1.19%)+ 3,192 0.65%* 3.86%* 1.12%* 3.39%* 53.24%
Investor Shares
1996 3.76% $ 4,025 0.85% 4.28% 1.36% 3.77% 62.68%
1995 9.04% 3,320 0.85% 4.36% 1.50% 3.71% 105.01%
1994(10) (1.22%)+ 2,280 0.85%* 3.67%* 3.20%* 1.32%* 53.24%
Flex Shares
1996(8) 3.27%* $ 2,692 1.35%* 3.79%* 2.54%* 2.60%* 62.68%
TENNESSEE TAX-EXEMPT
BOND FUND
Trust Shares
1996 3.43% $ 1,823 0.65% 4.49% 1.68% 3.46% 41.00%
1995 8.17% 1,664 0.65% 4.90% 2.65% 2.90% 27.73%
1994(11) (6.52%)+ 594 0.65%* 4.24%* 1.43%* 3.46%* 13.05%
Investor Shares
1996 3.28% $ 1,523 0.85% 4.29% 2.08% 3.06% 41.00%
1995 8.24% 1,170 0.85% 4.70% 2.10% 3.45% 27.73%
1994(12) (6.39%)+ 1,127 0.85%* 3.74%* 6.60%* (2.01%)* 13.05%
Flex Shares
1996(5) 1.98%* $ 2,017 1.34%* 3.80%* 2.74%* 2.40%* 41.00%
</TABLE>
(6) Commenced operations on October 21, 1993.
(7) Commenced operations on June 9, 1992.
(8) Commenced operations on June 1, 1995.
(9) Commenced operations on January 25, 1994.
(10) Commenced operations on January 18, 1994.
(11) Commenced operations on January 27, 1994.
(12) Commenced operations on January 19, 1994.
(A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-78
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1996
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED AND DISTRIBUTIONS
NET ASSET VALUE INVESTMENT UNREALIZED FROM DISTRIBUTIONS NET ASSET
BEGINNING INCOME GAINS (LOSSES) NET INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------------- ----------- ---------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
GEORGIA TAX-EXEMPT
BOND FUND
Trust Shares
1996 $ 9.63 $0.43 $(0.05) $(0.43) $(0.02) $ 9.56
1995 9.42 0.42 0.21 (0.42) -- 9.63
1994 (1) 10.00 0.14 (0.58) (0.14) -- 9.42
Investor Shares
$ 9.65 $0.41 $(0.05) $(0.41) $(0.02) $ 9.58
1995 9.44 0.40 0.21 (0.40) -- 9.65
1994 (2) 10.00 0.13 (0.56) (0.13) -- 9.44
Flex Shares
1996(3) $ 9.72 $0.36 $(0.14) $(0.36) $(0.02) $ 9.56
INVESTMENT GRADE
BOND FUND
Trust Shares
1996 $10.26 $0.60 $(0.19) $(0.60) -- $10.07
1995 9.89 0.61 0.37 (0.61) -- 10.26
1994 10.45 0.50 (0.36) (0.50) $(0.20) 9.89
1993(4) 10.09 0.45 0.36 (0.45) -- 10.45
Investor Shares
1996 $10.26 $0.56 $(0.20) $(0.56) -- $10.06
1995 9.89 0.57 0.38 (0.58) -- 10.26
1994 10.44 0.46 (0.35) (0.46) $(0.20) 9.89
1993(5) 10.00 0.44 0.44 (0.44) -- 10.44
Flex Shares
1996(6) $10.33 $0.52 $(0.26) $(0.52) -- $10.07
SHORT-TERM BOND FUND
Trust Shares
1996 $ 9.98 $0.54 $(0.10) $(0.54) $(0.02) $ 9.86
1995 9.79 0.53 0.19 (0.53) -- 9.98
1994 10.01 0.42 (0.21) (0.42) (0.01) 9.79
1993(7) 10.00 0.08 0.01 (0.08) -- 10.01
Investor Shares
1996 $10.01 $0.52 $(0.10) $(0.53) $(0.02) $ 9.88
1995 9.81 0.51 0.19 (0.50) -- 10.01
1994 10.03 0.40 (0.21) (0.40) (0.01) 9.81
1993(8) 10.06 0.06 (0.03) (0.06) -- 10.03
Flex Shares
1996(9) $10.02 $0.47 $(0.12) $(0.47) $(0.02) $ 9.88
SHORT-TERM U.S. TREASURY
SECURITIES FUND
Trust Shares
1996 $ 9.93 $0.55 $(0.09) $(0.55) -- $ 9.84
1995 9.82 0.47 0.11 (0.47) -- 9.93
1994 9.98 0.33 (0.11) (0.33) $(0.05) 9.82
1993(7) 10.00 0.07 (0.02) (0.07) -- 9.98
Investor Shares
1996 $ 9.94 $0.54 $(0.10) $(0.54) -- $ 9.84
1995 9.83 0.46 0.11 (0.46) -- 9.94
1994 9.99 0.32 (0.12) (0.31) $(0.05) 9.83
1993(10) 10.01 0.06 (0.02) (0.06) -- 9.99
Flex Shares
1996(11) $ 9.96 $0.48 $(0.14) $(0.48) -- $ 9.82
</TABLE>
* Annualized.
+ Cumulative since inception.
(1) Commenced operations on January 18, 1994.
(2) Commenced operations on January 19, 1994.
(3) Commenced operations on June 6, 1995.
(4) Commenced operations on July 16, 1992.
(5) Commenced operations on June 11, 1992.
F-79
<PAGE>
================================================================================
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS) TO
NET ASSETS RATIO OF NET INVESTMENTS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
TOTAL END OF EXPENSES TO INCOME (LOSS) TO (EXCLUDING WAIVERS EXCLUDING WAIVERS TURNOVER
RETURN (B) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
----------- ------------ ------------------ ------------------- ------------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
GEORGIA TAX-EXEMPT
BOND FUND
Trust Shares
1996 3.89% $ 22,950 0.65% 4.36% 0.89% 4.12% 60.02%
1995 6.94% 13,187 0.65% 4.56% 0.98% 4.23% 24.50%
1994 (1) (4.43%)+ 4,338 0.65%* 4.12%* 1.06%* 3.71%* 25.90%
Investor Shares
3.69% $ 3,418 0.85% 4.17% 1.41% 3.61% 60.02%
1995 6.70% 3,268 0.85% 4.31% 1.43% 3.73% 24.50%
1994 (2) (4.29%)+ 3,300 0.85%* 3.93%* 2.36%* 2.42%* 25.90%
Flex Shares
1996(3) 2.25%* $ 4,207 1.35%* 3.66%* 2.35%* 2.66%* 60.02%
INVESTMENT GRADE
BOND FUND
Trust Shares
1996 4.02% $599,514 0.75% 5.81% 0.87% 5.69% 184.33%
1995 10.39% 543,308 0.75% 6.22% 0.88% 6.09% 237.66%
1994 1.17% 460,538 0.75% 4.77% 0.88% 4.64% 259.19%
1993(4) 9.34%* 336,132 0.74%* 5.14%* 0.87%* 5.01%* 299.32%
Investor Shares
1996 3.50% $ 36,155 1.15% 5.40% 1.44% 5.11% 184.33%
1995 10.04% 33,772 1.15% 5.79% 1.49% 5.45% 237.66%
1994 0.86% 35,775 1.14% 4.39% 1.41% 4.12% 259.19%
1993(5) 9.21% 24,375 1.14%* 4.75%* 1.46%* 4.43%* 299.32%
Flex Shares
1996(6) 2.50%* $ 4,621 1.64%* 4.84%* 2.49%* 3.99%* 184.33%
SHORT-TERM BOND FUND
Trust Shares
1996 4.45% $ 91,156 0.65% 5.39% 0.81% 5.23% 162.62%
1995 7.60% 60,952 0.65% 5.49% 0.85% 5.29% 200.49%
1994 2.02% 34,772 0.65% 4.15% 0.85% 3.95% 74.85%
1993(7) 4.45%* 25,334 0.64%* 3.88%* 1.11%* 3.41%* 63.89%
Investor Shares
1996 4.23% $ 2,700 0.85% 5.20% 1.72% 4.33% 162.62%
1995 7.44% 2,609 0.85% 5.24% 1.56% 4.53% 200.49%
1994 1.81% 2,381 0.85% 3.94% 2.52% 2.27% 74.85%
1993(8) 1.65%* 716 0.85%* 3.85%* 7.22%* (2.52%)* 63.89%
Flex Shares
1996(9) 3.73%* $ 966 1.20%* 4.77%* 4.06%* 1.91%* 162.62%
SHORT-TERM U.S. TREASURY
SECURITIES FUND
Trust Shares
1996 4.73% $ 10,149 0.65% 5.56% 1.00% 5.21% 94.00%
1995 6.11% 9,599 0.65% 4.91% 1.08% 4.48% 87.98%
1994 2.17% 12,723 0.65% 3.23% 0.81% 3.07% 116.57%
1993(7) 2.22%* 30,336 0.63%* 3.34%* 1.04%* 2.93%* 36.44%
Investor Shares
1996 4.52% $ 4,192 0.80% 5.43% 1.32% 4.91% 94.00%
1995 6.03% 7,144 0.80% 4.74% 1.33% 4.21% 87.98%
1994 2.01% 4,841 0.78% 3.11% 1.41% 2.48% 116.57%
1993(10) 1.84%* 2,423 0.80%* 3.16%* 3.42%* 0.54%* 36.44%
Flex Shares
1996(11) 3.72%* $ 2,423 1.05%* 5.03%* 2.97%* 3.11%* 94.00%
</TABLE>
(6) Commenced operations on June 7, 1995.
(7) Commenced operations on March 15, 1993.
(8) Commenced operations on March 22, 1993.
(9) Commenced operations on June 20, 1995.
(10) Commenced operations on March 18, 1993.
(11) Commenced operations on June 22, 1995.
(A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-80
<PAGE>
FINANCIAL HIGHLIGHTS (concluded)
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1996
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED AND DISTRIBUTIONS
NET ASSET VALUE NET UNREALIZED FROM DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT GAINS (LOSSES) NET INVESTMENT FROM REALIZED VALUE END
OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD
--------------- ----------- ---------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
LIMITED-TERM FEDERAL
MORTGAGE SECURITIES FUND
Trust Shares
1996 $10.11 $0.62 $(0.14) $(0.60) -- $ 9.99
1995(1) 10.00 0.58 0.13 (0.60) -- 10.11
Investor Shares
1996 $10.11 $0.60 $(0.14) $(0.60) -- $ 9.97
1995(2) 9.98 0.58 0.13 (0.58) -- 10.11
Flex Shares
1996(3) $10.14 $0.55 $(0.15) $(0.55) -- $ 9.99
U.S. GOVERNMENT
SECURITIES FUND
Trust Shares
1996 $10.27 $0.62 $(0.33) $(0.62) $(0.03) $ 9.91
1995(4) 9.98 0.53 0.29 (0.53) -- 10.27
Investor Shares
1996 $10.26 $0.59 $(0.33) $(0.59) $(0.03) $ 9.90
1995(5) 10.00 0.56 0.26 (0.56) -- 10.26
Flex Shares
1996(3) $10.31 $0.52 $(0.37) $(0.52) $(0.03) $ 9.91
PRIME QUALITY MONEY
MARKET FUND
Trust Shares
1996 $1.00 $0.05 -- $(0.05) -- $1.00
1995 1.00 0.05 -- (0.05) -- 1.00
1994 1.00 0.03 -- (0.03) -- 1.00
1993(6) 1.00 0.03 -- (0.03) -- 1.00
Investor Shares
1996 $1.00 $0.05 -- $(0.05) -- $1.00
1995 1.00 0.05 -- (0.05) -- 1.00
1994 1.00 0.03 -- (0.03) -- 1.00
1993(6) 1.00 0.03 -- (0.03) -- 1.00
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
Trust Shares
1996 $1.00 $0.05 -- $(0.05) -- $1.00
1995 1.00 0.05 -- (0.05) -- 1.00
1994 1.00 0.03 -- (0.03) -- 1.00
1993(6) 1.00 0.03 -- (0.03) -- 1.00
Investor Shares
1996 $1.00 $0.05 -- $(0.05) -- $1.00
1995 1.00 0.04 -- (0.04) -- 1.00
1994 1.00 0.03 -- (0.03) -- 1.00
1993(6) 1.00 0.03 -- (0.03) -- 1.00
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
1996 $1.00 $0.03 -- $(0.03) -- $1.00
1995 1.00 0.03 -- (0.03) -- 1.00
1994 1.00 0.02 -- (0.02) -- 1.00
1993(6) 1.00 0.02 -- (0.02) -- 1.00
Investor Shares
1996 $1.00 $0.03 -- $(0.03) -- $1.00
1995 1.00 0.03 -- (0.03) -- 1.00
1994 1.00 0.02 -- (0.02) -- 1.00
1993(6) 1.00 0.02 -- (0.02) -- 1.00
</TABLE>
* Annualized.
+ Cumulative since inception.
(1) Commenced operations on June 7, 1994.
(2) Commenced operations on July 17, 1994.
(3) Commenced operations on June 7, 1995.
(4) Commenced operations on July 31, 1994.
(5) Commenced operations on June 9, 1994.
(6) Commenced operations on June 8, 1992.
F-81
<PAGE>
================================================================================
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS) TO
NET ASSETS RATIO OF NET INVESTMENTS AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS EXCLUDING WAIVERS TURNOVER
RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
----------- ------------ ------------------ ------------------- ------------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LIMITED-TERM FEDERAL
MORTGAGE SECURITIES FUND
Trust Shares
1996 4.84% $ 73,370 0.65% 6.04% 0.84% 5.85% 83.01%
1995(1) 7.50%+ 41,823 0.65%* 6.43%* 0.93%* 6.15%* 67.63%
Investor Shares
1996 4.59% $ 2,512 0.90% 5.75% 2.25% 4.40% 83.01%
1995(2) 7.45%+ 623 0.90%* 6.27%* 7.74%* (0.57%)* 67.63%
Flex Shares
1996(3) 4.10%* 1,349 1.25%* 5.38%* 3.59%* 3.04%* 83.01%
U.S. GOVERNMENT
SECURITIES FUND
Trust Shares
1996 2.77% $ 10,277 0.75% 6.05% 1.25% 5.55% 83.38%
1995(4) 8.64%+ 3,291 0.75%* 6.67%* 3.33%* 4.09%* 30.39%
Investor Shares
1996 2.47% $ 2,396 1.15% 5.68% 2.50% 4.33% 83.38%
1995(5) 8.61%+ 589 1.15%* 6.08%* 6.84%* 0.39%* 30.39%
Flex Shares
1996(3) 1.42%* $ 2,826 1.66%* 5.18%* 2.86%* 3.98%* 83.38%
PRIME QUALITY MONEY
MARKET FUND
Trust Shares
1996 5.25% $1,050,800 0.58% 5.11% 0.78% 4.91% --
1995 4.79% 799,189 0.58% 4.77% 0.79% 4.56% --
1994 2.88% 583,399 0.58% 2.86% 0.79% 2.65% --
1993(6) 2.92%* 410,991 0.58%* 2.85%* 0.78%* 2.65%* --
Investor Shares
1996 5.08% $ 215,696 0.75% 4.94% 1.00% 4.69% --
1995 4.62% 157,616 0.75% 4.55% 1.01% 4.29% --
1994 2.71% 129,415 0.75% 2.67% 0.99% 2.43% --
1993(6) 2.75%* 61,578 0.75%* 2.68%* 1.02%* 2.41%* --
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
Trust Shares
1996 5.14% $ 325,493 0.61% 5.02% 0.78% 4.85% --
1995 4.67% 434,111 0.61% 4.64% 0.80% 4.45% --
1994 2.77% 309,228 0.61% 2.69% 0.77% 2.53% --
1993(6) 2.79%* 453,567 0.61%* 2.71%* 0.78%* 2.54%* --
Investor Shares
1996 4.99% $ 58,608 0.75% 4.88% 0.99% 4.64% --
1995 4.51% 46,639 0.75% 4.51% 1.02% 4.24% --
1994 2.63% 32,395 0.75% 2.54% 0.97% 2.32% --
1993(6) 2.65%* 16,688 0.75%* 2.57%* 1.11%* 2.21%* --
TAX-EXEMPT MONEY
MARKET FUND
Trust Shares
1996 3.28% $ 273,613 0.50% 3.23% 0.68% 3.05% --
1995 3.10% 215,413 0.45% 3.12% 0.70% 2.87% --
1994 2.08% 143,982 0.42% 2.05% 0.71% 1.76% --
1993(6) 2.12%* 78,416 0.41%* 2.07%* 0.70%* 1.78%* --
Investor Shares
1996 3.16% $ 95,223 0.62% 3.10% 0.85% 2.87% --
1995 3.00% 87,647 0.55% 3.00% 0.87% 2.68% --
1994 1.96% 61,675 0.54% 1.93% 0.88% 1.59% --
1993(6) 2.00%* 35,209 0.53%* 1.95%* 0.95%* 1.53%* --
</TABLE>
(A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-82
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1996
1. Organization:
The STI Classic Funds (the "Trust") was organized as a Massachusetts
Business Trust under a Declaration of Trust dated January 15, 1992. The
Trust is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company with nineteen portfolios: the Prime
Quality Money Market Fund, the U.S. Government Securities Money Market
Fund, the Tax-Exempt Money Market Fund (collectively the "Money Market
Funds"), the Investment Grade Bond Fund, the Investment Grade Tax-Exempt
Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Short-Term Bond
Fund, the Capital Growth Fund, the Value Income Stock Fund, the Sunbelt
Equity Fund, the Mid-Cap Equity Fund, the Balanced Fund, the Florida
Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the Tennessee
Tax-Exempt Bond Fund, the U.S. Government Securities Fund, the Limited-Term
Federal Mortgage Securities Fund, the International Equity Fund and the
International Equity Index Fund (collectively the "Non-Dollar Funds"). The
assets of each portfolio are segregated, and a shareholder's interest is
limited to the Fund in which shares are held. Each Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by
the Trust.
SECURITY VALUATION -- Investment securities held by the Money Market
Funds are stated at amortized cost, which approximates market value.
Investment securities held by the Non-Dollar Funds which are listed on
a securities exchange for which market quotations are available are
valued at the last quoted sales price on each business day. If there
is no such reported sale, these securities and unlisted securities for
which market quotations are readily available are valued at the most
recently quoted bid price. Foreign securities in the International
Equity Fund and the International Equity Index Fund are valued based
upon quotations from the primary market in which they are traded. Debt
obligations with sixty days or less remaining until maturity may be
valued at their amortized cost.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as
a regulated investment company for Federal income tax purposes and
distribute all of its taxable income and net capital gains. Accordingly,
no provisions for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date and interest income
is recognized on an accrual basis. Costs used in determining net realized
gains and losses on the sales of investment securities are those of the
specific securities sold adjusted for the accretion and amortization of
purchase discounts and premiums during the respective holding period.
Purchase discounts and premiums on securities held by the Money Market
Funds are accreted and amortized ratably to maturity and are included in
interest income. Purchase discounts and premiums on securities held by the
Non-Dollar Funds are accreted and amortized to maturity using the
scientific interest method, which approximates the effective interest
method.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in
F-83
<PAGE>
================================================================================
the event of default of the counterparty. If the counterparty defaults and
the value of the collateral declines or if the counterparty enters into an
insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day, by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding. The maximum
offering price per share for Investor shares of the Investment Grade Bond,
the Investment Grade Tax-Exempt Bond, the Capital Growth, the Value Income
Stock, the Sunbelt Equity, the Mid-Cap Equity, the Balanced, the Florida
Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the Tennessee Tax-Exempt
Bond, the U.S. Government Securities, the International Equity, and the
International Equity Index Funds is equal to the net asset value per share
plus a sales load of 3.75%. The maximum offering price per share for
Investor shares of the Short-Term U.S. Treasury Securities Fund is equal to
the net asset value per share plus a sales load of 1.00%. The maximum
offering price per share for Investor shares of the Short-Term Bond Fund is
equal to the net asset value per share plus a sales load of 2.00%. The
maximum offering price per share for Investor shares of the Limited-Term
Federal Mortgage Securities Fund is equal to the net asset value per share
plus a sales load of 2.50%
Flex Shares of the Funds may be purchased at their net asset value. Shares
redeemed within the first year after purchase will be subject to a
contingent deferred sales charge ("CDSC") equal to 2.00% of the net asset
value of the shares at the time of redemption. The CDSC will not apply to
shares redeemed after such time.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International
Equity and the International Equity Index Funds are maintained in U.S.
dollars on the following basis:
(I) market value of investment securities, assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The International Equity and the International Equity Index Funds do not
isolate that portion of gains and losses on investments in equity
securities which is due to changes in the foreign exchange rates from that
which is due to changes in market prices of equity securities.
The International Equity and the International Equity Index Funds report
certain foreign currency related transactions as components of realized and
unrealized gains and losses for financial reporting purposes, whereas such
components are treated as ordinary income for Federal income tax purposes.
OTHER -- Expenses that are directly related to a specific Fund are charged
to that Fund. Class specific expenses are borne by that class. Other
operating expenses of the Trust are pro-rated to the Funds on the basis of
relative net assets. Fund expenses are pro-rated to the respective classes
on the basis of relative net assets.
Distributions from net investment income of each of the Money Market Funds
and the Investment Grade Bond, the Investment Grade Tax-Exempt Bond, the
Short-Term U.S. Treasury Securities, the Short-Term Bond, the Florida
Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the Tennessee Tax-Exempt
Bond, the U.S. Government Securities and the Limited-Term Federal Mortgage
Securities Funds are declared on each business day and paid to shareholders on
a monthly basis. Distributions from net investment income are declared and
paid each calendar quarter by the Capital Growth, the Value Income Stock, the
F-84
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1996
Sunbelt Equity, the Mid-Cap Equity and the Balanced Funds. Distributions
from net investment income are declared and paid annually by the International
Equity and the International Equity Index Funds. Any net realized capital
gains on sales of securities are distributed to shareholders at least annually.
RECLASSIFICATION ON COMPONENTS OF NET ASSETS -- In accordance with Statement
of Position 93-2, "Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distribution
by Investment Companies", $2,231,493, $1,362,183, $187,659, $87,216, and
$52,703 relating to differences attributable to the classification of
short-term capital gains and net investment income for tax distribution
purposes of the Capital Growth, Sunbelt, Investment Grade Bond, Short-Term
Bond, and Short-Term U.S. Treasury Securities Funds, respectively, as of
May 31, 1996 have been reclassified between the Fund's accumulated net
realized gains/losses and undistributed net income accounts, as appropriate.
These reclassifications had no effect on net asset value.
3. Organization Costs and Transactions with Affiliates:
The Trust incurred organization costs of approximately $653,100. These
costs have been deferred in the accounts of the Funds and are being
amortized on a straight line basis over a period of sixty months commencing
with operations. These costs include legal fees of approximately $41,100 for
organizational work performed by a law firm of which an officer of the Trust
is a partner. On March 18, 1992, the Trust sold initial shares of beneficial
interest to SEI Financial Management Corporation (the "Administrator"). In
the event any of the initial shares of the Trust are redeemed by any holder
thereof during the period that the Trust is amortizing its organizational
costs, the redemption proceeds payable to the holder thereof by the Trust
will be reduced by the unamortized organizational costs in the same ratio as
the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
Certain officers of the Trust are also officers of the Administrator and/or
SEI Financial Services Company (the "Distributor"). Such officers are paid
no fees by the Trust for serving as officers of the Trust.
4. Administration, Transfer Agency Servicing and Distribution Agreements:
The Trust and the Administrator are parties to an Administration Agreement
dated May 29, 1995, under which the Administrator provides administrative
services for an annual fee (expressed as a percentage of the combined
average daily net assets of the Trust and STI Classic Variable Annuity
Trust) of: .10% up to $1 billion, .07% on the next $4 billion, .05% on the
next $3 billion, .045% on the next $2 billion and .04% for over $10 billion.
The Trust and Federated Services Company are parties to a Transfer
Agency servicing agreement dated May 14, 1994 under which Federated Services
Company provides transfer agency services to the Trust.
The Trust and the Distributor are parties to a Distribution Agreement dated
May 29, 1995. The Distributor will receive no fees for its distribution
services under this agreement for the Trust Shares of any Fund. With
respect to the Investor Shares and Flex Shares, the Distributor receives
amounts, pursuant to a Distribution Plan and (in the case of Flex Shares) a
Service Plan, as outlined in the table in footnote 5 under the column titled
"Distribution Fee".
5. Investment Advisory and Custodian Agreements:
The Trust and STI Capital Management, N.A., ("STI Capital Management,
N.A."), Trusco Capital
F-85
<PAGE>
================================================================================
Management ("Trusco"), the SunTrust Bank, Atlanta and SunTrust Bank,
Chattanooga have entered into advisory agreements dated May 29, 1992
(December 20, 1993 in the case of SunTrust Bank, Chattanooga) (the "Advisory
Agreements"). On May 26, 1993, the Trust's Board of Trustees approved the
termination of Trust Company Bank as investment advisor to the Trust's
Tax-Exempt Money Market Fund and approved the appointment of Trusco as
advisor to such Fund. The Trust and Trusco subsequently entered into an
advisory agreement dated June 15, 1993 (the "Advisory Agreement") which
superseded the May 29, 1992 agreement between the parties.
Under terms of the respective agreements, the Funds are charged the
following annual fees based upon average daily net assets:
<TABLE>
<CAPTION>
MAXIMUM
FLEX
SHARE
MAXIMUM DISTRI-
MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX
ANNUAL SHARE SHARE SHARE AND SHARE
ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM
FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE
-------- -------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
TRUSCO:
International
Equity Index
Fund* .......... .90% 1.05% .38% 1.45% 1.00% 2.10%
Sunbelt Equity
Fund ........... 1.15% 1.15% .43% 1.60% 1.00% 2.20%
Short-Term Bond
Fund ........... .65% .65% .23% .85% 1.00% 1.20%
Short-Term U.S.
Treasury
Securities
Fund ........... .65% .65% .18% .80% 1.00% 1.05%
U.S. Government
Securities
Fund ........... .74% .75% .38% 1.15% 1.00% 1.65%
Prime Quality
Money Market
Fund ........... .65% .58% .20% .75% -- --
U.S. Government
Securities
Money Market
Fund ........... .65% .61% .17% .75% -- --
Tax-Exempt
Money Market
Fund ........... .55% .60% .15% .72% -- --
STI CAPITAL MANAGEMENT, N.A.:
Value Income
Stock Fund ..... .80% .95% .33% 1.30% 1.00% 2.00%
Mid-Cap Equity
Fund ........... 1.15% 1.15% .43% 1.60% 1.00% 2.20%
Capital Growth
Fund ........... 1.15% 1.15% .68% 1.80% 1.00% 2.27%
Balanced Fund ... .95% .95% .28% 1.25% 1.00% 2.00%
Investment
Grade
Tax-Exempt
Bond Fund ...... .74% .75% .43% 1.15% 1.00% 1.63%
Florida
Tax-Exempt
Bond Fund ...... .65% .65% .18% .85% 1.00% 1.35%
Investment
Grade Bond
Fund ........... .74% .75% .43% 1.15% 1.00% 1.64%
Limited-Term
Federal Mortgage
Securities
Fund ........... .65% .65% .23% .90% 1.00% 1.25%
International
Equity Fund .... 1.25% 1.46% .33% 1.81% 1.00% 2.51%
SUNTRUST BANK, ATLANTA:
Georgia
Tax-Exempt
Bond Fund ...... .65% .65% .18% .85% 1.00% 1.35%
SUNTRUST BANK, CHATTANOOGA:
Tennessee
Tax-Exempt
Bond Fund ...... .65% .65% .18% .85% 1.00% 1.35%
</TABLE>
- -----------------
*Trusco and SunBank serve as joint advisors to the
International Equity Index Fund.
The Investment Advisors, the Administrator and the Distributor have
voluntarily agreed to waive all or a portion of their fees (and to
reimburse Funds' expenses) in order to limit operating expenses to an
amount as outlined in the table above. Fee waivers and expense
reimbursements are voluntary and may be terminated at any time.
SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for
all the Funds except the International Equity and the International Equity
F-86
<PAGE>
NOTES TO FINANCIAL STATEMENTS
===============================================================================
STI CLASSIC FUNDS MAY 31, 1996
Index Funds. The Bank of New York serves as custodian to the International
Equity Fund and the Bank of California serves as custodian to the International
Equity Index Fund. Fees of the Custodians are paid on the basis of the net
assets of the Funds. The Custodians play no role in determining the investment
policies of the Trust or which securities are to be purchased or sold in the
Funds.
6. Investment Transactions:
The cost of purchases and the proceeds from sales of securities, excluding
short-term investments and U.S. Government Securities, for the period ended
May 31, 1996, were as follows:
PURCHASES SALES
(000) (000)
---------- ----------
Value Income Stock Fund ........................ $1,493,020 $1,485,530
Mid-Cap Equity Fund ............................ 289,235 205,572
Capital Growth Fund ............................ 1,729,362 1,898,664
Balanced Fund .................................. 117,600 110,702
International Equity Index Fund ................ 29,233 31,167
International Equity Fund ...................... 361,787 171,233
Sunbelt Equity Fund ............................ 387,532 349,431
Investment Grade Tax-Exempt Bond Fund .......... 660,206 618,286
Florida Tax-Exempt Bond Fund ................... 38,105 15,798
Tennessee Tax-Exempt Bond Fund ................. 4,376 1,626
Georgia Tax-Exempt Bond Fund ................... 27,200 12,685
Investment Grade Bond Fund ..................... 416,076 456,626
Short-Term Bond Fund ........................... 67,798 50,754
Short-Term U.S. Treasury Securities Fund ....... -- --
Limited-Term Federal Mortgage Securities Fund... -- --
U.S. Government Securities Fund ................ -- --
The cost of purchases and proceeds from sales of U.S. Government Securities
were:
PURCHASES SALES
(000) (000)
---------- ----------
Value Income Stock Fund ..................... -- --
Mid-Cap Equity Fund ......................... -- --
Capital Growth Fund ......................... -- --
Balanced Fund ............................... $ 54,234 $ 36,688
International Equity Index Fund ............. -- --
International Equity Fund ................... -- --
Sunbelt Equity Fund ......................... -- --
Investment Grade Tax-Exempt Bond Fund ....... -- --
Florida Tax-Exempt Bond Fund ................ -- --
Tennessee Tax-Exempt Bond Fund .............. -- --
Georgia Tax-Exempt Bond Fund ................ -- --
Investment Grade Bond Fund ..................... $828,696 $619,825
Short-Term Bond Fund ........................... 84,205 67,661
Short-Term U.S. Treasury Securities Fund ....... 15,534 14,800
Limited-Term Federal Mortgage Securities Fund... 76,783 42,100
U.S. Government Securities Fund ................ 19,279 8,016
The aggregate gross unrealized appreciation and depreciation for securities
held by the Funds at May 31, 1996, and the total cost of securities for
Federal income tax purposes were as follows:
VALUE INCOME MID-CAP CAPITAL
STOCK EQUITY GROWTH
FUND FUND FUND
(000) (000) (000)
------------ -------- ----------
Aggregate gross unrealized
appreciation ................... $128,322 $ 25,315 $150,430
Aggregate gross unrealized
depreciation ................... (7,858) (4,392) (13,470)
---------- -------- ----------
Net unrealized appreciation ...... $120,464 $ 20,923 $136,960
========== ======== ==========
Total cost of securities for
Federal income tax purposes .... $1,287,255 $260,367 $1,042,462
========== ======== ==========
INTERNATIONAL INTERNATIONAL SUNBELT
BALANCED EQUITY EQUITY EQUITY
FUND INDEX FUND FUND FUND
(000) (000) (000) (000)
-------- ------------- ------------- --------
Aggregate gross unrealized
appreciation ............... $ 8,701 $11,273 $15,901 $113,112
Aggregate gross unrealized
depreciation ............... (2,017) (2,306) (2,284) (12,731)
-------- ------- -------- --------
Net unrealized appreciation.. $ 6,684 $ 8,967 $13,617 $100,381
======== ======= ======== ========
Total cost of securities for
Federal income tax
purposes................... $114,332 $87,565 $195,658 $341,821
======== ======= ======== ========
INVESTMENT
GRADE
TAX-EXEMPT FLORIDA TENNESSEE
BOND TAX-EXEMPT TAX-EXEMPT
FUND BOND FUND BOND FUND
(000) (000) (000)
---------- ---------- ----------
Aggregate gross unrealized appreciation .. $ 482 $ 246 $ 43
Aggregate gross unrealized depreciation .. (1,178) (603) (76)
-------- ------- ------
Net unrealized depreciation .............. $ (696) $ (357) $ (33)
======== ======= ======
Total cost of securities for
Federal income tax purposes ............ $158,666 $36,007 $5,325
======== ======= ======
F-87
<PAGE>
===============================================================================
INVESTMENT
GEORGIA GRADE SHORT-
TAX-EXEMPT BOND TERM BOND
FUND FUND FUND
(000) (000) (000)
--------- ---------- ---------
Aggregate gross unrealized appreciation . $ 114 $3,382 $ 14
Aggregate gross unrealized depreciation . (694) (13,635) (1,342)
------- -------- -------
Net unrealized depreciation ............. $ (580) $(10,253) $(1,328)
======= ======== =======
Total cost of securities for
Federal income tax purposes ........... $30,682 $661,060 $95,244
======= ======== =======
SHORT- LIMITED-
TERM TERM
U.S. FEDERAL U.S.
TREASURY MORTGAGE GOVERNMENT
SECURITIES SECURITIES SECURITIES
FUND FUND FUND
(000) (000) (000)
--------- ---------- ----------
Aggregate gross unrealized appreciation . $ 19 $ 301 $ 37
Aggregate gross unrealized depreciation . (137) (749) (465)
------- -------- -------
Net unrealized depreciation ............. $ (118) $ (448) $ (428)
======= ======== =======
Total cost of securities for
Federal income tax purposes ........... $16,235 $341,253 $15,964
======= ======== =======
Subsequent to October 31, 1995, the Funds recognized net capital losses for
tax purposes that have been deferred to 1996 and can be used to offset future
capital gains at May 31, 1996. The Funds also had capital losses carryforward
at May 31, 1996, to the extent provided in the regulations for Federal income
tax as follows:
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES
5/31/96 2002 2003 2004
FUND (000) (000) (000) (000)
------------- ------- ------- -------
Investment Grade Bond Fund $6,806 -- $6,806 --
Short-Term U.S. Treasury Fund 232 -- 203 $ 29
Prime Quality Money Market Fund 176 -- 3 173
U.S. Government Securities
Money Market Fund 11 -- -- 11
Tax-Exempt Money Market Fund 14 $9 1 4
CAPITAL LOSS
POST OCTOBER UTILIZED DURING
DEFERRED LOSSES THE CURRENT YEAR
FUND (000) (000)
--------------- ----------------
Capital Growth Fund -- $ 1,541
Sunbelt Equity Fund -- 3,762
Balanced Fund -- 2,002
Investment Grade Bond Fund -- 11,848
Georgia Tax-Exempt Bond Fund -- 12
Tennessee Tax-Exempt Bond Fund -- 3
Short-Term Bond Fund -- 288
Limited Term Federal Mortgage
Securities Fund -- 15
U.S. Government Securities Fund $37 --
Prime Quality Money Market Fund 82 --
U.S. Govenment Securities Money
Market Fund -- 59
7. Concentration of Credit Risk:
The Prime Quality Money Market Fund Invests primarily in high quality money
market instruments rated in the highest short-term rating category by
Standard & Poor's Corporation ("S&P") or Moody's Investors Services, Inc.
("Moody's") or, if not rated, are determined by the Advisor to be of
comparable quality. The U.S. Government Securities Money Market Fund invests
exclusively in U.S. Treasury obligations, U.S. Government subsidiary
corporation securities which are backed by the full faith and credit of the
U.S. Government and repurchase agreements with approved dealers
collateralized by U.S. Treasury securities and U.S. Government subsidiary
corporation securities. The Tax-Exempt Money Market Fund invests in high
quality, U.S. dollar denominated municipal securities rated in one of the two
highest short-term rating categories or, if not rated, are determined by the
Advisor to be of comparable quality. The Investment Grade Bond Fund, the
Short-Term Bond Fund and the Balanced Fund invest primarily in investment
grade obligations rated at least BBB or better by S&P or Baa or better by
Moody's or, if not rated, are determined by the Advisor to be of comparable
quality. The Investment Grade Tax-Exempt Fund invests primarily in investment
grade municipal securities. Municipal
F-88
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
STI CLASSIC FUNDS MAY 31, 1996
securities must be rated BBB or better by S&P or Baa or better by Moody's in
the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2
or P-1, P-2 in the case of commercial paper; and VMIG-1, VMIG-2 in the case
of variable rate demand obligations. The Short-Term U.S. Treasury Securities
Fund invests exclusively in obligations issued by the U.S. Treasury with a
maximum remaining maturity of 3 years or less. The Florida Tax-Exempt Bond
Fund, the Georgia Tax-Exempt Bond Fund, and the Tennessee Tax-Exempt Bond
Fund invest primarily in municipal bonds concentrated in each of their
respective states. Municipal securities must be rated BBB or better by S&P or
Baa or better by Moody's in the case of bonds; A-1, A-2 or P-1, P-2 in the
case of tax-exempt commercial paper; and VMIG-1, VMIG-2 in the case of
variable rate demand obligations. The U.S. Government Securities Fund invests
primarily in obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, including mortgage backed securities. The
Limited-Term Federal Mortgage Securities Fund invests in mortgage related
securities issued or guaranteed by U.S. Government agencies. Up to 35% of the
U.S. Government Securities Fund and the Limited-Term Federal Mortgage
Securities Fund may be invested in corporate, or government bonds that carry
a rating of BBB or better by S&P or Baa or better by Moody's. The ability of
the issuers of the securities held by the Funds to meet their obligations may
be affected by economic developments in a specific industry, state or region,
or by changing business conditions.
The summary of credit quality ratings for the securities held by the Funds as
rated by S & P at May 31, 1996 were as follows:
U.S. GOV'T.
PRIME QUALITY SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
------------- ------------ ------------
AAA ................... 7.5% 35.0% 5.5%
AA .................... 0.2% -- 6.9%
A ..................... 12.7% -- 5.4%
A-1 ................... 57.2% -- 51.1%
A-2 ................... 2.9% -- --
A1+ ................... -- -- 1.1%
SP-1. ................. -- -- 12.5%
Not Rated ............. 3.7% -- 16.5%
Repurchase Agreement .. 15.8% 65.0% --
Cash Equivalents ...... -- -- 1.0%
------------- ------------ ------------
Totals .............. 100.0% 100.0% 100.0%
============= ============ ============
SHORT-TERM
INVESTMENT INVESTMENT U.S.
GRADE GRADE SHORT-TERM TREASURY
BOND TAX-EXEMPT BOND SECURITIES
FUND BOND FUND FUND FUND
---------- ---------- ---------- ----------
AAA ...................... 70.6% 57.7% 68.6% 96.9%
AA ....................... 3.1% 22.7% 6.1%
A ........................ 10.1% 9.4% 12.7 --
A-3 ...................... -- -- 2.1% --
BBB ...................... 11.8% 2.2% 7.7% --
Not Rated ................ -- 3.3% -- --
Repurchase Agreement ..... 4.4% -- -- --
Cash Equivalents ......... -- 4.7% 2.8% 3.1%
---------- ---------- ---------- ----------
Totals ................. 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ==========
LTD.-TERM
FEDERAL
FLORIDA TENNESSEE GEORGIA MORTGAGE U.S. GOV'T
BALANCED TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT SECURITIES SECURITIES
FUND BOND FUND BOND FUND BOND FUND FUND FUND
-------- ---------- ---------- ---------- ---------- -----------
AAA ......... 27.8% 81.2% 53.3% 35.7% 88.4% 92.5%
AA .......... .8% 11.5% 32.2% 41.5% -- --
A ........... 3.7% 1.9% 4.9% 8.7% -- --
A-1 ......... -- -- -- -- -- --
A-2 ......... -- -- -- -- -- --
A-3 ......... -- -- -- -- -- --
BBB ......... 7.6% -- -- -- -- --
BB .......... -- -- -- -- -- --
S - 1 ....... -- -- -- -- -- --
Equities .... 56.2% -- -- -- -- --
Not Rated ... -- 1.3% 8.6% 8.6% 3.8% --
Repurchase
Agreement.. 3.9% -- -- -- 7.1% --
Cash
Equivalents -- 4.1% 0.7% 5.5% 0.7% 7.5%
------ ------ ------ ------ ------ ------
Totals .... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
F-89
<PAGE>
===============================================================================
The summary of credit quality ratings for the securities held by the Funds as
rated by Moody's at May 31, 1996 were as follows:
U.S. GOV'T.
PRIME QUALITY SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
------------- ------------ ------------
Aaa .................. 9.9% 35.0% 6.4%
Aa ................... 0.4% -- 10.5%
A .................... -- -- 1.3%
A-1 .................. 3.0% -- 2.5%
A-2 .................. 8.3% -- 2.2%
A-3 .................. 0.8% -- --
P-1 .................. 57.2% -- 14.2%
P-2. ................. 2.9% -- --
MIG-1 ................ -- -- 12.9%
VMIG-1 ............... -- -- 30.4%
Not Rated ............ 1.7% -- 18.5%
Repurchase Agreement . 15.8% 65.0% --
Cash Equivalents ..... -- -- 1.1%
------------- ------------ ------------
Totals ............ 100.0% 100.0% 100.0%
============= ============ ============
INVESTMENT SHORT-TERM
GRADE U.S.
INVESTMENT TAX-EXEMPT SHORT-TERM TREASURY
GRADE BOND BOND SECURITIES
BOND FUND FUND FUND FUND
---------- ---------- ---------- ----------
Aaa ................ 70.6% 61.5% 68.6% 96.9%
Aa ................. 5.5% 16.0% 6.1% --
A .................. -- 5.0% 2.1% --
A-1 ................ 5.3% 4.8% 2.9% --
A-2 ................ 4.6% -- 6.3% --
A-3 ................ -- -- 6.3% --
Baa ................ 9.6% -- 4.9% --
Not Rated .......... -- 7.9% -- --
Repurchase Agreement 4.4% -- -- --
Cash Equivalents ... -- 4.8% 2.8% 3.1%
---------- ---------- ---------- ----------
Totals .......... 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ==========
LTD.-TERM
FEDERAL
FLORIDA TENNESSEE GEORGIA MORTGAGE U.S. GOV'T
BALANCED TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT SECURITIES SECURITIES
FUND BOND BOND FUND BOND FUND FUND FUND
-------- ---------- ---------- ---------- ---------- ----------
Aaa ....... 27.8% 80.4% 51.1% 41.7% 92.2% 92.5%
Aa ........ 1.6% 11.5% 25.4% 32.3% -- --
A ......... -- -- 1.8% 5.1% -- --
A-1 ....... 2.0% -- 10.7% 11.1% -- --
A-2 ....... 1.7% -- -- -- -- --
Baa ....... 6.5% 3.5% 10.3% -- -- --
Ba-1 ...... 0.3% -- -- -- -- --
Not Rated . -- 0.5% -- 4.3% -- --
Equities .. 56.2% -- -- -- -- --
Repurchase
Agreement 3.9% -- -- -- 7.1% --
Cash
Equivalents -- 4.1% 0.7% 5.5% 0.7% 7.5%
------ ------ ------ ------ ------ ------
Totals .. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
F-90
<PAGE>
STI CLASSIC FUNDS
PART C:OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 15
Item 24. Financial Statements and Exhibits:
Financial Statements
(a) Part A - Financial Highlights
Part B - Statement of Additional Information
(b) Additional Exhibits
(1) Declaration of Trust (Incorporated by reference to Registration
Statement filed February 12, 1992)*
(2) By-Laws (Incorporated by reference to Pre-Effective Amendment No.
1 filed April 23, 1992)*
(5)(b) Investment Advisory Agreements with:
SunBank Capital Management, N.A.
Trusco Capital Management, Inc.
Trust Company Bank*
(5)(c) Revised Investment Advisory Agreement with Trusco Capital
Management*
(5)(d) Investment Advisory Agreement with American National Bank and
Trust Company*
(5)(e) Investment Advisory Agreement with Trust Company Bank*
(6) Distribution Agreement*
(8)(a) Custodian Agreement with the Bank of California relating to
International Equity Index Fund*
(8)(b) Custodian Agreement with Trust Company Bank dated February 1,
1994*
(8)(c) Transfer Agent Agreement with Federated Services Company, dated
May 14, 1994*
(9)(a) Administration Agreement with SEI Financial Management Corporation
dated May 29, 1995*
(10) Opinion and Consent of Counsel (Incorporated by reference to
Pre-Effective Amendment No. 2 filed May 22, 1992)*
(11) Consent of Independent Public Accountants *
(12)
(15) Distribution Plan - Investor Class*
(15)(a) Distribution and Service Agreement relating to Flex Shares dated
May 29, 1995*
(16) Performance Quotation Computation (Incorporated by reference to
Post-Effective Amendment No. 9 filed September 22, 1994)
(18) Rule 18f-3 Plan*
(24) Powers of Attorney*
(27) Financial Data Schedules*
*Filed herewith.
C-1
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant:
See the Prospectuses and Statement of Additional Information regarding the
Trust's control relationships.The Administrator is a subsidiary of SEI
Corporation which also controls the distributor of the Registrant, SEI Financial
Services Company, and other corporations engaged in providing various financial
and record keeping services, primarily to bank trust departments, pension plan
sponsors, and investment managers.
Item 26. Number of Holders of Securities:
As of July 19, 1996:
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
Units of beneficial interest, without par value-
TRUST SHARES
Prime Quality Money Market Fund............................................11
U.S. Government Securities Money Market Fund...............................5
Tax-Exempt Money Market Fund...............................................5
Investment Grade Bond Fund.................................................6
Investment Grade Tax-Exempt Bond Fund......................................5
Capital Growth Fund........................................................9
Value Income Stock Fund....................................................8
Short-Term Bond Fund.......................................................6
Short-Term U.S. Treasury Securities Fund...................................6
Sunbelt Equity Fund........................................................6
Balanced Fund..............................................................6
Mid-Cap Equity Fund........................................................6
Florida Tax-Exempt Bond Fund...............................................6
Georgia Tax-Exempt Bond Fund...............................................6
Tennessee Tax-Exempt Bond Fund.............................................6
U.S. Government Securities Fund............................................6
Limited-Term Federal Mortgage Securities Fund..............................6
International Equity Index Fund............................................5
International Equity Fund..................................................7
INVESTOR SHARES
Prime Quality Money Market Fund............................................1,022
U.S. Government Securities Money Market Fund...............................477
Tax-Exempt Money Market Fund...............................................309
Investment Grade Bond Fund.................................................1,535
C-2
<PAGE>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
Investment Grade Tax-Exempt Bond Fund......................................981
Capital Growth Fund........................................................9,043
Value Income Stock Fund....................................................5,459
Short-Term Bond Fund.......................................................86
Short-Term U.S. Treasury Securities Fund...................................103
Sunbelt Equity Fund........................................................1,871
Balanced Fund..............................................................299
Mid-Cap Equity Fund........................................................1,063
Florida Tax-Exempt Bond Fund...............................................92
Georgia Tax-Exempt Bond Fund...............................................74
Tennessee Tax-Exempt Bond Fund.............................................33
U.S. Government Securities Fund............................................37
Limited-Term Federal Mortgage Securities Fund..............................48
International Equity Index Fund............................................486
International Equity Fund..................................................190
FLEX SHARES
Investment Grade Bond Fund.................................................292
Investment Grade Tax-Exempt Bond Fund......................................148
Capital Growth Fund........................................................1,071
Value Income Stock Fund....................................................1,808
Short-Term Bond Fund.......................................................42
Short-Term U.S. Treasury Securities Fund...................................65
Sunbelt Equity Fund........................................................325
Balanced Fund..............................................................191
Mid-Cap Equity Fund........................................................514
Florida Tax-Exempt Bond Fund...............................................72
Georgia Tax-Exempt Bond Fund...............................................89
Tennessee Tax-Exempt Bond Fund.............................................40
U.S. Government Securities Fund............................................124
Limited-Term Federal Mortgage Securities Fund..............................72
International Equity Index Fund............................................108
International Equity Fund..................................................146
C-3
<PAGE>
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 28. Business and Other Connections of Investment Advisors:
Other business, profession, vocation, or employment of a substantial nature
in which each director or principal officer of each Advisor is or has been, at
any time during the last two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner or trustee are as follows:
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
STI CAPITAL MANAGEMENT, N.A.
E. Jenner Wood III -- --
Director
Hunting F. Deutsch -- --
Director
Anthony R. Gray -- --
Chairman & Chief Investment
Officer
James R. Wood -- --
President
Daniel Jaworski -- --
C-4
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
Senior Vice President
Elliott A. Perny -- --
Executive Vice President
& Chief Portfolio Manager
Stuart F. Van Arsdale -- --
Senior Vice President
Jonathan D. Rich -- --
Director
Robert Buhrmann -- --
Senior Vice President
Larry M. Cole -- --
Senior Vice President
L. Earl Denney -- --
Executive Vice President
Thomas A. Edgar -- --
Senior Vice President
Daniel G. Shannon -- --
Senior Vice President
Ronald Schwartz -- --
Senior Vice President
Ryan R. Burrow Catalina Lighting Director/25% owner
Senior Vice President
Mills A. Riddick -- --
Senior Vice President
Christopher A. Jones -- --
C-5
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
Senior Vice President
David E. West -- --
Vice President
The list required by this Item 28 of officers and directors of Trusco Capital
Management, Inc., together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV, filed by Trusco Capital Management, Inc.
pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-23163).
SUNTRUST BANK
CHATTANOOGA, N.A.
Paul K. Brock, Jr. Brock Candy Company Vice President -
Director Special Projects
J. Harold Chandler Provident Life & Accident President & CEO
Director Insurance Co.
William H. Chapin See Rock City, Inc. President
Director
John W. Clay, Jr. Third National Corporation Chairman &
Director CEO
Andrew G. Cope The Johnston Company Managing Partner
Director
Robert P. Corker, Jr. -- --
Director
John B. Crimmins, Jr. -- --
Director
J.H. Davenport, III Howard Holdings, Inc. President
Director
Edwin B. Duckett, Jr. -- --
Director
C-6
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
R. Alton Duke, Jr. -- --
Director
Daniel K. Frierson Dixie Yarns, Inc. Chairman & CEO
Director
Zan Guerry Chattem, Inc. Chairman & CEO
Director
James L.E. Hill The Tennessee Aquarium President
Director
Summerfield K. Johnston, Jr. Coca Cola Enterprises, Inc. Vice Chairman & CEO
Director
Robert C. Jones Southern Products Chairman
Director Company, Inc.
James D. Kennedy, Jr. Cherokee Warehouses, Inc. Chairman
Director
T. A. Lupton, Jr. Stone Fort Land Company President
Director
Hugh O. Maclellen, Jr. Provident Life & Accident Chairman - Executive
Director Insurance Co. Committee
Jack C. McKee McKee Baking Company Executive Vice
Director President
Charles G. Mills Olan Mills Incorporated Chairman - Executive
Director Committee
J. Woodley Murphy E.I. DuPont de Nemours Plant Manager
Director & Co.
L. Harlen Painter Bell & Associates Attorney-at-Law
Director
C-7
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
Scott L. Probasco, Jr. American National Bank & Chairman - Executive
Director Trust Co. Committee
Robert J. Sudderth, Jr. American National Bank & Chairman & CEO
Director Trust Co.
Winston W. Walker -- --
Director
SUNTRUST BANK, ATLANTA N.A.
Gaylord O. Coan Gold Kist, Inc. President & CEO
Director Hindsight Corp. Director
A.D. Correll Georgia-Pacific Corporation President & CEO
Director
R.W. Courts, II Atlantic Realty Company President
Director
Ronald S. Crowding -- --
A.W. Dahlberg The Southern Company President
Director
William W. Gaston Gaston & Gaston General Partner
Director Gaston Development Co., Inc. President
Charles B. Ginden -- --
Director
Roberto C. Goizueta The Coca-Cola Company Chairman of the
Director Board
Edward P. Gould Trust Company of Georgia Chairman of the
Director Board
T. Marshall Hahn, Jr. Georgia-Pacific Honorary Chairman
Director Corporation
C-8
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
Jesse Hill, Jr. Atlanta Life Insurance President
Director Company
L. Phillip Humann SunTrust Banks, Inc. President &
Director Services Resources Treasurer
Corporation
William B. Johnson The Ritz Carlton Hotel Chairman of the
Director Company Board
Hicks J. Lanier Oxford Industries, Inc. Chairman of the
Director Board & President
Pinehill Development Co. 30% owner
Joseph L. Lanier, Jr. Dan River, Inc. Chairman of the
Director Board
Braelan Group Chairman
Robert R. Long Trust Company Bank President
Director
Arthur L. Montgomery -- --
Director
H.G. Patillo Patillo Construction Chairman of the
Director Company Board
Larry L. Prince Genuine Parts Company Chairman of the
Director Board
R. Randall Rollins Rollins, Inc. Chairman of the
Director Board
Lor, Inc. Director
Maran, Inc. Director
Gutterworld, Inc. Director
Dabora, Inc. Director & Secretary
Simpson, Nance & Graham Director
Auto Parts Wholesale, Inc. Director
Global Expanded Metal, Inc. Director
Rollins Holding Co. Director
C-9
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
Rol, Ltd. Partner
Rollins Investment Fund Partner
Energy Partners Partner
Petro Partnership Partner
The Piedmont Investment Group Director
WRG, Ltd. Partner
Rollins, Inc. Chairman
RPC Energy Services, Inc. Chairman
The Mul Company Partner
Bugvac, Inc. Director
Omnitron Int'l, Inc. Director
MRG, Ltd. Partner
Robert W. Scherer -- --
Director
Charles R. Shufeldt -- --
Executive Vice President
Donald Wayne Thurmond -- --
Senior Vice President
James B. Williams SunTrust Banks, Inc. Chairman of the
Director Board
Gerald T. Adams -- --
Senior Vice President
James R. Albach -- --
Group Vice President
Virginia D. Anderson -- --
Assistant Vice President
Christina Bird -- --
First Vice President
C-10
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
Edward Burgess -- --
Vice President
Gay Cash -- --
Vice President
Krista Lee Cosgrove -- --
Trust Officer
Mark Elam -- --
Vice President
Joseph B. Foley, Jr. -- --
First Vice President
Thomas R. Frisbie -- --
Group Vice President
Molly Guenther -- --
Assistant Vice President
Benjamin S. Harris -- --
Vice President
Jethro H. Irby, III -- --
First Vice President
V. Jere Koser -- --
Group Vice President
Richard A. Makepeace -- --
Assistant Vice President
Sally S. McKinley -- --
Assistant Vice President
James B. Murphy, III -- --
Vice President
C-11
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
James E. Russell -- --
Vice President
Mark Stancil -- --
Assistant Vice President
David E. Thompson -- --
Vice President
Charles C. Watson -- --
Group Vice President
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently
distributing the securities of the Registrant also acts as a
principal underwriter, distributor or investment adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"),
acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds-Registered Trademark- June 1, 1993
C-12
<PAGE>
The PBHG Funds, Inc. July 16, 1993
Marquis Funds-Registered Trademark- August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
Inventor Funds, Inc. August 1, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
Turner Funds April 30, 1996
SFS provides numerous financial services to investment managers,
pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution,
clearing and settlement of securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with
respect to each director, officer or partner of each principal
underwriter named in the answer to Item 21 of Part B. Unless
otherwise noted, the business address of each director or officer
is 680 East Swedesford Road, Wayne, Pennsylvania 19087.
Positions and Position and
Offices Offices
NAME WITH UNDERWRITER WITH REGISTRANT
Alfred P. West, Jr. Director, Chairman & Chief --
Executive Officer
Henry H. Greer Director, President & Chief --
Operating Officer
Carmen V. Romeo Director, Executive Vice President
& Treasurer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, --
President-Investment
Services Division
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
David G. Lee Senior Vice President President & Chief
Executive Officer
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
C-13
<PAGE>
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Vice President &
Counsel & Secretary Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Aller Vice President --
Steve Bendinelli Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President &
Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President &
Assistant Secretary
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President and Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Larry Hutchison Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President and Team Leader --
Vicki Malloy Vice President and Team Leader --
Jack May Vice President --
Carolyn McLaurin Vice President & Managing Director --
Barbara Moore Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President &
Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President &
Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Vice President &
Assistant Secretary
Wayne M. Withrow Vice President & Managing Director --
C-14
<PAGE>
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8);
(12); and 31a-1(d), the required books and records are maintained at the offices
of Registrant's Custodians:
C-15
<PAGE>
SunTrust Bank, Atlanta, N.A.
Park Place
P.O. Box 105504
Atlanta, Georgia 30348
Union Bank of California (INTERNATIONAL EQUITY INDEX FUND ONLY)
475 Sansome Street
Suite 1200
San Francisco, California 94111
Bank of New York (INTERNATIONAL EQUITY FUND ONLY)
One Wall Street
New York, New York
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's Administrator:
SEI Financial Management Corporation
680 E. Swedesford Road
Wayne, Pennsylvania 19087
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Advisor:
STI Capital Management, N.A.
P.O. Box 3808
Orlando, Florida 32802
Trusco Capital Management
50 Hurt Plaza, Suite 1400
Atlanta, Georgia 30303
SunTrust Bank, Chattanooga
736 Market Street
Chattanooga, Tennessee 37402
SunTrust Bank, Atlanta N.A.
25 Park Place
Atlanta, Georgia 30303
Item 31. Management Services: None.
C-16
<PAGE>
Item 32. Undertakings:
Registrant hereby undertakes that whenever Shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Trustees of their desire to communicate with Shareholders of the Trust,
the Trustees will inform such Shareholders as to the approximate number of
Shareholders of record and the approximate costs of mailing or afford said
Shareholders access to a list of Shareholders.
Registrant undertakes to call a meeting of Shareholders for the purpose of
voting upon the question of removal of a Trustee(s) when requested in writing to
do so by the holders of at least 10% of Registrant's outstanding shares and in
connection with such meetings to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to Shareholder communications.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to Shareholders,
upon request and without a charge.
C-17
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for STI Classic Funds is
on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustees
as trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
C-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Securities
Act") and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Registration Statement No. 33-45671 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Wayne,
Commonwealth of Pennsylvania on the 29th day of July, 1996.
By: /S/ David G. Lee
---------------------------------------------------
David G. Lee, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacity on the dates indicated.
* Trustee July 29, 1996
- ----------------------------
F. Wendell Gooch
* Trustee July 29, 1996
- ----------------------------
Daniel S. Goodrum
* Trustee July 29, 1996
- ----------------------------
Jesse S. Hall
* Trustee July 29, 1996
- ----------------------------
Wilton Looney
* Trustee July 29, 1996
- ----------------------------
Champney A. McNair
* Trustee July 29, 1996
- ----------------------------
T. Gordy Germany
* Trustee July 29, 1996
- ----------------------------
Bernard F. Sliger
/S/ Stephen G. Meyer Controller & Chief July 29, 1996
Financial Officer
- ----------------------------
Stephen G. Meyer
/S/ David G. Lee President & Chief July 29, 1996
- ---------------------------- Executive Officer
David G. Lee
* By: /S/ David G. Lee
- ----------------------------
David G. Lee,
As Power of Attorney
C-19
<PAGE>
EXHIBIT INDEX
Number Exhibit Page
- --------------------------------------------------------------------------------
EX-99.B1 Declaration of Trust*
EX-99.B2 By-Laws*
EX-99.B5B Investment Advisory Agreements with:
SunBank Capital Management, N.A.
Trusco Capital Management, Inc.
Trust Company Bank
EX-99.B5C Revised Investment Advisory Agreement with Trusco Capital
Management*
EX-99.B5D Investment Advisory Agreement with American National Bank
and Trust Company*
EX-99.B5E Investment Advisory Agreement with Trust Company Bank*
EX-99.B6 Distribution Agreement*
EX-99.B8A Custodian Agreement with the Bank of California relating to
International Equity Index Fund*
EX-99.B8B Custodian Agreement with Trust Company Bank dated February 1,
1995*
EX-99.B8C Transfer Agent Agreement with Federated Services Company,
dated May 14, 1994*
EX-99.B9A Administration Agreement with SEI Financial Management
Corporation dated May 29, 1995*
EX-99.B10 Opinion and Consent of Counsel (Incorporated by reference
to Pre-Effective Amendment No. 2 filed May 22, 1992)
EX-99.B11 Consent of Independent Public Accountants *
EX-99.B15 Distribution Plan - Investor Class*
EX-99.B15A Distribution and Service Agreement relating to Flex Shares
dated May 29, 1995*
EX-99.B16 Performance Quotation Computation (Incorporated by reference
to Post-Effective Amendment No. 9 filed September 22, 1994)
EX-99.B18 Rule 18f-3 Plan*
EX-99.B24 Powers of Attorney*
EX-27 Financial Data Schedules
*FILED HEREWITH.
<PAGE>
EXHIBIT 1
STI CLASSIC FUNDS
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST dated the 15th day of January, 1992, by
the Trustees hereunder, and by the holders of Shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
Shares in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
NAME
SECTION 1. This Trust shall be known as ST Classic Funds, and the Trustees
shall conduct the business of the Trust under that name or any other name as
they may from time to time determine.
<PAGE>
DEFINITIONS
SECTION 2. Whenever used herein, unless otherwise required by the context
or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary association
established by this Agreement and Declaration of Trust, as amended
from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV and then in office;
(c) The term "Shares" refers to units of beneficial interest in the
assets, or in specified assets, of the Trust;
(d) "Shareholder" means a record owner of Shares;
(e) The terms "Affiliated Person," "Assignment," "Commission," "Interested
Person," "Principal Underwriter" and "Majority Shareholder Vote" (the
67% or 50% requirement of the third sentence of Section 2(a) (42) of
the Investment Company Act of 1940 (the "1940 Act") and the Rules and
Regulations thereunder, all as amended from time to time, whichever
may be applicable) shall have the meanings given them in the 1940 Act;
(f) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time; and
(g) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time;
(h) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
ARTICLE II
PURPOSE
The purpose of the Trust is to provide investors with one or more
investment portfolio(s) consisting primarily of securities, including debt
instruments or obligations.
2
<PAGE>
ARTICLE III
SHARES
DIVISION OF BENEFICIAL INTEREST
SECTION 1. The Trustees may divide the beneficial interest in the Trust
into an unlimited number of Shares and authorize the issuance of Shares without
prior Shareholder approval. Shares may be issued in series and, if so, Shares of
any series will constitute units of beneficial interest in assets of the Trust
specifically allocated to such series. Shares of the Trust, or any series
thereof, shall have no par value; shall represent equal and proportionate
interests in the Trust, or such series, with none having priority or preference
over any other except as specifically set forth in this Article III: and shall
be transferable. Shares of the Trust or of any series may be divided into
classes with Shares of any class being identical to those of any other class of
the Trust or such series except insofar as the Trustees may, consistent with the
1940 Act and other applicable law, allocate certain expenses to particular
classes of the Trust or a series thereof, and may provide for separate voting by
holders of securities of a class on matters affecting solely that class as
prescribed in Article V hereof.
OWNERSHIP OF SHARES
SECTION 2. The ownership of Shares shall be recorded on the books of the
Trust or its transfer or similar agent. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any transfer or similar
agent of the Trust, as the case may be, shall be conclusive as to who are the
Shareholders of each series and as to the number of Shares of each series held
from time to time by each Shareholder.
INVESTMENTS IN THE TRUST; ASSETS OF THE SERIES
SECTION 3. The Trustees may accept investments in the Trust from such
persons and on such terms and, subject to any requirements of law, for such
consideration, which may consist of cash or tangible or intangible property or a
combination thereof, as they may from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares of
each series, together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the series of Shares
with respect to which the same were received
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by the Trust for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of account of the Trust and are herein
referred to as "assets of" such series. In addition, any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular series shall be allocated
by the Trustees between and among one or more of the series in such manner as
they, in their sole discretion, deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all series for all
purposes, and shall be referred to as assets belonging to that series.
NO PREEMPTIVE RIGHTS
SECTION 4. Shareholders shall have no preemptive or other right to
receive, purchase or subscribe for any additional Shares or other securities
issued by the Trust.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
SECTION 5. Shares shall be deemed to be personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having become
a Shareholder shall be held to have expressly assented and agreed to the terms
of this Declaration of Trust and to have become a party thereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the same nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said descendent under this Trust. Ownership
of Shares shall not entitle the Shareholder to any title in or to the whole or
any part of the Trust property or right to call for a partition or division of
the same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholder, nor, except as specifically provided herein, to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
SECTION 6. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of Shares of the Trust to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may issue and sell or cause to be
issued and sold Shares to and buy such Shares from any such person of any firm
or company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all subject to
any restrictions which may be contained in the By-Laws.
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ARTICLE IV
THE TRUSTEES
ELECTION
SECTION 1. A Trustee may be elected either by the Trustees or the
Shareholders subject to the limitations of the 1940 Act. The number of Trustees
shall be fixed by the Trustees, except that, commencing with the first
shareholder meeting at which Trustees are elected, there shall be not less than
three nor more than fifteen Trustees, each of whom shall hold office during the
lifetime of this Trust or until the election and qualification of his or her
successor, or until he or she sooner dies, resigns or is removed. The number of
Trustees so fixed may be increased either by the Shareholders or by the Trustees
by a vote of a majority of the Trustees then in office. The number of Trustees
so fixed may be decreased either by the Shareholders or by the Trustees by vote
of a majority of the Trustees then in office, but only to eliminate vacancies
existing by reason of the death, resignation or removal of one or more Trustees.
The initial Trustees, each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or her successor is
elected and qualified, or until he or she sooner dies, resigns or is removed,
shall be Carl A. Guarino and such other persons as the Trustee or Trustees then
in office shall, prior to any sale of Shares pursuant to public offering,
appoint. By vote of the Shareholders holding a majority of the shares entitled
to vote, the Shareholders may remove a Trustee with or without cause. By vote of
a majority of the Trustees then in office, the Trustees may remove a Trustee.
Any Trustee may resign at any time by written instrument signed by him and
delivered to any officer of the Trust, to each other Trustee or to a meeting of
the Trustees. Such resignation shall be effective upon receipt unless specified
to be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal. Any
Trustee may, but need not, be a Shareholder.
In case of the declination, death, resignation, retirement, removal,
incapacity, or inability of any of the Trustees, or in case a vacancy shall
exist by reason of an increase in number, or for any other reason, the remaining
Trustees shall fill such vacancy by appointing such other person as they in
their discretion shall see fit consistent with the limitations under the 1940
Act. Such appointment shall be evidenced by a written instrument signed by a
majority of the Trustees in office or by recording in the records of the Trust,
whereupon the appointment shall take effect. An appointment of a Trustee may be
made by the Trustees then in office in anticipation of a vacancy to occur by
reason of retirement, resignation or increase in number of Trustees effective at
a later date, provided that said appointment shall become effective only at or
after the effective
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date of said retirement, resignation or increase in number of Trustees. As soon
as any Trustee so appointed shall have accepted this trust, the trust estate
shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he shall be deemed a
Trustee hereunder. The power of appointment is subject to the provisions of
Section 16(a) of the 1940 Act. In the event that at any time after the
commencement of public sales of Trust Shares less than a majority of the
Trustees then holding office were elected to such office by the Shareholders,
the Trustees or the Trust's President promptly shall call a meeting of
Shareholders for the purpose of electing Trustees. Each Trustee elected by the
Shareholders or by the Trustees shall serve until the election or qualification
of his or her successor, or until he or she sooner dies, resigns or is removed.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
SECTION 2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
POWERS
SECTION 3. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and they shall have all
powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with
this Declaration of Trust providing for the conduct of the business of the Trust
and may amend and repeal them to the extent that such By-Laws do not reserve
that right to the Shareholders; they may fill vacancies in their number,
including vacancies resulting from increases in their number, and may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate; they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session, exercise some or all
of the powers and authority of the Trustees as the Trustees may determine; they
may appoint an advisory board, the members of which shall not be Trustees and
need not be Shareholders; they may employ one or more investment advisers or
administrators as provided in Section 7 of this Article IV; they may employ one
or more custodians of the assets of the trust and may authorize such custodians
to employ subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities, retain a transfer
agent or a Shareholder servicing agent, or both, provide for the distribution of
Shares by the Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider desirable to
any officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter; and they may
elect and remove such officers and appoint and terminate such agents as they
consider appropriate.
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Without limiting the foregoing, the Trustees shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on
and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with respect
to stock or other securities or property, and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall
deem proper;
(d) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the name of
the Trustees or of the Trust or in the name of a custodian, subcustodian or
other depositary or a nominee or nominees or otherwise;
(f) To establish separate and distinct series of shares with separately defined
investment objectives, policies and purposes, and to allocate assets,
liabilities and expenses of the Trust to a particular series of Shares or
to apportion the same among two or more series, provided that any liability
or expense incurred by a particular series of Shares shall be payable
solely out of the assets of that series and to establish separate classes
of shares of each series, all in accordance with Article III hereof;
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property of which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any security held
in the Trust;
(h) To loin with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or transferred)
as the Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
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(i) To compromise, arbitrate or otherwise adjust claims in favor of or against
the Trust or any matter in controversy, including but not limited to claims
for taxes;
(j) To enter into joint ventures, general or limited partnerships and any other
combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or other obligations of
any person; to make contracts of guaranty or suretyship, or otherwise
assume liability for payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any or all of such obligations;
(m) To purchase and pay for entirely out of Trust property such insurance as
they may deem necessary or appropriate for the conduct of the business,
including, without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers or administrators,
principal underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such
person as Shareholder, Trustee, officer, employee, agent, investment
adviser or administrator, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify such
person against such liability;
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the trustees,
officers, employees and agents of the Trust;
(o) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving notice
to such Shareholder;
(p) To enter into contracts of any kind and description;
(q) To name, or to change the name or designation of the Trust or any series or
class of the Trust;
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(r) To take whatever action may be necessary to enable the Trust to comply with
any applicable Federal, state or local statute, rule or regulation; and
(s) To engage in any other lawful act or activity in which corporations
organized under the Massachusetts Business Corporation Law may engage.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as otherwise
provided herein or from time to time in the By-Laws, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (if a quorum be present), within or without Massachusetts, including
any meeting held by means of a conference telephone or other communications
equipment by which all persons participating in the meeting can communicate with
each other simultaneously and participation by such means shall constitute
presence in person at a meeting, or by written consent of a majority of the
Trustees then in office.
PAYMENT OF EXPENSES BY THE TRUST
SECTION 4. The Trustees are authorized to pay or to cause to be paid out
of the principal or income of the Trust, or partly out of principal and partly
out of income, as they deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust or in connection
with the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, investment adviser or administrator, principal underwriter,
auditor, counsel, custodian, transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other expenses and charges
as the Trustees may deem necessary or proper to incur, provided, however, that
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with a particular series of Shares or class as determined by the
Trustees consistent with applicable law, shall be payable solely out of the
assets of that series or class. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular series shall be allocated and charged by the Trustees between
or among any one or more of the series in such manner as the Trustees in their
sole discretion deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all series for all purposes. Any
creditor of any series may look only to the assets of that series to satisfy
such creditor's debt.
SECTION 5. The Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder to pay directly, in advance or arrears, for
any and all expenses of the Trust, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.
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OWNERSHIP OF ASSETS OF THE TRUST
SECTION 6. Title to all of the assets of each series of Shares and the
Trust shall at all times be considered as vested in the Trustees.
ADVISORY, ADMINISTRATION AND DISTRIBUTION
SECTION 7. The Trustees may, at any time and from time to time, contract
with respect to the Trust or any series thereof for exclusive or nonexclusive
advisory and/or administration services with SunBank Capital Management, N.A.,
Trusco Capital Management, Trust Company Bank, SEI Financial Management
Corporation, a Delaware corporation, and/or any other corporation, trust,
association or other organization, every such contract: to comply with such
requirements and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine, including, without
limitation, in the case of a contract for advisory or sub-advisory services,
authority to determine from time to time what investments shall be purchased,
held, sold or exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's investments. Any
contract for advisory services shall be subject to such Shareholder approval as
is required by the 1940 Act. The Trustees may also, at any time and from time to
time, contract with SEI Financial Services Company, a Pennsylvania corporation,
and/or any other corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or principal underwriter for
the Shares, every such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws, and any such contract may
contain such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, adviser,
principal underwriter, or distributor or agent of or for any
corporation, trust, association, or other organization, or of or for
any parent or affiliate of any organization, with which an advisory or
administration or principal underwriter's or distributor's contract,
or transfer, Shareholder servicing or other agency contract may have
been or may hereafter be made, or that any such organization, or any
parent or affiliate thereof, is a Shareholder or has an interest in
the Trust, or that
(ii) any corporation, trust, association or other organization with which
an advisory or administration or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or administration contract,
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or principal underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has
other businesses or interests, shall not affect the validity of any
such contract or disqualify any Shareholder, Trustee or officer of
the Trust from voting upon or executing the same or create any
liability or accountability to the Trust or its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
SECTION 1. The Shareholders shall have power to vote only (i) for the
election or removal of Trustees as provided in Article IV, Section 1, (ii) with
respect to any investment adviser as provided in Article IV, Section 7, (iii)
with respect to any termination of the Trust or any series to the extent and as
provided in Article IX, Section 4, (iv) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX, Section 7, (v)
to the same extent as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by law, by this Declaration of Trust, by the
By-Laws or by any registration of the Trust with the Securities and Exchange
Commission or any state, or as the Trustees may consider necessary or desirable.
Each whole Share shall be entitled to one vote as to any matter on which
it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. Notwithstanding any other provisions of this
Declaration of Trust, or any matter submitted to a vote of Shareholders, all
Shares of the Trust then entitled to vote shall be voted by individual series or
class, except (1) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual series or class, and (2) when the Trustees have
determined that the matter affects only the interests of one or more series or
class, then only Shareholders of such series or class shall be entitled to vote
thereon. There shall be no cumulative voting in the election of Trustees. Shares
may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to the exercise
of the proxy the Trust receives a specific written notice to the contrary from
any one of them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless
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challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or the By-Laws to be taken by Shareholders.
VOTING POWER AND MEETINGS
SECTION 2. Meetings of Shareholders of the Trust or of any series or class
may be called by the Trustees, or such other person or persons as may be
specified in the By-Laws, and held from time to time for the purpose of taking
action upon any matter requiring the vote or the authority of the Shareholders
of the Trust or any series or class as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. If the Trustees
shall fail to call or give notice of any meeting of Shareholders for a period of
thirty days after written application by Shareholders holding at least 25% of
the Shares then outstanding requesting a meeting to be called for a purpose
requiring action by the Shareholders as provided herein or in the By-Laws, then
Shareholders holding at least 25% of the Shares then outstanding may call and
give notice of such meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the Trustees. Notice of a
meeting need not be given to any Shareholder if a written waiver of notice,
executed by him or her before or after the meeting, is filed with the records of
the meeting, or to any Shareholder who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him or her.
QUORUM AND REQUIRED VOTE
SECTION 3. A majority of the Shares entitled to vote shall be a quorum for
the transaction of business at a Shareholders' meeting, except that where any
provision of law or of this Declaration of Trust permits or requires that
holders of any series or class shall vote as a series or class, then a majority
of the aggregate number of Shares of that series or class entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
series or class. Any lesser number, however, shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice.
Except when a larger vote is required by any provisions of this
Declaration of Trust or the By-Laws, a majority of the Shares voted on any
matter shall decide such matter and a plurality shall elect a Trustee, provided
that where any provision of law or of this Declaration of Trust permits or
requires that the holders of any series or class shall vote
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as a series or class, then a majority of the Shares of that series or class
voted on the matter shall decide that matter insofar as that series or class
is concerned.
ACTION BY WRITTEN CONSENT
SECTION 4. Any action taken by Shareholders may be taken without a meeting
if a majority of Shareholders entitled to vote on the matter (or such larger
vote as shall be required by any provision of this Declaration of Trust or the
By-Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ADDITIONAL PROVISIONS
SECTION 5. The By-Laws may include further provisions for Shareholders'
votes and meetings and related matters.
ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS, REPURCHASES
AND DETERMINATION OF NET ASSET VALUE
DISTRIBUTIONS
SECTION 1. The Trustees may, but need not, distribute each year to the
Shareholders of each series such income and gains, accrued or realized, as the
Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices. The Trustees shall have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.
Distributions of each year's income of each series, if any be made, may be made
in one or more payments, which shall be in Shares, in cash or otherwise and on a
date or dates determined by the Trustees. At any time and from time to time in
their discretion, the Trustees may distribute to the Shareholders of any one or
more series as of a record date or dates determined by the Trustees, in shares,
in cash or otherwise, all or part of any gains realized on the sale or
disposition of property of the series or otherwise, or all or part of any other
principal of the Trust attributable to the series. Each distribution pursuant to
this Section 1 shall be made ratably according to the number of Shares of the
series or class held by the several Shareholders on the applicable record date
thereof, provided that no distributions need be made on Shares purchased
pursuant to orders received, or for which payment is made, after such time or
times as the
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Trustees may determine. Any such distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with this Declaration
of Trust.
REDEMPTIONS AND REPURCHASES
SECTION 2. Any holder of Shares of the Trust may, by presentation of a
written request, together with his certificates, if any, for such Shares, in
proper form for transfer, at the office of the Trust, the adviser, the
underwriter or the distributors, or at a principal office of a transfer or
Shareholder services agent appointed by the Trust (as the Trustees may
determine), redeem his Shares for the net asset value thereof determined and
computed in accordance with the provisions of this Section 2, less any
redemption charge which the Trustees may establish. Upon receipt of such written
request for redemption of Shares by the Trust, the adviser, the underwriter or
the distributor, or the Trust's transfer or Shareholder services agent, such
Shares shall be redeemed at the net asset value per share of the particular
series next determined after such Shares are tendered in proper form for
transfer to the Trust or determined as of such other time fixed by the Trustees,
as may be permitted or required by the 1940 Act, provided that no such tender
shall be required in the case of Shares for which a certificate or certificates
have not been issued, and in such case such Shares shall be redeemed at the net
asset value per share of the particular series next determined after such demand
has been received or determined at such other time fixed by the Trustees, as may
be determined or required by the 1940 Act.
The obligation of the Trust to redeem its Shares of each series as set
forth above in this Section 2 shall be subject to the condition that, during any
time of emergency, as hereinafter defined, such obligation may be suspended by
the Trust by or under authority of the Trustees for such period or periods
during such time of emergency as shall be determined by or under authority of
the Trustees. If there is such a suspension, any Shareholder may withdraw any
demand for redemption and any tender of Shares which has been received by the
Trust during any such period and any tender of Shares the applicable net asset
value of which would but for such suspension be calculated as of a time during
such period. Upon such withdrawal, the Trust shall return to the Shareholder the
certificates therefor, if any. For the purposes of any such suspension "time of
emergency" shall mean, either with respect to all Shares or any series of
Shares, any period during which:
(a) the New York Stock Exchange is closed other than for customary weekend
and holiday closings; or
(b) the Trustees or authorized officers of the Trust shall have
determined, in compliance with any applicable rules and regulations or
orders of the Commission, either that trading on the New York Stock
Exchange is restricted, or that an emergency exists as a result of
which (i) disposal by the Trust of securities owned by it is not
reasonably practicable or (ii) it is
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not reasonably practicable for the Trust fairly to determine the
current value of its net assets; or
(c) the suspension or postponement of such obligations is permitted by
order of the Commission.
The Trust may also purchase, repurchase or redeem Shares in accordance
with such other methods, upon such other terms and subject to such other
conditions as the Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
PAYMENT IN KIND
SECTION 3. Subject to any generally applicable limitation imposed by the
Trustees, any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or partly in kind,
instead of in cash. Such payment in kind shall be made by distributing
securities or other property, constituting, in the opinion of the Trustees, a
fair representation of the various types of securities and other property then
held by the series of Shares being redeemed, purchased or repurchased (but not
necessarily involving a portion of each of the series' holdings) and taken at
their value used in determining the net asset value of the Shares in respect of
which payment is made.
ADDITIONAL PROVISIONS RELATING TO REDEMPTIONS AND REPURCHASES
SECTION 4. The completion of redemption, purchase or repurchase of Shares
shall constitute a full discharge of the Trust and the Trustees with respect to
such Shares and the Trustees may require that any certificate or certificates
issued by the Trust to evidence the ownership of such Shares shall be
surrendered to the Trustees for cancellation or notation.
DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES
SECTION 5. No dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Shares of any series shall be
effected by the Trust other than from the assets of such series.
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ARTICLE VII
COMPENSATION AND LIMITATION
OF LIABILITY OF TRUSTEES
COMPENSATION
SECTION 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, administration, legal, accounting, investment banking or other
services and payment for the same by the Trust.
LIMITATION OF LIABILITY
SECTION 2. The Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent, employee, investment
adviser or administrator, principal underwriter or custodian, nor shall any
Trustee be responsible for the act or omission of any other Trustee, but nothing
herein contained shall protect any Trustee against any liability to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office.
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his or her capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
INDEMNIFICATION
Subject to the exceptions and limitations contained in this Article, every
person who is, or has been, a Trustee or officer of the Trust shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a Trustee or officer and against amounts paid or incurred by him in
settlement thereof.
No indemnification shall be provided hereunder to a Trustee or officer:
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(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interests of the Trust;
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting
in a payment by a Trustee or officer, unless there has been either a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office by the court or other
body approving the settlement or other disposition or a reasonable
determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry) that he did not engage in such
conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification hereinafter provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be entitled,
shall continue as to a person who has ceased to be such Trustee or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Trustees and officers may be entitled by
contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in the next to the last
paragraph of this Article shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Article, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of
any such advances; or
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(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office
act on the matter) or independent legal counsel in a written opinion
shall determine, based upon a review of the readily available facts
(as opposed to a full trial-type inquiry), that there is reason to
believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Article, a "Disinterested Trustee" is one (i) who is not
an "interested person of the Trust (as defined by the 1940 Act) (including
anyone who has been exempted from being an "interested person:" by any rule,
regulation or order of the Securities and Exchange Commission), and (ii) against
whom none of such actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has been pending.
As used in this Article, the words "claim," "action," suit" or
"proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include without limitation, attorney's fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled to be
held harmless from and indemnified against all loss and expenses arising from
such liability, but only out of the assets of the particular series of Shares of
which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
SECTION 1. All persons extending credit to, contracting with or having any
claim against the Trust or a particular series of Shares shall look only to the
assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross
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negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts and shall recite that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or as officers or officer
and not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recital as he or
she or they may deem appropriate, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE; NO BOND OR SURETY
SECTION 2. The exercise by the Trustees of their powers and discretion
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES
SECTION 3. No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
DURATION AND TERMINATION OF TRUST
SECTION 4. Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by vote of
Shareholders holding at least a majority of the Shares entitled to vote or by
the Trustees by written notice to the Shareholders. Any series of Shares may be
terminated at any time by vote of Shareholders holding at least a majority of
the Shares of such series entitled to vote or by the Trustees by written notice
to the Shareholders of such series. Upon termination of the Trust or of any one
or more series of Shares, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated, of the
Trust or of the particular series as may be determined by the Trustees, the
Trust shall,
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in accordance with such procedures as the Trustees consider appropriate, reduce
the remaining assets to distributable form in cash or Shares or other
securities, or any combination thereof, and distribute the proceeds to the
Shareholders of the series involved, ratably according to the number of Shares
of such series held by the several Shareholders of such series on the date of
termination.
SECTION 5. The original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of the Commonwealth of Massachusetts and
with the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may rely
on certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such amendments. In this instrument and in such amendment, references to
this instrument, and the expression "herein," "hereof," and "hereunder" shall be
deemed to refer to this instrument as amended from time to time. Headings are
placed herein for convenience of reference only and shall not be taken as part
hereof or control or affect the meaning, construction or effect of this
instrument. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
APPLICABLE LAW
SECTION 6. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust. This
Declaration of Trust is to be governed by and construed and administered
according to the laws of said Commonwealth.
AMENDMENTS
SECTION 7. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when authorized
to do so by a vote of Shareholders holding a majority of the Shares entitled to
vote, except that an amendment which shall affect the holders of one or more
series or classes of Shares but not the holders of all outstanding series as
classes shall be authorized by vote of the Shareholders holding a majority of
the Shares entitled to vote of each series or classes affected and no vote of
Shareholders of a series or classes not affected shall be required. Amendments
having the purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
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IN WITNESS WHEREOF, the undersigned being the sole initial Trustee of the
Trust has executed this document this 15th day of January, 1992.
/s/
---------------------------------------------
c/o SEI Financial Services Company
680 E. Swedesford Road
Wayne, PA 19087
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COMMONWEALTH OF PENNSYLVANIA
COUNTY OF CHESTER
I, the undersigned authority, hereby certify that the foregoing is a true and
correct copy of the instrument presented to me by Carl A. Guarino as the
original of such instrument.
WITNESS my hand and official seal, this 15th day of January, 1992.
/s/ Christine M. McCann
---------------------------------------------
Notary Public
My commission expires: May 6, 1995
Resident Agent: CT Corporation, 2 Oliver Street, Boston, MA 02109 of the Trust
<PAGE>
BY-LAWS
OF
STI CLASSIC FUNDS
SECTION 1. AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to the
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of STI Classic Funds, a Massachusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall be
located in Boston, Massachusetts.
SECTION 2. SHAREHOLDERS
2.1 ANNUAL MEETING. The Trust will not hold annual meetings of the
shareholders.
2.2 SPECIAL MEETINGS. A special meeting of the shareholders may be called at
any time by the Trustees, by the president or, if the Trustees and the
president shall fail to call any meeting of shareholders for a period of
30 days after written application of one or more shareholders who hold at
least 10% of all shares issued and outstanding and entitled to vote at the
meeting, then such shareholders may call such meeting. Each call of a
meeting shall state the place, date, hour and purposes of the meeting.
2.3 PLACE OF MEETINGS. All meetings of the shareholders shall be held at such
place within the United States as shall be designated by the Trustees or
the president of the Trust.
2.4 NOTICE OF MEETINGS. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each shareholder entitled
to vote thereat by leaving such notice with him or at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to
such shareholder at his address as it appears in the records of the Trust.
Such notice shall be given by the secretary or an assistant secretary or by
an officer designated by the Trustees. No notice of any meeting of
shareholders need be given to a shareholder if a written waiver of notice,
executed before or after the meeting by such shareholder or his attorney
thereunto duly authorized, is filed with the records of the meeting.
2.5 BALLOTS. No ballot shall be required for any election unless requested by
a shareholder present or represented at the meeting and entitled to vote in
the election.
2.6 PROXIES. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted.
Unless otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such meeting but
shall not be valid after the final adjournment of such meeting.
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SECTION 3. TRUSTEES
3.1 COMMITTEES AND ADVISORY BOARD. The Trustees may appoint from their number
an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for conduct of its
business. The Trustees may appoint an advisory board to consist of not
less than two nor more than five members. The members of the advisory
board shall be compensated in such manner as the Trustees may determine and
shall confer with and advise the Trustees regarding the investments and
other affairs of the Trust. Each member of the advisory board shall hold
office until the first meeting of the Trustees following the next annual
meeting of the shareholders and until his successor is elected and
qualified, or until he sooner dies, resigns, is removed, or becomes
disqualified, or until the advisory board is sooner abolished by the
Trustees.
3.2 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A
regular meeting of the Trustees may be held without call or notice
immediately after and at the same place as the annual meeting of the
shareholders.
3.3 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any time
and at any place designated in the call of the meeting, when called by the
Chairman of the Board, the president or the treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the
secretary or an assistant secretary or by the officer or one of the
Trustees calling the meeting.
3.4 NOTICE. It shall be sufficient notice to a Trustee to send notice by mail
at least forty-eight hours or by telegram at least twenty-four hours before
the meeting addressed to the Trustee at his or her usual or last known
business or residence address or to give notice to him or her in person or
by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him
or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3.5 QUORUM. At any meeting of the Trustees one-third of the Trustees then in
office shall constitute a quorum; provided, however, a quorum shall not be
less than two. Any meeting may be adjourned from time to time by a
majority of the votes cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further notice.
SECTION 4. OFFICERS AND AGENTS
4.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
president, a treasurer, a secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint. The
Trust may also have such agents, if any, as the Trustees from time to time
may in their discretion appoint. Any officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by the same
person.
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4.2 POWERS. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
4.3 ELECTION. The president, the treasurer and the secretary shall be elected
annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time.
4.4 TENURE. The president, the treasurer and the secretary shall hold office
for a one year term and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each agent shall retain his or her authority at
the pleasure of the Trustees.
4.5 PRESIDENT AND VICE PRESIDENTS. The president shall be the chief executive
officer of the Trust. The president shall, subject to the control of the
Trustees, have general charge and supervision of the business of the Trust.
Any vice president shall have such duties and powers as shall be designated
from time to time by the Trustees.
4.6 CHAIRMAN OF THE BOARD. If a Chairman of the Board of Trustees is elected,
he shall have the duties and powers specified in these By-Laws and, except
as the Trustees shall otherwise determine, preside at all meetings of the
shareholders and of the Trustees at which he or she is present and have
such other duties and powers as may be determined by the Trustees.
4.7 TREASURER AND CONTROLLER. The treasurer shall be the chief financial
officer of the Trust and subject to any arrangement made by the Trustees
with a bank or trust company or other organization as custodian or transfer
or shareholder services agent, shall be in charge of its valuable papers
and shall have such other duties and powers as may be designated from time
to time by the Trustees or by the president. If at any time there shall be
no controller, the treasurer shall also be the chief accounting officer of
the Trust and shall have the duties and powers prescribed the Trust and
shall have the duties and powers prescribed herein for the controller. Any
assistant treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
The controller, if any be elected, shall be the chief accounting officer of
the Trust and shall be in charge of its books of account and accounting
records. The controller shall be responsible for preparation of financial
statements of the Trust and shall have such other duties and powers as may
be designated from time to time by the Trustees or the president.
4.8 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept
therefor, which books shall be kept at the principal office of the Trust.
In the absence of the secretary from any meeting of shareholders or Trustee
an assistant secretary, or if there be none or he or she is absent, a
temporary clerk chosen at the meeting shall record the proceedings thereof
in the aforesaid books.
SECTION 5. RESIGNATION AND REMOVALS
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of the Board, the
president, the treasurer or the secretary or to a meeting of
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the Trustees. The Trustees may remove any officer elected by them with or
without cause by the vote of a majority of the Trustees then in office. Except
to the extent expressly provided in a written agreement with the Trust, no
Trustee, officer, or advisory board member resigning, and no officer or advisory
board member removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on account
of such removal.
SECTION 6. VACANCIES
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the treasurer
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
SECTION 7. SHARES OF BENEFICIAL INTEREST
In lieu of issuing certificates for shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
beheld to have expressly assented and agreed to the terms hereof.
SECTION 8. RECORD DATE
The Trustees may fix in advance a time, which shall not be more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date.
SECTION 9. SEAL
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts", together with the name of
the Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
SECTION 10. EXECUTION OF PAPERS
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
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SECTION 11. FISCAL YEAR
The fiscal year of the Trust shall end on such date in each year as the Trustees
shall from time to time determine.
SECTION 12. PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS
12.1 DEALINGS WITH AFFILIATES. The Trust shall not purchase or retain
securities issued by any issuer if one or more of the holders of the
securities of such issuer or one or more of the officers or directors of
such issuer is an officer or Trustee of the Trust or officer or director of
any organization, association or corporation with which the Trust has an
investment adviser's contract ("investment adviser"), if to the knowledge
of the Trust one or more of such officers or Trustees of the Trust or such
officers or directors of such investment advisers owns beneficially more
than one-half of one percent of the shares or securities of such issuer and
such officers, Trustees and directors owning more than one half of one
percent of such shares or securities together own beneficially more than
five percent of such outstanding shares or securities. Each Trustee and
officer of the Trust shall give notice to the secretary of the identity of
all issuers whose securities are held by the Trust of which such officer or
Trustee owns as much as one-half of one percent of the outstanding
securities, and the Trust shall not be charged with the knowledge of such
holdings in the absence of receiving such notice if the Trust has requested
such information not less often than quarterly.
Subject to the provisions of the preceding paragraph, no officer, Trustee
or agent of the Trust and no officer, director or agent of any investment
adviser shall deal for or on behalf of the Trust with himself as principal
or agent, or with any partnership, association or corporation in which he
has a material financial interest; provided that the foregoing provisions
shall not prevent (a) officers and Trustees of the Trust from buying,
holding or selling shares in the Trust, or from being partners, officers or
directors of or financially interested in any investment adviser to the
Trust or in any corporation, firm or association which may at any time have
a distributor's or principal underwriter's contract with the Trust;
(b) purchases or sales of securities or other property if such transaction
is permitted by or is exempt or exempted from the provisions of the
Investment Company Act of 1940 or any Rule or Regulation thereunder and if
such transaction does not involve any commission or profit to any security
dealer who is, or one or more of whose partners, shareholders, officers or
directors is, an officer or Trustee of the Trust or an officer or director
of the investment adviser, administrator or principal underwriter of the
Trust; (c) employment of legal counsel, registrar, transfer agent,
shareholder services, dividend disbursing agent or custodian who is, or has
a partner, stockholder, officer or director who is, an officer or Trustee
of the Trust; (d) sharing statistical, research and management expenses,
including office hire and services, with any other company in which an
officer or Trustee of the Trust is an officer or director or financially
interested.
12.2 DEALING IN SECURITIES OF THE TRUST. The Trust, the investment adviser, any
corporation, firm or association which may at any time have an exclusive
distributor's or principal underwriter's contract with the Trust (the
"distributor") and the officers and Trustees of the Trust and officers and
directors of every investment adviser and distributor, shall not take long
or short positions in the securities of the Trust, except that:
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(a) the distributor may place orders with the Trust for its shares
equivalent to orders received by the distributor;
(b) shares of the Trust may be purchased at not less than net asset value
for investment by the investment adviser and by officers and directors
of the distributor, investment adviser, or the Trust and any trust,
pension, profit-sharing or other benefit plan for persons, no such
purchase to be in contravention of any application state or federal
requirement.
12.3 LIMITATION ON CERTAIN LOANS. The Trust shall not make loans to any
officer, Trustee or employee of the Trust or any investment adviser or
distributor or their respective officers, directors or partners or
employees.
12.4 CUSTODIAN. All securities and cash owned by the Trust shall be maintained
in the custody of one or more banks or trust companies having (according to
its last published report) not less than two million dollars ($2,000,000)
aggregate capital, surplus and undivided profits (any such bank or trust
company is hereinafter referred to as the "custodian"); provided, however,
the custodian may deliver securities as collateral on borrowings effected
by the Trust, provided, that such delivery shall be conditioned upon
receipt of the borrowed funds by the custodian except where additional
collateral is being pledged on an outstanding loan and the custodian may
deliver securities lent by the Trust against receipt of initial collateral
specified by the Trust. Subject to such rules, regulations and orders, if
any, as the Securities and Exchange Commission may adopt, the Trust may, or
may not permit any custodian to, deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
operated by the Federal Reserve Banks, or established by a national
securities exchange or national securities association registered with said
Commission under the Securities Exchange Act of 1934, or such other person
as may be permitted by said Commission, pursuant to which system all
securities of any particular class or series of any issue deposited with
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry, without physical delivery of such securities.
The Trust shall upon the resignation or inability to serve of its custodian
or upon change of the custodian:
(a) in the case of such resignation or inability to serve use its best
efforts to obtain a successor custodian;
(b) require that the cash and securities owned by this corporation be
delivered directly to the successor custodian; and
(c) in the event that no successor custodian can be found, submit to the
shareholders, before permitting delivery of the cash and securities
owned by the Trust otherwise than to a successor custodian, the
question whether or not this Trust shall be liquidated or shall
function without a custodian.
12.5 LIMITATIONS ON INVESTMENT. Each series of shares may not invest in
securities other than those described in the Trust's then current
prospectus as appropriate for the series of shares for which such
securities are being purchased.
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12.6 DETERMINATION OF NET ASSET VALUE. Determinations of net asset value made
in good faith shall be binding on all parties concerned.
12.7 REPORTS TO SHAREHOLDERS; DISTRIBUTIONS FROM REALIZED GAINS. The Trust
shall send to each shareholder of record at least annually a statement of
the condition of the Trust and of the results of its operation, containing
all information required by applicable laws or regulations.
SECTION 13. AMENDMENTS
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such majority.
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EX-99.B8
CUSTODIAN AGREEMENT
STI CLASSIC FUNDS
This Agreement, dated as of the 1st day of February, 1994 by and between
STI Classic Funds (the "Trust"), a business trust duly organized under the
laws of the Commonwealth of Massachusetts and Trust Company Bank (the "Bank").
WITNESSETH:
WHEREAS, the Trust desires to appoint the Bank to act as Custodian of
its portfolio securities, cash and other property from time to time deposited
with or collected by the Bank for the Trust;
WHEREAS, the Bank is qualified and authorized to act as Custodian for
the Trust and the separate series thereof (each a "Fund" and, collectively,
the "Funds"), and is willing to act in such capacity upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have meanings
herein specified unless the context otherwise requires.
CUSTODIAN: The term Custodian shall mean the Bank in its capacity as
Custodian under this Agreement.
DEPOSITORY: The term Depository means any depository service which acts as a
system for the central handling of securities where all securities of any
particular class or series of an issuer deposited within the system are
treated as fungible and may be transferred by bookkeeping entry without
physical delivery.
PROPER INSTRUCTIONS. For purposes of this Agreement, the Custodian shall be
deemed to have received Proper Instructions upon receipt of written
(including instructions received by means of computer terminals or facsimile
transmissions), telephone or telegraphic instructions from a person or
persons authorized from time to time by the Trustees of the Trust to give the
particular class of instructions. Telephone or telegraphic instructions
shall be confirmed in writing by such person or persons as said Trustees
shall have from time to time authorized to give the particular class of
instructions in question. The Custodian may act upon telephone or
telegraphic instructions without awaiting receipt of written confirmation,
and shall not be liable for the Trust's failure to confirm such instructions
in writing.
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SECURITIES: The term Securities means stocks, bonds, rights, warrants and
all other negotiable or non-negotiable paper issued in certificated or
book-entry form commonly known as "securities" in banking custom or practice.
SHAREHOLDERS: The term Shareholders shall mean the registered owners from
time to time of the Shares of the Trust in accordance with the registry
records maintained by the Trust or agents on its behalf.
SHARES: The term Shares of the Trust shall mean the units of beneficial
interest.
SECTION 2. The Trust hereby appoints the Custodian as Custodian of the
Trust's cash, Securities and other property, to be held by the Custodian as
provided in this Agreement. The Custodian hereby accepts such appointment
subject to the terms and conditions hereinafter provided. The Bank shall
open a separate custodial account in the name of the Trust on the books and
records of the Bank to hold the Securities of the Trust deposited with,
transferred to or collected by the Bank for the account of the Trust, and a
separate cash account to which the Bank shall credit monies received by the
Bank for the account of or from the Trust. Such cash shall be segregated
from the assets of others and shall be and remain the sole property of the
Trust.
SECTION 3. The Trust shall from time to time file with the Custodian a
certified copy of each resolution of its Board of Trustees authorizing the
person or persons to give Proper Instructions and specifying the class of
instructions that may be given by each person to the Custodian under this
Agreement, together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and signatories designated therein to act, and shall be considered
in full force and effect with the Custodian fully protected in acting in
reliance thereon until it receives written notice to the contrary; provided,
however, that if the certifying officer is authorized to give Proper
Instructions, the certification shall be also signed by a second officer of
the Trust.
SECTION 4. The Trust will cause to be deposited with the Custodian hereunder
the applicable net asset value of Shares sold from time to time whether
representing initial issue, other stock or reinvestments of dividends and/or
distributions payable to Shareholders.
SECTION 5. The Bank, acting as agent for the Trust, is authorized, directed
and instructed subject to the further provisions of this Agreement:
(a) to hold Securities issued only in bearer form in bearer form;
(b) to register in the name of the nominee of the Bank, the Bank's
Depositories, or sub-custodians, (i) Securities issued only in
registered
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form, and (ii) Securities issued in both bearer and
registered form, which are freely interchangeable without penalty;
(c) to deposit any Securities which are eligible for deposit (i) with
any domestic or foreign Depository on such terms and conditions as
such Depository may require, including provisions for limitation or
exclusion of liability on the part of the Depository; and (ii) with
any sub-custodian which the Bank uses, including any subsidiary or
affiliate of the Bank;
(d) (i) to credit for the account of the Trust all proceeds received
and payable on or in respect of the assets maintained
hereunder,
(ii) to debit the account of the Trust for the cost of acquiring
Securities the Bank has received for the Trust, against
delivery of such Securities to the Bank,
(iii) to present for payment Securities and other obligations
(including coupons) upon maturity, when called for redemption,
and when income payments are due, and
(iv) to make exchanges of Securities which, in the Bank's opinion,
are purely ministerial as, for example, the exchange of
Securities in temporary form for Securities in definitive form
or the mandatory exchange of certificates;
(e) to forward to the Trust, and/or any other person designated by the
Trust, all proxies and proxy materials received by the Bank in
connection with Securities held in the Trust's account, which have
been registered in the name of the Bank's nominee, or are being held
by any Depository, or sub-custodian, on behalf of the Bank;
(f) to sell any fractional interest of any Securities which the Bank
has received resulting from any stock dividend, stock split,
distribution, exchange, conversion or similar activity;
(g) to release the Trust's name, address and aggregate share position to
the issuers of any domestic Securities in the account of the Trust,
provided, however, the Trust may instruct the Bank not to provide
any such information to any issuer;
(h) to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of or from
the Trust;
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(i) at the direction of the Trust, to enroll designated Securities
belonging to the Trust and held hereunder in a program for the
automatic reinvestment of all income and capital gains
distributions on those Securities in new shares (an "Automatic
Reinvestment Program"), or instruct any Depository holding such
Securities to enroll those Securities in an Automatic Reinvestment
Program;
(j) at the direction of the Trust, to receive, deliver and transfer
Securities and make payments and collections of monies in
connection therewith, enter purchase and sale orders and perform
any other acts incidental or necessary to the performance of the
above acts with brokers, dealers or similar agents selected by the
Trust, including any broker, dealer or similar agent affiliated
with the Bank, for the account and risk of the Trust in accordance
with accepted industry practice in the relevant market, provided,
however, if it is determined that any certificated Securities
transferred to a Depository or sub-custodian, the Bank, or the
Bank's nominee, the Bank's sole responsibility for such Securities
under this Agreement shall be to safekeep the Securities in
accordance with Section 11 hereof; and
(k) to notify the Trust and/or any other person designated by the Trust
upon receipt of notice by the Bank of any call for redemption,
tender offer, subscription rights, merger, consolidation,
reorganization or recapitalization which (i) appears in The Wall
Street Journal (Eastern edition), XCitek, The Kenny Services, any
official notifications from The Depository Trust Company and such
other publications or services to which the Bank may from time to
time subscribe, (ii) requires the Bank to act in response thereto,
and (iii) pertain to Securities belonging to the Trust and held
hereunder which have been registered in the name of the Bank's
nominee or are being held by a Depository or sub-custodian on
behalf of the Bank. Notwithstanding anything contained herein to
the contrary, the Trust shall have the sole responsibility for
monitoring the applicable dates on which Securities with put option
features must be exercised. All solicitation fees payable to the
Bank as agent in connection herewith will be retained by the Bank
unless expressly agreed to the contrary in writing by the Bank.
Notwithstanding anything in this Section to the contrary, the Bank is
authorized to hold Securities for the Trust which have transfer limitations
imposed upon them by the Securities Act of 1933, as amended, or represent
shares of mutual funds (i) in the name of the Trust, (ii) in the name of the
Bank's nominee, or (iii) with any Depository or sub-custodian.
SECTION 6. The Custodian's compensation shall be as set forth in Schedule A
hereto attached, or as shall be set forth in amendments to such schedule
approved by the Trust
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and the Custodian. The Bank is authorized to charge the Trust's account for
such compensation. All expenses and taxes payable with respect to the
Securities in the account of the Trust including, without limitation,
commission charges on purchases and sales and the amount of any loss or
liability for stockholders' assessments or otherwise, claimed or asserted
against the bank or against the Bank's nominee by reason of any registration
hereunder shall be charged to the Trust.
SECTION 7. In connection with its functions under this Agreement, the
Custodian shall:
(a) render to the Trust a daily report of all monies received or paid
on behalf of the Trust; and
(b) create, maintain and retain all records relating to its activities
and obligations under this Agreement in such manner as will meet
the obligations of the Trust with respect to said Custodian's
activities in accordance with generally accepted accounting
principles. All records maintained by the Custodian in connection
with the performance of its duties under this Agreement will remain
the property of the Trust and in the event of termination of this
Agreement will be relinquished to the Trust.
SECTION 8. Any Securities deposited with any Depository or with any
sub-custodian will be represented in accounts in the name of the Bank which
include only property held by the Bank as Custodian for customers in which
the Bank acts in a fiduciary or agency capacity.
Should any Securities which are forwarded to the Bank by the Trust, and which
are subsequently deposited to the Bank's account in any Depository or with
any sub-custodian, or which the Trust may arrange to deposit in the Bank's
account in any Depository or with any sub-custodian, not be deemed acceptable
for deposit by such Depository or sub-custodian, for any reason, and as a
result thereof there is a short position in the account of the Bank with the
Depository for such Security, the Trust agrees to furnish the Bank
immediately with like Securities in acceptable form.
SECTION 9. The Trust represents and warrants that: (i) it has the legal
right, power and authority to execute, deliver and perform this Agreement and
to carry out all of the transactions contemplated hereby; (ii) it has
obtained all necessary authorizations; (iii) the execution, delivery and
performance of this Agreement and the carrying out of any of the transactions
contemplated hereby will not be in conflict with, result in a breach of or
constitute a default under any agreement or other instrument to which the
Trust is a party or which is otherwise known to the Trust; (iv) it does not
require the consent or approval of any governmental agency or
instrumentality, except any such consents and approvals which the Trust has
obtained; (v) the execution and delivery of this Agreement by the Trust will
not violate any law, regulation, charter, by-law, order of any court or
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governmental agency or judgment applicable to the Trust; and (vi) all persons
executing this Agreement on behalf of the Trust and carrying out the
transactions contemplated hereby on behalf of the Trust are duly authorized
to do so.
In the event any of the foregoing representations should become untrue,
incorrect or misleading, the Trust agrees to notify the Bank immediately in
writing thereof.
SECTION 10. The Bank represents and warrants that: (i) it has the legal
right, power and authority to execute, deliver and perform this Agreement and
to carry out all of the transactions contemplated hereby; (ii) it has
obtained all necessary authorizations; (iii) the execution, delivery and
performance of this Agreement and the carrying out of any of the transactions
contemplated hereby will not be in conflict with, result in a breach of or
constitute a default under any agreement or other instrument to which the
Bank is a party or which is otherwise known to the Bank; (iv) it does not
require the consent or approval of any governmental agency or
instrumentality, except any such consents and approvals which the Bank has
obtained; (v) the execution and delivery of this Agreement by the Bank will
not violate any law, regulation, charter, by-law, order of any court or
governmental agency or judgment applicable to the Bank; and (vi) all persons
executing this Agreement on behalf of the Bank and carrying out the
transactions contemplated hereby on behalf of the Bank are duly authorized to
do so. In the event that any of the foregoing representations should become
untrue, incorrect or misleading, the Bank agrees to notify the Trust
immediately in writing thereof.
SECTION 11. All cash and Securities held by the Bank hereunder shall be kept
with the care exercised as to the Bank's own similar property. The Bank may
at its option insure itself against loss from any cause but shall be under no
obligation to insure for the benefit of the Trust.
SECTION 12. No liability of any kind shall be attached to or incurred by the
Custodian by reason of its custody of the Trust's assets held by it from time
to time under this Agreement, or otherwise by reason of its position as
Custodian hereunder except only for its own negligence, bad faith, or willful
misconduct in the performance of its duties as specifically set forth in the
Custodian Agreement. Without limiting the generality of the foregoing
sentence, the Custodian:
(a) may rely upon the advice of counsel for the Trust; and for any
action taken or suffered in good faith based upon such advice or
statements the Custodian shall not be liable to anyone;
(b) shall not be liable for anything done or suffered to be done in
good faith in accordance with any request or advice of, or based
upon information furnished by, the Trust or its authorized officers
or agents;
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(c) is authorized to accept a certificate of the Secretary or Assistant
Secretary of the Trust, or Proper Instructions, to the effect that
a resolution in the form submitted has been duly adopted by its
Board of Trustees or by the Shareholders, as conclusive evidence
that such resolution has been duly adopted and is in full force and
effect; and
(d) may rely and shall be protected in acting upon any signature,
written (including telegraph or other mechanical) instructions,
request, letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it to be genuine and to
have been signed, forwarded or presented by the purchaser, Trust or
other proper party or parties.
SECTION 13. The Trust, its successors and assigns do hereby fully indemnify
and hold harmless the Custodian its successors and assigns, from any and all
loss, liability, claims, demand, actions, suits and expenses of any nature as
the same may arise from the failure of the Trust to comply with any law,
rule, regulation or order of the United States, any state or any other
jurisdiction, governmental authority, body, or board relating to the sale,
registration, qualification of units of beneficial interest in the Trust, or
from the failure of the Trust to perform any duty or obligation under this
Agreement.
Upon written request of the Custodian, the Trust shall assume the entire
defense of any claim subject to the foregoing indemnity, or the joint defense
with the Custodian of such claim, as the Custodian shall request. The
indemnities and defense provisions of this Section 13 shall indefinitely
survive termination of this Agreement.
SECTION 14. This Agreement may be amended from time to time without notice
to or approval of the Shareholders by a supplemental agreement executed by
the Trust and the Bank and amending and supplementing this Agreement in the
manner mutually agreed.
SECTION 15. Either the Trust or the Custodian may give one hundred twenty
(120) days' written notice to the other of the termination of this Agreement,
such termination to take effect at the time specified in the notice. In case
such notice of termination is given either by the Trust or by the Custodian,
the Trustees of the Trust shall, by resolution duly adopted, promptly appoint
a successor Custodian (the "Successor Custodian") which Successor Custodian
shall be a bank, trust company, or a bank and trust company in good standing,
with legal capacity to accept custody of the cash and Securities of a mutual
fund. Upon receipt of written notice from the Trust of the appointment of
such Successor Custodian and upon receipt of Proper Instructions, the
Custodian shall deliver such cash and Securities as it may then be holding
hereunder directly and only to the Successor Custodian. Unless or until a
Successor Custodian has been appointed as above provided, the Custodian then
acting shall continue to act as Custodian under this Agreement.
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Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers, obligations and custody of its predecessor
Custodian. The Custodian ceasing to act shall nevertheless, upon request of
the Trust and the Successor Custodian and upon payment of its charges and
disbursements, execute an instrument in form approved by its counsel
transferring to the Successor Custodian all the predecessor Custodian's
rights, duties, obligations and custody.
Subject to the provisions of Section 21 hereof, in case the Custodian shall
consolidate with or merge into any other corporation, the corporation
remaining after or resulting from such consolidation or merger shall ipso
facto without the execution of filing of any papers or other documents,
succeed to and be substituted for the Custodian with like effect as though
originally named as such, PROVIDED, HOWEVER, in every case that said
Successor corporation maintains the qualifications set out in Section 17(f)
of the Investment Company Act of 1940, as amended.
SECTION 16. This Agreement shall take effect when assets of the Trust are
first delivered to the Custodian.
SECTION 17. This Agreement may be executed in two or more counterparts, each of
which when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
SECTION 18. A copy of the Declaration of Trust of the Trust is on file with
the Secretary of State of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of
the Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees, officers or Shareholders
of the Trust individually, but binding only upon the assets and property of
the Trust. No Fund of the Trust shall be liable for the obligations of any
other Fund of the Trust.
SECTION 19. The Custodian shall create and maintain all records relating to
its activities and obligations under this Agreement in such manner as will
meet the obligations of the Trust under the Investment Company Act of 1940,
as amended, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, applicable Federal and state tax laws and any other law
or administrative rules or procedures which may be applicable to the Trust.
Subject to security requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian, the books
and records of the Custodian pertaining to this Agreement shall be open to
inspection and audit at any reasonable times by officers of, attorneys for,
and auditors employed by, the Trust.
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SECTION 20. Nothing contained in this Agreement is intended to or shall
require the Custodian in any capacity hereunder to perform any functions or
duties on any holiday or other day of special observance on which the
Custodian is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next business day the
Custodian is open.
SECTION 21. This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust without the
written consent of the Custodian, or by the Custodian without the written
consent of the Trust, authorized or approved by a resolution of its Board of
Trustees.
SECTION 22. All communications (other than Proper Instructions which are to
be furnished hereunder to either party, or under any amendment hereto, shall
be sent by mail to the address listed below, provided that in the event that
the Bank, in its sole discretion, shall determine that an emergency exists
the Bank may use such other means of communications as the Bank deems
advisable.
To the Trust: Richard J. Shoch
SEI Corporation
680 East Swedesford Road
Wayne, PA 19087
To the Bank: Susan Grider
Trust Company Bank
c/o STI Trust & Investment Operations, Inc.
P.O. Box 105504, Center 31-33
Atlanta, GA 30348
SECTION 23. This Agreement, and any amendments hereto, shall be governed,
construed and interpreted in accordance with the laws of the Commonwealth of
Massachusetts applicable to agreements made and to be performed entirely
within such Commonwealth.
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IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to
be signed by their respective officers as of the day and year first above
written.
STI CLASSIC FUNDS
By: ________________
Name: Kevin P. Robins
Title: Vice President & Assistant Secretary
TRUST COMPANY BANK
By: ________________
Name:
Title:
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EX-99.B9
ADMINISTRATION AGREEMENT
_________________
THIS AGREEMENT is made as of this 29th day of May 1995, by and between
the STI Classic Funds (the "Trust"), a Massachusetts business trust, and SEI
Financial Management Corporation (the "Administrator"), a Delaware
corporation.
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares; and
WHEREAS, the Trust desires the Administrator to provide, and the
Administrator is willing to provide, management, shareholder services and
administrative services to such portfolios of the Trust as the Trust and the
Administrator may agree on (the "Portfolios") and as listed on Schedule B
attached hereto and made a part of this Agreement, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as
follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Trust hereby retains the
Administrator to act as the administrator of the Portfolios and to furnish
the Portfolios with the management and administrative services as set forth
below. The Administrator hereby accepts such employment to perform the duties
set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Trust in any
way and shall not be deemed an agent of the Trust.
ARTICLE 2. OTHER ADMINISTRATIVE SERVICES. The Administrator shall
perform or supervise the performance by others of other administrative
services in connection with the operations of the Portfolios, and, on behalf
of the Trust, will investigate, assist in the selection of and conduct
relations with custodians, depositories, accountants, legal counsel,
underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and
persons in any other capacity deemed to be necessary or desirable for the
Portfolios' operations. The Administrator shall provide the Trustees of the
Trust with such reports regarding investment performance as they may
reasonably request but shall have no responsibility for supervising the
performance by any investment adviser or sub-adviser of its responsibilities.
The Administrator shall provide the Trust with regulatory reporting,
fund accounting and related portfolio accounting services, all necessary
office space, equipment, personnel compensation and facilities (including
facilities for Shareholders' and Trustees' meetings) for handling the affairs
of the Portfolios and such other services as the Administrator shall, from
time to time, determine to be necessary to perform its obligations under this
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Agreement.
The Administrator shall make reports to the Trust's Trustees concerning
the performance of its obligations hereunder; furnish advice and
recommendations with respect to other aspects of the business and affairs of
the Portfolios as the Trust and the Administrator shall determine desirable;
and shall provide the Portfolios' Shareholders with the reports described in
the Portfolios' then current prospectuses.
The Administrator shall calculate the daily net asset value of the
Portfolios in accordance with the procedures prescribed in the Trust's
Registration Statement and such other procedures as may be established by the
Trustees of the Trust.
The Administrator will answer such correspondence and inquiries from
Shareholders, securities brokers and others relating to its duties hereunder
and such other correspondence and inquiries as may from time to time on such
terms as may be mutually agreed upon between the Administrator and the Fund.
Also, the Administrator may perform other services for the Trust as
agreed from time to time, including, but not limited to, preparation and
mailing of appropriate Federal income tax forms and returns to the Internal
Revenue Service and other appropriate taxing authorities; mailing the annual
reports of the Portfolios; and mailing notices of Shareholders' meetings,
proxies and proxy statements, for all of which the Trust will pay the
Administrator's out-of-pocket expenses.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to
perform its obligations under this Agreement. The Administrator shall also
provide the items which it is obligated to provide under this Agreement, and
shall pay all compensation, if any, of officers of the Trust as well as all
Trustees of the Trust who are affiliated persons of the Administrator or any
affiliated corporation of the Administrator; provided, however, that unless
otherwise specifically provided, the Administrator shall not be obligated to
pay the compensation of any employee of the Trust retained by the Trustees of
the Trust to perform services on behalf of the Trust.
(B) THE TRUST. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not otherwise allocated herein, including,
without limitation, organizational costs, taxes, expenses for legal and
auditing services, the expenses of preparing (including typesetting),
printing and mailing reports, prospectuses, statements of additional
information, proxy solicitation material and notices to existing
Shareholders, all expenses incurred in connection with issuing and redeeming
Shares, the cost of custodial services, the cost of pricing services, the
cost of initial and ongoing registration of the Shares under Federal and
state securities laws, fees and out-of-pocket expenses of Trustees who are
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not affiliated persons of the Administrator or the investment adviser to the
Trust or any affiliated corporation of the Administrator or the investment
adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of
investment advisers to the Trust.
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Trust shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto and made a part of this
Agreement. Such compensation shall be calculated and accrued daily, and paid
to the Administrator monthly. The Trust shall also reimburse the
Administrator for its reasonable out of pocket expenses, including the travel
and lodging expenses incurred by officers and employees of the Administrator
in connection with attendance at meetings of the Board of Trustees.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as
set forth above. Payment of the Administrator's compensation for the
preceding month shall be made promptly.
(B) COMPENSATION FROM TRANSACTIONS. The Trust hereby authorizes any
entity or person associated with the Administrator which is a member of a
national securities exchange to effect any transaction on the exchange for
the account of the Trust which is permitted by Section 11 (a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
hereby consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(a)(2)(iv).
(C) SURVIVAL OF COMPENSATION RATES. All rights of compensation under
this Agreement for services performed as of the termination date shall
survive the termination of this Agreement.
ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of
the Administrator shall be confined to those expressly set forth herein, and
no implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act
or omission in carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of applicable
law which cannot be waived or modified hereby. (As used in this Article 5,
the term "Administrator" shall include directors, officers, employees and
other corporate agents of the Administrator as well as that corporation
itself.)
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So long as the Administrator acts in good faith and with due diligence
and without gross negligence, the Trust assumes full responsibility and shall
indemnify the Administrator and hold it harmless from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and
against any and all losses, damages, costs, charges, reasonable counsel fees
and disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of said
administration, transfer agency, and dividend disbursing relationships to the
Trust or any other service rendered to the Trust hereunder. The indemnity and
defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In
order that the indemnification provision contained herein shall apply,
however, it is understood that if in any case the Trust may be asked to
indemnify or hold the Administrator harmless, the Trust shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the Administrator will use all reasonable
care to identify and notify the Trust promptly concerning any situation which
presents or appears likely to present the probability of such a claim for
indemnification against the Trust, but failure to do so in good faith shall
not affect the rights hereunder.
The Administrator may apply to the Trust at any time for instructions
and may consult counsel for the Trust or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or
accountable for any action taken or omitted by it in good faith in accordance
with such instruction or with the opinion of such counsel, accountants or
other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that Trustees, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or
otherwise and that directors, officers, employees and shareholders of the
Administrator and its counsel are or may be or become similarly interested in
the Trust, and that the Administrator may be or become interested in the
Trust as a Shareholder or otherwise.
ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall
be as
4
<PAGE>
specified in Schedule A attached hereto and made a part of this Agreement.
This Agreement shall not be assignable by either party without the
written consent of the other party.
ARTICLE 8. AMENDMENTS. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Trustees of the Trust, and (ii) by the vote of a majority of
the Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Trustees meeting
called for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and
the Administrator may conclusively assume that any special procedure which
has been approved by the Trust does not conflict with or violate any
requirements of its Declaration of Trust, By-Laws or then current
prospectuses, or any rule, regulation or requirement of any regulatory body.
ARTICLE 9. TRUSTEES' LIABILITY. A copy of the Declaration of Trust of
the Trust is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees of the Trust as Trustees and not individually and that
the obligations of this instrument are not binding upon any of the Trustees,
officers or Shareholders of the Trust individually, but binding only upon the
assets and property of the Trust.
ARTICLE 10. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the
Administrator on behalf of the Trust shall be prepared and maintained at the
expense of the Administrator, but shall be the property of the Trust and will
be made available to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the
Trust's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case
where it is advised by its counsel that it may be held liable for failure to
do so, unless (in cases involving potential exposure only to civil liability)
the Trust has agreed to indemnify the Administrator against such liability.
ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities
and Exchange Commission.
5
<PAGE>
ARTICLE 12. NOTICE. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party
giving notice: if to the Trust, at 680 East Swedesford Road, Wayne, PA
19087-1658, and if to the Administrator at 680 East Swedesford Road, Wayne,
PA 19087-1658.
ARTICLE 13. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts and the
applicable provisions of the 1940 Act. To the extent that the applicable laws
of the Commonwealth of Massachusetts, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
ARTICLE 14. MULTIPLE ORIGINALS. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
STI CLASSIC FUNDS
By:______________________
Attest:__________________
SEI FINANCIAL MANAGEMENT CORPORATION
By:______________________
Attest:__________________
6
<PAGE>
_____________________
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED MAY 29, 1995
BETWEEN
STI CLASSIC FUNDS
AND
SEI FINANCIAL MANAGEMENT CORPORATION
Fees: Pursuant to Article 4, Section A, the Trust shall pay the
Administrator compensation for services rendered to the
Portfolios listed in Schedule B hereto (the "Portfolios") at
an annual rate of the average daily net assets of each such
Portfolio and each Portfolio of the STI Classic Variable
Trust, which is calculated daily and paid monthly, as set
forth below:
.10% on first $1 billion
.07% on the next $4 billion
.05% on the next $3 billion
.045% on the next $2 billion
.04 % thereafter
Term: Pursuant to Article 7, the term of this Agreement shall
commence on May 29, 1995, and shall remain in effect for two
and one-half (2 1/2) years (the "Initial Term"). In the event
of a material breach of this Agreement by either party, the
non-breaching party shall notify the breaching party in
writing of such breach and upon receipt of such notice, the
breaching party shall have 45 days to remedy the breach or the
nonbreaching party may immediately terminate this Agreement.
7
<PAGE>
SCHEDULE B
TO THE ADMINISTRATION AGREEMENT
DATED MAY 29, 1995
BETWEEN
STI CLASSIC FUNDS
AND
SEI FINANCIAL MANAGEMENT CORPORATION
The Administrator shall perform services under the Administration Agreement
for the following Portfolios:
*Prime Quality MM Fund
*U.S. Government Securities MM Fund
*Investment Grade Bond Fund
*Investment Grade Tax Exempt Bond Fund
*Capital Growth Fund
*Tax Exempt MM Fund
*Value Income Stock Fund
*Short-Term Bond Fund
*Short-Term U.S. Treasury Securities Fund
*Sunbelt Equity Fund
*Aggressive Growth Fund
*Balanced Fund
*Florida Tax-Exempt Bond Fund
*Georgia Tax-Exempt Bond Fund
*Tennessee Tax-Exempt Bond Fund
*U.S. Government Securities Fund
*Limited-Term Federal Mortgage Securities Fund
*International Equity Index Fund
8
<PAGE>
EX-99. B11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated July 12, 1966 included in the
Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A of
the STI Classic Funds (No. 33-45671), and to all reference to our Firm
included in this Registration Statement File No. 33-45671.
/s/ Arthur Andersen L.L.P.
Philadelphia, Pa.
July 30, 1996
<PAGE>
EX-99.B15
THE STI CLASSIC FUNDS
DISTRIBUTION AND SERVICE PLAN
FLEX SHARES CLASS
WHEREAS, The STI Classic Funds (the "Trust") is engaged in business as
an open-end investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that the following Distribution and Service Plan (the
"Plan") will benefit the Trust and the owners of the Flex Shares of the
portfolios (the "Shareholders") of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby adopt this Distribution
and Service Plan pursuant to Rule 12b-1 under the 1940 Act and in accordance
with the conditions contained in the multi-class exemptive order granted by
the Securities and Exchange Commission (the "SEC") and applicable to the
Trust.
SECTION 1. The Trust has adopted this Plan to enable the Trust to
directly or indirectly bear expenses relating to (a) the distribution and
sale of Flex Shares (collectively, the "Shares") of the portfolios of the
Trust, as now in existence or hereinafter created from time to time, (each, a
"Portfolio"), and (b) the shareholder servicing of such Shares.
SECTION 2. Distribution Activities.
(a) The Shares of each Portfolio are authorized to pay the principal
underwriter of the Shares (the "Distributor") a total fee in connection
with distribution-related services provided in respect of such class,
calculated and payable monthly, at the annual rate rate of .75% of the
value of the average daily net assets of such class.
(b) The fee paid pursuant to this Section 2 may be used by the Distributor
to provide initial and ongoing sales compensation to its investment
executives and to other broker-dealers in respect of sales of Shares of
the applicable Portfolios and to pay for other advertising and
promotional expenses in connection with the distribution of the Shares.
These advertising and promotional expenses include, by way of example
but not by way of limitation, costs of printing and mailing
prospectuses, statements of additional information and shareholder
reports to prospective investors; preparation and distribution of sales
literature; advertising of any type; an allocation of overhead and
other expenses of the Distributor related to the distribution of the
Shares; and payments to, and expenses of, officers, employees or
representatives of the Distributor, of other broker-dealers, banks or
other financial institutions, and of any other persons who provide
support services in connection with the distribution of the Shares,
including travel, entertainment, and telephone expenses.
(c) Payments under this Section of the Plan are not tied exclusively to the
expenses for
<PAGE>
distribution-related activities actually incurred by the Distributor, so
that such payments may exceed expenses actually incurred by the
Distributor. The Trust's Board of Trustees will evaluate the
appropriateness of the Plan and its payment terms on a continuing basis
and in doing so will consider all relevant factors, including expenses
borne by the Distributor and amounts it receives under the Plan.
(d) The Trust's investment adviser and the Distributor may, at their option
and in their sole discretion, make payments from their own resources to
cover costs of additional distribution.
SECTION 3. Shareholder Servicing Activities.
(a) In addition to the amounts set forth in Section 2 above, the Shares of
each Portfolio are authorized to pay the Distributor a fee in connection
with the personal, ongoing servicing of shareholder accounts of such
Shares, calculated and payable monthly, at the annual rate of .25% of
the value of the average daily net assets of such class.
(b) The service fee payable to the Distributor pursuant to this Section 3
hereof may be used by the Distributor to provide compensation for
personal, ongoing servicing and/or maintenance of shareholder accounts
with respect to the Shares of the applicable Portfolios. Compensation
may be paid by the Distributor, or any portion of the fee may be
reallowed, to persons, including employees of the Distributor, and
institutions who respond to inquiries of holders of the Shares regarding
their ownership of Shares or their accounts with the Trust or who
provide other administrative or accounting services not otherwise
required to be provided by the Trust's investment adviser, transfer
agent or other agent of the Trust. Notwithstanding the foregoing, if the
National Association of Securities Dealers, Inc. (the "NASD") adopts a
definition of "service fee" for purposes of Section 26(d) of the NASD
Rules of Fair Practice that differs from the definition of shareholder
servicing activities in this paragraph, or if the NASD adopts a related
definition intended to define the same concept, the definition of
shareholder servicing activities in this paragraph shall be
automatically amended, without further action of the parties, to conform
to such NASD definition.
(c) Payments under this Section of the Plan are not tied exclusively to the
expenses for shareholder servicing activities actually incurred by the
Distributor, so that such payments may exceed expenses actually incurred
by the Distributor. The Trust's Board of Trustees will evaluate the
appropriateness of the Plan and its payment terms on a continuing basis
and in doing so will consider all relevant factors, including expenses
borne by the Distributor and amounts it receives under the Plan.
(d) The Trust's investment adviser and the Distributor may, at their option
and in their sole discretion, make payments from their own resources to
cover costs of additional shareholder servicing activities.
2
<PAGE>
SECTION 4. This Plan shall not take effect with respect to a Portfolio
until it has been approved (a) by a vote of at least a majority of the
outstanding voting securities of the Shares of such Portfolio; and (b)
together with any related agreements, by votes of the majority of both (i)
the Trustees of the Trust and (ii) the Qualified Trustees, cast in person at
a Board of Trustees meeting called for the purpose of voting on this Plan or
such agreement.
SECTION 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only for so long as such continuance is
specifically approved at least annually in the manner provided in Part (b) of
Section 4 herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 7. This Plan may be terminated at any time with respect to any
Portfolio by the vote of a majority of the Qualified Trustees or by vote of a
majority of the Portfolio's outstanding Shares.
SECTION 8. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time with respect to
any Portfolio, without payment of any penalty, by the vote of a majority of
the Qualified Trustees or by the vote of shareholders holding a majority of
the Portfolio's outstanding Shares, on not more than 60 days written notice
to any other party to the agreement; and (b) that such agreement shall
terminate automatically in the event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 2 hereof
without the approval of shareholders holding a majority of the outstanding
Shares of the applicable Portfolio, and all material amendments to this Plan
shall be approved in the manner provided in Section 4 (b) herein for the
approval of this Plan.
SECTION 10. As used in this Plan, (a) the term "Qualified Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the 1940
Act and the rules and regulations thereunder, subject to such exemptions as
may be granted by the SEC.
3
<PAGE>
SECTION 11. While this Plan is in effect, the selection and nomination of
those Trustees who are not interested persons of the Trust within the meaning of
Section 2(a)(19) of the 1940 Act shall be committed to the discretion of the
Trustees then in office who are not interested persons of the Trust.
SECTION 12. This Plan shall not obligate the Trust or any other party
to enter into an agreement with any particular person.
May 29, 1995
4
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 29th day of May, 1992, by and between STI Classic Funds, a
Massachusetts business trust (the "Trust" and Sun Bank Capital Management,
National Association, (the "Adviser").
WHEREAS, the Trust is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended, consisting of
several series of shares, each having its own investment policies; and
WHEREAS, the Trust has retained SEI Financial Management Corporation (the
"Administrator") to provide administration of the Trust's operations, subject to
the control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment management
services with respect to its Investment Grade Bond Fund, Investment Grade Tax
Exempt Bond Fund, Capital Growth Fund and such other funds as the Trust and the
Adviser may agree upon (the "Portfolios"), and the Adviser is willing to render
such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. DUTIES OF ADVISER. The Trust employs the Adviser to manage the investment
and reinvestment of the assets, and to continuously review, supervise, and
administer the investment program of the Portfolios, to determine in its
discretion the securities to be purchased or sold, to provide the
Administrator and the Trust with records concerning the Adviser's
activities which the Trust is required to maintain, and to render regular
reports to the Administrator and to the Trust's Officers and Trustees
concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the Board of Trustees of the Trust and in compliance with such
policies as the Trustees may from time to time establish, and in compliance
with the objectives, policies, and limitations for each such Portfolio set
forth in the Trust's prospectus and statement of additional information as
amended from time to time, and applicable laws and regulations.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on the
terms and for the compensation provided herein.
<PAGE>
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities
for the Portfolios and is directed to use its best efforts to obtain the
best net results as described in the Trust's prospectus and statement of
additional information from time to time. The Adviser will promptly
communicate to the Administrator and to the officers and the Trustees of
the Trust such information relating to portfolio transactions as they may
reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, solely by reason of its having directed a securities transaction
on behalf of the Trust to a broker-dealer in compliance with the provisions
of Section 28(e) of the Securities Exchange Act of 1934.
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust shall
pay to the Adviser compensation at the rate specified in the Schedule(s)
which are attached hereto and made a part of this Agreement. Such
compensation shall be paid to the Adviser at the end of each month, and
calculated by applying a daily rate, based on the annual percentage rates
as specified in the attached Schedule(s), to the assets. The fee shall be
based on the daily net assets for the month involved.
All rights of compensation under this Agreement for services performed as
of the termination date shall survive the termination of this Agreement.
4. OTHER EXPENSES. The Adviser shall pay all expenses of preparing (including
typesetting), printing and mailing reports, prospectuses, statements of
additional information, and sales literature to prospective clients to the
extent these expenses are not borne by the Trust under a distribution plan
adopted pursuant to Rule 12b-1.
5. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by any applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified for
offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust or any Portfolio
which would result in the Trust's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. Payment
of expenses by the Adviser pursuant to this Section 5 shall be settled on a
monthly basis (subject to fiscal year end reconciliation) by a reduction in
the fee payable to the Adviser for such month pursuant to Section 3 and, if
such reduction shall be insufficient to offset such expenses, by
reimbursing the Trust.
-2-
<PAGE>
6. REPORTS. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.
7. STATUS OF ADVISER. The services of the Adviser to the Trust are not to be
deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Trust are not impaired thereby.
The Adviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act
for or represent the Trust in any way or otherwise be deemed an agent of
the Trust.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under
the Investment Company Act of 1940 which are prepared or maintained by the
Adviser on behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.
9. LIMITATION OF LIABILITY OF ADVISER. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Adviser hereunder. The Adviser
shall not be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable state
law which cannot be waived or modified hereby. (As used in this
Paragraph 9, the term "Adviser" shall include directors, officers,
employees and other corporate agents of the Adviser as well as that
corporation itself).
10. PERMISSIBLE INTERESTS. Trustees, agents, and shareholders of the Trust are
or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Adviser are or may be
interested in the Trust as Trustees, shareholders or otherwise; and the
Adviser (or any successor) is or may be interested in the Trust as a
shareholder or otherwise. In addition, brokerage transactions for the
Trust may be effected through affiliates of the Adviser if approved by the
Board of Trustees, subject to the rules and regulations of the Securities
and Exchange Commission.
11. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until [two years from date of
execution], and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a) by
the vote of a majority of those Trustees of the who are not parties to this
Agreement or interested persons of such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trustees
of the Trust or by vote of a majority of the outstanding voting securities
of each Portfolio; provided, however, that if
-3-
<PAGE>
the shareholders of any Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve hereunder in the manner and to
the extent permitted by the Investment Company Act of 1940 and rules and
regulations thereunder. The foregoing requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the Investment Company Act of 1940 and the
rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time, without
the payment of any penalty by vote of a majority of the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Portfolio on not less than 30 days nor more than 60 days written notice to
the Adviser, or by the Adviser at any time without the payment of any
penalty, on 90 days written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment.
Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 11, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall have
the respective meanings set forth in the Investment Company Act of 1940 and
the rules and regulations thereunder; subject to such exemptions as may be
granted by the Securities and Exchange Commission under said Act.
12. NOTICE. Any notice required or permitted to be given by either party to
the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Trust, at 680 East Swedesford Road, Wayne, PA and if to
the Adviser at 50 Hurt Plaza, Suite 1400, Atlanta, GA 30303.
13. SEVERABILITY. If any provision of this Agreement shall be held or made ink
a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
A copy of the Declaration of Trust of the Trust is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees, and
is not binding upon any of the Trustees, officers, or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
-4-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
STI CLASSIC FUNDS
BY: _________________________________
SUNBANK CAPITAL MANAGEMENT, NATIONAL ASSOCIATION
BY: _________________________________
-5-
<PAGE>
AMENDED SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
STI CLASSIC FUNDS
AND
STI CAPITAL MANAGEMENT, N.A.
(formerly SunBank Capital Management, National Association)
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
<TABLE>
<S> <C>
Portfolio Fee (in basis points)
Investment Grade Bond Fund .74%
Investment Grade Tax Exempt Bond Fund .74%
Capital Growth Fund 1.15%
Value Income Stock Fund .80%
Mid Cap Fund (formerly Aggressive
Growth Fund) 1.15%
Balanced Fund .95%
Florida Tax-Exempt Bond Fund .65%
Limited-Term Federal
Mortgage Securities Fund .65%
International Equity Index Fund .90%
(this fee is split with Trusco
Capital Management, Inc.)
International Equity Fund 1.25%
</TABLE>
-6-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 15th day of June, 1993, by and between STI Classic Funds, a
Massachusetts business trust (the "Trust"), and Trusco Capital Management, (the
"Adviser").
WHEREAS, the Trust is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended,consisting of
several series of shares, each having its own investment policies; and
WHEREAS, the Trust has retained SEI Financial Management Corporation (the
"Administrator") to provide administration of the Trust's operations, subject to
the control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment management
services with respect to its Prime Quality Money Market Fund, Government
Securities Money Market Fund, Tax-Exempt Money Market Fund, Short-Term Bond Fund
and Short-Term U.S. Treasury Fund and such other funds as the Trust and the
Adviser may agree upon (the "Portfolios"), and the Adviser is willing to render
such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. DUTIES OF ADVISER. The Trust employs the Adviser to manage the investment
and reinvestment of the assets, and to continuously review, supervise, and
administer the investment program of the Portfolios, to determine in its
discretion the securities to be purchased or sold, to provide the
Administrator and the Trust with records concerning the Adviser's
activities which the Trust is required to maintain, and to render regular
reports to the Administrator and to the Trust's Officers and Trustees
concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the Board of Trustees of the Trust and in compliance with such
policies as the Trustees may from time to time establish, and in compliance
with the objectives, policies, and limitations for each such Portfolio set
forth in the Trust's prospectus and statement of additional information as
amended from time to time, and applicable laws and regulations.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on the
terms and for the compensation provided herein.
<PAGE>
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities
for the Portfolios and is directed to use its best efforts to obtain the
best net results as described in the Trust's prospectus and statement of
additional information from time to time. The Adviser will promptly
communicate to the Administrator and to the officers and the Trustees of
the Trust such information relating to portfolio transactions as they may
reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, solely by reason of its having directed a securities transaction
on behalf of the Trust to a broker-dealer in compliance with the provisions
of Section 28(e) of the Securities Exchange Act of 1934.
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust shall
pay to the Adviser compensation at the rate specified in the Schedule(s)
which are attached hereto and made a part of this Agreement. Such
compensation shall be paid to the Adviser at the end of each month, and
calculated by applying a daily rate, based on the annual percentage rates
as specified in the attached Schedule(s), to the assets. The fee shall be
based on the daily net assets for the month involved.
All rights of compensation under this Agreement for services performed as
of the termination date shall survive the termination of this Agreement.
4. OTHER EXPENSES. The Adviser shall pay all expenses of preparing (including
typesetting), printing and mailing reports, prospectuses, statements of
additional information, and sales literature to prospective clients to the
extent these expenses are not borne by the Trust under a distribution plan
adopted pursuant to Rule 12b-l.
5. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by any applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified for
offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust or any Portfolio
which would result in the Trust's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. Payment
of expenses by the Adviser pursuant to this Section 5 shall be settled on a
monthly basis (subject to fiscal year end reconciliation) by a reduction in
the fee payable to the Adviser for such month pursuant to Section 3 and, if
such reduction shall be insufficient to offset such expenses, by
reimbursing the Trust.
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<PAGE>
6. REPORTS. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.
7. STATUS OF ADVISER. The services of the Adviser to the Trust are not to be
deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Trust are not impaired thereby.
The Adviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act
for or represent the Trust in any way or otherwise be deemed an agent of
the Trust.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under
the Investment Company Act of 1940 which are prepared or maintained by the
Adviser on behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.
9. LIMITATION OF LIABILITY OF ADVISER. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Adviser hereunder. The Adviser
shall not be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable state
law which cannot be waived or modified hereby. (As used in this
Paragraph 9, the term "Adviser" shall include directors, officers,
employees and other corporate agents of the Adviser as well as that
corporation itself).
10. PERMISSIBLE INTERESTS. Trustees, agents, and shareholders of the Trust are
or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Adviser are or may be
interested in the Trust as Trustees, shareholders or otherwise; and the
Adviser (or any successor) is or may be interested in the Trust as a
shareholder or otherwise. In addition, brokerage transactions for the
Trust may be effected through affiliates of the Adviser if approved by the
Board of Trustees, subject to the rules and regulations of the Securities
and Exchange Commission.
11. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until [two years from date of
execution], and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a) by
the vote of a majority of those Trustees of the who are not parties to this
Agreement or interested persons of such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trustees
of the Trust or by vote of a majority of the outstanding voting securities
of each Portfolio; provided, however, that if
-3-
<PAGE>
the shareholders of any Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve hereunder in the manner and to
the extent permitted by the Investment Company Act of 1940 and rules and
regulations thereunder. The foregoing requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the Investment Company Act of 1940 and the
rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time, without
the payment of any penalty by vote of a majority of the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Portfolio on not less than 30 days nor more than 60 days written notice to
the Adviser, or by the Adviser at any time without the payment of any
penalty, on 90 days written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment.
Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of such
party. As used in this Section 11, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting securities"
shall have the respective meanings set forth in the Investment Company Act
of 1940 and the rules and regulations thereunder; subject to such
exemptions as may be granted by the Securities and Exchange Commission
under said Act.
12. NOTICE. Any notice required or permitted to be given by either party to
the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Trust, at 680 East Swedesford Road, Wayne, PA and if to
the Adviser at 50 Hurt Plaza, Suite 1400, Atlanta, GA 30303.
13. SEVERABILITY. If any provision of this Agreement shall be held or made ink
a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
15. REPRESENTATIONS BY ADVISER. By execution of this Agreement, the Adviser
represents and confirms that it is registered as an investment adviser
under the Investment Advisers Act of 1940.
A copy of the Declaration of Trust of the Trust is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees, and
is not binding upon any of the Trustees, officers, or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
STI CLASSIC FUNDS
BY: /S/ SANDRA K. ORLOW
------------------------------------
TRUSCO CAPITAL MANAGEMENT
BY: /S/ DOUGLAS S. PHILLIPS
------------------------------------
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<PAGE>
REVISED SCHEDULE A
DATED MAY 25, 1994
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
STI CLASSIC FUNDS
AND
TRUSCO CAPITAL MANAGEMENT
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
<TABLE>
<S> <C>
Portfolio Fee (in basis points)
Prime Quality Money Market Fund .65%
Government Securities
Money Market Fund .65%
Tax-Exempt Money Market Fund .55%
Short-Term Bond Fund .65%
Short-Term U.S. Treasury Fund .65%
Sunbelt Equity Fund 1.15%
U.S. Government Securities Fund .74%
International Equity Index Fund .90%
(this fee is split with SunBank
Capital Management, N.A.)
</TABLE>
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<PAGE>
Exhibit 99.B5C
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 20th day of December, 1993, by and between STI Classic
Funds, a Massachusetts business trust (the "Trust"), and American National
Bank & Trust Company, (the "Adviser").
WHEREAS, the Trust is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended, consisting of
several series of shares, each having its own investment policies; and
WHEREAS, the Trust has retained SEI Financial Management Corporation (the
"Administrator") to provide administration of the Trust's operations, subject to
the control of the Board of Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment management
services with respect to its Tennessee Tax-Exempt Bond Fund and such other funds
as the Trust and the Adviser may agree upon (the "Portfolios"), and the Adviser
is willing to render such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. DUTIES OF ADVISER. The Trust employs the Adviser to manage the investment
and reinvestment of the assets, and to continuously review, supervise, and
administer the investment program of the Portfolios, to determine in its
discretion the securities to be purchased or sold, to provide the
Administrator and the Trust with records concerning the Adviser's
activities which the Trust is required to maintain, and to render regular
reports to the Administrator and to the Trust's Officers and Trustees
concerning the Adviser's discharge of the foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the Board of Trustees of the Trust and in compliance with such
policies as the Trustees may from time to time establish, and in compliance
with the objectives, policies, and limitations for each such Portfolio set
forth in the Trust's prospectus and statement of additional information as
amended from time to time, and applicable laws and regulations.
The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on the
terms and for the compensation provided herein.
<PAGE>
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities
for the Portfolios and is directed to use its best efforts to obtain the
best net results as described in the Trust's prospectus and statement of
additional information from time to time. The Adviser will promptly
communicate to the Administrator and to the officers and the Trustees of
the Trust such information relating to portfolio transactions as they may
reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, solely by reason of its having directed a securities transaction
on behalf of the Trust to a broker-dealer in compliance with the provisions
of Section 28(e) of the Securities Exchange Act of 1934.
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust shall
pay to the Adviser compensation at the rate specified in the Schedule(s)
which are attached hereto and made a part of this Agreement. Such
compensation shall be paid to the Adviser at the end of each month, and
calculated by applying a daily rate, based on the annual percentage rates
as specified in the attached Schedule(s), to the assets. The fee shall be
based on the daily net assets for the month involved.
All rights of compensation under this Agreement for services performed as
of the termination date shall survive the termination of this Agreement.
4. OTHER EXPENSES. The Adviser shall pay all expenses of preparing (including
typesetting), printing and mailing reports, prospectuses, statements of
additional information, and sales literature to prospective clients to the
extent these expenses are not borne by the Trust under a distribution plan
adopted pursuant to Rule 12b-1.
5. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by any applicable statute or
regulatory authority of any jurisdiction in which Shares are qualified for
offer and sale, the Adviser shall bear such excess cost.
However, the Adviser will not bear expenses of the Trust or any Portfolio
which would result in the Trust's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. Payment
of expenses by the Adviser pursuant to this Section 5 shall be settled on a
monthly basis (subject to fiscal year end reconciliation) by a reduction in
the fee payable to the Adviser for such month pursuant to Section 3 and, if
such reduction shall be insufficient to offset such expenses, by
reimbursing the Trust.
-2-
<PAGE>
6. REPORTS. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.
7. STATUS OF ADVISER. The services of the Adviser to the Trust are not to be
deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Trust are not impaired thereby.
The Adviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act
for or represent the Trust in any way or otherwise be deemed an agent of
the Trust.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under
the Investment Company Act of 1940 which are prepared or maintained by the
Adviser on behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request.
9. LIMITATION OF LIABILITY OF ADVISER. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against the Adviser hereunder. The Adviser
shall not be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable state
law which cannot be waived or modified hereby. (As used in this
Paragraph 9, the term "Adviser" shall include directors, officers,
employees and other corporate agents of the Adviser as well as that
corporation itself).
10. PERMISSIBLE INTERESTS. Trustees, agents, and shareholders of the Trust are
or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Adviser are or may be
interested in the Trust as Trustees, shareholders or otherwise; and the
Adviser (or any successor) is or may be interested in the Trust as a
shareholder or otherwise. In addition, brokerage transactions for the
Trust may be effected through affiliates of the Adviser if approved by the
Board of Trustees, subject to the rules and regulations of the Securities
and Exchange Commission.
11. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until [two years from the date of
execution], and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a) by
the vote of a majority of those Trustees of the Trust who are not parties
to this Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by
the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of each Portfolio; provided
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<PAGE>
however, that if the shareholders of any Portfolio fail to approve the
Agreement as provided herein, the Adviser may continue to serve hereunder
in the manner and to the extent permitted by the Investment Company Act of
1940 and rules and regulations thereunder. The foregoing requirement that
continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act
of 1940 and the rules and regulations thereunder.
This Agreement may be terminated as to any Portfolio at any time, without
the payment of any penalty by vote of a majority of the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Portfolio on ont less than 30 days nor more than 60 days written notice to
the Adviser, or by the Adviser at any time without the payment of any
penalty, on 90 days written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment.
Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 11, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall have
the respective meanings set forth in the Investment Company Act of 1940 and
the rules and regulations thereunder; subject to such exemptions as may be
granted by the Securities and Exchange Commission under said Act.
12. NOTICE. Any notice required or permitted to be given by either party to
the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Trust, at 680 East Swedesford Road, Wayne, PA and if to
the Adviser at
13. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
A copy of the Declaration of Trust of the Trust is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees, and
is not binding upon any of the Trustees, officers or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
-4-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
STI CLASSIC FUNDS
BY: /S/ KEVIN ROBINS
-------------------------------------
AMERICAN NATIONAL BANK & TRUST COMPANY
BY: /S/
-------------------------------------
-5-
<PAGE>
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN
STI CLASSIC FUNDS
AND
SUNTRUST BANK, CHATTANOOGA
(formerly American National Bank & Trust Company)
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
<TABLE>
<S> <C>
Portfolio Fee (in basis points)
Tennessee Tax-Exempt Bond Fund .65%
</TABLE>
-6-
<PAGE>
MITSUBISHI GLOBAL CUSTODY
CUSTODIAN AGREEMENT
(FOREIGN AND DOMESTIC SECURITIES)
This Custodian Agreement is made by and between STI Classic Funds
("Principal") and THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Custodian").
Principal desires that Custodian hold and administer on behalf of Principal
certain Securities (as herein defined). Custodian is willing to do so on the
terms and conditions set forth in this Agreement. Accordingly, Principal and
Custodian agree as follows:
1. DEFINITIONS. Certain terms used in this Agreement are defined as
follows:
(a) "Account" means, collectively, each custodianship account
maintained by Custodian pursuant to Paragraph 3 of this Agreement.
(b) "Eligible Foreign Securities Depository", ("Depository")
shall mean a securities depository or clearing agency incorporated or organized
under the laws of a country other than the United States which operates (i) the
central system for handling securities or equivalent book-entries in that
country, or (ii) a transnational system for the central handling of securities
or equivalent book-entries.
(c) "Investment Manager" means an investment advisor or manager
identified by Principal in a written notice to Custodian as having the authority
to direct Custodian regarding the management, acquisition, or disposition of
Securities.
(d) "Securities" means domestic or foreign securities or both
within the meaning of Section 2(a)36 of the Investment Company Act of 1940
("1940 Act") and regulations issued by the U.S. Securities and Exchange
Commission ("SEC") under Section 17(f) of the 1940 Act, 17 C.F.R.
270.17f-5(c)(1), as amended, which are held by Custodian in the Account, and
shall include cash of any currency or other property and all income and proceeds
of sale of such securities or other property.
(e) "Eligible Foreign Custodian", ("Sub-Custodian") shall mean
(i) a banking institution or trust company incorporated or organized under the
laws of a country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders' equity
in excess of $100 million in U.S. currency (or a foreign currency equivalent
thereof), (iii) a banking institution or trust company incorporated or organized
under the laws of a country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank as defined in Rule 17f-5
or bank holding company that is incorporated or organized under the laws of a
country other than the United States which has such other qualifications as
shall be specified in Instructions and approved by the Bank; or (iv) any other
entity that shall have been so qualified by exemptive order, rule or other
appropriate action of the SEC. Custodian shall evaluate and determine at least
annually the continued eligibility of each Sub-Custodian as described in
Paragraph 5(d) of this Agreement.
<PAGE>
2. REPRESENTATIONS.
(a) Principal represents that with respect to any Account
established by Principal to hold Securities, Principal is authorized to enter
into this Agreement and to retain Custodian on the terms and conditions and for
the purposes described herein.
(b) Custodian represents that (i) it is organized under the laws
of the United States and has its principal place of business in the United
States, (ii) it is a bank within the meaning of Section 202(a)(2) of the
Investment Advisers Act of 1940 and Section 2(a)(5) of the Investment Company
Act of 1940, as amended, and (iii) it has equity capital in excess of
$1 million.
3. ESTABLISHMENT OF ACCOUNTS. Principal hereby establishes with
Custodian, and may in the future establish, one or more Accounts in Principal's
name. The Account shall consist of Securities delivered to and receipted for by
Custodian or by any Sub-Custodian. Custodian, in its sole discretion, may
reasonably refuse to accept any property now or hereafter delivered to it for
inclusion in the Account. Principal shall be notified promptly of such refusal.
4. CUSTODY. Subject to the terms of this Agreement, Custodian shall
be responsible for the safekeeping and custody of the Securities. Custodian may
(i) retain possession of all or any portion of the Securities in a foreign
branch or other office of Custodian, or (ii) retain, in accordance with
Paragraph 5 of this Agreement, one or more Sub-Custodians to hold all or any
portion of the Securities. Custodian and any Sub-Custodian may, in accordance
with Paragraph 5 of this Agreement, deposit definitive or book-entry Securities
with one or more Depositories.
(a) If Custodian retains possession of Securities, Custodian
shall ensure the Securities are at all times properly identified as being held
for the appropriate Account. Custodian shall segregate physically the
Securities from any Property owned by Custodian. Custodian shall not be
required to segregate physically the Securities from other securities or
property held by Custodian for third parties as Custodian, but Custodian shall
maintain adequate records showing the true ownership of the Securities.
(b) If Custodian deposits Securities with a Sub-Custodian,
Custodian shall maintain adequate records showing the identity and location of
the Sub-Custodian, the Securities held by the Sub-Custodian, and each Account to
which such Securities belong.
(c) If Custodian or any Sub-Custodian deposits Securities with a
Depository, Custodian shall maintain, or shall cause the Sub-Custodian to
maintain, adequate records showing the identity and location of the Depository,
the Securities held by the Depository, and each Account to which such Securities
belong.
(d) If Principal directs Custodian to deliver certificates or
other physical evidence of ownership of Securities to any broker or other party,
other than a Sub-Custodian or Depository employed by Custodian for purposes of
maintaining the Account, Custodian's sole responsibility shall be to exercise
care and diligence in effecting the delivery as instructed by Principal. Upon
completion of the delivery, Custodian shall be discharged completely of any
further liability or responsibility with respect to the safekeeping and custody
of Securities so delivered.
-2-
<PAGE>
(e) Custodian shall ensure that (i) the Securities will not be
subject to any right, charge, security interest, lien, or claim of any kind in
favor of Custodian or any Sub-Custodian or Depository except for the Securities'
safe custody or administration, and (ii) the beneficial ownership of the
Securities will be freely transferable without the payment of money or value
other than for safe custody or administration.
(f) Principal or its authorized representatives shall have
reasonable access to inspect books and records maintained by Custodian or any
Sub-Custodian or Depository holding Securities hereunder to verify the accuracy
of such books and records. Custodian shall notify Principal promptly of any
applicable law or regulation in any country where Securities are held that would
restrict such access or inspection.
5. SUB-CUSTODIANS AND DEPOSITORIES. With Principal's approval, as
provided in Paragraph 5(c) of this Agreement, Custodian may from time to time
retain one or more Sub-Custodians and Depositories to hold Securities
hereunder.
(a) Custodian shall exercise reasonable care in the selection of
Sub-Custodians and Depositories. In making its selection, Custodian shall
consider (i) the Sub-Custodian's or Depository's financial strength, general
reputation and standing in the country in which it is located, its ability to
provide efficiently the custodial services required, and the relative cost of
such services, (ii) whether the Sub-Custodian or Depository would provide a
level of safeguards for safekeeping and custody of Securities not materially
different from those prevailing in the U.S., (iii) whether the Sub-Custodian or
Depository has branch offices in the U.S. in order to facilitate jurisdiction
over and enforcement of judgments against it, and (iv) in the case of a
Depository, the number of its participants and its operating history.
(b) Custodian shall give written notice to Principal of its
intention to deposit Securities with a Sub-Custodian or (directly or through a
Sub-Custodian) with a Depository. The notice shall identify the proposed Sub-
Custodian or Depository and shall include reasonably available information
relied on by Custodian in making the selection.
(c) Within 30 days of its receipt of a notice from Custodian
pursuant to Paragraph 5(b) of this Agreement regarding Custodian's proposed
selection of one or more Sub-Custodians or Depositories, Principal shall give
written notice to Custodian of Principal's approval or disapproval of the
proposed selection. Principal hereby approves Custodian's retention of those
Sub-Custodians and Depositories, if any, that have been identified to it by
Custodian prior to Principal's execution of this Agreement.
(d) Custodian shall evaluate and determine at least annually the
continued eligibility of each Sub-Custodian and Depository approved by Principal
to act as such hereunder. In discharging this responsibility, Custodian shall
(i) monitor continuously the day to day services and reports provided by each
Sub-Custodian or Depository, (ii) at least annually, obtain and review the
annual financial report published by such Sub-Custodian or Depository and any
reports on such Sub-Custodian or Depository prepared by a reputable independent
analyst, (iii) at least triennially, physically inspect the operations of such
Sub-Custodian or Depository and (iv) Custodian shall provide client with a
report of its annual review of each Sub-Custodian and Depository.
(e) If Custodian determines that any Sub-Custodian or Depository
no longer satisfies the applicable requirements described in Paragraph 1(b) (in
the case of a Depository) or Para-
-3-
<PAGE>
graph 1(e) (in the case of a Sub-Custodian) of this Agreement or is otherwise no
longer capable or qualified to perform the functions contemplated herein,
Custodian shall promptly give written notice thereof to Principal. The notice
shall, in addition, either (i) indicate Custodian's intention to transfer
Securities held by the removed Sub-Custodian or Depository to another Sub-
Custodian or Depository previously approved by Principal, or (ii) include a
notice pursuant to Paragraph 5(b) of this Agreement of Custodian's intention
to deposit Securities with a new Sub-Custodian or Depository.
6. REGISTRATION. Subject to any specific instructions from
Principal, Custodian shall hold or cause to be held all Securities in the name
of Custodian, or any Sub-Custodian or Depository approved by Principal pursuant
to Paragraph 5 of this Agreement, or in the name of a nominee of any of them, as
Custodian shall determine to be appropriate under the circumstances.
7. TRANSACTIONS. Principal or any Investment Manager from time to
time may instruct Custodian (which in turn shall be responsible for giving
appropriate instructions to any Sub-Custodian or Depository) regarding the
purchase or sale of Securities in accordance with this Paragraph 7:
(a) Custodian shall effect and account for each Securities and
currency sale on the date such transaction actually settles; provided, however,
that Principal may in its sole discretion direct Custodian, in such manner as
shall be acceptable to Custodian, to account for Securities and currency
purchases and sales on contractual settlement date, regardless of whether
settlement of such transactions actually occurs on contractual settlement date.
Principal may, from time to time, direct Custodian to change the accounting
method employed by Custodian in a written notice delivered to Custodian at least
thirty (30) days prior to the date a change in accounting method shall become
effective.
(b) Custodian shall effect purchases by charging the Account
with the amount necessary to make the purchase and effecting payment to the
seller or broker for the securities or other property purchased. Custodian
shall have no liability of any kind to any person, including Principal, except
in the case of negligent or intentional tortious acts, or willful misconduct, if
the Custodian effects payment on behalf of Principal, and the seller or broker
fails to deliver the securities or other property purchased. Custodian shall
exercise such ordinary care and diligence as would be employed by a reasonably
prudent custodian and due diligence in examining and verifying the certificates
or other indicia of ownership of the property purchased before accepting them.
(c) Custodian shall effect sales by delivering certificates or
other indicia of ownership of the Property, and, as instructed, shall receive
cash for such sales. Custodian shall have no liability of any kind to any
person, including Principal, if Custodian exercises due diligence and delivers
such certificates or indicia of ownership and the purchaser or broker fails to
effect payment. If a purchase or sale is effected through a Depository,
Custodian shall exercise such ordinary care and diligence as would be employed
by a reasonably prudent custodian and due diligence in verifying proper
consummation of the transaction by the Depository.
(d) Principal or, where applicable, the Investment Manager, is
responsible for ensuring Custodian receives timely instructions and/or funds to
enable Custodian to effect settlement of any purchase or sale of Securities or
Currency Transactions. If Custodian does not receive such timely instructions
or funds, Custodian shall have no liability of any kind to any person, including
Principal, for failing to effect settlement. However, Custodian shall use
reasonable efforts to effect settlement as soon as possible after receipt of
appropriate instructions. Principal shall be liable for interest compensation
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and/or principal amounts to Custodian and/or its counterparty for failure to
deliver instructions or funds in a timely manner to effect settlements of third
party foreign exchange funds movement.
(e) At the direction of Principal or the Investment Manager, as
the case may be, Custodian shall convert currency in the Account to other
currencies through customary channels including, without limitation, Custodian
or any of its affiliates, as shall be necessary to effect any transaction
directed by Principal or the Investment Manager. Principal or the Investment
Manager, as the case may be, acknowledges that 1) the foreign currency exchange
department is a part of the Custodian or one of its affiliates or subsidiaries,
2) the Account is not obligated to effect foreign currency exchange with
Custodian, 3) the Custodian will receive benefits for such foreign currency
transactions which are in addition to the compensation which the Custodian
receives for administering the Account, and 4) the Custodian will make available
the relevant data so that Principal or the Investment Manager, as the case may
be, can determine that the foreign currency exchange transactions are as
favorable to the Account as terms generally available in arm's length
transactions between unrelated parties.
(f) Custodian shall have no responsibility to manage or
recommend investments of the Account or to initiate any purchase, sale, or other
investment transaction in the absence of instructions from Principal or, were
applicable, an Investment Manager.
8. CAPITAL CHANGES; INCOME.
(a) Custodian may, without further instructions from Principal
or any Investment Manager, exchange temporary certificates and may surrender and
exchange Securities for other securities in connection with any reorganization,
recapitalization, or similar transaction in which the owner of the Securities is
not given an option. Custodian has no responsibility to effect any such
exchange unless it has received actual notice of the event permitting or
requiring such exchange at its office designated in Paragraph 14 of this
Agreement or at the office of its designated agents.
(b) Custodian, or its designated agents, are authorized, as
Principal's agent, to surrender against payment maturing obligations and
obligations called for redemption, and to collect and receive payments of
interest and principal, dividends, warrants, and other things of value in
connection with Securities. Except as otherwise provided in Paragraph 15(d) of
this Agreement, Custodian or its designated agents shall not be obligated to
enforce collection of any item by legal process or other means.
(c) Custodian or its designated agents are authorized to sign
for Principal all declarations, affidavits, certificates, or other documents
that may be required to collect or receive payments or distributions with
respect to Securities. Custodian or its designated agents are authorized to
disclose, without further consent of Principal, Principal's identity to issuers
of Securities, or the agents of such issuers, who may request such disclosure.
9. NOTICES RE ACCOUNT SECURITIES. Custodian shall notify Principal
or, where applicable, the Investment Manager, of any reorganization,
recapitalization, or similar transaction not covered by Paragraph 8, and any
subscription rights, proxies, and other shareholder information pertaining to
the Securities actual notice of which is received by Custodian at its office
designated in Paragraph 14 of this Agreement or at the offices of its designated
agents. Custodian's sole responsibility in this regard shall be to give such
notices to Principal or the Investment Manager, as the case may be, within a
reasonable time after Custodian receives them, and Custodian shall not otherwise
be responsible for the timeliness of such notices. Custodian has no
responsibility to respond or otherwise act with respect to any such
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notice unless and until Custodian has received appropriate instructions from
Principal or the Investment Manager.
10. TAXES. Custodian shall pay or cause to be paid from the Account
all taxes and levies in the nature of taxes imposed on the Account or the
Securities thereof by any country. However, Custodian shall use reasonable
efforts to obtain refunds of taxes withheld on Securities or the income thereof
that are available under applicable tax laws, treaties, and regulations.
11. CASH. The Principal may from time to time, direct Custodian to
hold Account cash in The HighMark Group of mutual funds or in any investment
company for which Custodian or its affiliates or subsidiaries, acts as
investment advisor, custodies the assets, or provides other services. Principal
shall designate the particular HighMark fund or such other above-mentioned fund
that Principal deems appropriate for the Account. Principal or an Investment
Manager, where applicable, acknowledges that Custodian will receive fees for
such services which will be in addition to those fees charged by Custodian as
agent for the Account.
12. REPORTS. Custodian shall give written reports to Principal
showing (i) each transaction involving Securities effected by or reported to
Custodian, (ii) the identity and location of Securities held by Custodian as of
the date of the report, (iii) any transfer of location of Securities not
otherwise reported, and (iv) such other information as shall be agreed upon by
Principal and Custodian. Unless otherwise agreed upon by Principal and
Custodian, Custodian shall provide the reports described in this Paragraph 12 on
a monthly basis. A position report will be provided to Principal on a weekly
basis.
13. INSTRUCTIONS FROM PRINCIPAL.
(a) Principal shall certify or cause to be certified to
Custodian in writing the names and specimen signatures of all persons authorized
to give instructions, notices, or other communications on behalf of Principal or
any Investment Manager. Such certification shall remain effective until
Custodian receives notice to the contrary.
(b) Principal or authorized Investment Manager, as the case may
be, may give instruction, notice, or other communication called for by this
Agreement to Custodian in writing, or by telecopy, telex, telegram, or other
form of electronic communication acceptable to Custodian. Unless otherwise
expressly provided, all Instructions shall continue in full force and effect
until canceled or superseded. Principal or Investment Manager may give and
Custodian may accept oral instructions on an exception basis; provided, however,
that Principal or Investment Manager shall promptly confirm any oral
communications in writing or by telecopy or other means permitted hereunder.
Principal will hold confirmation in writing, the failure of such confirmation to
conform to the telephone instructions received or the Custodians's failure to
produce such confirmation at any subsequent time. The Custodian may
electronically record any instruction given by telephone, and any other
telephone discussions with respect to the Custody Account.
(c) All such communications shall be deemed effective upon
receipt by Custodian at its address specified in Paragraph 14 of this Agreement,
as amended from time to time. Custodian without liability may rely upon and act
in accordance with any instruction that Custodian in good faith believes has
been given by Principal or an Investment Manager.
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(d) Custodian may at any time request instructions from
Principal and may await such instructions without incurring liability.
Custodian has no obligation to act in the absence of such requested
instructions, but may, however, without liability take such action as it deems
appropriate to carry out the purposes of this Agreement.
14. ADDRESSES. Until further notice from either party, all
communications called for under this Agreement shall be addressed as follows:
IF TO PRINCIPAL:
SEI FINANCIAL MANAGEMENT CORPORATION
680 East Swedesford Road
Wayne, PA 19087
Attn: Mr. Robert Della Croce
Telephone: 610-989-6026
Telecopier: 610-
Telex (Answerback):
IF TO CUSTODIAN:
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
Mitsubishi Global Custody
Attn: Ms. Janet E. Potter, Vice President
475 Sansome Street, 12 Floor
San Francisco, CA 94111
Telephone: 415-291-7685
Telecopier: 415-291-7697
Telex (Answerback): 215748/MBCTD UR
15. CUSTODIAN'S RESPONSIBILITIES AND LIABILITIES.
(a) Custodian's duties and responsibilities shall be limited to
those expressly set forth in this Agreement, or as otherwise agreed by Custodian
in writing. In carrying out its responsibilities, Custodian shall exercise no
less than the same degree of care and diligence it usually exercises with
respect to similar property of its own.
(b) Custodian (i) shall not be required to maintain any special
insurance for the benefit of Principal, and (ii) shall not be liable or
responsible for any loss of or damage to Securities resulting from any causes
beyond Custodian's reasonable control including, without limitations, acts of
God, war, government action, civil commotion, fire, earthquake, or other
casualty or disaster. However, Custodian shall use reasonable efforts to
replace Securities lost or damaged due to such causes with securities of the
same class and issue with all rights and privileges pertaining thereto. The
Custodian shall be liable to the Principal for any loss which shall occur as the
result of the failure of a Sub-Custodian to exercise reasonable care with
respect to the safekeeping of assets to the same extent that the Custodian would
be liable to the Principal if the Custodian were holding such securities and
cash in their own premises. The Custodian shall be liable to the Principal only
to the extent of the Principal's direct
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damages, to be determined based on the market value of the property which is
subject to loss and without reference to any special conditions or
circumstances.
(c) The parties intend that Custodian shall not be considered a
fiduciary of the Account. Accordingly, Custodian shall have no power to make
decisions regarding any policy, interpretation, practice, or procedure with
respect to the Account, but shall perform the ministerial and administrative
functions described in this Agreement as provided herein and within the
framework of policies, interpretations, rules, practices, and procedures made by
Principal or an investment manager, where applicable, as the same shall be
reflected in instructions to Custodian from Principal or any Investment
Manager.
(d) Custodian shall not be required to appear in or defend any
legal proceedings with respect to the Account or the Securities unless Custodian
has been indemnified to its satisfaction against loss and expense (including
reasonable attorneys' fees).
(e) Custodian may consult with counsel acceptable to it after
written notification to Principal concerning its duties and responsibilities
under this Agreement, and shall not be liable for any action taken or not taken
in good faith on the advice of such counsel.
16. INDEMNITIES.
(a) INDEMNITY BY CUSTODIAN. Custodian shall indemnify and hold
harmless Principal from and against any loss, damage, cost, expense of liability
(including reasonable attorney's fees and expenses of legal proceedings) related
to this Agreement and arising out of the negligence or willful misconduct of
Custodian or any of Custodian's agents, including a Sub-custodian or Depository;
provided, however, that this indemnity and hold harmless shall not be applicable
to any liability caused by Principal's negligence or willful misconduct.
(b) INDEMNITY BY PRINCIPAL. Principal shall indemnify and hold
harmless Custodian from and against any loss, damage, cost, expense or liability
(including reasonable attorney's fees and expenses of legal proceedings) arising
out of Custodian's compliance with instructions from Principal or any Investment
Manager and the terms of this Agreement; provided, however, that this indemnity
and hold harmless shall not be applicable to any liability caused by Custodian's
negligence or willful misconduct.
(c) SURVIVAL OF INDEMNITIES. The right to indemnification under
this Agreement shall survive the termination of this Agreement.
17. COMPENSATION; EXPENSES. Principal shall reimburse Custodian for
all reasonable out-of-pocket expenses and processing costs incurred by Custodian
in the administration of the Account including, without limitation, reasonable
counsel fees incurred by Custodian pursuant to Paragraph 15(e) of this
Agreement. Principal also shall pay Custodian reasonable compensation for its
services hereunder as specified in Appendix A. Custodian shall be entitled to
withdraw such expenses or compensation from the Account if Principal fails to
pay the same to Custodian within 45 days after Custodian has sent an appropriate
billing to Principal.
18. AMENDMENT; TERMINATION. This Agreement may be amended at any
time by a written instrument signed by the parties. Either party may terminate
this Agreement and the Account upon
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90 days' written notice to the other unless the parties agree on a different
time period. Upon such termination, Custodian shall deliver or cause to be
delivered the Securities, less any amounts due and owing to Custodian under this
Agreement, to a successor custodian designated by Principal or, if a successor
custodian has not accepted an appointment by the effective date of termination
of the Account, to Principal. Upon completion of such delivery Custodian shall
be discharged of any further liability or responsibility with respect to the
Securities so delivered.
19. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors in interest. Without
consent of the parties, this agreement cannot be assigned to any third party.
20. GOVERNING LAW. The validity, construction, and administration of
this Agreement shall be governed by the applicable laws of the United States
from time to time in force and effect and, to the extent not preempted by any
such laws of the United States, by the laws of the State of California from time
to time in force and effect.
21. EFFECTIVE DATE. This Agreement shall be effective as of the date
appearing below, and shall supersede any prior or existing agreements between
the parties pertaining to the subject matter hereof
Date: 9/6/94
-------------------
By: /s/
-------------------------------------
Authorized Signature
"Principal"
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
By: /s/
-------------------------------------
Title: Vice President
----------------------------------
By: /s/
-------------------------------------
Title: Vice Presdient and Manager
----------------------------------
"Custodian"
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AGREEMENT
for
SHAREHOLDER RECORDKEEPING
AGREEMENT made as of the 14th day of May, 1994, by and between STI Classic
Funds, a Massachusetts business trust having its principal office and place of
business at 2 Oliver Street, Boston, Massachusetts 02109, (the "Trust"), on
behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a
Delaware business trust, having its principal office and place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of capital stock or beneficial interest
("Shares"); and
WHEREAS, the Trust desires to appoint the Company as its transfer agent,
dividend disbursing agent, and agent in connection with certain other
activities, and the Company desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: SHAREHOLDER RECORDKEEPING.
Article 1. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b) the Trust, or the
Fund, and the Company promptly cause such oral instructions to be confirmed in
writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be amended in
writing.
<PAGE>
Article 2. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefor to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund, the Fund's
administrator and the Custodian on a daily basis of the total
amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to its
account upon receipt of the check or other order, promptly mail a
debit advice to the Shareholder, and notify the Fund and/or Class
of its action. In the event that the amount paid for such Shares
exceeds proceeds of the redemption of such Shares plus the amount
of any dividends paid with respect to such Shares, the Fund
and/the Class or its distributor will reimburse the Company on
the amount of such excess.
(4) The Company shall only accept purchase orders from states in
which it has been notified by the Fund that the shares of the
Trust, a Fund or a Class are registered. The Fund shall provide
the Company with a listing of the states where the Trust, a Fund
or a Class are registered on a periodic basis.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be paid
out. The Company shall reconcile the amounts so requested and
the amounts actually received with the Custodian on a daily
basis. If a Shareholder is entitled to receive additional Shares
by virtue of any such distribution or dividend, appropriate
credits shall be made to the Shareholder's account; and
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(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall notify
the Funds on a daily basis of the total amount of redemption
requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) The Company shall effect transfers of Shares by the registered
owners thereof.
(4) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a
regular basis or upon reasonable request with the total number of
Shares which are authorized and issued and outstanding, but shall
have no obligation when recording the issuance of Shares, except
as otherwise set forth herein, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
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<PAGE>
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and such
records may be inspected by the Fund at reasonable times. The
Company may, at its option at any time, and shall forthwith upon
the Fund's demand, turn over to the Fund and cease to retain in
the Company's files, records and documents created and maintained
by the Company pursuant to this Agreement, which are no longer
needed by the Company in performance of its services or for its
protection. If not so turned over to the Fund, such records and
documents will be retained by the Company for six years from the
year of creation, during the first two of which such documents
will be in readily accessible form. At the end of the six year
period, such records and documents will either be turned over to
the Fund or destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register to the Fund's
distributor;
(b) Dividend and reinvestment blotters;
(c) Shareholder lists and statistical information;
(d) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(e) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
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(3) In addition to and not in lieu of the services set forth above,
the Company perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or
periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, withholding taxes on
accounts subject to back-up or other withholding (including
non-resident alien accounts), preparing and filing reports on
U.S. Treasury Department Form 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder
account information; and
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence as
may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder Meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of check forms and facsimile signature
imprinting devices, if any; and for the preparation or use, and
for keeping account of, such certificates, forms and devices.
Article 3. DUTIES OF THE TRUST.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and
any laws, rules and regulations of government authorities having
jurisdiction.
B. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
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Article 4. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as set out in
Schedule A, attached hereto, as may be added or amended from time to
time. Such fees may be changed from time to time subject to written
agreement between the Trust and the Company. Pursuant to information
in the Fund Prospectus or other information or instructions from the
Fund, the Company may subdivide any Fund into Classes or other
subcomponents for recordkeeping purposes. The Company will charge the
Fund the fees set forth on Schedule A for each such Class or
sub-component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 4A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items set out in Schedule D
attached hereto, as may be added or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Trust and/or the Fund, will be reimbursed by
the appropriate Fund.
C. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to the Trust or each of the Funds as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket expenses
in accordance with Schedules A and Schedules B. The Trust or the
Funds will pay to the Company the amount of such invoice within
30 days following the receipt of the invoices.
Article 5. ASSIGNMENT OF SHAREHOLDER RECORDKEEPING.
Except as provided below, no right or obligation under this Section Two may
be assigned by either party without the written consent of the other party.
(1) This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and
assigns.
(2) The Company may without further consent on the part of the Trust
subcontract for the performance hereof; provided, however, that
the Company shall be as fully responsible to the Trust for the
acts and omissions of any subcontractor as it is for its own acts
and omissions;
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SECTION TWO: GENERAL PROVISIONS.
Article 6. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to such
approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
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Article 7. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements and
in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each Fund
being offered for sale.
Article 8. INDEMNIFICATION.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund
shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents
-8-
<PAGE>
employees and affiliates, harmless against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the terms
of this Agreement, or which arise out of the Trust's or The
Fund's lack of good faith, negligence or willful misconduct or
which arise out of the breach of any representation or warranty
of the Trust or Fund hereunder or otherwise.
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
or
(b) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(4) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Trust or the
Fund.
(5) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state, unless Company has been notified that Shares are not
registered in such state, or in violation of any stop order or
other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 8.A. from liability for any act or omission resulting from the
Company's willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund harmless
from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or
attributable to any action or failure or omission to act by the
Company as a result of the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by
the Company under this Agreement, and the Company
-9-
<PAGE>
and its agents or subcontractors shall not be liable and shall be
indemnified by the Trust or the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such instructions
or upon the opinion of such counsel provided such action is not in
violation of applicable federal or state laws or regulations. The
Company, its agents and subcontractors shall be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the
officers of the Trust or the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent
or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 8 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 9. TERMINATION OF AGREEMENT.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Trust exercise its rights to
terminate, all out-of-pocket expenses associated with the movement of records
and materials will be borne by the Trust or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Article 15 shall survive
the termination of this Agreement.
Article 10. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed
by both parties.
Article 11. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Charter. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
Article 12. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Pennsylvania.
-10-
<PAGE>
Article 13. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at 2 Oliver Street,
Boston, Massachusetts 02109, or to the Company at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779, or to such other address as the Trust or
the Company may hereafter specify, shall be deemed to have been properly
delivered or given hereunder to the respective address.
Article 14. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
Article 15. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE TRUST.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
Article 16. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the property of the Company as
provided in the Declaration of Trust.
Article 17. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
with respect to the Trust or the Funds by either of the parties here to except
by the specific written consent of the other party.
Article 18. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
Article 19. SUCCESSOR AGENT.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor agent
at the office of the Company all properties of the Trust held by it hereunder.
If no such successor agent shall be appointed, the Company shall at its office
upon receipt of Proper Instructions deliver such properties in accordance with
such instructions.
-11-
<PAGE>
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
Article 20. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
Article 21. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign to a
successor all of or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 28 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
Article 22. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: STI CLASSIC FUNDS
Signature: /s/ Richard J. Shoch Signature: /s/ Kevin Robins
--------------------------- ---------------------------
Typed Name: Richard J. Shoch Typed Name: Kevin Robins
-------------------------- --------------------------
(Assistant/Secretary) Title: Vice President
---------------- -------------------------------
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannetee Fisher-Garber /s/ R. Jeffrey Niss
- ------------------------------------- -------------------------------------
Jeannette Fisher-Garber R. Jeffrey Niss
Secretary Sr. Vice President
</TABLE>
-12-
<PAGE>
SCHEDULE A
STI CLASSIC FUNDS
Fees*/ and Expenses
Shareholder Recordkeeping
I. Transfer Agency Services
Annual Base Fees*/
For each class of Trust Shares $16,000
For each class of Investor Shares $12,000
Annual Account Fees*/
(includes system access and funds control and reconcilement)
- Daily Dividend Fund $16.00
- Monthly dividend fund $10.00
- Quarterly dividend fund $10.00
- Contingent Deferred Sales Charge (Additionally)
(monthly and quarterly funds only) $5.00
- Closed Accounts*/ $1.32
(annual)
II. Shareholder Services (Services or features not covered above)
- Account Activity Processing $3.50
(includes account establishment, transaction and maintenance
processing)
- Account Servicing $4.50
(includes shareholder servicing and correspondence)
III. Termination Fees
- During first three years from commencement of services $20,000
- After three years of service Waived
(includes shareholder servicing and correspondence)
_______________
*/ All fees are annualized and will be prorated on a monthly basis for billing
purposes. Out-of-pocket expenses are not covered by these fees.
-13-
<PAGE>
SCHEDULE B
STI CLASSIC FUNDS
Out-of-Pocket Expenses Schedule
Shareholder Recordkeeping
- -- Postage (including overnight courier service)
- -- Statement Stock
- -- Envelopes
- -- Telecommunication Charges (including FAX and Dedicated Line Charges)
- -- Travel
- -- Duplicating
- -- Forms
- -- Supplies
- -- Microfiche
- -- Computer Access Charges
- -- Customized Programming and Reporting
- -- Disaster Recovery
- -- Other as Incurred
-14-
<PAGE>
MEMORANDUM OF INTERPRETATION
ARTICLE 8.A.(3)
The parties to the Agreement for Shareholder Recordkeeping dated May 14, 1994
(the "Agreement"), STI Classic Funds ("STI") and Federated Services Company
(Federated) agree that Article i.A.(3) of the Agreement specifically includes
the following:
1. those records delivered to Federated by STI's former transfer agent, SEI
Corporation; and
2. information concerning STI shareholders which is created, maintained or
delivered to Federated by STI's sponsor, SunTrust Banks, Inc. or its
affiliates.
<TABLE>
<S> <C>
ATTEST: STI CLASSIC FUNDS
Signature: /s/ Richard J. Shoch Signature: /s/ Kevin Robins
--------------------------- ---------------------------
Typed Name: Richard J. Shoch Typed Name: Kevin Robins
-------------------------- --------------------------
(Assistant/Secretary) Title: Vice President
---------------- -------------------------------
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannetee Fisher-Garber /s/ R. Jeffrey Niss
- ------------------------------------- -------------------------------------
Jeannette Fisher-Garber R. Jeffrey Niss
Secretary Sr. Vice President
</TABLE>
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
______________________________ Date:________________
Robert A. Nesher
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Jesse S. Hall Date: 12-13-94
- ------------------------------ --------------
Jesse S. Hall
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ F. Wendell Gooch Date : 6-10-94
- ------------------------------ --------------
F. Wendell Gooch
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Daniel S. Goodrum Date: 7-7-94
- ------------------------------ --------------
Daniel S. Goodrum
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Wilton Looney Date: 6/13/94
- ------------------------------ --------------
Wilton Looney
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Carmen V. Romeo Date: 7/18/94
- ------------------------------ --------------
Carmen V. Romeo
Treasurer and Chief
Financial Officer
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints
Carmen V. Romeo, his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ David G. Lee Date: 7/18/94
- ------------------------------ --------------
David G. Lee
President
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Champney A. McNair Date: 6/18/94
- ------------------------------ --------------
Champney A. McNair
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ T. Gordy Germany Date: 6-10-94
- ------------------------------ --------------
T. Gordy Germany
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Bernard F. Sliger Date: 6/30/94
- ------------------------------ --------------
Bernard F. Sliger
Trustee
<PAGE>
STI CLASSIC FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them singly, his or her
true and lawful attorney-in-fact and agents with full power of substitution and
resubstitution, to sign for him or her and in his or her name, place and stead,
and in the capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Stephen G. Meyer Date: 7/25/95
- ------------------------------ --------------
Stephen G. Meyer
Controller
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<GROSS-ADVISORY-FEES> (4580)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (5609)
<AVERAGE-NET-ASSETS> 617256
<PER-SHARE-NAV-BEGIN> 10.33
<PER-SHARE-NII> .52
<PER-SHARE-GAIN-APPREC> (.26)
<PER-SHARE-DIVIDEND> (.45)
<PER-SHARE-DISTRIBUTIONS> (.37)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.10
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 051
<NAME> INVESTMENT GRADE TAX EXEMPT BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 158666
<INVESTMENTS-AT-VALUE> 157970
<RECEIVABLES> 12019
<ASSETS-OTHER> 2546
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 172535
<PAYABLE-FOR-SECURITIES> (3970)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (1095)
<TOTAL-LIABILITIES> (5065)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166022
<SHARES-COMMON-STOCK> 3367
<SHARES-COMMON-PRIOR> 3691
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2142
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (696)
<NET-ASSETS> 167470
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7184
<OTHER-INCOME> 0
<EXPENSES-NET> (1333)
<NET-INVESTMENT-INCOME> 5851
<REALIZED-GAINS-CURRENT> 5634
<APPREC-INCREASE-CURRENT> (3672)
<NET-CHANGE-FROM-OPS> 7813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1492)
<DISTRIBUTIONS-OF-GAINS> (1295)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 401
<NUMBER-OF-SHARES-REDEEMED> (934)
<SHARES-REINVESTED> 208
<NET-CHANGE-IN-ASSETS> (4266)
<ACCUMULATED-NII-PRIOR> 55
<ACCUMULATED-GAINS-PRIOR> 1275
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (1120)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1615)
<AVERAGE-NET-ASSETS> 150909
<PER-SHARE-NAV-BEGIN> 11.30
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> (.37)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.12
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 052
<NAME> INVESTMENT GRADE TAX EXEMPT BOND FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 158666
<INVESTMENTS-AT-VALUE> 157970
<RECEIVABLES> 12019
<ASSETS-OTHER> 2546
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 172535
<PAYABLE-FOR-SECURITIES> (3970)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (1095)
<TOTAL-LIABILITIES> (5065)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166022
<SHARES-COMMON-STOCK> 498
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2142
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (696)
<NET-ASSETS> 167470
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7184
<OTHER-INCOME> 0
<EXPENSES-NET> (1333)
<NET-INVESTMENT-INCOME> 5851
<REALIZED-GAINS-CURRENT> 5634
<APPREC-INCREASE-CURRENT> (3672)
<NET-CHANGE-FROM-OPS> 7813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (120)
<DISTRIBUTIONS-OF-GAINS> (137)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 603
<NUMBER-OF-SHARES-REDEEMED> (125)
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 5536
<ACCUMULATED-NII-PRIOR> 55
<ACCUMULATED-GAINS-PRIOR> 1275
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (1120)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1615)
<AVERAGE-NET-ASSETS> 150909
<PER-SHARE-NAV-BEGIN> 11.30
<PER-SHARE-NII> .37
<PER-SHARE-GAIN-APPREC> .18
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> (.37)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.11
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 060
<NAME> CAPITAL GROWTH FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1037968
<INVESTMENTS-AT-VALUE> 1174928
<RECEIVABLES> 0
<ASSETS-OTHER> 8617
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1183545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 897267
<SHARES-COMMON-STOCK> 65851
<SHARES-COMMON-PRIOR> 80814
<ACCUMULATED-NII-CURRENT> 3296
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 146022
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 136960
<NET-ASSETS> 1183545
<DIVIDEND-INCOME> 19620
<INTEREST-INCOME> 4354
<OTHER-INCOME> 0
<EXPENSES-NET> (14696)
<NET-INVESTMENT-INCOME> 9278
<REALIZED-GAINS-CURRENT> 224050
<APPREC-INCREASE-CURRENT> 63301
<NET-CHANGE-FROM-OPS> 296629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9644)
<DISTRIBUTIONS-OF-GAINS> (41659)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13624
<NUMBER-OF-SHARES-REDEEMED> (32204)
<SHARES-REINVESTED> 3617
<NET-CHANGE-IN-ASSETS> (2707)
<ACCUMULATED-NII-PRIOR> 2006
<ACCUMULATED-GAINS-PRIOR> (26568)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (13507)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (16392)
<AVERAGE-NET-ASSETS> 1171356
<PER-SHARE-NAV-BEGIN> 12.18
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 3.32
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> (.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.90
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> CAPITAL GROWTH FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1037968
<INVESTMENTS-AT-VALUE> 1174928
<RECEIVABLES> 0
<ASSETS-OTHER> 8617
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1183545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 897267
<SHARES-COMMON-STOCK> 12833
<SHARES-COMMON-PRIOR> 13220
<ACCUMULATED-NII-CURRENT> 3296
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 146022
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 136960
<NET-ASSETS> 1183545
<DIVIDEND-INCOME> 19620
<INTEREST-INCOME> 4354
<OTHER-INCOME> 0
<EXPENSES-NET> (14696)
<NET-INVESTMENT-INCOME> 9278
<REALIZED-GAINS-CURRENT> 224050
<APPREC-INCREASE-CURRENT> 63301
<NET-CHANGE-FROM-OPS> 296629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (570)
<DISTRIBUTIONS-OF-GAINS> (7343)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1605
<NUMBER-OF-SHARES-REDEEMED> (2576)
<SHARES-REINVESTED> 585
<NET-CHANGE-IN-ASSETS> 30203
<ACCUMULATED-NII-PRIOR> 2006
<ACCUMULATED-GAINS-PRIOR> (26568)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (13507)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (16392)
<AVERAGE-NET-ASSETS> 1171356
<PER-SHARE-NAV-BEGIN> 12.17
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 3.32
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> (.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.89
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 062
<NAME> CAPITAL GROWTH FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1037968
<INVESTMENTS-AT-VALUE> 1174928
<RECEIVABLES> 0
<ASSETS-OTHER> 8617
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1183545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 897267
<SHARES-COMMON-STOCK> 739
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3296
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 146022
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 136960
<NET-ASSETS> 1183545
<DIVIDEND-INCOME> 19620
<INTEREST-INCOME> 4354
<OTHER-INCOME> 0
<EXPENSES-NET> (14696)
<NET-INVESTMENT-INCOME> 9278
<REALIZED-GAINS-CURRENT> 224050
<APPREC-INCREASE-CURRENT> 63301
<NET-CHANGE-FROM-OPS> 296629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5)
<DISTRIBUTIONS-OF-GAINS> (227)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 768
<NUMBER-OF-SHARES-REDEEMED> (46)
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 10969
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (13507)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (16392)
<AVERAGE-NET-ASSETS> 1171356
<PER-SHARE-NAV-BEGIN> 12.20
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 3.26
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> (.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.84
<EXPENSE-RATIO> 2.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 070
<NAME> VALUE INCOME STOCK FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1286912
<INVESTMENTS-AT-VALUE> 1407376
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407376
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (6082)
<TOTAL-LIABILITIES> (6082)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1135801
<SHARES-COMMON-STOCK> 94636
<SHARES-COMMON-PRIOR> 85611
<ACCUMULATED-NII-CURRENT> 5610
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139419
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 120464
<NET-ASSETS> 1401294
<DIVIDEND-INCOME> 40342
<INTEREST-INCOME> 4145
<OTHER-INCOME> 0
<EXPENSES-NET> (11386)
<NET-INVESTMENT-INCOME> 33101
<REALIZED-GAINS-CURRENT> 196134
<APPREC-INCREASE-CURRENT> 60796
<NET-CHANGE-FROM-OPS> 290031
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (29124)
<DISTRIBUTIONS-OF-GAINS> (92363)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29898
<NUMBER-OF-SHARES-REDEEMED> (30154)
<SHARES-REINVESTED> 9282
<NET-CHANGE-IN-ASSETS> 252422
<ACCUMULATED-NII-PRIOR> 4457
<ACCUMULATED-GAINS-PRIOR> 46607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (9448)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11463)
<AVERAGE-NET-ASSETS> 1178094
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> 2.71
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> (1.16)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.15
<EXPENSE-RATIO> .92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 071
<NAME> VALUE INCOME STOCK FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1286912
<INVESTMENTS-AT-VALUE> 1407376
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407376
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (6082)
<TOTAL-LIABILITIES> (6082)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1135801
<SHARES-COMMON-STOCK> 9945
<SHARES-COMMON-PRIOR> 7969
<ACCUMULATED-NII-CURRENT> 5610
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139419
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 120464
<NET-ASSETS> 1401294
<DIVIDEND-INCOME> 40342
<INTEREST-INCOME> 4145
<OTHER-INCOME> 0
<EXPENSES-NET> (11386)
<NET-INVESTMENT-INCOME> 33101
<REALIZED-GAINS-CURRENT> 196134
<APPREC-INCREASE-CURRENT> 60796
<NET-CHANGE-FROM-OPS> 290031
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2618)
<DISTRIBUTIONS-OF-GAINS> (9853)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2522
<NUMBER-OF-SHARES-REDEEMED> (1569)
<SHARES-REINVESTED> 1023
<NET-CHANGE-IN-ASSETS> 38341
<ACCUMULATED-NII-PRIOR> 4457
<ACCUMULATED-GAINS-PRIOR> 46607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (9448)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11463)
<AVERAGE-NET-ASSETS> 1178094
<PER-SHARE-NAV-BEGIN> 11.58
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 2.71
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> (1.16)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.13
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 072
<NAME> VALUE INCOME STOCK FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 1286912
<INVESTMENTS-AT-VALUE> 1407376
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1407376
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (6082)
<TOTAL-LIABILITIES> (6082)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1135801
<SHARES-COMMON-STOCK> 2010
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5610
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139419
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 120464
<NET-ASSETS> 1401294
<DIVIDEND-INCOME> 40342
<INTEREST-INCOME> 4145
<OTHER-INCOME> 0
<EXPENSES-NET> (11386)
<NET-INVESTMENT-INCOME> 33101
<REALIZED-GAINS-CURRENT> 196134
<APPREC-INCREASE-CURRENT> 60796
<NET-CHANGE-FROM-OPS> 290031
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (206)
<DISTRIBUTIONS-OF-GAINS> (1106)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2014
<NUMBER-OF-SHARES-REDEEMED> (113)
<SHARES-REINVESTED> 108
<NET-CHANGE-IN-ASSETS> 26298
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (9448)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11463)
<AVERAGE-NET-ASSETS> 1178094
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 2.65
<PER-SHARE-DIVIDEND> (.26)
<PER-SHARE-DISTRIBUTIONS> (1.16)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.08
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 080
<NAME> SHORT TERM TREASURY FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 16235
<INVESTMENTS-AT-VALUE> 16116
<RECEIVABLES> 0
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16764
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17167
<SHARES-COMMON-STOCK> 1032
<SHARES-COMMON-PRIOR> 966
<ACCUMULATED-NII-CURRENT> 52
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (337)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (118)
<NET-ASSETS> 16764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1037
<OTHER-INCOME> 0
<EXPENSES-NET> (122)
<NET-INVESTMENT-INCOME> 915
<REALIZED-GAINS-CURRENT> 95
<APPREC-INCREASE-CURRENT> (294)
<NET-CHANGE-FROM-OPS> 716
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (551)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 579
<NUMBER-OF-SHARES-REDEEMED> (547)
<SHARES-REINVESTED> 34
<NET-CHANGE-IN-ASSETS> 550
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<ACCUMULATED-GAINS-PRIOR> (380)
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<GROSS-EXPENSE> (208)
<AVERAGE-NET-ASSETS> 16771
<PER-SHARE-NAV-BEGIN> 9.93
<PER-SHARE-NII> .55
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<PER-SHARE-NAV-END> 9.84
<EXPENSE-RATIO> .65
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 081
<NAME> SHORT TERM TREASURY FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
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<PAID-IN-CAPITAL-COMMON> 17167
<SHARES-COMMON-STOCK> 426
<SHARES-COMMON-PRIOR> 719
<ACCUMULATED-NII-CURRENT> 52
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (337)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (118)
<NET-ASSETS> 16764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1037
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<EXPENSES-NET> (122)
<NET-INVESTMENT-INCOME> 915
<REALIZED-GAINS-CURRENT> 95
<APPREC-INCREASE-CURRENT> (294)
<NET-CHANGE-FROM-OPS> 716
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<NUMBER-OF-SHARES-SOLD> 97
<NUMBER-OF-SHARES-REDEEMED> (418)
<SHARES-REINVESTED> 28
<NET-CHANGE-IN-ASSETS> (2952)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (380)
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<GROSS-ADVISORY-FEES> (109)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (208)
<AVERAGE-NET-ASSETS> 16771
<PER-SHARE-NAV-BEGIN> 9.94
<PER-SHARE-NII> .54
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<PER-SHARE-NAV-END> 9.84
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 082
<NAME> SHORT TERM TREASURY FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 16236
<INVESTMENTS-AT-VALUE> 16116
<RECEIVABLES> 0
<ASSETS-OTHER> 648
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16764
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17167
<SHARES-COMMON-STOCK> 246
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 52
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (337)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (118)
<NET-ASSETS> 16764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1037
<OTHER-INCOME> 0
<EXPENSES-NET> (122)
<NET-INVESTMENT-INCOME> 915
<REALIZED-GAINS-CURRENT> 95
<APPREC-INCREASE-CURRENT> (294)
<NET-CHANGE-FROM-OPS> 716
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (56)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 262
<NUMBER-OF-SHARES-REDEEMED> (19)
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 2423
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (109)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (208)
<AVERAGE-NET-ASSETS> 16771
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> (.14)
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 090
<NAME> SHORT TERM BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 95244
<INVESTMENTS-AT-VALUE> 93916
<RECEIVABLES> 0
<ASSETS-OTHER> 906
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94822
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95683
<SHARES-COMMON-STOCK> 9241
<SHARES-COMMON-PRIOR> 6107
<ACCUMULATED-NII-CURRENT> 90
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 377
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1328)
<NET-ASSETS> 94822
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4745
<OTHER-INCOME> 0
<EXPENSES-NET> (521)
<NET-INVESTMENT-INCOME> 4224
<REALIZED-GAINS-CURRENT> 1358
<APPREC-INCREASE-CURRENT> (2395)
<NET-CHANGE-FROM-OPS> 3187
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4065)
<DISTRIBUTIONS-OF-GAINS> (124)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6066
<NUMBER-OF-SHARES-REDEEMED> (3190)
<SHARES-REINVESTED> 258
<NET-CHANGE-IN-ASSETS> 30204
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> (765)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (512)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (678)
<AVERAGE-NET-ASSETS> 78550
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> (.10)
<PER-SHARE-DIVIDEND> (.54)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.86
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 091
<NAME> SHORT TERM BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 95244
<INVESTMENTS-AT-VALUE> 93916
<RECEIVABLES> 0
<ASSETS-OTHER> 906
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94822
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95683
<SHARES-COMMON-STOCK> 273
<SHARES-COMMON-PRIOR> 261
<ACCUMULATED-NII-CURRENT> 90
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 377
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1328)
<NET-ASSETS> 94822
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4745
<OTHER-INCOME> 0
<EXPENSES-NET> (521)
<NET-INVESTMENT-INCOME> 4224
<REALIZED-GAINS-CURRENT> 1358
<APPREC-INCREASE-CURRENT> (2395)
<NET-CHANGE-FROM-OPS> 3187
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (133)
<DISTRIBUTIONS-OF-GAINS> (4)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> (60)
<SHARES-REINVESTED> 9
<NET-CHANGE-IN-ASSETS> 91
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> (765)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (512)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (678)
<AVERAGE-NET-ASSETS> 78550
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .52
<PER-SHARE-GAIN-APPREC> (.10)
<PER-SHARE-DIVIDEND> (.53)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.88
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 092
<NAME> SHORT TERM BOND FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 95244
<INVESTMENTS-AT-VALUE> 93916
<RECEIVABLES> 0
<ASSETS-OTHER> 906
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<TOTAL-ASSETS> 94822
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95683
<SHARES-COMMON-STOCK> 98
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 90
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 377
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1328)
<NET-ASSETS> 94822
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4745
<OTHER-INCOME> 0
<EXPENSES-NET> (521)
<NET-INVESTMENT-INCOME> 4224
<REALIZED-GAINS-CURRENT> 1358
<APPREC-INCREASE-CURRENT> (2395)
<NET-CHANGE-FROM-OPS> 3187
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 101
<NUMBER-OF-SHARES-REDEEMED> (5)
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (512)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (678)
<AVERAGE-NET-ASSETS> 78550
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> (.47)
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<PER-SHARE-NAV-END> 9.88
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 100
<NAME> SUNBELT EQUITY FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 341254
<INVESTMENTS-AT-VALUE> 441636
<RECEIVABLES> 0
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<TOTAL-ASSETS> 444137
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<PAID-IN-CAPITAL-COMMON> 321373
<SHARES-COMMON-STOCK> 29228
<SHARES-COMMON-PRIOR> 25824
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 22383
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 100381
<NET-ASSETS> 444137
<DIVIDEND-INCOME> 2293
<INTEREST-INCOME> 443
<OTHER-INCOME> 0
<EXPENSES-NET> (4011)
<NET-INVESTMENT-INCOME> (1275)
<REALIZED-GAINS-CURRENT> 39898
<APPREC-INCREASE-CURRENT> 84777
<NET-CHANGE-FROM-OPS> 123400
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (5188)
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<NUMBER-OF-SHARES-SOLD> 10848
<NUMBER-OF-SHARES-REDEEMED> (7882)
<SHARES-REINVESTED> 437
<NET-CHANGE-IN-ASSETS> 153522
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10518)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> (3890)
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<GROSS-EXPENSE> (4492)
<AVERAGE-NET-ASSETS> 337331
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> (.04)
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<PER-SHARE-DISTRIBUTIONS> (.20)
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<PER-SHARE-NAV-END> 14.11
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 101
<NAME> SUNBELT EQUITY FUND INVESTOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 341254
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<PAID-IN-CAPITAL-COMMON> 321373
<SHARES-COMMON-STOCK> 2079
<SHARES-COMMON-PRIOR> 2227
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 22383
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 100381
<NET-ASSETS> 444137
<DIVIDEND-INCOME> 2293
<INTEREST-INCOME> 443
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<EXPENSES-NET> (4011)
<NET-INVESTMENT-INCOME> (1275)
<REALIZED-GAINS-CURRENT> 39898
<APPREC-INCREASE-CURRENT> 84777
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<DISTRIBUTIONS-OF-GAINS> (426)
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<NUMBER-OF-SHARES-REDEEMED> (614)
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<NET-CHANGE-IN-ASSETS> 6822
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<GROSS-EXPENSE> (4492)
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<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> (.10)
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<PER-SHARE-NAV-END> 13.95
<EXPENSE-RATIO> 1.60
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> SUNBELT EQUITY FUND FLEX CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
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<PAID-IN-CAPITAL-COMMON> 321373
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<ACCUM-APPREC-OR-DEPREC> 100381
<NET-ASSETS> 444137
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<EXPENSES-NET> (4011)
<NET-INVESTMENT-INCOME> (1275)
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<NUMBER-OF-SHARES-REDEEMED> (10)
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<GROSS-EXPENSE> (4492)
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<PER-SHARE-NAV-BEGIN> 10.20
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 110
<NAME> MID-CAP EQUITY FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
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<NUMBER-OF-SHARES-REDEEMED> (3620)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 111
<NAME> MID-CAP EQUITY FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
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<INVESTMENTS-AT-COST> 259207
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 237062
<SHARES-COMMON-STOCK> 1410
<SHARES-COMMON-PRIOR> 669
<ACCUMULATED-NII-CURRENT> 249
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<ACCUMULATED-NET-GAINS> 18671
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20923
<NET-ASSETS> 276905
<DIVIDEND-INCOME> 2105
<INTEREST-INCOME> 1718
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<EXPENSES-NET> (2458)
<NET-INVESTMENT-INCOME> 1365
<REALIZED-GAINS-CURRENT> 29513
<APPREC-INCREASE-CURRENT> 12518
<NET-CHANGE-FROM-OPS> 43396
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<DISTRIBUTIONS-OF-GAINS> (922)
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<NUMBER-OF-SHARES-SOLD> 824
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<SHARES-REINVESTED> 82
<NET-CHANGE-IN-ASSETS> 10626
<ACCUMULATED-NII-PRIOR> 200
<ACCUMULATED-GAINS-PRIOR> 3319
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<GROSS-EXPENSE> (2793)
<AVERAGE-NET-ASSETS> 206152
<PER-SHARE-NAV-BEGIN> 10.99
<PER-SHARE-NII> .03
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 112
<NAME> MID-CAP EQUITY FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 259207
<INVESTMENTS-AT-VALUE> 280130
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<TOTAL-ASSETS> 280130
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<OTHER-ITEMS-LIABILITIES> (3225)
<TOTAL-LIABILITIES> (3225)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 237062
<SHARES-COMMON-STOCK> 396
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 249
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18671
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20923
<NET-ASSETS> 276905
<DIVIDEND-INCOME> 2105
<INTEREST-INCOME> 1718
<OTHER-INCOME> 0
<EXPENSES-NET> (2458)
<NET-INVESTMENT-INCOME> 1365
<REALIZED-GAINS-CURRENT> 29513
<APPREC-INCREASE-CURRENT> 12518
<NET-CHANGE-FROM-OPS> 43396
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> (167)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 419
<NUMBER-OF-SHARES-REDEEMED> (37)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 5029
<ACCUMULATED-NII-PRIOR> 200
<ACCUMULATED-GAINS-PRIOR> 3319
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (2377)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2793)
<AVERAGE-NET-ASSETS> 206152
<PER-SHARE-NAV-BEGIN> 11.13
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 2.45
<PER-SHARE-DIVIDEND> (.02)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.69
<EXPENSE-RATIO> 2.20
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 120
<NAME> BALANCED FUND TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 114017
<INVESTMENTS-AT-VALUE> 120701
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120701
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (1036)
<TOTAL-LIABILITIES> (1036)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105187
<SHARES-COMMON-STOCK> 9666
<SHARES-COMMON-PRIOR> 8680
<ACCUMULATED-NII-CURRENT> 527
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6684
<NET-ASSETS> 119665
<DIVIDEND-INCOME> 972
<INTEREST-INCOME> 3136
<OTHER-INCOME> 0
<EXPENSES-NET> (1020)
<NET-INVESTMENT-INCOME> 3088
<REALIZED-GAINS-CURRENT> 11091
<APPREC-INCREASE-CURRENT> 1891
<NET-CHANGE-FROM-OPS> 16070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2933)
<DISTRIBUTIONS-OF-GAINS> (904)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4974
<NUMBER-OF-SHARES-REDEEMED> (4335)
<SHARES-REINVESTED> 346
<NET-CHANGE-IN-ASSETS> 22587
<ACCUMULATED-NII-PRIOR> 518
<ACCUMULATED-GAINS-PRIOR> (2857)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (990)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1196)
<AVERAGE-NET-ASSETS> 103993
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> 1.41
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> (.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.55
<EXPENSE-RATIO> .95
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 121
<NAME> BALANCED FUND INVESTOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 114017
<INVESTMENTS-AT-VALUE> 120701
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120701
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (1036)
<TOTAL-LIABILITIES> (1036)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105187
<SHARES-COMMON-STOCK> 422
<SHARES-COMMON-PRIOR> 366
<ACCUMULATED-NII-CURRENT> 527
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6684
<NET-ASSETS> 119665
<DIVIDEND-INCOME> 972
<INTEREST-INCOME> 3136
<OTHER-INCOME> 0
<EXPENSES-NET> (1020)
<NET-INVESTMENT-INCOME> 3088
<REALIZED-GAINS-CURRENT> 11091
<APPREC-INCREASE-CURRENT> 1891
<NET-CHANGE-FROM-OPS> 16070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (115)
<DISTRIBUTIONS-OF-GAINS> (44)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 119
<NUMBER-OF-SHARES-REDEEMED> (76)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 1131
<ACCUMULATED-NII-PRIOR> 518
<ACCUMULATED-GAINS-PRIOR> (2857)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (990)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1196)
<AVERAGE-NET-ASSETS> 103993
<PER-SHARE-NAV-BEGIN> 10.30
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 1.41
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> (.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.60
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 122
<NAME> BALANCED FUND FLEX CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 114017
<INVESTMENTS-AT-VALUE> 120701
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120701
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> (1036)
<TOTAL-LIABILITIES> (1036)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105187
<SHARES-COMMON-STOCK> 272
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 527
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6684
<NET-ASSETS> 119665
<DIVIDEND-INCOME> 972
<INTEREST-INCOME> 3136
<OTHER-INCOME> 0
<EXPENSES-NET> (1020)
<NET-INVESTMENT-INCOME> 3088
<REALIZED-GAINS-CURRENT> 11091
<APPREC-INCREASE-CURRENT> 1891
<NET-CHANGE-FROM-OPS> 16070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (31)
<DISTRIBUTIONS-OF-GAINS> (18)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 305
<NUMBER-OF-SHARES-REDEEMED> (38)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 3131
<ACCUMULATED-NII-PRIOR> 518
<ACCUMULATED-GAINS-PRIOR> (2857)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (990)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1196)
<AVERAGE-NET-ASSETS> 103993
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 1.29
<PER-SHARE-DIVIDEND> (.25)
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<PER-SHARE-NAV-END> 11.53
<EXPENSE-RATIO> 2.00
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 130
<NAME> FLORIDA TAX EXEMPT BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 36007
<INVESTMENTS-AT-VALUE> 35650
<RECEIVABLES> 1459
<ASSETS-OTHER> 578
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<TOTAL-ASSETS> 37687
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<OTHER-ITEMS-LIABILITIES> (180)
<TOTAL-LIABILITIES> (180)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37715
<SHARES-COMMON-STOCK> 3059
<SHARES-COMMON-PRIOR> 994
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 145
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (357)
<NET-ASSETS> 37507
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1438
<OTHER-INCOME> 0
<EXPENSES-NET> (203)
<NET-INVESTMENT-INCOME> 1235
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<APPREC-INCREASE-CURRENT> (723)
<NET-CHANGE-FROM-OPS> 732
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (996)
<DISTRIBUTIONS-OF-GAINS> (111)
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<NUMBER-OF-SHARES-SOLD> 2945
<NUMBER-OF-SHARES-REDEEMED> (902)
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> 20672
<ACCUMULATED-NII-PRIOR> 1
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> (294)
<AVERAGE-NET-ASSETS> 27960
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> (.07)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 131
<NAME> FLORIDA TAX EXEMPT BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 36007
<INVESTMENTS-AT-VALUE> 35650
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<TOTAL-ASSETS> 37687
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<OTHER-ITEMS-LIABILITIES> (180)
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37715
<SHARES-COMMON-STOCK> 400
<SHARES-COMMON-PRIOR> 326
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 145
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (357)
<NET-ASSETS> 37507
<DIVIDEND-INCOME> 0
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<NET-INVESTMENT-INCOME> 1235
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<APPREC-INCREASE-CURRENT> (723)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 132
<NAME> FLORIDA TAX EXEMPT BOND FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
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<PAID-IN-CAPITAL-COMMON> 37715
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<ACCUM-APPREC-OR-DEPREC> (357)
<NET-ASSETS> 37507
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<NET-INVESTMENT-INCOME> 1235
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 140
<NAME> GEORGIA TAX EXEMPT BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<GROSS-EXPENSE> (256)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
