<PAGE>
100093/10-97
STI CLASSIC FUNDS TRUST SHARES
PROSPECTUS
OCTOBER 1, 1997
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
SMALL CAP EQUITY FUND
MID-CAP EQUITY FUND
BALANCED FUND
SUNBELT EQUITY FUND
INTERNATIONAL EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
INVESTMENT ADVISORS
TO THE FUNDS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
(the "Advisors")
STI CLASSIC FUNDS
<PAGE>
PROSPECTUS
GENERAL INFORMATION
AND CONTENTS
<TABLE>
<C> <S>
1 ABOUT THE TRUST
---
1 CAPITAL GROWTH FUND
---
3 VALUE INCOME STOCK FUND
---
5 SMALL CAP EQUITY FUND
---
7 MID-CAP EQUITY FUND
---
9 BALANCED FUND
---
11 SUNBELT EQUITY FUND
---
13 INTERNATIONAL EQUITY INDEX FUND
---
15 INTERNATIONAL EQUITY FUND
---
17 EMERGING MARKETS EQUITY FUND
---
20 RISK CONSIDERATIONS
---
25 PURCHASING FUND SHARES
---
26 TAX INFORMATION
---
31 FUND INVESTMENTS
---
32 MORE ABOUT INVESTMENTS AND HEDGING TOOLS
---
</TABLE>
OCTOBER 1, 1997
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 gives you important information about the Trust Shares
of the Equity Funds that you should know before investing. Please read this
Prospectus, and keep it for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THE TRUST'S SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR
APPROVED OF THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY STATEMENT OR
INDICATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS:
- ARE NOT BANK DEPOSITS
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY BANK OR GOVERNMENT AGENCY
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS.
INVESTING IN THE FUNDS INVOLVES RISK. YOU COULD LOSE MONEY.
<PAGE>
PROSPECTUS 1
ABOUT THE TRUST
STI CLASSIC FUNDS is a diversified, open-end management investment company.
The Funds provide a convenient and economical way for you to invest in a number
of professionally managed portfolios of securities. This Prospectus relates to
the Trust Shares of the Capital Growth Fund, Value Income Stock Fund, Small Cap
Equity Fund, Mid-Cap Equity Fund, Balanced Fund, Sunbelt Equity Fund,
International Equity Index Fund, International Equity Fund, and Emerging Markets
Equity Fund.
FUND INFORMATION
CAPITAL GROWTH FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of undervalued
equity securities traded in the United States.
Based on its analysis of overall business cycles, the Advisor rotates the
Fund's investments between various market sectors.
The Fund may invest in securities of foreign issuers, high yield securities,
and shares issued by money market investment companies. To some extent, the Fund
may invest in other securities and engage in other investment practices. See
"FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Capital Growth Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Event Risk;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
<PAGE>
2 PROSPECTUS
FUND MANAGEMENT
[LOGO]
Mr. Anthony Gray has managed the Capital Growth Fund since it began
operating. He has more than 30 years of investment experience, and has served as
Chairman and Chief Executive Officer of STI Capital Management, N.A. since 1979.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the CAPITAL
GROWTH FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.05%
Other Expenses .10%
Total Fund Operating Expenses After Fee Waivers(2) 1.15%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.25%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
You 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. $12 $37 $63 $ 140
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 3
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the CAPITAL GROWTH FUND. The financial highlights
for the Fund for the periods from inception through May 31, 1997 have
been audited by Arthur Andersen LLP, independent public accountants,
whose report appears in STI Classic Fund's annual report and accompanies
the Statement of Additional Information. The annual report for the Fund,
which contains more information about performance, is available at no
charge by calling 1-800-874-4770.
- ---------------------
CAPITAL GROWTH FUND
- ---------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $14.90 $0.12 $3.13 $(0.12) $(2.94) $15.09 24.66% $1,085,128
1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97% 981,498
1995 11.99 0.16 0.57 (0.14) (0.40) 12.18 6.63% 984,205
1994 11.95 0.16 0.31 (0.17) (0.26) 11.99 3.87% 891,870
1993(1) 10.36 0.12 1.57 (0.10) -- 11.95 17.90%* 507,692
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE*
---------- ---------- --------------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1997 1.15% 0.83% 1.25% 0.73% 141% $0.0620
1996 1.15% 0.90% 1.27% 0.78% 156% --
1995 1.15% 1.38% 1.28% 1.25% 128% --
1994 1.15% 1.25% 1.29% 1.11% 124% --
1993(1) 1.15%* 1.43%* 1.28%* 1.30%* 95% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JUNE 8, 1992.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
VALUE INCOME STOCK FUND
FUND OBJECTIVE
[LOGO]
The Value Income Stock Fund seeks to provide current income with a
secondary goal of achieving capital appreciation by investing primarily in
equity securities.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund strives to provide a yield, above that of the S&P 500 Stock
Index. The Fund primarily invests in equity securities of companies that have a
market capitalization of at least $500 million and that have a history of paying
regular dividends.
The Fund may invest in securities of foreign issuers, high yield securities,
futures, options, and securities issued by companies with smaller market
capitalizations. To some extent, the Fund may invest in other securities and
engage in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Value Income Stock Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Credit Risk;
<PAGE>
4 PROSPECTUS
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks and;
- Currency Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Mills Riddick, CFA, is Senior Vice President, STI Capital
Management, N.A. and has managed the Value Income Stock Fund since April, 1995.
He has more than 15 years of investment experience, and has been a value
portfolio manager at STI Capital Management since 1989. Prior to joining STI
Capital Management, N.A., Mr. Riddick served as a broker with Drexel Burnham
Lambert.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the VALUE
INCOME STOCK FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees .80%
Other Expenses .15%
Total Fund Operating Expenses .95%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You 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. $10 $30 $53 $117
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 5
FINANCIAL AND PERFORMANCE HIGHLIGHTS
The table that follows presents information about the investment results of
the Trust Shares of the VALUE INCOME STOCK Fund. The financial highlights for
the Fund for the periods from inception through May 31, 1997 have been audited
by Arthur Andersen LLP, independent public accountants, whose report appears in
STI Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- -------------------------
VALUE INCOME STOCK FUND
- -------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND NET NET
NET ASSET NET UNREALIZED DISTRIBUTIONS ASSET ASSETS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED END OF TOTAL PERIOD TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD RETURN (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $13.15 $0.30 $2.32 $(0.30) $(1.76) $13.71 22.18% $1,488,062 0.91%
1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91% 1,244,399 0.92%
1995 10.54 0.32 1.56 (0.32) (0.51) 11.59 19.06% 991,977 0.95%
1994 10.23 0.29 0.70 (0.32) (0.36) 10.54 9.95% 573,082 0.88%
1993(1) 10.00 0.11 0.16 (0.04) -- 10.23 9.05%* 137,761 0.80%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
---------- --------------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C>
1997 2.40% 0.91% 2.40% 105% $0.0609
1996 2.86% 0.92% 2.86% 134% --
1995 3.16% 0.95% 3.16% 126% --
1994 3.21% 0.97% 3.12% 149% --
1993(1) 4.32%* 0.96%* 4.16%* 35% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON FEBRUARY 12, 1993.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
SMALL CAP EQUITY FUND
FUND OBJECTIVE
[LOGO]
The Small Cap Equity Fund seeks to provide capital appreciation with
a secondary goal of achieving current income.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of undervalued companies with market capitalizations under
$1 billion.
The Fund may invest in securities of foreign issuers and options. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Small Cap Equity Fund may be subject to the following types of
risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
<PAGE>
6 PROSPECTUS
FUND MANAGEMENT
[LOGO]
Brett Barner, CFA, is Vice President, STI Capital Management, N.A.,
and has managed the Small Cap Equity Fund since it began operating.
He has more than ten years of investment experience, and has been a portfolio
manager with STI since 1990. Prior to joining STI Capital Management, N.A., Mr.
Barner served as a consultant with Drexel Burnham Lambert and Shearson Lehman
Brothers.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the SMALL CAP
EQUITY FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .97%
Other Expenses(2) .23%
Total Fund Operating Expenses After Fee Waivers(3) 1.20%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
(3) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.38%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ---------------------------------------------------------------------
<S> <C> <C>
You 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. $12 $38
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 7
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the SMALL CAP EQUITY FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------
SMALL CAP EQUITY FUND
- -----------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
NET ASSET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED FROM NET NET ASSET NET ASSETS
BEGINNING INVESTMENT NET GAINS ON INVESTMENT VALUE END OF TOTAL END OF
OF PERIOD INCOME INVESTMENTS INCOME PERIOD RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997(1) $10.00 $0.05 $1.04 $(0.02) $11.07 $10.97%* $ 131,049
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES INVESTMENT
RATIO OF TO AVERAGE INCOME TO
NET NET ASSETS AVERAGE NET
RATIO OF INVESTMENT (EXCLUDING ASSETS
EXPENSES TO INCOME TO WAIVERS (EXCLUDING AVERAGE
AVERAGE NET AVERAGE AND WAIVERS AND PORTFOLIO COMMISSION
ASSETS NET ASSETS CONTRIBUTIONS) CONTRIBUTIONS) TURNOVER RATE RATE***
------------ ---------- ---------- --------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
1997(1) 1.20%** 1.86%** 1.37%** 1.69%** 27% $ 0.0523
</TABLE>
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** ANNUALIZED.
*** AVERAGE COMMISSION RATE PAID PER SHARE FOR THE SECURITY PURCHASES AND SALES.
PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER
SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JANUARY 31, 1997.
MID-CAP EQUITY FUND
FUND OBJECTIVE
[LOGO]
The Mid-Cap Equity 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 factor in selecting investments and any such income should be
considered incidental.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of small to mid-size companies (I.E., companies with market
capitalizations of $500 million to $5 billion).
The Fund may invest in securities of foreign issuers, high-yield securities
and variable and floating rate instruments. To some extent, the Fund may invest
in other securities and engage in other investment practices. See "FUND
INVESTMENTS."
<PAGE>
8 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Mid-Cap Equity Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Credit Risk;
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Elliott A. Perny has managed the Mid-Cap Equity Fund since
October, 1996. He has more than 25 years of investment experience.
Mr. Perny has served as Senior Executive Vice President of STI Capital
Management, N.A. since September, 1992, and has served as a portfolio manager
with STI since 1991. Prior to joining STI Capital Management, N.A., Mr. Perny
served as a portfolio manager at Florida National Bank and Atlantic Bank.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the MID-CAP
EQUITY FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.04%
Other Expenses .11%
Total Fund Operating Expenses After Fee Waivers(2) 1.15%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.26%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
You 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. $12 $37 $63 $140
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 9
FINANCIAL AND PERFORMANCE HIGHLIGHTS
The table that follows presents information about the investment results of
the Trust Shares of the MID-CAP EQUITY FUND. The financial highlights for the
Fund for the periods from inception through May 31, 1997 have been audited by
Arthur Andersen LLP, independent public accountants, whose report appears in STI
Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ---------------------
MID-CAP EQUITY FUND
- ---------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $12.76 $0.03 $1.69 $(0.05) $(1.22) $13.21 14.23%
1996 11.00 0.08 2.63 (0.08) (0.87) 12.76 25.54%
1995 9.85 0.08 1.15 (0.08) -- 11.00 12.56%
1994(1) 10.00 0.02 (0.16) (0.01) -- 9.85 (1.39)%+
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
END OF TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
------------ ---------- ---------- --------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $ 287,370 1.15% 0.23% 1.26% 0.12% 152% $0.0587
1996 253,905 1.15% 0.70% 1.29% 0.56% 116% --
1995 125,562 1.15% 0.88% 1.32% 0.71% 66% --
1994(1) 57,036 1.15%* 1.20%* 1.68%* 0.67%* 8% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 3, 1994.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
BALANCED FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities and debt obligations.
The Fund may invest in securities of foreign issuers, investment grade
obligations, variable and floating rate instruments, mortgage- and asset-backed
securities, and shares of investment companies. To some extent, the Fund may
invest in other securities and engage in other investment practices. See "FUND
INVESTMENTS."
<PAGE>
10 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Balanced Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Prepayment Risk;
- Hedging Risks;
- Foreign Securities Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
The Balanced Fund is co-managed by Anthony R. Gray (equity portion),
and L. Earl Denney, CFA, (fixed income portion). Mr. Gray, Chairman and Chief
Executive Officer of STI Capital Management, N.A., since 1979, has more than 30
years of investment experience. Mr. Denney, Senior Vice President, since 1983,
STI Capital Management, N.A., has more than 17 years of experience. Prior to
joining STI Capital Management, N.A., Mr. Denney served as a fixed income
portfolio manager with American National Bank.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the BALANCED
FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .83%
Other Expenses .12%
Total Fund Operating Expenses After Fee Waivers(2) .95%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .95%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.07%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You 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. $10 $30 $53 $ 117
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 11
FINANCIAL AND PERFORMANCE HIGHLIGHTS
The table that follows presents information about the investment results of
the Trust Shares of the BALANCED FUND. The financial highlights for the Fund
for the periods from inception through May 31, 1997 have been audited by Arthur
Andersen LLP, independent public accountants, whose report appears in STI
Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- --------------
BALANCED FUND
- --------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $11.55 $0.33 $1.47 $(0.32) $(1.09) $11.94 16.66%
1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26%
1995 9.76 0.33 0.49 (0.32) -- 10.26 8.72%
1994(1) 10.00 0.11 (0.29) (0.06) -- 9.76 (1.78)%+
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
NET RATIO OF INCOME ASSETS ASSETS
ASSETS END EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
OF PERIOD TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
(000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
------------ ---------- ---------- --------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $ 151,358 0.95% 2.89% 1.08% 2.76% 197% $0.0608
1996 111,638 0.95% 3.00% 1.09% 2.86% 155% --
1995 89,051 0.95% 3.44% 1.11% 3.28% 157% --
1994(1) 90,579 0.95%* 2.76%* 1.25%* 2.46%* 106% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 3, 1994.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER. THE PORTFOLIO TURNOVER
RATE WAS 135% FOR THE EQUITY PORTION OF THE FUND AND 286% FOR THE FIXED
INCOME PORTION OF THE FUND.
SUNBELT EQUITY FUND
FUND OBJECTIVE
[LOGO]
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 U.S.
Current income will not be an important criterion of investment selection and
any such income should be considered incidental.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of
U.S. companies headquartered and/or conducting a substantial portion of their
operations in the southern region of the U.S. Stocks chosen for the Fund are
primarily of U.S. companies
<PAGE>
12 PROSPECTUS
headquartered and/or operating in the following U.S. states:
- Texas
- Arkansas
- Alabama
- Mississippi
- Tennessee
- Kentucky
- Florida
- Virginia
- Georgia
- North Carolina
- South Carolina
- Louisiana
The Fund may invest in high yield securities, futures and options. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Sunbelt Equity Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Geographic Risk;
- Hedging Risks; and
- High-Yield Security Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. James Foster has managed the Sunbelt Equity Fund since it began
operating. He has served as Vice President of Trusco Capital Management, Inc.
since 1989, and has more than 27 years of investment experience.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the SUNBELT
EQUITY FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.04%
Other Expenses .11%
Total Fund Operating Expenses After Fee Waivers(2) 1.15%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.26%.THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
You 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. $12 $37 $63 $140
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 13
FINANCIAL AND PERFORMANCE HIGHLIGHTS
The table that follows presents information about the investment results of
the Trust Shares of the SUNBELT EQUITY FUND. The financial highlights for the
Fund for the periods from inception through May 31, 1997 have been audited by
Arthur Andersen LLP, independent public accountants, whose report appears in STI
Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- --------------------
SUNBELT EQUITY FUND
- --------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $14.11 $(0.09) $ 0.25 $-- $(0.99) $ 13.28 1.48% $ 381,371
1996 10.03 (0.04) 4.32 -- (0.20) 14.11 43.19% 412,430
1995 9.70 (0.01) 0.38 -- (0.04) 10.03 3.81% 258,908
1994(1) 10.00 -- (0.30) -- -- 9.70 (2.99)%+ 128,280
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
---------- ---------- --------------- --------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997 1.15% (0.65)% 1.26% (0.76)% 72% $ 0.0674
1996 1.15% (0.34)% 1.28% (0.47)% 106% --
1995 1.15% (0.12)% 1.30% (0.27)% 80% --
1994(1) 1.15%* (0.19)%* 1.58%* (0.62)%* 21% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 3, 1994.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
INTERNATIONAL EQUITY INDEX FUND
FUND OBJECTIVE
[LOGO]
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)
- ----------
(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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in equity securities of companies
headquartered, or based in, the approximately twenty foreign countries included
in the EAFE-GDP Index.
While the Fund is structured to have overall investment characteristics
similar to those of the EAFE-GDP Index, it selects a representative sample of
securities in each country using a computerized statistically-based optimization
process.
The Fund expects that there will be a close correlation between it's
performance and that of the EAFE-GDP Index. However, the Fund's ability to track
the EAFE-GDP Index may be affected by, among other things, transaction costs,
changes in
<PAGE>
14 PROSPECTUS
either the composition of the Index or number of shares outstanding for the
component companies of the EAFE-GDP Index, and the timing and amount of
purchases and redemptions.
The Fund may invest in securities of foreign issuers, futures, options, and
forward foreign currency contracts. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The International Equity Index Fund is subject to the following types
of risk:
- Fund Risk;
- Market Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
INTERNATIONAL EQUITY INDEX FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .80%
Other Expenses .25%
Total Fund Operating Expenses After Fee Waivers(2) 1.05%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .90%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.15%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
You 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. $11 $33 $58 $128
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 15
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the INTERNATIONAL EQUITY INDEX FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report
accompanies the Statement of Additional Information.The annual report for
the Fund, which contains more information about performance, is available to
Shareholders at no charge by calling 1-800-874-4770.
- --------------------------------
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS NET
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET ASSETS END
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF PERIOD
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.96 $0.10 $0.69 $(0.11) $(0.30) $ 11.34 7.48% $ 53,516
1996 10.24 0.10 0.84 (0.13) (0.09) 10.96 9.29% 90,980
1995(1) 10.00 0.08 0.19 (0.02) (0.01) 10.24 2.69%+ 89,446
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE RATE**
---------- ---------- --------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 1.05% 0.71% 1.15% 0.61% 2% $0.0244
1996 1.05% 0.84% 1.19% 0.70% 30% --
1995(1) 1.05%* 1.13%* 1.31%* 0.87%* 10% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JUNE 6, 1994.
INTERNATIONAL EQUITY FUND
OBJECTIVE
[LOGO]
The International Equity Fund seeks to provide long-term capital
appreciation by investing primarily in a diversified portfolio of equity
securities of foreign issuers.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests primarily in equity securities of foreign issuers.
The Fund will invest in the securities of foreign issuers of at least three
different countries outside the United States. A foreign issuer:
- is a company organized under the laws of a specific country;
- principally trades its securities in a market or on an exchange in a
specific foreign country; or
- 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 has 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). The Fund may also invest in securities of
issuers whose principal activities are in countries with emerging markets. The
Fund defines an emerging market country as any country whose economy and market
are considered to be emerging or developing by the World Bank or United Nations.
<PAGE>
16 PROSPECTUS
The Fund may invest in options, futures, forward foreign currency contracts,
and high yield securities. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The International Equity Fund is subject to the following types of
risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ned Dau, Vice President of STI Capital Management, N.A., has
managed the International Equity Fund since May, 1997. Prior to joining STI, he
was a senior international equity analyst for American Express Financial
Advisors from 1996 to 1997, and the Principal Financial Group from 1992 to 1995.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
INTERNATIONAL EQUITY FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.20%
Other Expenses .26%
Total Fund Operating Expenses After Fee Waivers(2) 1.46%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.25%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.51%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
You 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. $15 $46 $80 $175
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 17
FINANCIAL AND PERFORMANCE HIGHLIGHTS
The table that follows presents information about the investment results of
the Trust Shares of the INTERNATIONAL EQUITY FUND. The financial highlights for
the Fund for the periods from inception through May 31, 1997 have been audited
by Arthur Andersen LLP, independent public accountants, whose report appears in
STI Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4700.
- --------------------------
INTERNATIONAL EQUITY FUND
- --------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $11.40 $0.03 $2.57 $(0.02) $(0.35) $13.63 23.29% $489,325
1996(1) 10.00 0.05 1.35 -- -- 11.40 14.00%+ 213,306
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
---------- ---------- --------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 1.46% 0.51% 1.51% 0.46% 139% $0.0313
1996(1) 1.46%* 1.36%* 1.65%* 1.17%* 113% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON DECEMBER 1, 1995.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
EMERGING MARKETS EQUITY FUND
OBJECTIVE
The Emerging Markets Equity Fund seeks to provide long-term capital
appreciation by investing primarily in equity securities of companies located in
emerging markets that appear undervalued relative to their global peers.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in equity securities of foreign issuers
located in emerging market countries. The Fund defines an emerging
market country as a country whose economy and market are considered to be
emerging or developing by the World Bank or the United Nations.
The Fund may invest in high yield securities, mortgage-backed securities,
futures, and forward foreign currency contracts. To some extent, the Fund may
invest in other securities and engage in other investment practices. See "FUND
INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Emerging Markets Equity Fund is subject to the following types of
risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Event Risk;
- Prepayment Risk;
<PAGE>
18 PROSPECTUS
- Hedging Risks;
- High Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ned Dau, Vice President of STI Capital Management, N.A., has
managed the Emerging Markets Equity Fund since May, 1997. Prior to joining STI,
he was a senior international equity analyst for American Express Financial
Advisors from 1996 to 1997, and the Principal Financial Group from 1992 to 1995.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the EMERGING
MARKETS EQUITY FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .81%
Other Expenses After Fee Waivers(2) .74%
Total Fund Operating Expenses After Fee Waivers(3) 1.55%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.30%.
(2) OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
(3) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 2.04%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
- ---------------------------------------------------------------------
You 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. $16 $49
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 19
FINANCIAL AND PERFORMANCE HIGHLIGHTS
The table that follows presents information about the investment results of
the Trust Shares of the EMERGING MARKETS EQUITY FUND. The financial highlights
for the Fund for the periods from inception through May 31, 1997 have been
audited by Arthur Andersen LLP, independent public accountants, whose report
appears in STI Classic Fund's annual report and accompanies the Statement of
Additional Information. The annual report for the Fund, which contains more
information about performance, is available at no charge by calling
1-800-874-4700.
- -------------------------------
EMERGING MARKETS EQUITY FUND
- -------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
NET REALIZED
NET ASSET NET AND DISTRIBUTIONS RATIO OF
VALUE INVESTMENT UNREALIZED FROM NET NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME GAINS ON INVESTMENT VALUE END OF TOTAL END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME PERIOD RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997(1) $10.00 $0.04 $0.75 $ 0.00 $10.79 7.90%* $ 39,495 1.55%**
<CAPTION>
RATIO OF RATIO OF NET
EXPENSES INVESTMENT
TO AVERAGE INCOME TO
RATIO OF NET NET ASSETS AVERAGE NET
INVESTMENT (EXCLUDING ASSETS
INCOME TO WAIVERS (EXCLUDING PORTFOLIO AVERAGE
AVERAGE NET AND WAIVERS AND TURNOVER COMMISSION
ASSETS CONTRIBUTIONS) CONTRIBUTIONS) RATE RATE ***
------------ ---------- --------------- --------------- --------
<S> <C> <C> <C> <C> <C>
1997(1) 1.37%** 2.04%** 0.88%** 24% $0.0019
</TABLE>
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** ANNUALIZED.
*** AVERAGE COMMISSION RATE PAID PER SHARE FOR THE SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL
YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JANUARY 31, 1997.
THERE CAN BE NO ASSURANCE THAT A FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
THE INVESTMENT OBJECTIVE OF EACH FUND IS NON-FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
<PAGE>
20 PROSPECTUS
RISK CONSIDERATIONS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
<S> <C>
- ------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
FUND RISK -- The possibility that a Fund's performance during a All Funds
specific period may not meet, or exceed that of the market as a whole.
MARKET RISK -- The possibility that stock prices in general will All Funds
decline over short, or even extended, periods of time. Stock markets
tend to be cyclical, with periods when stock prices generally rise and
periods when stock prices generally decline.
SMALL ISSUER RISK -- Small and medium capitalization companies may be Value Income Stock Fund
more vulnerable than larger, more established organizations to adverse Small Cap Equity Fund
business or economic developments. In particular, small capitalization Mid-Cap Equity Fund
companies may have limited product lines, markets and financial
resources and may be dependent upon a relatively small management
group. These securities may be traded over-the-counter or listed on an
exchange and may or may not pay dividends.
INTEREST RATE RISK -- The potential for a decline in the price of Balanced Fund
fixed-income securities due to rising interest rates. This risk will
be greater for long-term securities than for short-term securities.
CREDIT RISK -- The possibility that an issuer will be unable to make Capital Growth Fund
timely payments of either principal or interest. Value Income Stock Fund
Mid-Cap Equity Fund
Balanced Fund
Sunbelt Equity Fund
International Equity
Fund
Emerging Markets
Equity Fund
CALL RISK -- The possibility that securities with high interest rates Balanced Fund
will be prepaid (or "called") by the issuer, prior to maturity, during
periods of falling interest rates. This would require a Fund to invest
the resulting proceeds elsewhere, at generally lower interest rates.
</TABLE>
<PAGE>
PROSPECTUS 21
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
EVENT RISK -- The possibility that corporate debt securities may Capital Growth Fund
suffer substantial declines in credit quality and market value due to Value Income Stock Fund
corporate restructurings. While event risk may be high for certain Mid-Cap Equity Fund
corporate securities held by a Fund, event risk overall should be low Balanced Fund
because of the Fund's diversified holdings. International Equity
Fund
Emerging Markets
Equity Fund
GEOGRAPHIC RISK -- The risk that a Fund's concentration of investments Sunbelt Equity Fund
in securities of issuers located in a single state or geographic
region subject a Fund to economic conditions and government policies
of that state or region that could adversely affect the value of a
Fund.
PREPAYMENT RISK -- The risk that mortgage-backed and asset-backed Balanced Fund
securities may be retired substantially earlier than their stated Emerging Markets
maturities or final distribution dates, resulting in a loss of all, or Equity Fund
part, of any premium paid.
HEDGING RISKS -- Hedging is a strategy designed to offset investment All Funds (except
risks. Hedging activities include, among other things, the use of Capital
options and futures. There are risks associated with hedging Growth Fund)
activities, including:
- - 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;
- - There may be an imperfect or no correlation, between the changes in
market value of the securities held by a Fund and the prices of
futures and options on futures;
- - There may not be a liquid secondary market for a futures contract or
option;
- - Trading restrictions or limitations may be imposed by an exchange,
and government regulations may restrict trading in futures contracts
and options.
</TABLE>
<PAGE>
22 PROSPECTUS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
HIGH-YIELD SECURITY RISKS -- There are risks associated with investing Capital Growth Fund
in high-yield securities, including: Value Income Stock Fund
- - High-yield, lower rated bonds ("junk bonds") involve greater risk of Mid-Cap Equity Fund
default or price declines than investments in investment grade Sunbelt Equity Fund
securities (e.g., securities rated BBB or higher by S&P or Baa or International Equity
higher by Moody's) due to changes in the issuer's creditworthiness. Fund
- - The market for high risk, high-yield securities may be thinner and Emerging Markets
less active, causing market price volatility and limited liquidity Equity Fund
in the secondary market. This may limit the ability of a Fund to
sell these 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.
- - The market for high risk, high-yield securities may be adversely
affected by legislative and regulatory developments.
FOREIGN SECURITY RISKS -- There are risks associated with All Funds (except
international investing, including: Sunbelt Equity Fund)
CURRENCY RISK -- The possibility that changes in foreign exchange
rates will affect, favorably or unfavorably, the value of foreign
securities or the U.S. dollar amount of income or gain received on
such securities.
VOLATILITY -- Investments in foreign stock markets can be more
volatile than investments in U.S. markets. Diplomatic, political,
or economic developments could affect investments in foreign
countries.
EXPENSE CONSIDERATIONS -- Fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S.
exchanges. Expenses for custodial arrangements of foreign
securities may be somewhat greater than typical expenses for
custodial arrangements for handling U.S. securities of equal
value.
FOREIGN TAXES -- Certain foreign governments levy withholding
taxes against dividend and interest income. Although in some
countries a portion of these taxes are recoverable, the
non-recovered portion of foreign withholding taxes will reduce the
income received from the securities comprising the portfolio.
</TABLE>
<PAGE>
PROSPECTUS 23
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
REGULATORY ENVIRONMENT -- Foreign companies generally are not
subject to uniform accounting, auditing, and financial reporting
standards comparable to those applicable to U.S. domestic
companies. Foreign branches of U.S. banks, foreign banks, and
foreign issuers may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting and
recordkeeping standards than those applicable to domestic branches
of U.S. banks and U.S., domestic issuers. There is generally less
government regulation of securities exchanges, brokers, and listed
companies abroad than in the U.S.
CURRENCY RISK -- The possibility that changes in foreign exchange All Funds (except
rates will affect, favorably or unfavorably, the value of foreign Sunbelt Equity Fund)
securities or the U.S. dollar amount of income or gain received on
such securities.
</TABLE>
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUNDS
The International Equity, Value Income Stock, Small Cap Equity, Sunbelt
Equity Fund, and Emerging Markets Funds are each the successor to collective
investment funds. The collective investment funds were previously managed by STI
Capital Management, Inc. and Trusco Capital Management, Inc. Substantially all
of the assets of those collective investment funds were transferred to the Funds
when each Fund started operating. Total return, a type of performance
calculation, for the predecessor collective investment funds, is presented
below. You may find this performance information helpful because the collective
investment funds were managed using the same investment objectives, policies,
and restrictions as those used by each of the Funds. The performance information
relates to a period of time before the effective date of each Fund's
registration.
The total return of a fund refers to the average compounded rate of return
on a hypothetical investment. When we compute total return, we assume that your
entire investment is redeemed at the end of each period and that you reinvest
all income dividends and capital gains distributions.
Please keep in mind that performance information, such as total return, is
not necessarily indicative of the future performance of a Fund. Also, keep in
mind that the performance of the collective investment funds does not represent
the historical performance of any Fund. The predecessor collective investment
funds were not subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the 1940 Act and the Internal
Revenue Code. If these had been imposed, a collective investment funds
performance would have been adversely affected. The predecessor collective
investment funds did not incur expenses that correspond to the advisory,
administrative, and other fees to which each Fund is now subject. Accordingly,
the following performance information has been adjusted by applying the total
expense ratios for the corresponding Fund, as disclosed in the Prospectus at the
time the Fund started operating. This adjustment reduced the actual performance
of the collective investment funds.
<PAGE>
24 PROSPECTUS
The average annual total returns (adjusted to reflect Fund expenses, before
voluntary waivers and reimbursements) for the following periods:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN SINCE
YEAR YEARS YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
International Equity N/A N/A N/A N/A 33.16%
Collective Fund (2/2/95-11/30/95)
Value Income Stock 15.87% 18.70% N/A N/A 16.31%
Collective Fund (ending (ending (10/31/89-1/31/93)
1/31/93) 1/31/93)
Sunbelt Equity 22.70% 29.73% 21.29% 16.14% 16.94%
Collective Fund (ending (ending (ending (ending (12/1/80-12/31/93)
12/31/93) 12/31/93) 12/31/93) 12/31/93)
Small Cap Equity 36.43% N/A N/A N/A 27.97%
Collective Fund (ending (8/31/94-1/31/97)
1/31/97)
Emerging Markets Equity N/A N/A N/A N/A 22.25%
Collective Fund (3/29/96-1/31/97)
</TABLE>
FUND PERFORMANCE
The average annual total returns for the Funds (net of voluntary waivers and
reimbursements) for the following periods ended May 31, 1997:
<TABLE>
<CAPTION>
ONE THREE SINCE
YEAR YEARS INCEPTION
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
International Equity Fund* 23.29% N/A 25.50%
Value Income Stock Fund* 22.18% 23.00% 18.87%
Sunbelt Equity Fund* 1.48% 14.69% 11.83%
Small Cap Equity Fund* N/A N/A 37.24%
Emerging Markets Equity N/A N/A 26.02%
Fund*
</TABLE>
- ----------
* COMMENCED FUND OPERATIONS ON DECEMBER 1, 1995; FEBRUARY 12, 1993; JANUARY 3,
1994; JANUARY 31, 1997; AND JANUARY 31, 1997, RESPECTIVELY.
The performance of Trust Shares will normally be higher than Investor Shares
or Flex Shares because Trust Shares are not subject to the service fees and
other expenses charged to Investor Shares and Flex Shares.
<PAGE>
PROSPECTUS 25
PURCHASING FUND SHARES
WHO MAY BUY TRUST SHARES OF THE FUNDS
Individuals generally may not purchase Trust Shares directly. Instead, Trust
Shares are sold to financial institutions or intermediaries, including
subsidiaries of SunTrust Banks, Inc. (SunTrust), on behalf of accounts for which
they act as fiduciary, agent, investment advisor, or custodian. As a result,
you, as a customer of a financial institution, may own Trust Shares through
accounts maintained with financial institutions and potentially through the
Preferred Portfolio Account (an asset allocation account available through
SunTrust Securities, Inc.). Trust Shares will be held of record by (in the name
of) your financial institution. Depending upon the terms of your account,
however, you may have, or be given, the right to vote the Trust Shares.
HOW TO BUY FUND SHARES
Trust Shares are offered continuously, and may be purchased on any day that
the New York Stock Exchange is open for business (a Business Day). Your price
per share (the offering price) will be the net asset value per share (NAV) next
determined after your purchase order is received by the Transfer Agent. NAV is
calculated by (1) taking the current market value of a Fund's total assets, (2)
subtracting the liabilities, and (3) dividing that amount by the total number of
shares owned by shareholders. The NAV is calculated once each Business Day at
the close of the New York Stock Exchange (4:00 p.m. Eastern time). So, to
receive the current Business Day's NAV, purchase orders must be received before
4:00 p.m. Eastern time.
Trust Shares are sold without a sales charge. Certain financial institutions
may, however, charge fees for services provided in connection with the purchase
of Trust Shares. Financial institutions also may impose an earlier time for a
purchase order to be effective on the same day. This allows the financial
institution time to process your order and transmit it to the Transfer Agent.
For more information about how to purchase shares, you should contact your
financial institution directly.
The Trust reserves the right to reject any purchase order when the
Distributor determines that accepting the order would not be in the best
interests of the Trust and/or Shareholders.
REDEEMING FUND SHARES
HOW TO SELL YOUR SHARES
Redemption requests should be sent to the Transfer Agent by your financial
institution. Your financial institution will provide you with information about
how to request redemption of Trust Shares held in your account. Redemption
requests must be received by the Transfer Agent by 4:00 p.m. Eastern time to get
that day's NAV. Requests received after these times will normally be executed
the next Business Day. You may have to transmit your redemption request to your
financial institution at an earlier time for your redemption to be effective
that day. For more information about how to redeem your shares, you should
contact your financial institution directly. The Trust reserves
<PAGE>
26 PROSPECTUS
the right to wire redemption proceeds within five Business Days of the Transfer
Agent receiving the redemption request if, in the judgment of the Advisor, an
earlier payment could adversely impact a Fund.
REDEMPTIONS IN KIND
The Trust intends to pay redemption proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
remaining shareholders in the Fund) the Trust reserves the right to pay all, or
part, of your redemption proceeds in liquid securities that have a market value
equal to the redemption price (redemption in kind). Although it is highly
unlikely that your shares would ever actually be redeemed in kind, if it did
happen, you would probably have to pay brokerage costs to sell the securities
distributed to you.
TRANSACTIONS OVER THE TELEPHONE
Telephone redemption and exchange transactions are extremely convenient, but
not without risk. To try to keep your telephone transactions as safe, secure,
and risk free as possible, the Trust has developed certain safeguards and
procedures for determining the identity of callers and authenticity of
instructions. As a result, neither the Trust nor its Transfer Agent will be
responsible for any loss, liability, cost, or expense for following telephone or
wire instructions they reasonably believed to be genuine. If you choose to make
telephone transactions, you will generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are declared and paid quarterly by each of the Funds,
except the International Equity Index Fund, International Equity Fund, and
Emerging Markets Equity Fund. These Funds declare and pay income dividends
annually. If you own Fund shares on the record date, you will be entitled to
receive dividends. The Funds make distributions of capital gains at least
annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. To elect cash
payment, you must notify the Transfer Agent in writing prior to the date of
distribution. Your election will become effective for dividends paid after the
Transfer Agent receives your written notice. To cancel your election, simply
send written notice to the Transfer Agent.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their Shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. We have not
tried to present a detailed explanation of the tax treatment of the Funds or
their Shareholders. More information about taxes is in the SAI. WE URGE YOU TO
CONSULT YOUR TAX ADVISOR REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE, AND
LOCAL INCOME TAXES.
<PAGE>
PROSPECTUS 27
TAX STATUS OF EACH FUND
Each Fund is treated as a separate entity for Federal income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies. As long as a Fund qualifies as a regulated investment
company, it pays no Federal income tax on the earnings it distributes to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME WHETHER
YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
Corporate Shareholders may be entitled to a dividends-received deduction for
the portion of dividends they receive which are attributable to dividends
received by a Fund from U.S. corporations.
Capital gains dividends will be treated as gain from the sale or exchange of
a capital asset held for more than 1 year.
Distributions paid in January but declared as dividends by a Fund in
October, November or December of the previous year, may be taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
TAX MANAGEMENT
The Funds use a tax management technique known as "highest in, first out."
Through this technique, a Fund's portfolio holdings which have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
FOREIGN TAX CONSIDERATIONS
Shareholders of the International Equity Index, International Equity, and
Emerging Markets Equity Funds may be entitled to a foreign tax deduction or
credit.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Massachusetts as
long as it qualifies as a regulated investment company for Federal income tax
purposes.
Distributions by the Funds to you may be subject to state and local
taxation. You should verify your tax liability with your tax advisor.
<PAGE>
28 PROSPECTUS
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust is organized as a Massachusetts business trust. The Trust is
permitted to offer separate portfolios of shares and different classes of each
Fund. All payments received by the Trust for shares of any Fund belong to that
Fund. Each Fund has its own assets and liabilities.
BOARD OF TRUSTEES
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services.
GENERAL INFORMATION
VOTING RIGHTS
Shareholders of record receive one vote for every full Fund share owned.
Each Fund or class of a Fund will vote separately on matters relating solely to
that Fund or class. If you are a customer of a financial institution that has
purchased shares of a Fund for your account, you may, depending on the nature of
your account, have certain voting rights.
As a Massachusetts business trust, the Trust is not required to hold annual
Shareholder meetings unless otherwise required by the Investment Company Act.
However, a meeting may be called by Shareholders owning at least 10% of the
outstanding shares of the Trust. If a meeting is requested by Shareholders, the
Trust will provide appropriate assistance and information to the Shareholders
who requested the meeting.
REPORTING
Shareholders of record will receive the Trust's unaudited financial
information and audited financial statements, proxy statements and other
reports. If you are a customer of a financial institution that has purchased
shares of a Fund for your account, you may, depending on the nature of your
account, receive all or a portion of this information directly from your
financial institution.
SHAREHOLDER INQUIRIES
You may contact your financial institution's representative to obtain
information on account statements, procedures, and other related information.
INVESTMENT ADVISORS
The Advisors make investment decisions for the assets of the Funds and
continuously review, supervise, and administer their Fund's respective
investment program. The Trustees of the Trust supervise the Advisors and
establish policies that the Advisors must follow in their day-to-day management
activities.
<PAGE>
PROSPECTUS 29
STI Capital Management, N.A. (STI Capital) serves as the Advisor to the
Capital Growth, Value Income, Small Cap Equity, Mid-Cap Equity, Balanced,
International Equity, and Emerging Markets Funds. As of May 31, 1997, STI
Capital had approximately $12.4 billion in assets under management. The
principal business address of STI Capital is P.O. Box 3808, Orlando, Florida
32802. For the fiscal year ended May 31, 1997, STI Capital received advisory
fees computed daily and paid monthly at the annual rate included in each Fund's
ANNUAL FUND OPERATING EXPENSE summary.
Trusco Capital Management, Inc. (Trusco) serves as the Advisor to the
Sunbelt Equity Fund. As of May 31, 1997, Trusco had approximately $17.4 billion
in assets under management. The principal business address of Trusco is 50 Hurt
Plaza, Suite 1400, Atlanta, Georgia 30303. For the fiscal year ended May 31,
1997, Trusco received advisory fees computed daily and paid monthly at the
annual rate included in each Fund's ANNUAL FUND OPERATING EXPENSES summary.
STI Capital and Trusco serve as joint advisors to the International Equity
Index Fund.
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
(SunTrust). SunTrust is a southeastern regional bank holding company with assets
of $52.5 billion, as of December 31, 1996. SunTrust is one of the 20 largest
banking companies in the U.S. 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 tri-state area.
SunTrust Banks, Inc. has discretionary assets under management of approximately
$53.4 billion, as of December 31, 1996.
The Advisors may use their affiliates as brokers for the Funds' portfolio
transactions.
DISTRIBUTION
SEI Investments Distribution Co. (the Distributor), a wholly-owned
subsidiary of SEI Investments Company, serves as each Fund's distributor under a
Distribution Agreement. The Distributor receives no compensation for
distribution services rendered to the Trust Shares of each Fund.
Each Fund may use the Distributor as its broker for portfolio transactions.
The Distributor receives compensation from the Funds for its brokerage services.
Flex and Investor Shares are offered primarily to individual investors, and
are described in a separate prospectus. Flex Shares are offered subject to a
contingent deferred sales charge. Investor Shares are offered subject to a
front-end sales charge. You may call 1-800-874-4770 to receive more information
about Investor Shares or Flex Shares. It is possible that a financial
institution may offer different classes of shares to its customers. As a result,
the financial institution may receive different compensation with respect to
different classes of shares.
<PAGE>
30 PROSPECTUS
ADMINISTRATION
SEI Fund Resources acts as the Trust's Administrator. For its administrative
services, the Administrator is entitled to a fee, 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>
The Administrator may voluntarily waive all or a portion of its fees to
limit Total Fund Operating Expenses.
<PAGE>
PROSPECTUS 31
FUND INVESTMENTS
% =Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net
assets.
X = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
CAPITAL VALUE SMALL CAP MID-CAP SUNBELT INTERNATIONAL INTERNATIONAL
GROWTH INCOME EQUITY EQUITY BALANCED EQUITY EQUITY INDEX EQUITY
SECURITY OR PRACTICE FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRADITIONAL INVESTMENTS
ADRs 35% 35% X(6) 35% 75% -- X(3) X(3)
Bank Obligations -- -- -- -- 60% -- 35% 35%
Convertible Securities X 35% X X 70% X(2) X X
Corporate Debt Obligations 35%(2) 20%(2) -- 20%(2) 60%(5,7) -- -- 35%(2)
Equity Securities X X X X 70% X X X
Investment Company Shares 10% 10% 10% 10% 10% 10% 10% 10%
Mortgage-Backed Securities -- * * * 60%(1) -- -- *
Pay-In-Kind Securities 35% -- -- -- 75% -- -- --
Repurchase Agreements 35% 35% * 20% 75% 35% 35% *
Restricted Securities 15% 15% 15% 15% 15% 15% 15% 15%
Securities of Foreign * * X 35%(2) 60% -- X X
Issuers
Supranational Agency -- -- X 20%(2) 60% -- -- --
Obligations
U.S. Treasury and -- 20% -- -- 60% -- -- 35%
Government Agency
Obligations
Zero Coupon Obligations -- -- -- -- 60% -- -- --
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Illiquid Securities 15% 15% 15% 15% 15% 15% 15% 15%
Securities Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Standby Commitments X X X X X X X X
When Issued Securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
LEVERAGING AND HEDGING TOOLS
Forward Foreign Currency -- -- -- -- -- -- X X
Contracts
Futures and Options on -- 20% -- -- 75% 20% 20% 35%
Futures
Options -- 20% 35% -- 75% 35% X(4) X(4)
Swaps, Caps, Floors, and -- -- -- -- 75% -- -- --
Collars
Variable and Floating Rate -- * -- X X -- -- --
Instruments
<CAPTION>
EMERGING
MARKETS
EQUITY
SECURITY OR PRACTICE FUND
- ------------------------------
<S> <C>
TRADITIONAL INVESTMENTS
ADRs X
Bank Obligations 35%
Convertible Securities X
Corporate Debt Obligations 35%(2)
Equity Securities X
Investment Company Shares 10%
Mortgage-Backed Securities 35%
Pay-In-Kind Securities --
Repurchase Agreements --
Restricted Securities 15%
Securities of Foreign X
Issuers
Supranational Agency X
Obligations
U.S. Treasury and 35%
Government Agency
Obligations
Zero Coupon Obligations --
INVESTMENT PRACTICES
Borrowing 33 1/3%
Illiquid Securities 15%
Securities Lending 33 1/3%
Standby Commitments
When Issued Securities 33 1/3%
LEVERAGING AND HEDGING TOOLS
Forward Foreign Currency X
Contracts
Futures and Options on X
Futures
Options X(4)
Swaps, Caps, Floors, and
Collars
Variable and Floating Rate
Instruments
</TABLE>
(1) INCLUDING UP TO 25% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES. THE
BALANCED FUND MAY ALSO PURCHASE ASSET-BACKED SECURITIES.
(2) MAY INVEST UP TO 10% OF ITS ASSETS IN HIGH YIELD SECURITIES. EMERGING
MARKETS EQUITY FUND MAY INVEST UP TO 20% IN SUCH SECURITIES.
(3) MAY ALSO INVEST IN EDRS.
(4) INCLUDES OPTIONS ON CURRENCIES.
(5) UP TO 25% OF ITS ASSETS MAY BE INVESTED IN SECURITIES AND RATED BBB OR Baa,
OR THEIR UNRATED EQUIVALENTS.
(6) MAY INVEST UP TO 20% IN UNSPONSORED ADRS.
(7) WILL INVEST AT LEAST 25% IN SENIOR FIXED-INCOME SECURITIES.
Under normal market conditions, the Funds will follow the practices and
policies outlined above. However, for temporary defensive purposes during
periods when its Adviser determines that market conditions warrant, each Fund
may invest up to 100% of its assets in cash, money market instruments,
repurchase agreements and short-term obligations. The SMALL CAP EQUITY FUND also
may invest in senior fixed income securities rated investment grade and
securities issued by mid- to large-cap companies. When the Funds are investing
for temporary defensive purposes, they will not be pursuing their respective
investment objectives.
<PAGE>
32 PROSPECTUS
INVESTMENT RESTRICTIONS
Each Fund will not invest more than 25% of its assets in any one industry.
With respect to 75% of its assets, each Fund will not:
- Invest more than 5% of its assets in the securities of any one issuer.
- Purchase more than 10% of the outstanding voting securities of any one
issuer.
MORE ABOUT INVESTMENTS AND HEDGING TOOLS
The following is a description of some of the permitted investments for the
Funds. Further discussion is contained in the SAI.
AMERICAN DEPOSITARY RECEIPTS (ADRs) AND EUROPEAN DEPOSITARY RECEIPTS (EDRs)
are securities, typically issued by a U.S. financial institution or a non-U.S.
financial institution in the case of an EDR (a depositary). The institution has
ownership interests in a security, or a pool of securities, issued by a foreign
issuer and deposited with the depositary. ADRs and EDRs 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.
An unsponsored facility may be established by a depositary without participation
by the issuer of the underlying security.
ASSET-BACKED SECURITIES are securities backed by non-mortgage assets such as
company receivables, truck and auto loans, leases, and credit card receivables.
These securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Asset-backed securities may also be DEBT OBLIGATIONS, 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 these assets and issuing these DEBT OBLIGATIONS.
BANK OBLIGATIONS are SHORT-TERM OBLIGATIONS issued by U.S. and foreign
banks, including bankers' acceptances, certificates of deposit, custodial
receipts, and time deposits.
COMMON AND PREFERRED STOCKS represent units of ownership in a corporation.
Owners of common stock typically are entitled to vote on important matters.
Owners of preferred stock ordinarily do not have voting rights, but are entitled
to dividends at a specified rate. Preferred stock has a prior claim to common
stockholders with respect to dividends.
CONVERTIBLE SECURITIES are securities issued by corporations that are
exchangeable for a set number of another security at a prestated price. 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 OPTION
provisions.
CORPORATE DEBT SECURITIES are DEBT OBLIGATIONS issued by corporations with
maturities exceeding 270 days.
DEBT OBLIGATIONS represent money borrowed that obligates the issuer, (E.G.,
a corporation, municipality, government, government agency) to repay the
borrowed amount at maturity (when the obligation is due and payable) and usually
to pay the holder interest at specific times (E.G., bonds, notes, debentures.
EQUITY SECURITIES include COMMON and PREFERRED STOCKS, WARRANTS, RIGHTS to
subscribe to common stock, and CONVERTIBLE SECURITIES. These securities may be
publicly or privately issued.
<PAGE>
PROSPECTUS 33
FORWARD FOREIGN CURRENCY CONTRACTS involve obligations 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 the foreign currency. The Fund may realize a gain or
loss from currency transactions.
FUTURES CONTRACTS AND OPTIONS ON 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. They may also be used 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.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An 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 index at the
close of the last trading day of the contract and the price at which the
agreement is made.
HIGH YIELD SECURITIES are DEBT OBLIGATIONS rated below INVESTMENT GRADE,
I.E., below BBB by S&P or Baa by Moody's or their unrated equivalents.
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.
INVESTMENT COMPANY SHARES are shares of other mutual funds which may be
purchased by the Funds to the extent consistent with applicable law. Closed-end
mutual funds usually trade at discount from net asset value.
INVESTMENT GRADE OBLIGATIONS are DEBT OBLIGATIONS rated BBB or better by S&P
or Baa or better by Moody's, or their unrated equivalents. These securities are
deemed to have speculative characteristics.
MONEY MARKET INSTRUMENTS are high quality, dollar-denominated, SHORT-TERM
OBLIGATIONS, including BANK OBLIGATIONS, U.S. TREASURY OBLIGATIONS, U.S.
GOVERNMENT AGENCY, and SHORT-TERM CORPORATE OBLIGATIONS.
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
<PAGE>
34 PROSPECTUS
securities include conventional fifteen- and thirty-year fixed rate mortgages,
graduated payment mortgages, adjustable rate mortgages, and floating rate
mortgages.
During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities may accelerate. It is often not possible
to predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a
U.S. Government agency representing an interest in a pool of mortgage loans.
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 are mortgage-backed securities issued by a
non-governmental entity, such as a trust. 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
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government, or by private originators, or investors in mortgage loans.
Each class of a CMO is issued with a specific fixed or floating interest rate
and has a stated maturity or final distribution date.
REMICS are CMOs that qualify for special tax treatment under the Internal
Revenue Code. They invest in certain mortgages that are principally secured by
interests in real property. These securities are often guaranteed as to the
payment of principal and/or interest as payments are required to be made on the
underlying mortgage participation certificates.
STRIPPED MORTGAGE-BACKED SECURITIES (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 the other class may receive all of the principal
payments. SMBs are extremely sensitive to changes in interest rates because of
the impact of prepayment of principal on the underlying mortgage securities.
OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time. The
seller or writer of an option is obligated to sell (a call option) or buy (a put
option) the underlying security. All options written by a Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
currency ("options on currencies") or security. With respect to put options
written by the Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash or cash equivalents in an amount equal to the
amount the Fund would be required to pay upon exercise of the put option.
PAY-IN-KIND SECURITIES are DEBT OBLIGATIONS or PREFERRED STOCK, that pay
interest or dividends in the form of additional DEBT OBLIGATIONS or PREFERRED
STOCK.
<PAGE>
PROSPECTUS 35
REPURCHASE AGREEMENTS are agreements by which a Fund obtains a security and
simultaneously agrees 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.
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.
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. The Trust's Board of Trustees has adopted procedures for
determining the liquidity of restricted securities.
RIGHTS give existing shareholders of a corporation the right, but not the
obligation, to buy shares of the corporation at a given price, usually below the
offering price, during a specified period.
SECURITIES LENDING -- To generate additional income, a Fund may lend
securities which it owns under agreements requiring that the loan be
continuously secured by collateral equal to at least 100% of the market value of
the loaned securities. A Fund continues to receive interest on the loaned
securities while simultaneously earning interest on the investment of cash
collateral.
SECURITIES OF FOREIGN ISSUERS are securities issued by foreign corporations,
including foreign branches of U.S. banks and foreign banks, and by foreign
governments or their agencies or instrumentalities.
SENIOR FIXED INCOME SECURITIES are DEBT OBLIGATIONS that pay a fixed rate of
return.
SHORT-TERM OBLIGATIONS are DEBT OBLIGATIONS maturing (becoming payable) in
397 days or less, including commercial paper and short-term corporate
obligations. Short-term corporate obligations are short-term obligations issued
by corporations.
STANDBY COMMITMENTS AND PUTS permit the holder to sell 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.
SUPRANATIONAL AGENCY OBLIGATIONS are obligations of supranational entities
established through the joint participation of several governments, including
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.
SWAPS, CAPS, FLOORS, and COLLARS -- Swaps, caps, floors, and collars are
hedging tools designed to permit the purchaser to preserve a return or spread on
a particular investment or portion of its portfolio. They are also used to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. 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 a Fund's performance.
<PAGE>
36 PROSPECTUS
U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some of these securities
are supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and others are
supported only by the credit of the agency or instrumentality.
U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the
U.S. Treasury. They also consist of separately traded interest and principal
component parts of these 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 involve certain obligations that 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.
WARRANTS give holders the right, but not the obligation, to buy shares of a
company at a given price, usually higher than the market price, during a
specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES 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 interest rate realized on these securities is fixed
as of the purchase date and no interest accrues to the Fund before settlement.
ZERO COUPON OBLIGATIONS are DEBT OBLIGATIONS that do not bear any interest,
but instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
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
face value or par and pay interest periodically.
<PAGE>
PROSPECTUS 37
<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 Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* TRANSFER AGENT
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222-3779
* CUSTODIAN
SunTrust Bank, Atlanta c/o STI Trust & Investment
Operations, Inc.
303 Peachtree Street N.E.
14th Floor
Atlanta, GA 30308
The Bank of New York One Wall Street
(International Equity Fund, New York, New York 10286
International Equity Index Fund and
Emerging Markets Equity Fund only)
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
38 PROSPECTUS
Additional information about the Funds is included in the SAI dated October
1, 1997. The SAI has been filed with the SEC and is incorporated by reference
into this Prospectus. You may obtain a copy of the SAI, or of the annual or
semi-annual reports, without charge by calling 1-800-874-4770, or by contacting
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR.
<PAGE>
Blank Page
<PAGE>
100486/10-97
STI CLASSIC FUNDS TRUST SHARES
PROSPECTUS
OCTOBER 1, 1997
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
TAX FREE INCOME FUND
INVESTMENT GRADE TAX-EXEMPT
BOND 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:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
SUNTRUST BANK, ATLANTA
SUNTRUST BANK, CHATTANOOGA, N.A.
(the "Advisors")
STI CLASSIC FUNDS
<PAGE>
PROSPECTUS
GENERAL INFORMATION
AND CONTENTS
<TABLE>
<C> <S>
1 ABOUT THE TRUST
---
1 INVESTMENT GRADE BOND FUND
---
3 U.S. GOVERNMENT SECURITIES FUND
---
5 LIMITED-TERM FEDERAL MORTGAGE
--- SECURITIES FUND
7 SHORT-TERM BOND FUND
---
9 SHORT-TERM U.S. TREASURY
--- SECURITIES FUND
11 INVESTMENT GRADE TAX-EXEMPT
--- BOND FUND
13 FLORIDA TAX-EXEMPT BOND FUND
---
15 GEORGIA TAX-EXEMPT BOND FUND
---
17 TENNESSEE TAX-EXEMPT BOND FUND
---
19 PRIME QUALITY MONEY MARKET FUND
---
21 U.S. GOVERNMENT SECURITIES
--- MONEY MARKET FUND
23 TAX-EXEMPT MONEY MARKET FUND
---
26 RISK CONSIDERATIONS
---
29 PURCHASING FUND SHARES
---
31 TAX INFORMATION
---
36 FUND INVESTMENTS
---
38 MORE ABOUT INVESTMENTS AND HEDGING
--- TOOLS
</TABLE>
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 gives you important information about the Trust Shares
of the Fixed-Income Funds, State Tax-Exempt Funds, and Money Market Funds that
you should know before investing. Please read this Prospectus, and keep it for
future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THE TRUST'S SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR
APPROVED OF THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY STATEMENT OR
INDICATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS:
- ARE NOT BANK DEPOSITS
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY BANK OR GOVERNMENT AGENCY
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS.
INVESTING IN THE FUNDS INVOLVES RISK. YOU COULD LOSE MONEY.
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 CONSTANT VALUE OF $1.00 PER SHARE.
OCTOBER 1, 1997
<PAGE>
PROSPECTUS 1
ABOUT THE TRUST
STI CLASSIC FUNDS is a diversified, open-end management investment company.
The Funds provide a convenient and economical way for you to invest in a number
of professionally managed portfolios of securities. This Prospectus relates to
the Trust Shares 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, Investment Grade Tax-Exempt Bond Fund
(the Fixed Income Funds), Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond
Fund, Tennessee Tax-Exempt Bond Fund (the State Tax-Exempt Funds), Prime Quality
Money Market Fund, U.S. Government Securities Money Market Fund, and Tax-Exempt
Money Market Fund (the Money Market Funds) (collectively, the Funds).
ABOUT MONEY MARKET FUNDS
The Money Market Funds are governed by SEC rules which impose certain
quality, maturity, and diversification requirements. Each Fund's assets are
valued using the amortized cost method, which enables a Money Market Fund to
maintain a stable net asset value per share. All securities purchased by a Money
Market Fund must have remaining maturities of 13 months or less.
FUND INFORMATION --
FIXED-INCOME FUNDS
INVESTMENT GRADE BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in debt obligations, such as corporate debt
obligations, and U.S. Treasury and Government agency obligations. The Fund
invests only in investment grade obligations and may invest in mortgage- and
asset-backed securities, securities of foreign issuers, variable and floating
rate instruments which may be subject to "caps" or "floors," futures and
options. To some extent, the Fund may invest in other securities and engage in
other investment practices. See "FUND INVESTMENTS."
It is anticipated that the Fund's average weighted maturity will range from
4 to 10 years, which may impact the Fund's exposure to interest rate risk. The
Fund may shorten its average weighted maturity to as little as 90 days for
temporary defensive purposes.
<PAGE>
2 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Investment Grade Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Prepayment Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. L. Earl Denney, CFA, has managed the Investment Grade Bond Fund
since it began operating. He has been Senior Vice President of STI Capital
Management, N.A. since 1983. Mr. Denney has over 20 years experience in fixed
income investment management. Prior to joining STI Capital Management, N.A., he
was fixed income portfolio manager with American National Bank.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
INVESTMENT GRADE BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .64%
Other Expenses .11%
Total Fund Operating Expenses After Fee Waivers(2) .75%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .85%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 8 $ 24 $ 42 $ 93
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 3
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the INVESTMENT GRADE BOND FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------
INVESTMENT GRADE BOND FUND
- -----------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.07 $0.60 $ 0.09 $(0.60) $ -- $10.16 6.99% $ 633,646 0.75%
1996 10.26 0.60 (0.19) (0.60) -- 10.07 4.02% 599,514 0.75%
1995 9.89 0.61 0.37 (0.61) -- 10.26 10.39% 543,308 0.75%
1994 10.45 0.50 (0.36) (0.50) (0.20) 9.89 1.17% 460,538 0.75%
1993(1) 10.09 0.45 0.36 (0.45) -- 10.45 9.34%* 336,132 0.74%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 5.89% 0.85% 5.79% 298%
1996 5.81% 0.87% 5.69% 184%
1995 6.22% 0.88% 6.09% 238%
1994 4.77% 0.88% 4.64% 259%
1993(1) 5.14%* 0.87%* 5.01%* 299%
</TABLE>
* ANNUALIZED.
(1)COMMENCED OPERATIONS ON JULY 16, 1992.
(2)A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
U.S. GOVERNMENT SECURITIES FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in U.S. Government agency obligations,
including mortgage-backed securities.
The Fund may invest in investment grade obligations, variable and floating
rate instruments and may engage in dollar roll transactions. To some extent, the
Fund may invest in other securities and engage in other investment practices.
See "FUND INVESTMENTS."
The average maturity of the Fund's portfolio will typically range from 7 to
14 years, which may impact the Fund's exposure to interest rate risk.
RISK CONSIDERATIONS
[LOGO]
The U.S. Government Securities Fund is subject to the following types
of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
<PAGE>
4 PROSPECTUS
- Call Risk;
- Event Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Charles B. Leonard, CFA, First Vice President of Trusco Capital
Management, Inc., and Michael L. Ford, an Associate of Trusco, have co-managed
the U.S. Government Securities Fund since it began operating. Mr. Leonard, who
has more than 25 years of investment experience, has been with Trusco since 1986
as the senior fixed income manager. Mr. Ford, who has more than 11 years of
investment experience, has been with Trusco since April 1994. Prior to joining
Trusco, Mr. Ford served as a senior securities analyst with Liberty Capital
Advisors from 1992 to 1994 and served as a securities analyst at Southern Farm
Bureau Life Insurance Company from 1990 to 1992.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the U.S.
GOVERNMENT SECURITIES FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .45%
Other Expenses .30%
Total Fund Operating Expenses After Fee Waivers(2) .75%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.04%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You 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. $ 8 $ 24 $ 42 $ 93
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 5
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the U.S. GOVERNMENT SECURITIES FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ---------------------------------
U.S. GOVERNMENT SECURITIES FUND
- ---------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.91 $0.62 $ 0.11 $(0.62) $ -- $10.02 7.54% $ 19,471 0.75%
1996 10.27 0.62 (0.33) (0.62) (0.03) 9.91 2.77% 10,277 0.75%
1995(1) 9.98 0.53 0.29 (0.53) -- 10.27 8.64%+* 3,291 0.75%
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 6.19% 1.02% 5.92% 21%
1996 6.05% 1.25% 5.55% 83%
1995(1) 6.67% 3.33% 4.09% 30%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JULY 31, 1994.
LIMITED-TERM FEDERAL MORTGAGE
SECURITIES FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in mortgage-backed securities issued or
guaranteed by U.S. Government agencies, such as GNMA, Fannie Mae, or FHLMC.
These securities typically have an average life of from 1 to 5 years.
The Fund may invest in investment grade obligations, variable and floating
rate instruments and asset-backed securities, and may engage in dollar roll
transactions. To some extent, the Fund may invest in other securities and engage
in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Limited-Term Federal Mortgage Securities Fund is subject to the
following types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
<PAGE>
6 PROSPECTUS
- Call Risk;
- Event Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA, have co-managed
the Limited-Term Federal Mortgage Securities Fund since it began operating. Mr.
Denney has served as Senior Vice President of STI Capital Management, N.A. since
1983. Mr. Denney has over 20 years experience in fixed income investment
management. Prior to joining STI Capital Management, N.A., he was fixed income
portfolio manager with American National Bank. Mr. West, a Vice President of STI
Capital Management, N.A., has served as a fixed-income portfolio manager with
STI since 1989.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51%
Other Expenses .14%
Total Fund Operating Expenses After Fee Waivers(2) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .79%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 7
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND.
The financial highlights for the Fund for the periods from inception
through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.99 $0.58 $ 0.04 $(0.58) $(0.01) $10.02 6.43% $ 123,903 0.65%
1996 10.11 0.62 (0.14) (0.60) -- 9.99 4.84% 73,370 0.65%
1995(1) 10.00 0.58 0.13 (0.60) -- 10.11 7.50%+ 41,823 0.65%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 5.81% 0.78% 5.68% 133%
1996 6.04% 0.84% 5.85% 83%
1995(1) 6.43%* 0.93%* 6.15%* 68%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JUNE 7, 1994.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
SHORT-TERM BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in debt obligations, such as corporate debt
obligations, and U.S. Treasury and Government agency obligations. The Fund
invests only in investment grade obligations and may invest in securities of
foreign issuers, mortgage- and asset-backed securities, variable and floating
rate instruments, futures and options. To some extent, the Fund may invest in
other securities and engage in other investment practices. See "FUND
INVESTMENTS."
The Fund intends to maintain a dollar-weighted average maturity of 3 years
or less, which may impact the Fund's exposure to interest rate risk. The Fund
may shorten its average weighted maturity to as little as 90 days for temporary
defensive purposes.
<PAGE>
8 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Short-Term Bond Fund is subject to the following types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Hedging Risks;
- Prepayment Risk;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. David Yealy has managed the Short-Term Bond Fund since July,
1996. He joined Trusco Capital Management, Inc. in 1991, and currently serves as
a Vice President.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
SHORT-TERM BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51%
Other Expenses .14%
Total Fund Operating Expenses After Fee Waivers(2) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .79%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 9
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the SHORT-TERM BOND FUND. The financial highlights
for the Fund for the periods from inception through May 31, 1997 have
been audited by Arthur Andersen LLP, independent public accountants,
whose report appears in STI Classic Fund's annual report and accompanies
the Statement of Additional Information. The annual report for the Fund,
which contains more information about performance, is available at no charge by
calling 1-800-874-4770.
- -----------------------
SHORT-TERM BOND FUND
- -----------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.86 $0.53 $ 0.07 $(0.53) $(0.03) $ 9.90 6.30% $89,701 0.65%
1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45% 91,156 0.65%
1995 9.79 0.53 0.19 (0.53) -- 9.98 7.60% 60,952 0.65%
1994 10.01 0.42 (0.21) (0.42) (0.01) 9.79 2.02% 34,772 0.65%
1993(1) 10.00 0.08 0.01 (0.08) -- 10.01 4.45%* 25,334 0.64%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 5.37% 0.78% 5.24% 118%
1996 5.39% 0.81% 5.23% 163%
1995 5.49% 0.85% 5.29% 200%
1994 4.15% 0.85% 3.95% 75%
1993(1) 3.88%* 1.11%* 3.41%* 64%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON MARCH 15, 1993.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
SHORT-TERM U.S. TREASURY
SECURITIES FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests exclusively in obligations issued by the U.S.
Treasury with remaining maturities of 3 years or less. The Fund will
not invest in repurchase agreements. To some extent, the Fund may invest in
other securities and engage in other investment practices. See "FUND
INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
maturity will range from 1 to 2 years, which may impact the Fund's exposure to
interest rate risk.
<PAGE>
10 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Short-Term U.S. Treasury Securities Fund is subject to the
following types of risk:
- Fund Risk; and
- Interest Rate Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. David Yealy, has managed the Short-Term U.S. Treasury Securities
Fund since July, 1996. He joined Trusco Capital Management, Inc. in 1991 and
currently serves as a Vice President.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
SHORT-TERM U.S. TREASURY SECURITIES FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .35%
Other Expenses .30%
Total Fund Operating Expenses After Fee Waivers(2) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .95%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 11
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the SHORT-TERM U.S. TREASURY SECURITIES FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.84 $0.51 $ 0.04 $(0.51) $ -- $9.88 5.76% $21,988 0.65%
1996 9.93 0.55 (0.09) (0.55) -- 9.84 4.73% 10,149 0.65%
1995 9.82 0.47 0.11 (0.47) -- 9.93 6.11% 9,599 0.65%
1994 9.98 0.33 (0.11) (0.33) (0.05) 9.82 2.17% 12,723 0.65%
1993(1) 10.00 0.07 (0.02) (0.07) -- 9.98 2.22%* 30,336 0.63%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 5.23% 0.92% 4.96% 93%
1996 5.56% 1.00% 5.21% 94%
1995 4.91% 1.08% 4.48% 88%
1994 3.23% 0.81% 3.07% 117%
1993(1) 3.34%* 1.04%* 2.93%* 36%
</TABLE>
* ANNUALIZED.
(1)COMMENCED OPERATIONS ON MARCH 15, 1993.
(2)A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
INVESTMENT GRADE TAX-EXEMPT
BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment-grade municipal securities.
The Fund intends to be fully invested in federally tax-exempt
securities. The issuers of these securities can be located in:
- any of the 50 states;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets are invested in securities with
income exempt from regular federal income tax and not treated as a preference
item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments and investment
grade taxable debt obligations. To some extent, the Fund may invest in other
securities and engage in other
<PAGE>
12 PROSPECTUS
investment practices. See "FUND INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Investment Grade Tax-Exempt Bond Fund is subject to the following
types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ronald Schwartz, CFA, has managed the Investment Grade Tax-Exempt
Bond Fund since the Fund began operations. He joined STI Capital Management,
N.A. in 1988, and currently serves as a Senior Vice President. Prior to joining
STI Capital Management, N.A., he served as a trader at the Bank of Boston.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
INVESTMENT GRADE TAX-EXEMPT BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .63%
Other Expenses .12%
Total Fund Operating Expenses After Fee Waivers(2) .75%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .86%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment, $ 8 $ 24 $ 42 $ 93
assuming
(1) a 5% annual return; and
(2) redemption at the end of each time period.
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 13
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the INVESTMENT GRADE TAX-EXEMPT BOND FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $11.10 $0.44 $0.33 $(0.44) $(0.21) $11.22 7.13% $ 139,144 0.75%
1996 11.28 0.45 0.19 (0.45) (0.37) 11.10 5.82% 124,507 0.75%
1995 10.68 0.46 0.60 (0.46) -- 11.28 10.21% 78,208 0.75%
1994(1) 11.37 0.22 (0.34) (0.22) (0.35) 10.68 (1.10)%+ 44,595 0.75%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 3.96% 0.86% 3.85% 489%
1996 4.01% 0.89% 3.87% 514%
1995 4.34% 0.91% 4.18% 592%
1994(1) 3.46%* 0.95%* 3.26%* 432%
</TABLE>
*ANNUALIZED.
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(1)COMMENCED OPERATIONS ON OCTOBER 21, 1993.
(2)A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
FUND INFORMATION -- STATE
TAX-EXEMPT BOND FUNDS
FLORIDA TAX-EXEMPT BOND FUND
FUND OBJECTIVE
[LOGO]
The Florida Tax-Exempt Bond Fund seeks to provide current income
exempt from regular federal income tax for Florida residents without undue
investment risk.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment grade Florida municipal
securities. The Fund intends to be fully invested in municipal securities with
income exempt from
regular federal income tax. The issuers of these securities can be located in:
- Florida;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets will be invested in securities with
income exempt from regular federal income tax and not treated as a preference
item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments and investment
grade taxable debt obligations. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
<PAGE>
14 PROSPECTUS
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Florida Tax-Exempt Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Geographic Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ronald Schwartz, CFA, has managed the Florida Tax-Exempt Bond
Fund since the Fund began operations. He joined STI Capital Management, N.A. in
1988, and currently serves as Senior Vice President. Prior to joining STI
Capital Management, N.A., he served as a trader at the Bank of Boston.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the FLORIDA
TAX-EXEMPT BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .49%
Other Expenses .16%
Total Fund Operating Expenses After Fee Waivers(2) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .81%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 15
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the FLORIDA TAX-EXEMPT BOND FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -------------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.06 $0.46 $ 0.25 $(0.46) $(0.03) $10.28 7.22% $50,487 0.65%
1996 10.18 0.46 (0.07) (0.46) (0.05) 10.06 3.87% 30,790 0.65%
1995 9.75 0.44 0.43 (0.44) -- 10.18 9.26% 10,118 0.65%
1994(1) 10.00 0.13 (0.25) (0.13) -- 9.75 (1.19)%+ 3,192 0.65%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 4.48% 0.80% 4.33% 135%
1996 4.49% 0.88% 4.26% 63%
1995 4.63% 1.13% 4.15% 105%
1994(1) 3.86%* 1.12%* 3.39%* 53%
</TABLE>
*ANNUALIZED.
+CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1)COMMENCED OPERATIONS ON JANUARY 25, 1994.
(2)A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
GEORGIA TAX-EXEMPT BOND FUND
FUND OBJECTIVE
[LOGO]
The Georgia Tax-Exempt Bond Fund seeks to provide current income
exempt from regular federal income tax for Georgia residents without undue
investment risk.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment grade Georgia municipal
securities. The Fund intends to be fully invested in municipal securities with
income exempt from regular federal income tax and substantially exempt from
State of Georgia income tax. The issuers of these securities can be located in:
- Georgia;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets will be invested in securities the
income from which is exempt from regular federal income tax and not treated as a
preference item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments, and
investment grade taxable debt obligations. To some extent, the Fund may invest
in other securities and engage in other
<PAGE>
16 PROSPECTUS
investment practices. See "FUND INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Georgia Tax-Exempt Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Geographic Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Ms. Gay Cash has managed the Georgia Tax-Exempt Bond Fund since it
began operating. She has more than 16 years of investment experience and has
served as a Vice President of SunTrust Bank, Atlanta since 1987.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the GEORGIA
TAX-EXEMPT BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .48%
Other Expenses .17%
Total Fund Operating Expenses After Fee Waivers(2) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .82%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 17
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the GEORGIA TAX-EXEMPT BOND FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- --------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.56 $0.42 $ 0.22 $(0.42) $(0.05) $ 9.73 6.79% $39,732 0.65%
1996 9.63 0.43 (0.05) (0.43) (0.02) 9.56 3.89% 22,950 0.65%
1995 9.42 0.42 0.21 (0.42) -- 9.63 6.94% 13,187 0.65%
1994(1) 10.00 0.14 (0.58) (0.14) -- 9.42 (4.43)%+ 4,338 0.65%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 4.31% 0.81% 4.15% 15%
1996 4.36% 0.89% 4.12% 60%
1995 4.56% 0.98% 4.23% 25%
1994(1) 4.12%* 1.06%* 3.71%* 26%
</TABLE>
*ANNUALIZED.
+CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1)COMMENCED OPERATIONS ON JANUARY 18, 1994.
TENNESSEE TAX-EXEMPT BOND FUND
FUND OBJECTIVE
[LOGO]
The Tennessee Tax-Exempt Bond Fund seeks to provide current income
exempt from regular federal income tax for Tennessee residents without undue
investment risk.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment grade Tennessee municipal
securities. The Fund intends to be fully invested in municipal securities the
income on which is exempt from regular federal income tax and substantially
exempt from State of Tennessee income tax. The issuers of these securities can
be located in:
- Tennessee;
- District of Columbia;
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets will be invested in securities the
income from which is exempt from regular federal income tax and not treated as a
preference item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments and taxable
debt obligations. To some extent, the Fund may invest in other securities and
engage in other investment practices. See "FUND INVESTMENTS."
<PAGE>
18 PROSPECTUS
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Tennessee Tax-Exempt Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Geographic Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ronald Schwartz, CFA, has managed the Tennessee Tax-Exempt Bond
Fund since the Fund began operating. He joined STI Capital Management, N.A. in
1988, and currently serves as Vice President and Trust Investment Officer of
SunTrust Bank, Chattanooga. Prior to joining STI Capital Management, N.A., he
served as a trader at the Bank of Boston.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the TENNESSEE
TAX-EXEMPT BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers and Reimbursements(1) .00%
Other Expenses After Fee Waivers and Reimbursements(2) .65%
Total Fund Operating Expenses After Fee Waivers(3) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE 1.07%.
(3)ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.72%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE
VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE
SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 19
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the TENNESSEE TAX-EXEMPT BOND FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------------
TENNESSEE TAX-EXEMPT BOND FUND
- -----------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.40 $0.43 $ 0.23 $(0.43) $ -- $ 9.63 7.16% $1,973 0.65%
1996 9.50 0.43 (0.11) (0.42) -- 9.40 3.43% 1,823 0.65%
1995 9.22 0.44 0.28 (0.44) -- 9.50 8.17% 1,664 0.65%
1994(1) 10.00 0.12 (0.77) (0.13) -- 9.22 (6.52)%+ 594 0.65%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 4.51% 1.72% 3.44% 16%
1996 4.49% 1.68% 3.46% 41%
1995 4.90% 2.65% 2.90% 28%
1994(1) 4.24%* 1.43%* 3.46%* 13%
</TABLE>
*ANNUALIZED.
+CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1)COMMENCED OPERATIONS ON JANUARY 27, 1994.
FUND INFORMATION -- MONEY
MARKET FUNDS
PRIME QUALITY MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests in U.S. and foreign money market instruments
denominated in U.S. dollars.
The Fund may invest in obligations of supranational entities rated in the
highest short-term ratings category or their unrated equivalents. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
RISK CONSIDERATIONS
[LOGO]
The Prime Quality Money Market Fund is subject to the following types
of risk:
- Fund Risk;
<PAGE>
20 PROSPECTUS
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Prepayment Risk;
- Event Risk;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the PRIME
QUALITY MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .50%
Other Expenses After Fee Waivers and Reimbursements(2) .08%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(3) .58%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .11%.
(3)ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE .76%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE
VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE
SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 6 $ 19 $ 32 $ 73
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 21
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the PRIME QUALITY MONEY MARKET FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------------
PRIME QUALITY MONEY MARKET FUND
- -----------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $ -- $(0.05) $ -- $1.00 5.01% $ 1,086,555
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(1) 1.00 0.03 -- (0.03) -- 1.00 2.92%* 410,991
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
1997 0.58% 4.90% 0.76% 4.72%
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(1) 0.58%* 2.85%* 0.78%* 2.65%*
</TABLE>
*ANNUALIZED.
(1)COMMENCED OPERATIONS ON JUNE 8, 1992.
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests exclusively in:
- U.S. Treasury obligations;
- securities of wholly-owned corporations (E.G., GNMA, Fannie Mae, FHLMC),
of the U.S. Government that are backed by the full faith and credit of the
U.S. Government such as mortgage-backed securities; and
- repurchase agreements.
<PAGE>
22 PROSPECTUS
To some extent, the Fund may invest in other securities and engage in other
investment practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
RISK CONSIDERATIONS
[LOGO]
The U.S. Government Securities Money Market Fund is subject to the
following types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the U.S.
GOVERNMENT SECURITIES MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51%
Other Expenses After Fee Waivers and Reimbursements(2) .10%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(3) .61%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .11%.
(3)ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE .76%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE
VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE
SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 6 $ 20 $ 34 $ 76
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 23
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the U.S. GOVERNMENT SECURITIES MONEY MARKET FUND.
The financial highlights for the Fund for the periods from inception
through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- -------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- -------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $ -- $(0.05) $ -- $1.00 4.83% $ 344,350 0.61%
1996 1.00 0.05 -- (0.05) -- 1.00 5.14% 325,493 0.61%
1995 1.00 0.05 -- (0.05) -- 1.00 4.67% 434,111 0.61%
1994 1.00 0.03 -- (0.03) -- 1.00 2.77% 309,228 0.61%
1993(1) 1.00 0.03 -- (0.03) -- 1.00 2.79%* 453,567 0.61%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING
AVERAGE WAIVERS AND WAIVERS AND
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
---------- --------------- ---------------
<S> <C> <C> <C>
1997 4.73% 0.76% 4.58%
1996 5.02% 0.78% 4.85%
1995 4.64% 0.80% 4.45%
1994 2.69% 0.77% 2.53%
1993(1) 2.71%* 0.78%* 2.54%*
</TABLE>
*ANNUALIZED.
(1)COMMENCED OPERATIONS ON JUNE 8, 1992.
TAX-EXEMPT MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund intends to be fully invested in securities the interest on
which is exempt from regular federal income taxes. The Fund primarily
invests in high quality short-term municipal securities of issuers located in:
- all 50 states;
- District of Columbia; and
- Puerto Rico and other U.S. territories.
At least 80% of the Fund's total assets will be invested in securities with
income exempt from regular federal income taxes and not treated as a preference
item for purposes of the federal alternative minimum tax.
The Fund may invest in U.S. dollar denominated taxable money market
instruments. To some extent, the Fund may invest in other securities and engage
in other investment practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
<PAGE>
24 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Tax-Exempt Money Market Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
TAX-EXEMPT MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .49%
Other Expenses .11%
Total Fund Operating Expenses After Fee Waivers(2) .60%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .55%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .66%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
You 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. $ 6 $ 19 $ 33 $ 75
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 25
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the TAX-EXEMPT MONEY MARKET FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ---------------------------------
TAX-EXEMPT MONEY MARKET FUND
- ---------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 1.00 $0.03 $ -- $(0.03) $ -- $ 1.00 3.09% $ 333,006 0.50%
1996 1.00 0.03 -- (0.03) -- 1.00 3.28% 273,613 0.50%
1995 1.00 0.03 -- (0.03) -- 1.00 3.10% 215,413 0.45%
1994 1.00 0.02 -- (0.02) -- 1.00 2.08% 143,982 0.42%
1993(1) 1.00 0.02 -- (0.02) -- 1.00 2.12%* 78,416 0.41%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING
AVERAGE WAIVERS AND WAIVERS AND
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
---------- --------------- ---------------
<S> <C> <C> <C>
1997 3.04% 0.66% 2.88%
1996 3.23% 0.68% 3.05%
1995 3.12% 0.70% 2.87%
1994 2.05% 0.71% 1.76%
1993(1) 2.07%* 0.70%* 1.78%*
</TABLE>
*ANNUALIZED.
(1)COMMENCED OPERATIONS ON JUNE 8, 1992.
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 SHAREHOLDER APPROVAL.
<PAGE>
26 PROSPECTUS
RISK CONSIDERATIONS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ----------------------------------------------------------------------------------------------
<S> <C>
FUND RISK -- The possibility that a Fund's performance during a All Funds
specific period may not meet, or exceed, that of the market as a
whole.
INTEREST RATE RISK -- The potential for a decline in the price of All Funds
fixed-income securities due to rising interest rates. This risk
will be greater for long-term securities than for short-term
securities.
CREDIT RISK -- The possibility that an issuer will be unable to All Funds (except
make timely payments of either principal or interest. Short-Term
U.S. Treasury Securities
Fund)
CALL RISK -- The possibility that securities with high interest All Funds (except
rates will be prepaid (or "called") by the issuer, prior to Short-Term
maturity, during periods of falling interest rates.This would U.S. Treasury Securities
require a Fund to invest the resulting proceeds elsewhere, at Fund)
generally lower interest rates.
EVENT RISK -- The possibility that corporate debt securities may All Funds (except
suffer substantial declines in credit quality and market value Short-Term
due to corporate restructurings. While event risk may be high for U.S. Treasury Securities
certain corporate securities held by a Fund, event risk overall Fund and U.S.
should be low because of the Fund's diversified holdings. Government Securities
Money Market Fund)
GEOGRAPHIC RISK -- The risk that a Fund's concentration of State Tax-Exempt Funds
investments in securities of issuers located in a single state or
geographic region subject a Fund to economic conditions and
government policies of that state or region that could adversely
affect the value of a Fund.
PREPAYMENT RISK -- The risk that mortgage-backed and asset-backed Investment Grade Bond Fund
securities may be retired substantially earlier than their stated U.S. Government
maturities or final distribution dates, resulting in a loss of Securities Fund
all, or part, of any premium paid. Limited-Term Federal
Mortgage Securities
Fund
Short-Term Bond Fund
Money Market Funds
</TABLE>
<PAGE>
PROSPECTUS 27
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ----------------------------------------------------------------------------------------------
<S> <C>
HEDGING RISKS -- Hedging is a strategy designed to offset Investment Grade Bond Fund
investment risks. Hedging activities include, among other things, Short-Term Bond Fund
the use of options and futures. There are risks associated with Investment Grade
hedging activities, including: Tax-Exempt Bond Fund
- - The success of a hedging strategy may depend on an ability to State Tax-Exempt Funds
predict movements in the prices of individual securities,
fluctuations in markets, and movements in interest rates;
- - There may be an imperfect or no correlation between the changes
in market value of the securities held by a Fund and the prices
of futures and options on futures;
- - There may not be a liquid secondary market for a futures
contract or option;
- - Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in
futures contracts and options.
</TABLE>
<PAGE>
28 PROSPECTUS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ----------------------------------------------------------------------------------------------
<S> <C>
FOREIGN SECURITY RISKS -- There are risks associated with Investment Grade Bond Fund
international investing, including: Short-Term Bond Fund
CURRENCY RISK -- The possibility that changes in foreign Prime Quality Money
exchange rates will affect, favorably or unfavorably, the Market Fund
value of foreign securities or the U.S. dollar amount of
income or gain received on such securities.
VOLATILITY -- Investments in foreign stock markets can be
more volatile than investments in U.S. markets. Diplomatic,
political, or economic developments could affect investments
in foreign countries.
EXPENSE CONSIDERATIONS -- Fixed commissions on many foreign
stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. Expenses for custodial
arrangements of foreign securities may be somewhat greater
than typical expenses for custodial arrangements for
handling U.S. securities of equal value.
FOREIGN TAXES -- Certain foreign governments levy
withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from the
securities comprising the portfolio.
REGULATORY ENVIRONMENT -- Foreign companies generally are
not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to U.S.
domestic companies. Foreign branches of U.S. banks, foreign
banks, and foreign issuers may be subject to less stringent
reserve requirements and to different accounting, auditing,
reporting and recordkeeping standards than those applicable
to domestic branches of U.S. banks and U.S. domestic
issuers. There is generally less government regulation of
securities exchanges, brokers, and listed companies abroad
than in the U.S.
CURRENCY RISK -- The possibility that changes in foreign exchange Investment Grade Bond Fund
rates will affect, favorably or unfavorably, the value of foreign Short-Term Bond Fund
securities or the U.S. dollar amount of income or gain received Prime Quality Money
on such securities. Market Fund
</TABLE>
<PAGE>
PROSPECTUS 29
PURCHASING FUND SHARES
WHO MAY BUY TRUST SHARES OF THE FUNDS
Individuals generally may not purchase Trust Shares directly. Instead, Trust
Shares are sold to financial institutions or intermediaries, including
subsidiaries of SunTrust Banks, Inc. (SunTrust), on behalf of accounts for which
they act as a fiduciary, agent, investment advisor or custodian. As a result,
you, as a customer of a financial institution, may own Trust Shares through
accounts maintained with financial institutions and potentially through the
Preferred Portfolio Account (an asset allocation account available through
SunTrust Securities, Inc.). Trust Shares will be held of record by (in the name
of) your financial institution. Depending upon the terms of your account,
however, you may have, or be given, the right to vote the Trust Shares.
HOW TO BUY FUND SHARES
Trust Shares are offered continuously, and may be purchased on any day that
the New York Stock Exchange is open for business (a Business Day). However, you
may not purchase or redeem shares of a Money Market Fund on days that the
Federal Reserve is closed (Federal holidays).
- MONEY MARKET FUNDS. The price per share (the offering price) will be the
net asset value per share (NAV) next determined after your purchase order
is received by the Transfer Agent. The Trust expects the NAV of each Money
Market Fund to remain constant at $1.00 per share. NAV for the Money
Market Funds is calculated by (1) taking the current market value of a
Fund's total assets using the amortized cost method of valuing securities,
(2) subtracting the liabilities, and (3) dividing that amount by the total
number of shares of that class owned by shareholders. The NAV is
calculated once each Business Day at the close of the New York Stock
Exchange (4:00 p.m. Eastern time). All money market funds are required to
use the amortized cost valuation method, which is described in detail in
the Statement of Additional Information (SAI).
Your purchase order will be effective as of the Business Day it is
received by the Transfer Agent. You will be eligible to receive dividends
declared the same day if (1) the Transfer Agent receives the order (i)
before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, or
(ii) before 1:00 p.m. Eastern time for the Prime Quality Money Market Fund
and the U.S. Government Securities Money Market Fund; and (2) the
Custodian receives federal funds (readily available funds) before 4:00
p.m. Eastern time on the same day. Otherwise your purchase order will be
effective the next Business Day, as long as the Custodian receives readily
available funds before 4:00 p.m. Eastern time on the next Business Day.
- NON-MONEY MARKET FUNDS. The price per share (the offering price) will be
the net asset value per share (NAV) next determined after your purchase
order is received by the Transfer Agent. NAV for the non-Money Market
Funds is calculated by (1) taking the current market value of a Fund's
total assets, (2) subtracting the liabilities, and (3) dividing that
amount by the
<PAGE>
30 PROSPECTUS
total number of shares owned by shareholders. In determining the market
value of a Fund's assets, the Trust may use a pricing service to provide
market quotations or valuations for certain securities owned by a Fund.
The NAV is calculated once each Business Day at the close of the New York
Stock Exchange (4:00 p.m. Eastern time). So, to receive the current
Business Day's NAV, purchase orders must be received before 4:00 p.m.
Eastern time.
Trust Shares are sold without a sales charge. Certain financial institutions
may, however, charge fees for services provided in connection with the purchase
of Trust Shares. Financial institutions also may impose an earlier time for a
purchase order to be effective on the same day. This allows the financial
institution time to process your order and transmit it to the Transfer Agent.
For more information about how to purchase shares, you should contact your
financial institution directly.
The Trust reserves the right to reject any purchase order when the
Distributor determines that accepting the order would not be in the best
interests of the Trust and/or Shareholders.
REDEEMING FUND SHARES
HOW TO SELL YOUR SHARES
Redemption requests should be sent to the Transfer Agent by your financial
institution. Your financial institution will provide you with information about
how to request redemption of Trust Shares held in your account.
- MONEY MARKET FUNDS. For Money Market Funds, a redemption request will be
effective as of the Business Day it is received by the Transfer Agent (1)
before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, or
(2) before 1:00 p.m. Eastern time for the Prime Quality Money Market Fund
and the U.S. Government Securities Money Market Funds.
- NON-MONEY MARKET FUNDS. Redemption requests for non-Money Market Funds
must be received by the Transfer Agent by 4:00 p.m. Eastern time to get
that day's NAV.
Requests received after these times will normally be executed the next
Business Day. You may have to transmit your redemption request to your financial
institution at an earlier time for your redemption to be effective that day. For
more information about how to redeem your shares, you should contact your
financial institution directly. The Trust reserves the right to wire redemption
proceeds within five Business Days of the Transfer Agent receiving the
redemption request if, in the judgment of the Advisor, an earlier payment could
adversely impact a Fund.
REDEMPTIONS IN KIND
The Trust intends to pay redemption proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
remaining shareholders in the Fund) the Trust reserves the right to pay all or
part of your redemption proceeds in liquid securities that have a market value
equal to the redemption price (redemption in kind). Although it is highly
unlikely
<PAGE>
PROSPECTUS 31
that your shares would ever actually be redeemed in kind, if it did happen, you
would probably have to pay brokerage cost to sell the securities distributed to
you.
TRANSACTIONS OVER THE TELEPHONE
Telephone redemption and exchange transactions are extremely convenient, but
not without risk. To try and keep your telephone transactions as safe, secure
and risk free as possible, the Trust has developed certain safeguards and
procedures for ascertaining the identity of callers and authenticity of
instructions. As a result, neither the Trust nor its Transfer Agent will be
responsible for any loss, liability, cost or expense for following telephone or
wire instructions they reasonably believed to be genuine. If you choose to make
telephone transactions, you will generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Income dividends of each Fund are declared daily and paid monthly. If you
own Fund shares on the record date, you will be entitled to receive dividends.
The Funds make distributions of capital gains at least annually.
You will receive dividends and distributions in the form of additional
shares unless the you have elected to receive payment in cash. To elect cash
payment, you must notify the Transfer Agent in writing prior to the date of
distribution. Your election will become effective for dividends paid after the
Transfer Agent receives your written notice. To cancel your election, simply
send written notice to the Transfer Agent.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their Shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial, or administrative action. We have not
tried to present a detailed explanation of the tax treatment of the Funds or
their Shareholders. More information about taxes is in the SAI. WE URGE YOU TO
CONSULT YOUR TAX ADVISOR 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 income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies. As long as a Fund qualifies as a regulated investment
company, it pays no Federal income tax on the earnings it distributes to
Shareholders.
<PAGE>
32 PROSPECTUS
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME WHETHER
YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
Capital gains dividends will be treated as gain from the sale or exchange of
a capital asset held for more than 1 year.
Distributions paid in January, but declared as dividends by a Fund in
October, November or December of the previous year, are taxable to you in the
previous, may be taxable in the previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
TAX MANAGEMENT
The Funds use a tax management technique known as "highest in, first out."
Through this technique, a Fund's portfolio holdings which have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
TAX-EXEMPT DISTRIBUTIONS
The State Tax-Exempt Funds, the Tax-Exempt Money Market Fund, and the
Investment Grade Tax-Exempt Bond Fund may pay "exempt-interest" dividends.
Exempt-interest dividends are excludable from your gross income for Federal
income tax purposes, but may have other Federal income tax consequences (I.E.,
alternative minimum tax). Current Federal tax laws limit the types and number of
bonds that pay exempt interest. This may hinder a Fund's ability to pay
exempt-interest dividends.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Massachusetts as
long as it qualifies as a regulated investment company for Federal income tax
purposes.
Distributions by Funds to you may be subject to state and local taxation.
However, a portion of the distributions you receive attributable to interest on
U.S. Government obligations may be exempt from state taxation. Each year you
will be notified of the percentage of income and distributions that may be tax
exempt under state law. You should verify your tax liability with your tax
advisor.
<PAGE>
PROSPECTUS 33
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust is organized as a Massachusetts business trust. The Trust is
permitted to offer separate portfolios of shares and different classes of each
Fund. All payments received by the Trust for shares of any Fund belong to that
Fund. Each Fund has its own assets and liabilities.
BOARD OF TRUSTEES
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services.
GENERAL INFORMATION
VOTING RIGHTS
Shareholders of record receive one vote for every full Fund share owned.
Each Fund or class of a Fund will vote separately on matters relating solely to
that Fund or class. If you are a customer of a financial institution or
intermediary, you may have certain voting rights depending on the nature of your
account.
As a Massachusetts business trust, the Trust is not required to hold annual
Shareholder meetings unless otherwise required by the Investment Company Act.
However, a meeting may be called by Shareholders owning at least 10% of the
outstanding shares of the Trust. If a meeting is requested by Shareholders, the
Trust will provide appropriate assistance and information to the Shareholders
who requested the meeting.
REPORTING
Shareholders of record, generally a financial institution or intermediary,
will receive the Trust's unaudited financial information and audited financial
statements, as well as proxy statements and other reports. If you are a customer
of a financial institution, you may receive this information directly from the
financial institution, depending on the nature of your account.
SHAREHOLDER INQUIRIES
You may contact your financial institution's representative to obtain
information on account statements, procedures, and other related information.
INVESTMENT ADVISORS
The Advisors make investment decisions for the assets of the Funds they
advise and continuously review, supervise, and administer their respective
Fund's investment program. The Trustees of the Trust supervise the Advisors and
establish policies that the Advisors must follow in their day-to-day management
activities.
<PAGE>
34 PROSPECTUS
STI Capital Management, N.A. (STI Capital) serves as the Advisor to the
Investment Grade Bond, Limited-Term Federal Mortgage Securities, Investment
Grade Tax-Exempt Bond, and Florida Tax-Exempt Bond Funds. As of May 31, 1997,
STI Capital had approximately $12.4 billion in assets under management. The
principal business address of STI is P.O. Box 3808, Orlando, Florida 32802. For
the fiscal year ended May 31, 1997, STI Capital received advisory fees computed
daily and paid monthly at the annual rate included in each Fund's ANNUAL FUND
OPERATING EXPENSES summary.
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 May 31, 1997, Trusco had approximately $17.4
billion in assets under management. The principal business address of Trusco is
50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303. For the fiscal year ended May
31, 1997, Trusco received advisory fees computed daily and paid monthly at the
annual rate included in each Fund's ANNUAL FUND OPERATING EXPENSES summary,
except for the Tax-Exempt Money Market Fund. The Advisor received .39% for its
advisory services provided to the Tax-Exempt Money Market Fund.
SunTrust Bank, Chattanooga, N.A. (SunTrust Chattanooga) serves as the
Advisor to the Tennessee Tax-Exempt Bond Fund. As of May 31, 1997, SunTrust
Chattanooga had approximately $3.7 billion in assets under management. The
principal business address of SunTrust Chattanooga is 736 Market Street,
Chattanooga, Tennessee 37402. For the fiscal year ended May 31, 1997, SunTrust
Chattanooga received advisory fees computed daily and paid monthly at the annual
rate included in each Fund's ANNUAL FUND OPERATING EXPENSES summary.
SunTrust Bank, Atlanta (SunTrust Atlanta) serves as the Advisor to the
Georgia Tax-Exempt Bond Fund. As of December 31, 1996, SunTrust Atlanta had
approximately $12 billion in assets under management. The principal address for
SunTrust Atlanta is 25 Park Place, Atlanta, Georgia 30303. For the fiscal year
ended May 31, 1997, SunTrust Atlanta received advisory fees computed daily and
paid monthly at the annual rate included in each Fund's ANNUAL FUND OPERATING
EXPENSES summary.
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
(SunTrust). SunTrust is a southeastern regional bank holding company with assets
of $52.5 billion, as of December 31, 1996. SunTrust is one of the 20 largest
banking companies in the U.S. 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 tri-state area.
SunTrust Banks, Inc. has discretionary assets under management of approximately
$53.4 billion, as of December 31, 1996.
The Advisors may use their affiliates as brokers for the Funds' portfolio
transactions.
<PAGE>
PROSPECTUS 35
DISTRIBUTION
SEI Investments Distribution Co. (the Distributor), a wholly-owned
subsidiary of SEI Investments Company, serves as each Fund's distributor under a
Distribution Agreement. The Distributor receives no compensation for
distribution services for the Trust Shares of each Fund.
Each Fund may use the Distributor as its broker for portfolio transactions.
The Distributor receives compensation from the Funds for its brokerage services.
Flex and Investor Shares are offered primarily to individual investors, and
are described in a separate prospectus. Flex Shares are subject to a contingent
deferred sales charge. Investor Shares are subject to a front-end sales charge.
You may call 1-800-874-4770 to receive more information about Flex or Investor
Shares. It is possible that a financial institution may offer different classes
of shares to its customers. As a result, the financial institution may receive
different compensation with respect to different classes of shares.
ADMINISTRATION
SEI Fund Resources acts as the Trust's Administrator. For its administrative
services, the Administrator is entitled to a fee, 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>
The Administrator may voluntarily waive all or a portion of its fees to
limit Total Fund Operating Expenses.
<PAGE>
36 PROSPECTUS
FUND INVESTMENTS -- NON-MONEY MARKET FUNDS
% = Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net assets.
X = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
LIMITED-TERM SHORT-TERM
INVESTMENT U.S. FEDERAL U.S. INVESTMENT FLORIDA GEORGIA TENNESSEE
GRADE GOVERNMENT MORTGAGE SHORT-TERM TREASURY GRADE TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
SECURITY BOND SECURITIES SECURITIES BOND SECURITIES TAX-EXEMPT BOND BOND BOND
OR PRACTICE FUND FUND FUND FUND FUND BOND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TRADITIONAL
INVESTMENTS
ADRs X -- -- -- -- -- -- -- --
Asset-Backed
Securities X * 35% X -- -- -- -- --
Bank Obligations X 35% 35% -- -- -- -- -- --
Commercial Paper
(Two Highest
Ratings
Categories) X 35% 35% X -- -- -- -- --
Corporate Debt
Obligations
(Investment
Grade) X(4) 35% 35% X(4) -- 20% 20%(4) 20%(4) 20%(4)
Investment
Company Shares 10% 10% 10% 10% 10% 10% 10% 10% 10%
Mortgage-Backed
Securities X(1) X(7) X(7) X(2) -- * * * *
Municipal
Securities (Two
Highest Ratings
Categories) -- -- -- X(4) -- X(3,4,5) X(3,4,5) X(3,4,5) X(3,4,5)
Repurchase
Agreements X 35% 35% * -- 20% 20% 20% 20%
Restricted
Securities * * * * * * * * *
Securities of
Foreign Issuers X -- -- X -- -- -- -- --
Supranational
Agency
Obligations X -- -- 35% -- -- -- -- --
U.S. Treasury
and Government
Agency
Obligations X X X X X(6) 20% 20% 20% 20%
Zero Coupon
Obligations X -- -- X -- X X X X
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Dollar Rolls -- X X -- -- -- -- -- --
Illiquid
Securities 15% 15% 15% 15% 15% 15% 15% 15% 15%
Securities
Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Standby
Commitments X X X X X X X X X
When-Issued
Securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
LEVERAGING AND
HEDGING TOOLS
Futures and
Options on
Futures 35% * * 35% -- * 35% 35% 35%
Options 35% * * 35% * * 35% 35% 35%
Puts 35% -- -- 35% -- 35% 35% 35% 35%
Swaps, Caps,
Floors and
Collars 25% -- -- -- -- -- -- -- --
Variable and
Floating
Rate
Instruments X X X X X X X X X
</TABLE>
(1) MAY PURCHASE UP TO 35% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(2) MAY PURCHASE UP TO 25% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(3) INVESTS AT LEAST 65% OF ITS ASSETS IN MUNICIPAL SECURITIES. OF THIS 65%, 75%
MUST BE RATED A OR BETTER OR THEIR UNRATED EQUIVALENTS. EACH STATE
TAX-EXEMPT BOND FUND MUST INVEST AT LEAST 65% OF ITS ASSETS IN MUNICIPAL
SECURITIES ISSUED BY ITS RESPECTIVE STATE.
(4) MAY PURCHASE UP TO 25% RATED BBB OR BAA OR THEIR UNRATED EQUIVALENTS.
(5) MAY PURCHASE MUNICIPAL FORWARDS.
(6) U.S. TREASURY OBLIGATIONS ONLY.
(7) PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES PERMITTED BUT NOT TYPICALLY
USED.
<PAGE>
PROSPECTUS 37
FUND INVESTMENTS -- MONEY MARKET FUNDS
% = Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net assets.
X = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
U.S. GOVERNMENT
PRIME QUALITY SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
SECURITY OR PRACTICE FUND FUND FUND
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
TRADITIONAL INVESTMENTS
Asset-Backed Securities * -- --
Bank Obligations X(1) -- 20%
Commercial Paper (Highest Quality) X -- X
Investment Company Shares 10% 10% 10%
Mortgage-Backed Securities *(2) X *
Municipal Securities -- -- X
Repurchase Agreements X X 20%
Restricted Securities * * *
Securities of Foreign Issuers X -- --
Short-Term Corporate Obligations X -- --
Supranational Agency Obligations X -- --
U.S. Treasury and Agency Obligations X X 20%
Zero Coupon Obligations X X X
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3%
Illiquid Securities 10% 10% 10%
Securities Lending 33 1/3% 33 1/3% 33 1/3%
Standby Commitments X X X
When-Issued Securities 33 1/3% 33 1/3% 33 1/3%
LEVERAGING AND HEDGING TOOLS
Variable and Floating Rate Instruments X X X
</TABLE>
(1) MAY INVEST UP TO 25% OF ITS ASSETS IN OBLIGATIONS ISSUED BY FOREIGN BRANCHES
OF U.S. BANKS AND BY LONDON BRANCHES OF FOREIGN BANKS.
(2) INCLUDES PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
Under normal market conditions, the Funds will follow the practices and
policies outlined above. However, for temporary defensive purposes during
periods when its Adviser determines that market conditions warrant, each Fund
may invest up to 100% of its assets in cash, money market instruments,
repurchase agreements and short-term obligations. When the Funds are investing
for temporary defensive purposes, they will not be pursuing their respective
investment objectives.
INVESTMENT RESTRICTIONS
Each Fund will not invest more than 25% of its assets in any one industry.
With respect to 75% of its assets, each Fund will not:
- invest more than 5% of its assets in the securities of any one issuer;
- purchase more than 10% of the outstanding voting securities of any one
issuer.
<PAGE>
38 PROSPECTUS
MORE ABOUT INVESTMENTS AND HEDGING TOOLS
The following is a description of some of the permitted investments for the
Funds. Further discussion is contained in the SAI.
AMERICAN DEPOSITARY RECEIPTS (ADRs) are securities, typically issued by a
U.S. financial institution (a depositary). The institution has 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. An unsponsored
facility may be established by a depositary without the participation of the
issuer of the underlying security.
ASSET-BACKED SECURITIES are securities backed by non-mortgage assets such as
company receivables, truck and auto loans, leases, and credit card receivables.
These securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Asset-backed securities may also be DEBT OBLIGATIONS, 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 these assets and issuing DEBT OBLIGATIONS.
BANK OBLIGATIONS are SHORT-TERM OBLIGATIONS issued by U.S. and foreign
banks, including bankers' acceptances, certificates of deposit, custodial
receipts, and time deposits. Eurodollar and Yankee Bank Obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
U.S. by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the U.S. by
foreign banks.
CORPORATE DEBT SECURITIES are DEBT OBLIGATIONS issued by corporations with
maturities exceeding 270 days.
DEBT OBLIGATIONS represent money borrowed that obligates the issuer, (E.G.,
a corporation, municipality, government, government agency) to repay the
borrowed amount at maturity (when the obligation is due and payable) and usually
to pay the holder interest at specific times (E.G., bonds, notes, debentures).
DOLLAR ROLLS are transactions in which securities are sold for delivery in
the current month and the seller contracts to repurchase substantially similar
securities on a specified future date. Any difference between the sale price and
the purchase price (plus interest earned on the cash proceeds of the sale) is
applied against the past interest income on the securities sold to arrive at an
implied borrowing rate.
FUTURES CONTRACTS AND OPTIONS ON 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. They may also be used to
<PAGE>
PROSPECTUS 39
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.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An 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 index at the
close of the last trading day of the contract and the price at which the
agreement is made.
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.
INVESTMENT COMPANY SHARES are shares of other mutual funds which may be
purchased by the Funds to the extent consistent with applicable law.
INVESTMENT GRADE OBLIGATIONS are DEBT OBLIGATIONS rated BBB or better by S&P
or Baa or better by Moody's, or their unrated equivalents. These securities are
deemed to have speculative characteristics.
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. In a
loan participation, the borrower corporation is 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.
MONEY MARKET INSTRUMENTS are high quality, dollar-denominated, SHORT-TERM
OBLIGATIONS, including BANK OBLIGATIONS, U.S. TREASURY OBLIGATIONS, U.S.
GOVERNMENT AGENCY OBLIGATIONS, and SHORT-TERM CORPORATE OBLIGATIONS.
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, adjustable rate
mortgages, and floating rate mortgages.
During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities may accelerate. It is often not possible
to predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a
U.S. Government agency representing an interest in a pool of mortgage loans.
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 are mortgage-backed securities issued by a
non-governmental entity, such as a trust. 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
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government, or by private originators,
<PAGE>
40 PROSPECTUS
or investors in mortgage loans. Each class of a CMO is issued with a specific
fixed or floating interest 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. This can result in a loss of all, or part, of any premium paid.
REMICS are CMOs that qualify for special tax treatment under the Internal
Revenue Code. They invest in certain mortgages that are principally secured by
interests in real property. These securities are often guaranteed as to the
payment of principal and/or interest as payments are required to be made on the
underlying mortgage participation certificates.
STRIPPED MORTGAGE-BACKED SECURITIES (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 the other class may receive all of the principal
payments. SMBs are extremely sensitive to changes in interest rates because of
the impact of prepayment of principal on the underlying mortgage securities.
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.
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.
MUNICIPAL SECURITIES consist of:
- 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 these funds
to other public institutions and facilities; and
- 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
(for example, tolls from a bridge). 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 totally
dependent 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 the
payment.
OPTIONS--The buyer of an option acquires the right to buy (a call option) or
sell (a put option) a certain quantity of a security (the underlying security)
or instrument at a certain price up to a specified point in time. The seller or
writer of an option is obligated to sell (a call option) or buy (a put option)
the underlying security. All options written by a Fund will be "covered," which
means
<PAGE>
PROSPECTUS 41
that the Fund will own an equal amount of the underlying currency ("options on
currencies") or security. With respect to put options written by the Fund, the
Fund will establish a segregated account with its custodian bank consisting of
cash or cash equivalents in an amount equal to the amount the Fund would be
required to pay upon exercise of the put option.
REPURCHASE AGREEMENTS are agreements by which a Fund obtains a security and
simultaneously agrees 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.
A Fund will enter into repurchase agreements only with financial institutions
judged to present minimal risk of bankruptcy during the term of the agreement
based on established guidelines.
RESTRICTED SECURITIES are securities that may not be sold freely to the
public without registering under the Securities Act of 1933 or an exemption from
registration. The Trust's Board of Trustees has adopted procedures for
determining the liquidity of restricted securities.
SECURITIES LENDING -- To generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral equal to at least 100% of the market value of
the loaned securities. A Fund continues to receive interest on the loaned
securities while simultaneously earning interest on the investment of cash
collateral.
SECURITIES OF FOREIGN ISSUERS are securities issued by foreign corporation,
including foreign branches of U.S. banks and foreign banks, and by foreign
governments or their agencies or instrumentalities. There are special risk
considerations associated with foreign securities.
SENIOR FIXED INCOME SECURITIES are DEBT OBLIGATIONS that pay a fixed rate of
return.
SHORT-TERM OBLIGATIONS are DEBT OBLIGATIONS maturing (becoming payable) in
397 days or less, including COMMERCIAL PAPER and other short-term corporation
obligations. Short-term corporate obligations are short-term obligations issued
by corporations.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder 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.
SUPRANATIONAL AGENCY OBLIGATIONS are obligations 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.
SWAPS, CAPS, FLOORS and COLLARS -- Swaps, caps, floors, and collars are
hedging tools designed to permit the purchaser to preserve a return or spread on
a particular investment or portion of its portfolio. They are also used to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. Swap agreements are sophisticated hedging
insturments 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 a Fund's performance.
<PAGE>
42 PROSPECTUS
U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some of these securities
are supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and others are
supported only by the credit of the agency or instrumentality.
U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the
U.S. Treasury. They also consist of separately traded interest and principal
component parts of these 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 involve certain obligations that 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES 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 interest rate realized on these securities is fixed
as of the purchase date and no interest accrues to the Fund before settlement.
ZERO COUPON OBLIGATIONS are DEBT OBLIGATIONS that do not bear any interest,
but instead are issued at a deep discount from face value or 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
face value or par and pay interest periodically.
<PAGE>
PROSPECTUS 43
<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, Atlanta 25 Park Place
Atlanta, GA 30303
SunTrust Bank, Chattanooga, N.A. 736 Market Street
Chattanooga, TN 37402
* DISTRIBUTOR
SEI Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* 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 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
44 PROSPECTUS
Additional information about the Funds is included in the SAI dated October
1, 1997. The SAI has been filed with the SEC and is incorporated by reference
into this Prospectus. You may obtain a copy of the SAI, or the annual or
semi-annual report, without charge by calling 1-800-874-4770 or by contacting
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR.
<PAGE>
Blank Page
<PAGE>
100092/10-97
STI CLASSIC FUNDS INVESTOR
AND FLEX SHARES
PROSPECTUS
OCTOBER 1, 1997
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
SMALL CAP EQUITY 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")
STI CLASSIC FUNDS
<PAGE>
PROSPECTUS
GENERAL INFORMATION
AND CONTENTS
<TABLE>
<C> <S>
1 ABOUT THE TRUST
---
1 CAPITAL GROWTH FUND
---
3 VALUE INCOME STOCK FUND
---
6 SMALL CAP EQUITY FUND
---
8 MID-CAP EQUITY FUND
---
10 BALANCED FUND
---
13 SUNBELT EQUITY FUND
---
15 INTERNATIONAL EQUITY INDEX FUND
---
18 INTERNATIONAL EQUITY FUND
---
21 RISK CONSIDERATIONS
---
26 PURCHASING FUND SHARES
---
33 TAX INFORMATION
---
38 FUND INVESTMENTS
---
39 MORE ABOUT INVESTMENTS AND HEDGING TOOLS
---
</TABLE>
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 gives you important information about the Investor
Shares and Flex Shares of the Equity Funds that you should know before
investing. Please read this Prospectus, and keep it for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THE TRUST'S SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR
APPROVED OF THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY STATEMENT OR
INDICATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS:
- ARE NOT BANK DEPOSITS
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY BANK OR GOVERNMENT AGENCY
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS.
INVESTING IN THE FUNDS INVOLVES RISK. YOU COULD LOSE MONEY.
OCTOBER 1, 1997
<PAGE>
PROSPECTUS 1
ABOUT THE TRUST
STI Classic Funds is a diversified, open-end management investment company.
The Funds provide a convenient and economical way for you to invest in a number
of professionally managed portfolios of securities. This Prospectus relates to
the Investor Shares and Flex Shares of the Capital Growth Fund, Value Income
Stock Fund, Small Cap Equity Fund, Mid-Cap Equity Fund, Balanced Fund, Sunbelt
Equity Fund, International Equity Index Fund, and International Equity Fund.
CHOOSING INVESTOR OR FLEX SHARES
Each class has its own expense structure and other characteristics, allowing
you to decide which class best suits your needs. You should consider the amount
you want to invest, how long you plan to have it invested, and whether you plan
to make additional investments.
INVESTOR SHARES
- - Front-end sales charge
- - Lower annual expenses
- - $2,000 minimum initial investment
FLEX SHARES
- - Deferred sales charge on shares redeemed within one year of purchase
- - Higher annual expenses
- - $10,000 minimum initial investment
FUND INFORMATION
CAPITAL GROWTH FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of undervalued
equity securities traded in the United States.
Based on its analysis of overall business cycles, the Advisor rotates the
Fund's investments between various market sectors.
The Fund may invest in securities of foreign issuers, high yield securities;
and shares of money market investment companies. To some extent, the Fund may
invest in other securities and engage in other investment practices. See "FUND
INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Capital Growth Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
<PAGE>
2 PROSPECTUS
- Credit Risk;
- Event Risk;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Anthony Gray has managed the Capital Growth Fund since it began
operating. He has more than 30 years of investment experience, and has served as
Chairman and Chief Executive Officer of STI Capital Management, N.A. since 1979.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the CAPITAL GROWTH FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
</TABLE>
(*) SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.05% 1.05%
12b-1 Distribution & Service Fees After Reimbursements(2) .56% .95%
Other Expenses After Fee Waivers and Reimbursements(3) .19% .27%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.80% 2.27%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .68% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .28%
FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 2.02% FOR INVESTOR SHARES AND 2.43% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $55 $92 $131 $241
contingent deferred sales charge* for FLEX
SHARES $43 $71 $122 $261
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
PROSPECTUS 3
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the CAPITAL GROWTH FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ---------------------
CAPITAL GROWTH FUND
- ---------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $14.89 $0.03 $3.10 $(0.02) $(2.94) $ 15.06 23.74% $ 218,660
1996 12.17 0.03 3.32 (0.04) (0.59) 14.89 28.18% 191,078
1995 11.98 0.09 0.57 (0.07) (0.40) 12.17 5.93% 160,875
1994 11.93 0.09 0.31 (0.09) (0.26) 11.98 3.26% 170,795
1993(1) 10.00 0.06 1.93 (0.06) -- 11.93 20.49%* 131,858
FLEX
SHARES
1997 $14.84 $(0.01) $3.07 $-- $(2.94) $ 14.96 23.24% $ 36,753
1996(2) 12.20 0.02 3.26 (0.05) (0.59) 14.84 27.48%* 10,969
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF RATIO OF EX- INCOME (LOSS)
NET PENSES TO AVER- TO AVERAGE NET
INVESTMENT AGE NET ASSETS ASSETS
RATIO OF INCOME (EXCLUDING (EXCLUDING
EXPENSES (LOSS) TO WAIVERS AND WAIVERS AND PORTFOLIO AVERAGE
TO AVERAGE AVERAGE REIM- REIM- TURNOVER COMMISSION
NET ASSETS NET ASSETS BURSEMENTS) BURSEMENTS) RATE(3) RATE**
---------- ---------- --------------- --------------- -------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C>
1997 1.80% 0.19% 2.02% (0.03)% 141% $0.0620
1996 1.80% 0.24% 2.08% (0.04)% 156% --
1995 1.80% 0.73% 2.10% 0.43% 128% --
1994 1.80% 0.64% 2.11% 0.33% 124% --
1993(1) 1.80%* 0.81%* 2.06%* 0.55%* 95% --
FLEX
SHARES
1997 2.27% (0.29)% 2.43% (0.45)% 141% $0.0620
1996(2) 2.27%* (0.29)%* 2.68%* (0.70)%* 156% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JUNE 9, 1992.
(2) COMMENCED OPERATIONS ON JUNE 1, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
VALUE INCOME STOCK FUND
FUND OBJECTIVE
[LOGO]
The Value Income Stock Fund seeks to provide current income with a
secondary goal of achieving capital appreciation by investing primarily in
equity securities.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund strives to provide a yield above that of the S&P 500 Stock
Index. The Fund primarily invests in equity
securities of companies that have a market capitalization of at least $500
million and that have a history of paying regular dividends.
The Fund may invest in securities of foreign issuers, high yield securities,
futures, options, and securities issued by companies with smaller market
capitalizations. To some extent, the Fund may invest in other securities and
engage in other investment practices. See "FUND INVESTMENTS."
<PAGE>
4 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Value Income Stock Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Credit Risk;
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Mills Riddick, CFA, is Senior Vice President, STI Capital
Management, N.A. and has managed the Value Income Stock Fund since April 1995.
He has more than 15 years of investment experience, and has been a portfolio
manager at STI Capital Management since 1989. Prior to joining STI Capital
Management, N.A., Mr. Riddick served as a broker with Drexel Burnham Lambert.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the VALUE INCOME STOCK FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
</TABLE>
* SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees .80% .80%
12b-1 Distribution & Service Fees After Reimbursements(1) .31% .98%
Other Expenses After Fee Waivers and Reimbursements(2) .19% .22%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(3) 1.30% 2.00%
</TABLE>
(1) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICES FEES WOULD BE .33% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(2) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .23%
FOR FLEX SHARES.
(3) ABSENT THE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND OPERATING
EXPENSES WOULD BE 1.32% FOR INVESTOR SHARES AND 2.03% FOR FLEX SHARES. THESE
WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS
FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $50 $77 $106 $188
contingent deferred sales charge* for FLEX
SHARES $40 $63 $108 $233
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
<PAGE>
PROSPECTUS 5
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
*IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the VALUE INCOME STOCK FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -------------------------
VALUE INCOME STOCK FUND
- -------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND
NET UNREALIZED DISTRIBUTIONS NET
ASSET NET NET GAINS DISTRIBUTIONS FROM ASSET
VALUE INVESTMENT (LOSSES) FROM NET REALIZED VALUE
BEGINNING INCOME ON INVESTMENT CAPITAL END OF TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS PERIOD RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
INVESTOR SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $13.13 $0.25 $2.32 $(0.26) $(1.76) $13.68 21.69%
1996 11.58 0.30 1.71 (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(1) 9.73 0.09 0.44 (0.03) -- 10.23 19.42%*
FLEX SHARES
1997 $13.08 $0.18 $2.29 $(0.18) $(1.76) $13.61 20.91%*
1996(2) 11.59 0.26 2.65 (0.26) (1.16) 13.08 26.52%*
<CAPTION>
RATIO OF
RATIO OF NET
NET RATIO OF INVESTMENT
RATIO OF INVESTMENT EXPENSES TO INCOME (LOSS)
EXPENSES INCOME AVERAGE NET TO AVERAGE
NET TO (LOSS) TO ASSETS NET ASSETS
ASSETS AVERAGE AVERAGE (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
END OF NET NET WAIVERS AND WAIVERS AND TURNOVER COMMISSION
PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3) RATE**
------------ ---------- ---------- --------------- --------------- -------- --------
INVESTOR SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $ 165,999 1.30% 2.01% 1.31% 2.00% 105% 0.$0609
1996 130,597 1.30% 2.47% 1.37% 2.40% 134% --
1995 92,256 1.30% 2.80% 1.41% 2.69% 126% --
1994 60,589 1.25% 2.80% 1.44% 2.61% 149% --
1993(1) 24,779 1.15%* 4.51%* 1.63%* 4.04%* 35% --
FLEX SHARES
1997 $73,466 2.00% 1.33% 2.03% 1.30% 105% 0.$0609
1996(2) 26,298 2.00%* 1.72%* 2.15%* 1.57%* 134% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSIONS RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL
YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON FEBRUARY 17, 1993.
(2) COMMENCED OPERATIONS ON JUNE 1, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
<PAGE>
6 PROSPECTUS
SMALL CAP EQUITY FUND
FUND OBJECTIVE
[LOGO]
The Small Cap Equity Fund seeks to provide capital appreciation with
a secondary goal of achieving current income.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of undervalued companies with market capitalizations under
$1 billion.
The Fund may invest in securities of foreign issuers and options. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Small Cap Equity Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Brett Barner, CFA, is Vice President, STI Capital Management, N.A.,
and has managed the Small Cap Equity Fund since it began operating in
1997. He has more than ten years of investment experience, and has been a
portfolio manager with STI since 1990. Prior to joining STI Capital Management,
N.A., Mr. Barner served as a consultant with Drexel Burnham Lambert and Shearson
Lehman Brothers.
<PAGE>
PROSPECTUS 7
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Flex Shares of the SMALL CAP
EQUITY FUND. Investor Shares of the Fund are not currently available
for purchase.
<TABLE>
<CAPTION>
FLEX SHARES
<S> <C>
- ----------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 2.00%
</TABLE>
* SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 0.97%
12b-1 Distribution & Service Fees After Reimbursements(2) 0.73%
Other Expenses(3) 0.55%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 2.25%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD 1.00%.
(3) OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, THE ESTIMATED
TOTAL FUND OPERATING EXPENSES WOULD BE 2.70%. THESE FEE WAIVERS AND
REIMBURSEMENTS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE
DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum contingent deferred sales charge* for FLEX
SHARES $ 43 $ 70
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
seperate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
8 PROSPECTUS
MID-CAP EQUITY FUND
FUND OBJECTIVE
[LOGO]
The Mid-Cap Equity 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 factor in selecting investments and any such income should be
considered incidental.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of small to mid-size companies (I.E., companies with market
capitalizations of $500 million to $5 billion).
The Fund may invest in securities of foreign issuers, high yield securities
and variable and floating rate instruments. To some extent, the Fund may invest
in other securities and engage in other investment practices. See "FUND
INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Mid-Cap Equity Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Credit Risk;
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Elliott A. Perny has managed the Mid-Cap Equity Fund since
October, 1996. He has more than 25 years of investment experience.
Mr. Perny has served as Senior Executive Vice President of STI Capital
Management, N.A. since September, 1992, and has served as a portfolio manager
with STI since 1991. Prior to joining STI Capital Management, N.A., Mr. Perny
served as a portfolio manager at Florida National Bank and Atlantic Bank.
<PAGE>
PROSPECTUS 9
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the Mid-Cap Equity Fund.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%*
</TABLE>
(*)SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.04% 1.04%
12b-1 Distribution & Service Fees After Reimbursements(2) .30% .73%
Other Expenses After Fee Waivers and Reimbursments(3) .26% .43%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.60% 2.20%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .43% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .27%
FOR INVESTOR SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.85% FOR INVESTOR SHARES AND 2.58% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $53 $86 $121 $220
contingent deferred sales charge* for FLEX
SHARES $42 $69 $118 $253
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
10 PROSPECTUS
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the MID-CAP EQUITY FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ---------------------
MID-CAP EQUITY FUND
- ---------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS NET ASSETS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET END OF
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END PERIOD
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ----------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $12.74 $(0.03) $1.69 $(0.01) $(1.22) $13.17 13.76% 2$0,245
1996 10.99 0.03 2.62 (0.03) (0.87) 12.74 24.93% 17,971
1995 9.84 0.03 1.15 (0.03) -- 10.99 11.96% 7,345
1994(1) 10.00 0.01 (0.17) -- -- 9.84 (1.60)%+ 3,004
FLEX
SHARES
1997 $12.69 $(0.07) $1.64 $-- $(1.22) $13.04 13.06% 1$0,120
1996(2) 11.13 -- 2.45 (0.02) (0.87) 12.69 23.00%* 5,029
<CAPTION>
RATIO OF
NET
INVESTMENT
RATIO OF RATIO OF INCOME
NET EXPENSES TO (LOSS) TO
INVESTMENT AVERAGE NET AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3) RATE**
---------- ----------- ------------ ----------- -------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C>
1997 1.60% (0.21%) 1.85% (0.46)% 152% $0.0587
1996 1.60% 0.25% 1.96% (0.11)% 116% --
1995 1.60% 0.43% 2.27% (0.24)% 66% --
1994(1) 1.60%* 0.74%* 4.60%* (2.26)%* 8% --
FLEX
SHARES
1997 2.20% (0.85%) 2.58% (1.23%) 152% $0.0587
1996(2) 2.20%* (0.37%)* 3.04%* (1.21%)* 116% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON FEBRUARY 1, 1994.
(2) COMMENCED OPERATIONS ON JUNE 5, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
BALANCED FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities and debt obligations.
<PAGE>
PROSPECTUS 11
The Fund may invest in securities of foreign issuers, investment grade
obligations, variable and floating rate instruments, mortgage- and asset-backed
securities, and shares of investment companies. To some extent, the Fund may
invest in other securities and engage in other investment practices. See "FUND
INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Balanced Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Prepayment Risk;
- Hedging Risks;
- Foreign Securities Risk; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
The Balanced Fund is co-managed by Anthony R. Gray (equity portion),
and L. Earl Denney, CFA, (fixed income portion). Mr. Gray, Chairman and Chief
Executive Officer of STI Capital Management, N.A., since 1979, has more than 30
years of investment experience. Mr. Denney, Senior Vice President, STI Capital
Management, N.A., since 1983, has more than 17 years of experience. Prior to
joining STI Capital Management, N.A., Mr. Denney served as a fixed income
portfolio manager with American National Bank.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the BALANCED FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charges Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
</TABLE>
* SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .83% .83%
12b-1 Distribution & Service Fees After Reimbursements(2) .04% .67%
Other Expenses After Fee Waivers and Reimbursements(3) .38% .51%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.25% 2.01%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .95%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .28% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .41%
FOR INVESTOR SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.64% FOR INVESTOR SHARES AND 2.46% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<PAGE>
12 PROSPECTUS
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $ 50 $ 76 $ 104 $ 183
contingent deferred sales charge* for FLEX SHARES $ 40 $ 63 $ 108 $ 234
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the BALANCED FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- --------------
BALANCED FUND
- --------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND DISTRIBUTIONS
NET ASSET NET UNREALIZED DISTRIBUTIONS FROM NET ASSETS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET REALIZED NET ASSET END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL VALUE END TOTAL PERIOD TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN (000) NET ASSETS
----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 11.60 $ 0.29 $ 1.48 $ (0.29 ) $ (1.09 ) $ 11.99 16.27 % $ 6,012 1.25%
1996 10.30 0.30 1.41 (0.30 ) (0.11 ) 11.60 16.88 % 4,896 1.25%
1995 9.79 0.28 0.51 (0.28 ) -- 10.30 8.29 % 3,765 1.25%
1994(1) 10.00 0.03 (0.24 ) -- -- 9.79 (2.10 )%+ 2,311 1.25%*
FLEX
SHARES
1997 $ 11.53 $ 0.22 $ 1.45 $ (0.21 ) $ (1.09 ) $ 11.90 15.40 % $ 6,067 2.01%
1996(2) 10.36 0.24 1.29 (0.25 ) (0.11 ) 11.53 15.58 %* 3,131 2.00%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER COMMISSION
ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3) RATE**
----------- ------------ -------------- ----------- -----------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 2.58 % 1.64% 2.19 % 197% $ 0.0608
1996 2.70 % 1.89% 2.06 % 155% --
1995 3.17 % 1.80% 2.62 % 157% --
1994(1) 2.46 %* 4.91% * (1.20 )%* 106% --
FLEX
SHARES
1997 1.84 % 2.45% 1.40 % 197% $ 0.0608
1996(2) 1.85 %* 2.97% * 0.88 %* 155% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 4, 1994.
(2) COMMENCED OPERATIONS ON JUNE 14, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER. THE PORTFOLIO
TURNOVER RATE WAS 135% FOR THE EQUITY PORTION OF THE FUND AND 286% FOR THE
FIXED INCOME PORTION OF THE FUND.
<PAGE>
PROSPECTUS 13
SUNBELT EQUITY FUND
FUND OBJECTIVE
[LOGO]
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 U.S.
Current income will not be an important criterion of investment selection and
any such income should be considered incidental.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of U.S. companies headquartered and/or conducting a
substantial portion of their operations in the southern region of the U.S.
Stocks chosen for the Fund are primarily 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
- Louisiana
The Fund may invest in high yield securities, futures, and options. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Sunbelt Equity Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Geographic Risk;
- Hedging Risks; and
- High-Yield Security Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. James Foster has managed the Sunbelt Equity Fund since it began
operating. He has served as Vice President of Trusco Capital Management, Inc.
since 1989, and has more than 27 years of investment experience.
<PAGE>
14 PROSPECTUS
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the SUNBELT EQUITY FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
</TABLE>
* SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.04% 1.04%
12b-1 Distribution & Service Fees After Reimbursements(2) .29% .61%
Other Expenses .27% .55%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(3) 1.60% 2.20%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .43% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.85% FOR INVESTOR SHARES AND 2.70% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $53 $86 $121 $220
contingent deferred sales charge* for FLEX
SHARES $42 $69 $118 $253
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
PROSPECTUS 15
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the SUNBELT EQUITY FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- --------------------
SUNBELT EQUITY FUND
- --------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $13.95 $(0.14) $ 0.24 -- $(0.99) $ 13.06 1.05% $28,095
1996 9.96 (0.11) 4.30 -- (0.20) 13.95 42.58% 29,002
1995 9.69 (0.05) 0.36 -- (0.04) 9.96 3.20% 22,180
1994(1) 10.00 (0.02) (0.29) -- -- 9.69 (3.10)%+ 16,077
FLEX
SHARES
1997 $13.97 $(0.14) $ 0.16 -- $(0.99) $ 13.00 0.46% $ 5,689
1996(2) 10.20 (0.07) 4.04 -- (0.20) 13.97 39.86%* 2,705
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME(LOSS) TO
INVESTMENT AVERAGE NET AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3) RATE**
---------- ---------- --------------- --------------- -------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C>
1997 1.60% (1.10)% 1.84% (1.34)% 72% $0.0674
1996 1.60% (0.79)% 1.93% (1.12)% 106% --
1995 1.60% (0.57)% 1.98% (0.95)% 80% --
1994(1) 1.60%* (0.63)%* 2.04%* (1.07)%* 21% --
FLEX
SHARES
1997 2.20% (1.72)% 2.69% (2.21)% 72% $0.0674
1996(2) 2.20% (1.43)%* 3.62%* (2.85)%* 106% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 4, 1994.
(2) COMMENCED OPERATIONS ON JUNE 5, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
INTERNATIONAL EQUITY INDEX FUND
FUND OBJECTIVE
[LOGO]
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)
- ----------
(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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in equity securities of companies
headquartered, or based in, the approximately twenty foreign countries included
in the EAFE-GDP Index.
While the Fund is structured to have overall investment characteristics
similar to those of the EAFE-GDP Index, it selects a representative sample of
securities in each country using a statistically-based optimization process.
The Fund expects that there will be a close correlation between it's
performance and that of
<PAGE>
16 PROSPECTUS
the EAFE-GDP Index. However, the Fund's ability to track the EAFE-GDP Index may
be affected by, among other things, transaction costs, changes in either the
composition of the Index or number of shares outstanding for the component
companies of the EAFE-GDP Index, and the timing and amount of purchases and
redemptions.
The Fund may invest in securities of foreign issuers, futures, options, and
forward foreign currency contracts. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The International Equity Index Fund is subject to the following types
of risk:
- Fund Risk;
- Market Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the INTERNATIONAL EQUITY INDEX FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
</TABLE>
* SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .80% .80%
12b-1 Distribution & Service Fees After Reimbursements(2) .14% .00%
Other Expenses After Fee Waivers and Reimbursements(3) .51% 1.30%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.45% 2.10%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .90%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .38% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .60%
FOR INVESTOR SHARES AND 1.79% FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.88% FOR INVESTOR SHARES AND 3.69% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<PAGE>
PROSPECTUS 17
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $52 $82 $114 $205
contingent deferred sales charge* for FLEX
SHARES $41 $66 $113 $243
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the INTERNATIONAL EQUITY INDEX FUND.
The financial highlights for the Fund for the periods from inception
through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- --------------------------------
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
INVESTOR SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $ 10.88 $ 0.03 $0.72 $ (0.07 ) $ (0.30 ) $ 11.26 7.12 %
1996 10.20 0.05 0.85 (0.13 ) (0.09 ) 10.88 8.90 %
1995(1) 10.00 0.05 0.17 (0.01 ) (0.01 ) 10.20 2.18 %+
FLEX SHARES
1997 $ 10.87 $ (0.05 ) $0.72 -- $ (0.30 ) $ 11.24 6.41 %
1996(2) 10.24 -- 0.82 (0.10 ) (0.09 ) 10.87 8.32 %+
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
END OF TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE RATE**
------------ ---------- ---------- --------------- --------------- -------- -----------
INVESTOR SHARES
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $ 5,592 1.45% 0.28 % 1.88% (0.15)% 2 % $ 0.0244
1996 5,597 1.45% 0.48 % 2.06% (0.13)% 30 % --
1995(1) 3,960 1.45% * 0.67 %* 2.44% * (0.32)% * 10 %* --
FLEX SHARES
1997 $ 900 2.10% (0.39 )% 3.69% (1.98)% 2 % $ 0.0244
1996(2) 917 2.10% * (0.24 )%* 4.14% * (2.28)% * 30 % --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JUNE 6, 1994.
(2) COMMENCED OPERATIONS ON JUNE 8, 1995.
<PAGE>
18 PROSPECTUS
INTERNATIONAL EQUITY FUND
FUND OBJECTIVE
[LOGO]
The International Equity Fund seeks to provide long-term capital
appreciation by investing primarily in a diversified portfolio of equity
securities of foreign issuers.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests primarily in equity securities of foreign issuers.
The Fund will invest in the securities of foreign issuers of at least three
different countries outside the United States. A foreign issuer:
- is a company organized under the laws of a specific country;
- principally trades its securities in a market or on an exchange in a
specific foreign country; or
- 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 has 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). The Fund may also invest in securities of
issuers whose principal activities are in countries with emerging markets. The
Fund defines an emerging market country as any country whose economy and market
are considered to be emerging or developing by the World Bank or the United
Nations.
The Fund may invest in options, futures, forward foreign currency contracts,
and high yield securities. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The International Equity Fund is subject to the following types of
risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ned Dau, Vice President of STI Capital Management, N.A., has
managed the International Equity Fund since May, 1997. Prior to joining STI, he
was a senior international equity analyst for American Express Financial
Advisors from 1996 to 1997, and the Principal Financial Group from 1992 to 1995.
<PAGE>
PROSPECTUS 19
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the INTERNATIONAL EQUITY FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
</TABLE>
* SEE "PURCHASING FUND SHARES."
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.20% 1.20%
12b-1 Distribution & Service Fees After Reimbursements(2) .17% .56%
Other Expenses After Fee Waivers and Reimbursements(3) .44% .75%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.81% 2.51%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.25%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .33 FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .47%
FOR INVESTOR SHARES AND .78% FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 2.05% OF INVESTOR SHARES AND 3.03% OF FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $55 $92 $132 $242
contingent deferred sales charge* for FLEX
SHARES $45 $78 $134 $285
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
20 PROSPECTUS
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the INTERNATIONAL EQUITY FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available to
Shareholders at no charge by calling 1-800-874-4770.
- --------------------------
INTERNATIONAL EQUITY FUND
- --------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND NET
NET ASSET NET UNREALIZED DISTRIBUTIONS ASSET RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS VALUE NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED END OF TOTAL END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD RETURN PERIOD (000) NET ASSETS
--------- ---------- ----------- ------------- ------------- ------ ------ ------------ ----------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $11.38 $(0.01) $2.56 -$- $(0.35) $13.58 22.85% $10,674 1.81%
1996(1) 10.44 0.04 0.90 -- -- 11.38 9.00%+ 3,448 1.81%*
FLEX
SHARES
1997 $11.37 $(0.04) $2.49 -$- $(0.35) $13.47 21.98% $ 8,375 2.51%
1996(1) 10.44 0.02 0.91 -- -- 11.37 8.91%+ 953 2.51%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
---------- --------------- --------------- -------- ----------
I
<S> <C> <C> <C> <C> <C>
1997 0.18% 2.05% (0.06)% 139% $0.0313
1996 1.73%* 3.14%* 0.40%* 113% --
FLEX
SHARES
1997 (0.27)% 3.03% (0.79)% 139% $0.0313
1996 1.08%* 5.86%* (2.27)%* 113% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS REQUIRED ONLY FOR FISCAL
YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 2, 1996.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
THERE CAN BE NO ASSURANCE THAT A FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE.
THE INVESTMENT OBJECTIVE OF EACH FUND IS NON-FUNDAMENTAL AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
<PAGE>
PROSPECTUS 21
RISK CONSIDERATIONS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
<S> <C>
- -----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
FUND RISK -- The possibility that a Fund's performance during a All Funds
specific period may not meet or exceed that of the market as a
whole.
MARKET RISK -- The possibility that stock prices in general will All Funds
decline over short, or even extended, periods of time. Stock
markets tend to be cyclical, with periods when stock prices
generally rise and periods when stock prices generally decline.
SMALL ISSUER RISK -- Small and medium capitalization companies may Value Income Stock Fund
be more vulnerable than larger, more established organizations Small Cap Equity Fund
to adverse business or economic developments. In particular, Mid-Cap Equity Fund
small capitalization companies may have limited product lines,
markets, and financial resources and may be dependent upon a
relatively small management group. These securities may be
traded over-the-counter or listed on an exchange and may or may
not pay dividends.
INTEREST RATE RISK -- The potential for a decline in the price of Balanced Fund
fixed income securities due to rising interest rates. This risk
will be greater for long-term securities than for short-term
securities.
CREDIT RISK -- The possibility that an issuer will be unable to make Capital Growth Fund
timely payments of either principal or interest. Value Income Stock Fund
Mid-Cap Equity Fund
Balanced Fund
Sunbelt Equity Fund
International Equity Fund
CALL RISK -- The possibility that securities with high interest Balanced Fund
rates will be prepaid (or "called") by the issuer prior to
maturity during periods of falling interest rates. This would
require a Fund to invest the resulting proceeds elsewhere, at
generally lower interest rates.
</TABLE>
<PAGE>
22 PROSPECTUS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- -----------------------------------------------------------------------------------------------
<S> <C>
EVENT RISK -- The possibility that corporate debt securities may Capital Growth Fund
suffer substantial declines in credit quality and market value Value Income Stock Fund
due to corporate restructurings. While event risk may be high Mid-Cap Equity Fund
for certain corporate securities held by a Fund, event risk in Balanced Fund
the aggregate should be low because of the Fund's diversified International Equity Fund
holdings.
GEOGRAPHIC RISK -- The risk that a Fund's concentration of Sunbelt Equity Fund
investments in securities of issuers located in a single state
or geographic region subject a Fund to economic conditions and
government policies of that state or region that could
adversely affect the value of a Fund.
PREPAYMENT RISK -- The risk that mortgage-backed and asset-backed Balanced Fund
securities may be retired substantially earlier than their
stated maturities or final distribution dates, resulting in a
loss of all or part of any premium paid.
HEDGING RISKS -- Hedging is a strategy designed to offset investment All Funds (except Capital
risks. Hedging activities include, among other things, the use Growth Fund)
of options and futures. There are risks associated with hedging
activities, including:
- 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;
- There may be an imperfect or no correlation between the
changes in market value of the securities held by a Fund and
the prices of futures and options on futures;
- There may not be a liquid secondary market for a futures
contract or option;
- Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in
futures contracts and options.
</TABLE>
<PAGE>
PROSPECTUS 23
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- -----------------------------------------------------------------------------------------------
<S> <C>
HIGH-YIELD SECURITY RISKS -- There are risks associated with Capital Growth Fund
investing in high-yield securities, including: Value Income Stock Fund
- High-yield, lower rated bonds ("junk bonds") involve greater Mid-Cap Equity Fund
risk of default or price declines than investments in Sunbelt Equity Fund
investment grade securities (e.g., securities rated BBB or International Equity Fund
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 these securities at their fair
market values 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.
- The market for high risk, high-yield securities may be
adversely affected by legislative and regulatory
developments.
FOREIGN SECURITY RISKS -- There are risks associated with
international investing, including:
CURRENCY RISK -- The possibility that changes in foreign
exchange rates will affect, favorably or unfavorably, the value
of foreign securities or the U.S. dollar amount of income or
gain received on such securities.
VOLATILITY -- Investments in foreign stock markets can be more
volatile than investments in U.S. markets. Diplomatic,
political, or economic developments could affect investments in
foreign countries.
</TABLE>
<PAGE>
24 PROSPECTUS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- -----------------------------------------------------------------------------------------------
<S> <C>
EXPENSE CONSIDERATIONS -- Fixed commissions on many foreign All Funds (except Sunbelt
stock exchanges are generally higher than negotiated Equity Fund)
commissions on U.S. exchanges. Expenses for custodial
arrangements of foreign securities may be somewhat greater than
typical expenses for custodial arrangements for handling U.S.
securities of equal value.
FOREIGN TAXES -- Certain foreign governments levy withholding
taxes against dividend and interest income. Although in some
countries a portion of these taxes are recoverable, the
non-recovered portion of foreign withholding taxes will reduce
the income received from the securities comprising the
portfolio.
REGULATORY ENVIRONMENT -- Foreign companies generally are not
subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to U.S.
domestic companies. Foreign branches of U.S. banks, foreign
banks and foreign issuers may be subject to less stringent
reserve requirements and to different accounting, auditing,
reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic issuers.
There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the U.S.
CURRENCY RISK -- The possibility that changes in foreign exchange All Funds (except Sunbelt
rates will affect, favorably or unfavorably, the value of foreign Equity Fund)
securities or the U.S. dollar amount of income or gain received on
such securities.
</TABLE>
<PAGE>
PROSPECTUS 25
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUNDS
The International Equity, Value Income Stock, Small Cap Equity, and Sunbelt
Equity Funds are each the successor to collective investment funds. The
collective investment funds were previously managed by STI Capital Management,
Inc. and Trusco Capital Management, Inc. Substantially all of the assets of
those collective investment funds were transferred to the Funds when each Fund
started operating. Total return, a type of performance calculation, for the
predecessor collective investment funds, is presented below. You may find this
performance information helpful because the collective investment funds were
managed using the same investment objectives, policies, and restrictions as
those used by each of the Funds. The performance information relates to a period
of time before the effective date of each Fund's registration.
The total return of a fund refers to the average compounded rate of return
on a hypothetical investment. This includes any sales charge imposed for
designated time periods, such as the period from which a fund started operating
through a specified date. When we compute total return, we assume that your
entire investment is redeemed at the end of each period and that you reinvest
all income dividends and capital gains distributions.
Please keep in mind that performance information, such as total return, is
not necessarily indicative of the future performance of a Fund. Also, keep in
mind that the performance of the collective investment funds does not represent
the historical performance of any fund. The predecessor collective investment
funds were not subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the 1940 Act and the Internal
Revenue Code. If these had been imposed, a collective investment fund's
performance would have been adversely affected. The predecessor collective
investment funds did not incur expenses that correspond to the advisory,
administrative, and other fees to which each Fund is now subject. Accordingly,
the following performance information has been adjusted by applying the total
expense ratios for the Trust Shares of the Funds, as disclosed in the Prospectus
at the time the Funds started operating. This adjustment reduced the actual
performance of the collective investment funds.
The total expense ratios for the Trust Shares of the Funds are lower than
those for Investor and Flex Shares of the Funds. As a result, the performance
you see below is higher than if the total expense ratios for Investor or Flex
Shares were applied to the performance information.
<PAGE>
26 PROSPECTUS
The average annual total returns (adjusted to reflect Fund expenses, before
voluntary waivers and reimbursements) for the following periods:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
International Equity N/A N/A N/A N/A 33.16%
Collective Fund (2/2/95-11/30/95)
Value Income Stock 15.87% 18.70% N/A N/A 16.31%
Collective Fund (ending 1/31/93) (ending 1/31/93) (10/31/89-1/31/93)
Sunbelt Equity 22.70% 29.73% 21.29% 16.14% 16.94%
Collective Fund (ending (ending (ending (ending (12/1/80-12/31/93)
12/31/93) 12/31/93) 12/31/93) 12/31/93)
Small Cap Equity 36.43% N/A N/A N/A 27.97%
Collective Fund (ending 1/31/97) (8/31/94-1/31/97)
</TABLE>
FUND PERFORMANCE
The average annual total returns for the Funds (net of voluntary waivers and
reimbursements) for the following periods ended May 31, 1997:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
International Equity Fund
Investor Shares* 18.28% N/A N/A N/A
Flex Shares** 19.98% N/A N/A N/A
Value Income Stock Fund
Investor Shares* 17.14% 20.99% N/A N/A
Flex Shares** 18.91% N/A N/A N/A
Sunbelt Equity Fund
Investor Shares* (2.71)% 12.68% N/A N/A
Flex Shares** (1.40)% N/A N/A N/A
<CAPTION>
SINCE INCEPTION
<S> <C>
- --------------------------------------------------
International Equity Fund
Investor Shares* 19.68%
Flex Shares** 22.30%
Value Income Stock Fund
Investor Shares* 18.14%
Flex Shares** 23.68%
Sunbelt Equity Fund
Investor Shares* 10.08%
Flex Shares** 18.46%
</TABLE>
- ----------
* COMMENCED FUND OPERATIONS ON JANUARY 2, 1996; FEBRUARY 12, 1993; AND JANUARY
4, 1994, RESPECTIVELY.
** COMMENCED FUND OPERATIONS ON JANUARY 2, 1996; JUNE 1, 1995; AND JUNE 5,
1995, RESPECTIVELY.
The performance relating to Trust Shares will normally be higher than
Investor Shares or Flex Shares because Trust Shares are not subject to the
service fees and other expenses charged to the Investor Shares and Flex Shares.
<PAGE>
PROSPECTUS 27
PURCHASING FUND SHARES
HOW TO BUY FUND SHARES
You may buy either Investor or Flex Shares (and fractions of shares) by
mail, telephone or wire directly from the Transfer Agent, Federated Services
Company. You also may purchase shares through Investment Consultants of certain
correspondent banks of SunTrust Banks, Inc., or other financial institutions
that have executed dealer agreements with the Trust's Distributor. Shares are
offered continuously, and may be purchased on any day that the New York Stock
Exchange is open for business (a Business Day).
The price per share (the offering price) will be the net asset value per
share (NAV) next determined after your purchase order is received by the
Transfer Agent plus, in the case of Investor Shares, the applicable front-end
sales charge. NAV is calculated by (1) taking the current market value of a
Fund's total assets for that class of shares (either Investor or Flex), (2)
subtracting the liabilities applicable to that class of shares, and (3) dividing
that amount by the total number of shares of that class owned by shareholders.
The NAV is calculated once each Business Day at the close of the New York Stock
Exchange (4:00 p.m. Eastern time). So, to receive the current Business Day's
NAV, the Transfer Agent must receive your purchase order before 4:00 p.m.
Eastern time. If you purchase shares through a financial institution (rather
than directly through the Transfer Agent), you may have to transmit your
purchase order to your financial institution at an earlier time for your
purchase to be effective that day. This allows the financial institution time to
process your order and transmit it to the Transfer Agent. For more information
about how to purchase shares through your financial institution, you should
contact your financial institution directly.
If you decide to buy shares directly call 1-800-874-4770. Make your check
out to "STI Classic Funds" and include the name of the appropriate Fund(s) on
the check. The check must be payable in U.S. dollars. Third-party checks, credit
cards, credit card checks, and cash are not accepted. PLEASE NOTE, IF YOU BUY
SHARES WITH A CHECK, AND THEN SELL THOSE SHARES IN A SHORT PERIOD OF TIME, THE
TRUST CAN DELAY PAYMENT TO YOU UNTIL YOUR CHECK CLEARS, OR FOR UP TO 15 BUSINESS
DAYS, WHICHEVER COMES FIRST.
FUNDLINK
FUNDLINK is a telephone-activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK you must first contact your SunTrust Investment
Consultant and complete the FUNDLINK application and authorization agreements.
Once you have signed up to use FUNDLINK, simply call the Transfer Agent at
1-800-428-6970 to complete all your purchase and redemption transactions.
<PAGE>
28 PROSPECTUS
FRONT-END SALES CHARGES -- INVESTOR SHARES
The following table shows: (1) the sales charge you pay (i) as a percentage
of the offering price and (ii) as a percentage of your net investment (NAV
multiplied by the number of shares you purchase); and (2) the amount that is
paid to your Investment Consultant (Dealer) as a percentage of the offering
price.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER'S
AS A AS A REALLOWANCE
PERCENTAGE PERCENTAGE OF AS A % OF
OF OFFERING YOUR NET OFFERING
YOUR INVESTMENT PRICE INVESTMENT 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 over 1.50% 1.52% 1.350%
</TABLE>
The front-end sales charge will be waived on Investor Shares purchased:
- - through reinvestment of dividends and distributions;
- - through a SunTrust Securities, Inc. asset allocation account;
- - by persons repurchasing shares they redeemed within the last 60 days (see
REPURCHASE OF INVESTOR SHARES, below).
- - by employees, and members of their immediate family, of SunTrust Banks, Inc.
and its affiliates;
- - by persons reinvesting distributions from qualified employee benefit
retirement plans and rollovers from individual retirement accounts (IRAs)
previously with the trust department of a bank affiliated with SunTrust Banks,
Inc.; or
- - by persons investing an amount less than or equal to the value of an account
distribution, when an account for which a bank affiliated with SunTrust Banks,
Inc. acted in a fiduciary, administrative, custodial, or investment advisory
capacity is closed.
REPURCHASE OF INVESTOR SHARES
You may repurchase any amount of Investor Shares of any Fund at NAV (without
the normal front-end sales charge), equal to or less than the value of any
amount of Investor Shares (for which you paid a front-end sales charge) that you
redeemed within the past 60 days. In effect, this allows you to repurchase
shares that you may have had to redeem, without repaying the front-end sales
charge. To exercise this privilege, your purchase order must be received by the
Transfer Agent within 60 days after your redemption. IN ADDITION, YOU MUST
NOTIFY THE TRANSFER AGENT, WHEN YOU SEND IN YOUR PURCHASE ORDER, THAT YOU ARE
REPURCHASING SHARES.
<PAGE>
PROSPECTUS 29
REDUCED SALES CHARGES -- INVESTOR SHARES
- - RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, (see
"Front-End Sales Charges"), this right allows you to add the value of Investor
Shares you already own to the amount you are currently purchasing. The Trust
will combine the value of your current purchases with the current value of any
Investor Shares you purchased previously for (i) your account, (ii) your
spouse's account, (iii) a joint account with your spouse, or (iv) your minor
children's trust or custodial accounts. A fiduciary purchasing shares for the
same fiduciary account, trust or estate, may also use this right of
accumulation. The Trust will only consider the value of Investor Shares
purchased previously that were sold subject to a sales charge. TO BE ENTITLED
TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED, YOU MUST ASK THE
DISTRIBUTOR FOR THE REDUCTION AT THE TIME OF PURCHASE. You must provide the
Distributor with your account number(s) and, if applicable, the account
numbers for your spouse and/or children (and provide children's ages). The
Trust may amend or terminate this right of accumulation at any time.
- - LETTER OF INTENT. You may purchase at the sales charge rate applicable to the
total amount of the purchases you intend to make over a 13-month period. In
other words, a Letter of Intent allows you to purchase Investor Shares of a
Fund over a 13-month period and receive the same sales charge as if you had
purchased all the shares at the same time. The Trust will only consider the
value of Investor Shares sold subject to a sales charge. As a result, neither
Investor Shares of STI Classic Money Market Funds nor Investor Shares
purchased with dividends or distributions will be included in the calculation.
TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES YOU INTEND TO
PURCHASE OVER A 13-MONTH PERIOD, YOU MUST SEND A LETTER OF INTENT TO THE
TRANSFER AGENT. In calculating the total amount of purchases, you may include
in your Letter purchases made up to 90 days before the date of the Letter. The
13-month period begins on the date of the first purchase, including those
purchases made in the 90-day period before the date of the Letter. Please
note, the purchase price of these prior purchases will not be adjusted.
You are not legally bound by the terms of a Letter of Intent to purchase the
amount of shares you stated in the Letter. The Letter does, however,
authorize the Transfer Agent to hold in escrow 3.75% of the total amount you
intend to purchase to be purchased. If you do not complete the total
intended purchases at the end of the 13-month period, the Transfer Agent
will redeem the necessary portion of the escrowed shares to make up the
difference between the reduced rate sales charge (based on the amount you
intended to purchase) and the sales charge that would normally apply (based
on the actual amount purchased).
- - COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the
appropriate sales charge rate, the Trust will combine same day purchases of
Investor Shares (that are subject to a sales charge) made by you, your spouse
and your minor children (under age 21). This combination also applies to
Investor Shares you purchase with a Letter of Intent.
<PAGE>
30 PROSPECTUS
CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES
You do not pay an initial sales charge when you purchase Flex Shares. If,
however, you redeem (sell) your shares within the first year after your
purchase, you will pay a contingent deferred sales charge (CDSC) equal to 2.00%
of either (1) NAV of the shares at the time of purchase, or (2) NAV of the
shares at the time of redemption, whichever is less. The CDSC does not apply to
shares you purchase through reinvestment of dividends or distributions. So, you
never pay a CDSC on any increase in your investment above the initial purchase
price. In addition, the CDSC does not apply to exchanges of Flex Shares of one
Fund for Flex Shares of another Fund.
The CDSC will be waived if you sell your Flex Shares for the following
reasons:
- to make withdrawals from a retirement plan;
- because of death or disability; or
- for certain payments under the Systematic Withdrawal Plan (discussed
below).
MINIMUM PURCHASE
To purchase Investor Shares for the first time, you must invest at least
$2,000 in any Fund. Employees of SunTrust Banks, Inc., and members of their
immediate family, however, may buy Investor Shares with an initial purchase of
$1,000. To purchase Flex Shares for the first time, you must invest at least
$10,000 in any Fund. To purchase additional shares of any Fund, you must invest
at least $1,000 or, via a statement coupon, $100.
MINIMUM PURCHASE -- RETIREMENT PLANS
A retirement plan may purchase either Investor Shares or Flex Shares for the
first time with an investment of at least $2,000 in any Fund.
If you invest through the Systematic Investment Plan, described below, you
will be subject to lower minimum purchase amounts.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a SunTrust Banks, Inc.
affiliate bank, you may purchase shares of either class automatically through
regular deductions from your account. With a $500 minimum initial investment,
you may begin regularly scheduled investments from $50 up to $100,000 once or
twice a month. If you are buying Flex Shares, you should plan on investing at
least $10,000 per Fund during the first two years. The Distributor may close
your account if you do not meet this minimum investment requirement at the end
of two years.
PURCHASING SHARES -- THE DISTRIBUTOR
The Distributor may accept investments of smaller amounts, for either class
of shares, at its discretion. In addition, the Trust reserves the right to
reject any purchase order when the Distributor
<PAGE>
PROSPECTUS 31
determines that accepting the order would not be in the best interests of the
Trust and/or Shareholders.
REDEEMING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (redeem) your Investor or Flex Shares on any day that NAV is
calculated, by contacting the Transfer Agent directly by mail, telephone or, if
eligible, via FUNDLINK. You may also make redemption requests (in writing or by
telephone) through a SunTrust Investment Consultant, and through certain
correspondent banks of SunTrust Banks, Inc. Redemption requests made via
telephone or FUNDLINK (1-800-428-6970) must be for a redemption amount of at
least $1,000. Redemption requests for $25,000 or more must be in writing and
must include a signature guarantee (a notarized signature is not sufficient).
The redemption price of each share will be the next NAV determined after receipt
of your redemption request less, in the case of Flex Shares, any applicable
CDSC. Redemption requests must be received by the Transfer Agent by 4:00 p.m.
Eastern time to get that day's NAV. If you redeem your shares through a
financial institution (rather than directly through the Transfer Agent), you may
have to transmit your redemption request to the financial institution at an
earlier time for your redemption to be effective that day. This allows the
financial institution time to process your request and transmit it to the
Transfer Agent. For more information about how to request redemptions through
your financial institution, you should contact your financial institution
directly.
RECEIVING YOUR MONEY
Your redemption proceeds normally will be sent within five Business Days of
the Transfer Agent receiving your request. Your proceeds can be wired to your
bank account (subject to a $7.00 fee), transferred to your bank account via
FUNDLINK, or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK OR THROUGH AUTOMATED CLEARING HOUSE (ACH), REDEMPTION PROCEEDS MAY NOT BE
AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
REDEMPTIONS IN KIND
The Trust intends to pay your redemption proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the remaining shareholders of the Fund) the Trust reserves the right to pay
all, or part, of your redemption proceeds in liquid securities that have a
market value equal to the redemption price (redemption in kind). Although it is
highly unlikely that your shares would ever actually be redeemed in kind, if it
did happen, you would probably have to pay brokerage costs to sell the
securities distributed to you.
<PAGE>
32 PROSPECTUS
INVOLUNTARY REDEMPTIONS
If your account balance drops below the required minimum, $2,000 for
Investor Shares and $10,000 for Flex Shares, you may be required to redeem your
shares. You will always be given at least 60 days' written notice to give you
time to add to your account and avoid the redemption.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual,
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with a
SunTrust Banks, Inc. affiliated bank, electronically transferred to your
account.
EXCHANGES
You may exchange your Investor or Flex Shares by contacting (1) an
Investment Consultant of a SunTrust Banks, Inc. affiliated bank, SunTrust
Securities, Inc., or certain correspondent banks of SunTrust Banks, Inc. in
writing or by telephone, or (2) the Transfer Agent directly via FUNDLINK.
Exchange requests must be for an exchange amount of at least $1,000. You may
exchange your shares up to four times during a calendar year without
restriction. More than four exchanges during a year may be viewed as abuse of
the exchange privilege. In such a case, the Trust may charge you a $10.00 fee
for each additional exchange. You will, however, be notified before any fee is
charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT
BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP
TO 15 BUSINESS DAYS). This exchange privilege may be changed or canceled at any
time upon 60 days' notice.
INVESTOR SHARES
You may exchange Investor Shares of any Fund for Investor Shares of any
other Fund. Shares you exchange for the first time from a Money Market Fund
(which has no sales charge) into a Fund with a sales charge are subject to that
sales charge. Similarly, shares you exchange for the first time into a Fund with
a higher sales charge are subject to an incremental sales charge (the difference
between the lower and higher applicable sales charges). Should you exchange
shares into a Fund with the same, lower or no sales charge (a Money Market
Fund), there is no sales charge for the exchange.
FLEX SHARES
You may exchange Flex Shares of any Fund for Flex Shares of any other Fund
or for Investor Shares of the Money Market Funds of the Trust. No CDSC is
imposed on redemptions of Money Market Fund shares you acquire in an exchange,
provided you hold your shares for at least one year from your initial purchase
date. If you exchange Flex Shares of any Fund for Investor Shares of a
<PAGE>
PROSPECTUS 33
Money Market Fund, you may only exchange those Money Market Fund Investor Shares
for Flex Shares.
TRANSACTIONS OVER THE TELEPHONE
Telephone redemption and exchange transactions are extremely convenient, but
not without risk. To try to keep your telephone transactions as safe, secure,
and risk free as possible, the Trust has developed certain safeguards and
procedures for determining the identity of callers and authenticity of
instructions. As a result, neither the Trust nor its Transfer Agent will be
responsible for any loss, liability, cost, or expense for following telephone or
wire instructions they reasonably believed to be genuine. If you choose to make
telephone transactions, you will generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are paid quarterly by each of the Funds, except the
International Equity Index Fund and International Equity Fund. These Funds pay
income dividends annually. If you own Fund shares on a Fund's record date, you
will be entitled to receive dividends. The Funds make distributions of capital
gains at least annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. To elect cash
payment, you must notify the Transfer Agent in writing prior to the date of
distribution. Your election will be effective for dividends paid after the
Transfer Agent receives your written notice. To cancel your election, simply
send written notice to the Transfer Agent.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their Shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. We have not
tried to present a detailed explanation of the tax treatment of the Funds or
their Shareholders. MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF
ADDITIONAL INFORMATION. WE URGE YOU TO CONSULT YOUR TAX ADVISOR 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 income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies. As long as a Fund qualifies as a regulated investment
company, it pays no Federal income tax on the earnings it distributes to
Shareholders.
<PAGE>
34 PROSPECTUS
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME WHETHER
YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
Corporate shareholders may be entitled to a dividends-received deduction for
the portion of dividends they receive which are attributable to dividends
received by a Fund from U.S. corporations.
Capital gains dividends will be treated as gain from the sale or exchange of
a capital asset held for more than 1 year.
Distributions paid in January but declared as dividends by a Fund in
October, November or December of the previous year, may be taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
TAX MANAGEMENT
The Funds use a tax management technique known as "highest in, first out."
Through this technique, a Fund's portfolio holdings which have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
FOREIGN TAX CONSIDERATIONS
Shareholders of the International Equity Index and International Equity
Funds may be entitled to a foreign tax deduction or credit.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Massachusetts as
long as it qualifies as a regulated investment company for Federal income tax
purposes.
Distributions by the Funds to you may be subject to state and local
taxation. You should verify your tax liability with your tax advisor.
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust is organized as a Massachusetts business trust. The Trust is
permitted to offer separate portfolios of shares and different classes of each
Fund. All payments received by the Trust for shares of any Fund belong to that
Fund. Each Fund has its own assets and liabilities.
BOARD OF TRUSTEES
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services.
<PAGE>
PROSPECTUS 35
GENERAL INFORMATION
VOTING RIGHTS
You receive one vote for every full Fund share owned. 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
Shareholder meetings unless otherwise required by the Investment Company Act.
However, a meeting may be called by Shareholders owning at least 10% of the
outstanding shares of the Trust. If a meeting is requested by Shareholders, the
Trust will provide appropriate assistance and information to the Shareholders
who requested the meeting.
REPORTING
You will receive the Trust's unaudited financial information and audited
financial statements. In addition, the Trust will send you proxy statements and
other reports. If you are a customer of a financial institution that has
purchased shares of a Fund for your account, you may, depending upon the nature
of your account, receive all or a portion of this information directly from your
financial institution.
SHAREHOLDER INQUIRIES
You may call your financial institution or 1-800-874-4770 to obtain
information on account statements, procedures, and other related information.
INVESTMENT ADVISORS
The Advisors make investment decisions for the assets of the Funds and
continuously review, supervise, and administer their Fund's respective
investment program. The Trustees of the Trust supervise the Advisors and
establish policies that the Advisors must follow in their day-to-day management
activities.
STI Capital Management, N.A. (STI Capital) serves as the Advisor to the
Capital Growth, Value Income Stock, Small Cap Equity, Mid-Cap Equity, Balanced
and International Equity Funds. As of May 31, 1997, STI Capital had
approximately $12.4 billion in assets under management. The principal business
address of STI Capital is P.O. Box 3808, Orlando, Florida 32802. For the fiscal
year ended May 31, 1997, STI Capital received advisory fees computed daily and
paid monthly at the annual rate included in each Fund's ANNUAL FUND OPERATING
EXPENSES summary.
Trusco Capital Management, Inc. (Trusco) serves as the Advisor to the
Sunbelt Equity Fund. As of May 31, 1997, Trusco had approximately $17.4 billion
in assets under management. The principal business address of Trusco is 50 Hurt
Plaza, Suite 1400, Atlanta, Georgia 30303. For the fiscal year ended May 31,
1997, Trusco received advisory fees computed daily and paid monthly at the
annual rate included in each Fund's ANNUAL FUND OPERATING EXPENSES summary.
<PAGE>
36 PROSPECTUS
STI Capital and Trusco serve as joint advisors to the International Equity
Index Fund.
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
(SunTrust). SunTrust is a southeastern regional bank holding company with assets
of $52.5 billion, as of December 31, 1996. SunTrust is one of the 20 largest
banking companies in the U.S. 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 tri-state area.
SunTrust Banks, Inc. has discretionary assets under management of approximately
$53.4 billion, as of December 31, 1996.
The Advisors may use their affiliates as brokers for the Funds' portfolio
transactions.
DISTRIBUTION
SEI Investments Distribution Co. (the Distributor), a wholly-owned
subsidiary of SEI Investments Company, serves as each Fund's distributor under a
Distribution Agreement.
The Investor Shares of each fund have a Distribution Plan. Under the
Distribution Agreement and Plan, the Distributor is entitled to receive an
annual fee of up to:
- .68% of the average daily net assets of the Capital Growth Fund;
- .33% of the average daily net assets of the Value Income Stock and
International Equity Funds;
- .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.
The Distributor may use this fee:
- as compensation for its distribution-related services or shareholder
services or
- to compensate financial institutions and intermediaries, such as banks
(including SunTrust Banks, Inc.'s affiliate and correspondent banks),
savings and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries for
performing distribution-related or shareholder services.
Flex Shares of each Fund have a Distribution Plan. Under the Distribution
Agreement and Plan, the Distributor is entitled to recover up to .75% of the
average daily assets of the Flex Shares of each Fund.
The Distributor may use these fees:
- as compensation for its distribution-related services or shareholder
services; or
- to compensate financial institutions and intermediaries, such as banks
(including Suntrust Banks, Inc.'s affiliates and subsidiaries) for
performing distribution-related or shareholder services.
The Distributor may waive all, or a portion of its fees to limit Total Fund
Operating Expenses.
<PAGE>
PROSPECTUS 37
Flex Shares also have a service fee of up to .25% of the average daily net
assets of the Flex Shares of each Fund. The service fee may be used for personal
service and maintenance of shareholder accounts.
The Distributor may waive all, or a portion of its fee to limit Total Fund
Operating Expenses.
A prospective investor may visit any one of the Investment Services offices
of SunTrust Banks, Inc.'s affiliate banks (as listed on the last pages of this
Prospectus), SunTrust Securities, Inc., or certain correspondent banks of
SunTrust Banks, Inc. to receive copies of the Prospectuses for the Investor and
Flex Shares of the Trust and application forms.
Each Fund may use the Distributor as its broker for portfolio transactions.
The Distributor receives compensation for its brokerage services.
At times, the Distributor may use its own funds to provide promotional
incentives, in the form of cash or other compensation, to financial institutions
whose representatives have sold or are expected to sell significant amounts of
Fund shares.
Trust Shares of the Funds are offered without a sales charge or distribution
fee primarily to financial institutions, and are described in a separate
prospectus. You may call 1-800-874-4770 to receive more information about Trust
Shares. Certain financial institutions may offer different classes of shares to
their customers. As a result, financial institutions may receive different
compensation with respect to different classes of shares.
ADMINISTRATION
SEI Fund Resources acts as the Trust's Administrator. For its administrative
services, the Administrator is entitled to a fee, 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>
The Administrator may voluntarily waive all or a portion of its fees to
limit Total Fund Operating Expenses.
<PAGE>
38 PROSPECTUS
FUND INVESTMENTS
% = Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net assets.
4 = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
CAPITAL VALUE SMALL CAP MID-CAP SUNBELT INTERNATIONAL INTERNATIONAL
GROWTH INCOME EQUITY EQUITY BALANCED EQUITY EQUITY INDEX EQUITY
FUND FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRADITIONAL INVESTMENTS
ADRs 35% 35% 4(6) 35% 75% -- 4(3) 4(3)
Bank Obligations -- -- -- -- 60% -- 35% 35%
Covertible Securities 4 35% 4 4 70% 4(2) 4 4
Corporate Debt Obligations 35%(2) 20%(2) -- 20%(2) 60%(5)(,)(7 -- -- 35%(2)
Equity Securities 4 4 4 4 70% 4 4 4
Investment Company Shares 10% 10% 10% 10% 10% 10% 10% 10%
Mortgage-Backed Securities -- * * * 60%(1) -- -- *
Pay-In-Kind Securities 35% -- -- -- 75% -- -- --
Repurchase Agreements 35% 35% * 20% 75% 35% 35% *
Restricted Securities 15% 15% 15% 15% 15% 15% 15% 15%
Securities of Foreign * * 4 35%(2) 60% -- 4 4
Issuers
Supranational Agency -- -- 4 20%(2) 60% -- -- --
Obligations
U.S. Treasury and -- 20% -- -- 60% -- -- 35%
Government Agency
Obligations
Zero Coupon Obligations -- -- -- -- 60% -- -- --
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Illiquid Securities 15% 15% 15% 15% 15% 15% 15% 15%
Securities Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
When Issued Securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Standby Commitments 4 4 4 4 4 4 4 4
LEVERAGING AND HEDGING TOOLS
Forward Foreign Currency -- -- -- -- -- -- 4 4
Contracts
Futures and Options on -- 20% -- -- 75% 20% 20% 35%
Futures
Options -- 20% 35% -- 75% 35% 4(4) 4(4)
Swaps, Caps, Floors, and -- -- -- -- 75% -- -- --
Collars
Variable and Floating Rate -- * -- 4 4 -- -- --
Instruments
</TABLE>
(1) INCLUDING UP TO 25% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES. THE
BALANCED FUND MAY ALSO PURCHASE ASSET-BACKED SECURITIES.
(2) MAY INVEST UP TO 10% OF ITS ASSETS IN HIGH YIELD SECURITIES.
(3) MAY ALSO INVEST IN EDRS.
(4) INCLUDES OPTIONS ON CURRENCIES.
(5) UP TO 25% OF ITS ASSETS MAY BE INVESTED IN SECURITIES RATED BBB OR Baa, OR
THEIR UNRELATED EQUIVALENTS.
(6) MAY INVEST UP TO 20% IN UNSPONSORED ADRS.
(7) WILL INVEST AT LEAST 25% IN SENIOR FIXED-INCOME SECURITIES.
Under normal market conditions, the Funds will follow the practices and
policies outlined above. However, for temporary defensive purposes during
periods when its Adviser determines that market conditions warrant each Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations. The SMALL CAP EQUITY FUND also may invest
in senior fixed income securities rated investment grade and securities issued
by mid- to large-cap companies. When the Funds are investing for temporary
defensive purposes, they will not be pursuing their respective investment
objectives.
<PAGE>
PROSPECTUS 39
INVESTMENT RESTRICTIONS
Each Fund will not invest more than 25% of its assets in any one industry.
With respect to 75% of its assets, each Fund will not:
- invest more than 5% of its assets in the securities of any one issuer.
- purchase more than 10% of the outstanding voting securities of any one
issuer.
MORE ABOUT INVESTMENTS AND HEDGING TOOLS
The following is a description of some of the permitted investments for the
Funds. Further discussion is contained in the SAI.
AMERICAN DEPOSITARY RECEIPTS (ADRs) AND EUROPEAN DEPOSITARY RECEIPTS (EDRs)
are securities, typically issued by a U.S. financial institution or a non-U.S.
financial institution in the case of an EDR (a depositary). The institution has
ownership interests in a security, or a pool of securities, issued by a foreign
issuer and deposited with the depositary. ADRs and EDRs 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.
An unsponsored facility may be established by a depositary without participation
by the issuer of the underlying security.
ASSET-BACKED SECURITIES are securities backed by non-mortgage assets such as
company receivables, truck and auto loans, leases, and credit card receivables.
These securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Asset-backed securities may also be DEBT OBLIGATIONS, 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 these assets and issuing DEBT OBLIGATIONS.
BANK OBLIGATIONS are SHORT-TERM OBLIGATIONS issued by U.S. and foreign
banks, including bankers' acceptances, certificates of deposit, custodial
receipts, and time deposits.
COMMON AND PREFERRED STOCKS represent units of ownership in a corporation.
Owners of common stock typically are entitled to vote on important matters.
Owners of preferred stock ordinarily do not have voting rights, but are entitled
to dividends at a specified rate. Preferred stock has a prior claim to common
stockholders with respect to dividends.
CONVERTIBLE SECURITIES are securities issued by corporations that are
exchangeable for a set number of another security at a prestated price. 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 OPTION
provisions.
CORPORATE DEBT SECURITIES are DEBT OBLIGATIONS issued by corporations with
maturities exceeding 270 days.
DEBT OBLIGATIONS represent money borrowed that obligates the issuer, (E.G.,
a corporation, municipality, government, government agency) to repay the
borrowed amount at maturity (when the
<PAGE>
40 PROSPECTUS
obligation is due and payable) and usually to pay the holder interest at
specific times E.G., bonds, notes, debentures).
EQUITY SECURITIES include COMMON AND PREFERRED STOCKS, WARRANTS, RIGHTS to
subscribe to common stock and CONVERTIBLE SECURITIES. These securities may be
publicly and privately issued.
FORWARD FOREIGN CURRENCY CONTRACTS involve obligations 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 the foreign currency. The Fund may realize a gain or
loss from currency transactions.
FUTURES CONTRACTS AND OPTIONS ON 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. They may also be used 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.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An 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 index at the
close of the last trading day of the contract and the price at which the
agreement is made.
HIGH YIELD SECURITIES are DEBT OBLIGATIONS rated below INVESTMENT GRADE,
I.E., below BBB by S&P or Baa by Moody's or their unrated equivalents. See "Risk
Considerations: High Yield Securities" for more information.
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.
INVESTMENT COMPANY SHARES are shares of other mutual funds which may be
purchased by the Funds to the extent consistent with applicable law. Closed-end
mutual funds usually trade at a discount from net asset value.
INVESTMENT GRADE OBLIGATIONS are DEBT OBLIGATIONS rated BBB or better by S&P
or Baa or better by Moody's, or their unrated equivalents. These securities are
deemed to have speculative characteristics.
<PAGE>
PROSPECTUS 41
MONEY MARKET INSTRUMENTS are high quality, dollar-denominated, SHORT-TERM
OBLIGATIONS, including BANK OBLIGATIONS, U.S. TREASURY OBLIGATIONS, U.S.
GOVERNMENT AGENCY OBLIGATIONS issued or guaranteed by the agencies or
instrumentalities of the U.S. Government, and SHORT-TERM CORPORATE OBLIGATIONS.
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 fifteen-
and thirty-year fixed rate mortgages, graduated payment mortgages, adjustable
rate mortgages, and floating rate mortgages.
During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities may accelerate. It is often not possible
to predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a
U.S. Government agency representing an interest in a pool of mortgage loans.
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 are mortgage-backed securities issued by a
non-governmental entity, such as a trust. 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
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government, or by private originators, or investors in mortgage loans.
Each class of a CMO is issued with a specific fixed or floating interest rate
and has a stated maturity or final distribution date.
REMICS are CMOs that qualify for special tax treatment under the Internal
Revenue Code. They invest in certain mortgages that are principally secured by
interests in real property. These securities are often guaranteed as to the
payment of principal and/or interest as payments are required to be made on the
underlying mortgage participation certificates.
STRIPPED MORTGAGE-BACKED SECURITIES (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 the other class may receive all of the principal
payments. SMBs are extremely sensitive to changes in interest rates because of
the impact of prepayment of principal on the underlying mortgage securities.
OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time. The
seller or writer of an option is obligated to sell (a call option) or buy (a put
option) the underlying security. All options written by a Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
currency ("options on currencies") or security. With respect to put options
written by the Fund, the Fund will establish a segregated
<PAGE>
42 PROSPECTUS
account with its custodian bank consisting of cash or cash equivalents in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put option.
PAY-IN-KIND SECURITIES are DEBT OBLIGATIONS or PREFERRED STOCK, that pay
interest or dividends in the form of additional DEBT OBLIGATIONS or PREFERRED
STOCK.
REPURCHASE AGREEMENTS are agreements by which a Fund obtains a security and
simultaneously agrees 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.
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.
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. The Trust's Board of Trustees has adopted procedures for
determining the liquidity of restricted securities.
RIGHTS give existing shareholders of a corporation the right, but not the
obligation, to buy shares of the corporation at a given price, usually below the
offering price, during a specified period.
SECURITIES LENDING -- To generate additional income, a Fund may lend
securities which it owns under agreements requiring that the loan be
continuously secured by collateral equal to at least 100% of the market value of
the loaned securities. A Fund continues to receive interest on the loaned
securities while simultaneously earning interest on the investment of cash
collateral.
SECURITIES OF FOREIGN ISSUERS are securities issued by foreign corporations,
including foreign branches of U.S. banks and foreign banks, and by foreign
governments or their agencies or instrumentalities.
SENIOR FIXED INCOME SECURITIES are DEBT OBLIGATIONS that pay a fixed rate of
return.
SHORT-TERM OBLIGATIONS are DEBT OBLIGATIONS maturing (becoming payable) in
397 days or less, including commercial paper and short-term corporate
obligations. Short-term corporate obligations are short-term obligations issued
by corporations.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder 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.
SUPRANATIONAL AGENCY OBLIGATIONS are obligations established through the
joint participation of several governments, including 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.
SWAPS, CAPS, FLOORS, and COLLARS -- Swaps, caps, floors, and collars are
hedging tools designed to permit the purchaser to preserve a return or spread on
a particular investment or portion
<PAGE>
PROSPECTUS 43
of its portfolio. They are also used to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. 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 a Fund's performance.
U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some of these securities
are supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and others are
supported only by the credit of the agency or instrumentality.
U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the
U.S. Treasury. They also consist of separately traded interest and principal
component parts of these 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 involve certain obligations that 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.
WARRANTS give holders the right, but not the obligation, to buy shares of a
company at a given price, usually higher than the market price, during a
specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES 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 interest rate realized on these securities is fixed
as of the purchase date and no interest accrues to the Fund before settlement.
ZERO COUPON OBLIGATIONS are DEBT OBLIGATIONS that do not bear any interest,
but instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
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
face value or par and pay interest periodically.
<PAGE>
44 PROSPECTUS
TRUST AND INVESTMENT SERVICES OFFICES OF SUNTRUST BANKS, INC. AFFILIATE BANKS:
FLORIDA: (STATEWIDE TOLL FREE) 1-800-526-1177
SUNTRUST SECURITIES, INC. --
FLORIDA
200 S. Orange Avenue
Tower 10
Orlando, FL 32801
(407) 237-4380
1-800-432-4760, ext. 4380
501 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
(954) 765-7422
777 Brickell Avenue
Miami, FL 33131
(305) 579-7450
401 E. Jackson Street
Tampa, FL 33602
(813) 224-2517
Osceola Office
111 E. Osceola Street
Stuart, FL 34994
(407) 223-6012
Belnova Office
120 S. Ridgewood Avenue
Daytona Beach, FL 32114
(904) 258-2390
200 W. Forsyth Street
Jacksonville, FL 32202
(904) 632-2534
Pelican Bay Office
801 Laurel Oak Drive
Naples, FL 33963
(941) 598-0515
210 Security Square
Winter Haven, FL 33880
(941) 297-6855
One East Jefferson Street
Brooksville, FL 34601
(352) 754-5798
3522 Thomasville Road
Tallahassee, FL 32308
(904) 298-5064
11 Hoffman Drive
Gulf Breeze, FL 32561
(904) 435-1264
GEORGIA:
SUNTRUST SECURITIES, INC. -- GEORGIA
55 Park Place
First Floor
Atlanta, GA 30303
(404) 588-8108
1-800-600-6350
101 N. Lumpkin Street
Athens, GA 30601
(706) 354-5346
2815 Wrightsboro Road
Augusta, GA 30909
(706) 821-2015
606 Cherry Street
Macon, GA 31201
(912) 755-5175
1246 First Avenue
Columbus, GA 31901
(706) 649-3631
33 Bull Street, Suite 208
Savannah, GA 31401
(912) 944-1165
410 W. Broad Avenue
Albany, GA 31701
(912) 430-5468
Coffee County Branch
201 S. Peterson Avenue
Douglas, GA 31533
(912) 383-5242
510 Gloucester Street
Brunswick, GA 31520
(912) 262-5322
<PAGE>
PROSPECTUS 45
TENNESSEE:
SUNTRUST SECURITIES, INC. -- TENNESSEE
424 Church Street
4th Floor
Nashville, TN 37219
(615) 748-4477
1-800-932-2652
736 Market Street
Chattanooga, TN 37402
(423) 757-3005
TN WATS 1-800-572-7306, Ext. 3005
Bordering States WATS
1-800-874-1083, Ext. 3005
Out of State WATS
1-800-251-6266, Ext. 3005
9950 Kingston Pike
Knoxville, TN 37997
(423) 544-2181
1-800-456-1177
207 Mockingbird Lane
Johnson City, TN 37604
(423) 461-1005
25 Public Square
Lawrenceburg, TN 38464
(615) 762-3511
ALABAMA:
SUNTRUST SECURITIES, INC. -- ALABAMA
201 South Court Street
Florence, AL 35630
(205) 767-8537
<PAGE>
46 PROSPECTUS
<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 Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* TRANSFER AGENT
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222-3779
* CUSTODIAN
SunTrust Bank, Atlanta c/o STI Trust & Investment
Operations, Inc.
303 Peachtree Street N.E.
14th Floor
Atlanta, GA 30308
The Bank of New York One Wall Street
(International Equity Fund and New York, New York 10286
International Equity Index Fund only)
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
PROSPECTUS 47
Additional information about the Funds is included in the SAI dated October
1, 1997. The SAI has been filed with the SEC and is incorporated by reference
into this Prospectus. You may obtain a copy of the SAI, or of the annual or
semi-annual reports, without charge by calling 1-800-874-4770, or by contacting
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR.
<PAGE>
Blank Page
<PAGE>
110487/10-97
STI CLASSIC FUNDS INVESTOR
AND FLEX SHARES
PROSPECTUS
OCTOBER 1, 1997
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
INESTMENT GRADE TAX-EXEMPT
BOND FUND
FLORIDA TAX-EXEMPT BOND FUND
GEORGIA TAX-EXEMPT BOND FUND
TENNESSEE TAX-EXEMPT BOND FUND
INVESTMENT ADVISORS
TO THE FUNDS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANGEMENT, INC.
SUNTRUST BANK, ATLANTA
SUNTRUST BANK, CHATTANOOGA, N.A.
(the "Advisors")
STI CLASSIC FUNDS
<PAGE>
PROSPECTUS
GENERAL INFORMATION
AND CONTENTS
<TABLE>
<C> <S>
1 ABOUT THE TRUST
---
1 INVESTMENT GRADE BOND FUND
---
4 U.S. GOVERNMENT SECURITIES FUND
---
6 LIMITED-TERM FEDERAL MORTGAGE
--- SECURITIES FUND
8 SHORT-TERM BOND FUND
---
11 SHORT-TERM U.S. TREASURY
--- SECURITIES FUND
13 INVESTMENT GRADE TAX-EXEMPT
--- BOND FUND
15 FLORIDA TAX-EXEMPT BOND FUND
---
18 GEORGIA TAX-EXEMPT BOND FUND
---
21 TENNESSEE TAX-EXEMPT BOND FUND
---
24 RISK CONSIDERATIONS
---
27 PURCHASING FUND SHARES
---
34 TAX INFORMATION
---
39 FUND INVESTMENTS
---
40 MORE ABOUT INVESTMENTS AND HEDGING TOOLS
---
</TABLE>
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 gives you important information about the Investor
Shares and Flex Shares of the Fixed-Income and State Tax-Exempt Bond Funds that
you should know before investing. Please read this Prospectus, and keep it for
future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THE TRUST'S SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR
APPROVED OF THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY STATEMENT OR
INDICATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS:
- ARE NOT BANK DEPOSITS
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY BANK OR GOVERNMENT AGENCY
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS.
INVESTING IN THE FUNDS INVOLVES RISK. YOU COULD LOSE MONEY.
OCTOBER 1, 1997
<PAGE>
PROSPECTUS 1
ABOUT THE TRUST
STI CLASSIC FUNDS is a diversified, open-end management investment company.
The Funds provide a convenient and economical way for you to invest in a number
of professionally managed portfolios of securities. This Prospectus relates to
the Investor and Flex Shares 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, Investment Grade Tax-Exempt Bond
Fund (the Fixed Income Funds), Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt
Bond Fund, and Tennessee Tax-Exempt Bond Fund (the State Tax-Exempt
Funds)(collectively, the Funds).
CHOOSING INVESTOR OR FLEX SHARES
Each class has its own expense structure and other characteristics, allowing
you to decide which class best suits your needs. You should consider the amount
you want to invest, how long you plan to have it invested and whether you plan
to make additional investments.
INVESTOR SHARES
- - Front-end sales charge
- - Lower annual expenses
- - $2,000 minimum initial investment
FLEX SHARES
- - Deferred sales charge on shares redeemed within one year of purchase
- - Higher annual expenses
- - $10,000 minimum initial investment
FUND INFORMATION -- FIXED
INCOME FUNDS
INVESTMENT GRADE BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in debt obligations, such as corporate debt
obligations, and U.S. Treasury and Government agency obligations. The Fund
invests only in investment grade obligations, and may invest in mortgage- and
asset-backed securities, securities of foreign issuers, variable and floating
rate instruments which may be subject to "caps" or "floors," futures and
options. To some extent, the Fund may invest in other securities and engage in
other investment practices. See "FUND INVESTMENTS."
It is anticipated that the Fund's average weighted maturity will range from
4 to 10 years, which may impact the Fund's exposure to interest rate risk. The
Fund may shorten its average weighted maturity to as little as 90 days for
temporary defensive purposes.
<PAGE>
2 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Investment Grade Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Prepayment Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. L. Earl Denney, CFA, has managed the Investment Grade Bond Fund
since it began operations. He has been Senior Vice President of STI Capital
Management, N.A. since 1983. Mr. Denney has over 20 years experience in fixed
income investment management. Prior to joining STI Capital Management, N.A., he
was fixed income portfolio manager with American National Bank.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the INVESTMENT GRADE BOND FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .64% .64%
12b-1 Distribution & Service Fees After Reimbursements(2) .27% .55%
Other Expenses After Fee Waivers and Reimbursements(3) .24% .45%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.15% 1.64%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .43% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .46%
FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.41% FOR INVESTOR SHARES AND 2.20% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<PAGE>
PROSPECTUS 3
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for
INVESTOR SHARES $49 $73 $98 $172
contingent deferred sales charge*
for FLEX SHARES $37 $52 $89 $194
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the INVESTMENT GRADE BOND FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------
INVESTMENT GRADE BOND FUND
- -----------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ----------- ------------- ------------- --------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.06 $0.56 $0.10 $(0.56) $-- $10.16 6.66% $33,165
1996 10.26 0.56 (0.20) (0.56) -- 10.06 3.50% 36,155
1995 9.89 0.57 0.38 (0.58) -- 10.26 10.04% 33,772
1994 10.44 0.46 (0.35) (0.46) (0.20) 9.89 0.86% 35,775
1993(1) 10.00 0.44 0.44 (0.44) -- 10.44 9.21%* 24,375
FLEX SHARES
1997 $10.07 $0.51 $0.10 $(0.51) $-- $10.17 6.16% $5,763
1996(2) 10.33 0.52 (0.26) (0.52) -- 10.07 2.50%* 4,621
<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
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3)
---------- ------------ --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 1.15% 5.48% 1.41% 5.22% 298%
1996 1.15% 5.40% 1.44% 5.11% 184%
1995 1.15% 5.79% 1.49% 5.45% 237%
1994 1.14% 4.39% 1.41% 4.12% 259%
1993(1) 1.14%* 4.75%* 1.46%* 4.43%* 299%
FLEX SHARES
1997 1.64% 5.00% 2.20% 4.44% 298%
1996(2) 1.64%* 4.84%* 2.49%* 3.99%* 184%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON JUNE 11, 1992.
(2) COMMENCED OPERATIONS ON JUNE 7, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
<PAGE>
4 PROSPECTUS
U.S. GOVERNMENT SECURITIES FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in U.S. Government Agency obligations,
including mortgage-backed securities.
The Fund may invest in investment grade obligations, variable and floating
rate instruments and may engage in dollar roll transactions. To some extent, the
Fund may invest in other securities and engage in other investment practices.
See "FUND INVESTMENTS."
The average maturity of the Fund's portfolio will typically range from 7 to
14 years, which may impact the Fund's exposure to interest rate risk.
RISK CONSIDERATIONS
[LOGO]
The U.S. Government Securities Fund is subject to the following types
of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Charles B. Leonard, CFA, First Vice President of Trusco Capital
Management, Inc., and Michael L. Ford, an Associate of Trusco, have co-managed
the U.S. Government Securities Fund since it began operating. Mr. Leonard, who
has more than 25 years of investment experience, has been with Trusco since
1986. Mr. Ford, who has more than 11 years of investment experience, has been
with Trusco since April 1994. Prior to joining Trusco, Mr. Ford served as a
senior securities analyst with Liberty Capital Advisors from 1992 to 1994 and
served as a securities analyst at Southern Farm Bureau Life Insurance Company
from 1990 to 1992.
<PAGE>
PROSPECTUS 5
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the U.S. GOVERNMENT SECURITIES FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .45% .45%
12b-1 Distribution & Service Fees After Reimbursements(2) .05% .51%
Other Expenses After Fee Waivers and Reimbursements(3) .65% .70%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.15% 1.66%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .38% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .67%
FOR INVESTOR SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.79% FOR INVESTOR SHARES AND 2.44% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for
INVESTOR SHARES $49 $73 $98 $172
contingent deferred sales charge*
for FLEX SHARES $37 $52 $90 $197
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
6 PROSPECTUS
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the U.S. GOVERNMENT SECURITIES FUND.
The financial highlights for the Fund for the periods from inception
through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ---------------------------------
U.S. GOVERNMENT SECURITIES FUND
- ---------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ----------- ------------- ------------- --------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $9.90 $0.58 $0.12 $(0.58) $-- $10.02 7.21% $2,243
1996 10.26 0.59 (0.33) (0.59) (0.03) 9.90 2.47% 2,396
1995(1) 10.00 0.56 0.26 (0.56) -- 10.26 8.61%+ 589
FLEX SHARES
1997 $9.91 $0.53 $0.11 $(0.53) $-- $10.02 6.57% $2,801
1996(2) 10.31 0.52 (0.37) (0.52) -- 9.91 1.42%* 2,826
<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
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ------------ --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 1.15% 5.76% 1.79% 5.12% 21%
1996 1.15% 5.68% 2.50% 4.33% 83%
1995(1) 1.15%* 6.08%* 6.84%* 0.39%* 30%
FLEX SHARES
1997 1.66% 5.26% 2.42% 4.50% 21%
1996(2) 1.66%* 5.18%* 2.86%* 3.98%* 83%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JUNE 9, 1994.
(2) COMMENCED OPERATIONS ON JUNE 7, 1995.
LIMITED-TERM FEDERAL
MORTGAGE SECURITIES FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in mortgage-backed securities issued or
guaranteed by U.S. Government agencies, such as GNMA, Fannie Mae, or FHLMC.
These securities typically have an average life of from 1 to 5 years.
The Fund may invest in investment grade obligations, variable and floating
rate instruments and asset-backed securities, and may engage in dollar roll
transactions. To some extent, the Fund may invest in other securities and engage
in other investment practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Limited-Term Federal Mortgage Securities Fund is subject to the
following types of risk:
- Fund Risk;
<PAGE>
PROSPECTUS 7
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA, have co-managed
the Limited-Term Federal Mortgage Securities Fund since it began operating. Mr.
Denney has served as Senior Vice President of STI Capital Management, N.A. since
1983. Mr. Denney has over 20 years experience in fixed income investment
management. Prior to joining STI Capital Management, N.A., he was fixed income
portfolio manager with American National Bank. Mr. West, a Vice President of STI
Capital Management, N.A., has served as a fixed-income portfolio manager with
STI since 1989.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly in connection with an investment in Investor and
Flex Shares of the LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 2.50% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51% .51%
12b-1 Distribution & Service Fees After Reimbursements(2) -- --
Other Expenses After Fee Waivers and Reimbursements(3) .39% .74%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .90% 1.25%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .23% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .60%
FOR INVESTOR SHARES AND 1.01% FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.48% FOR INVESTOR SHARES AND 2.66% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR
SHARES $34 $53 $74 $133
contingent deferred sales charge* for
FLEX SHARES $33 $40 $69 $151
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
8 PROSPECTUS
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the LIMITED-TERM FEDERAL MORTGAGE
SECURITIES FUND. The financial highlights for the Fund for the periods
from inception through May 31, 1997 have been audited by Arthur Anderson
LLP, independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ----------- ------------- ------------- --------- -------------- ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $9.97 $0.56 $0.04 $(0.56) $(0.01) $10.00 6.17% $2,426
1996 10.11 0.60 (0.14) (0.60) -- 9.76 4.59% 2,512
1995(1) 9.98 0.58 0.13 (0.58) -- 10.11 7.45%+ 623
FLEX SHARES
1997 $9.99 $0.52 $0.04 $(0.52) $(0.01) $10.02 5.80% $1,409
1996(2) 10.14 0.55 (0.15) (0.55) -- 9.99 4.10%* 1,349
<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
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3)
---------- ------------ --------------- -------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 0.90% 5.55% 1.48% 4.97% 133%
1996 0.90% 5.75% 2.25% 4.40% 83%
1995(1) 0.90%* 6.27%* 7.74%* (0.57)%* 68%
FLEX SHARES
1997 1.25% 5.20% 2.66% 3.79% 133%
1996(2) 1.25%* 5.38%* 3.59%* 3.04%* 83%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JULY 17, 1994.
(2) COMMENCED OPERATIONS ON JUNE 7, 1995.
(3) A PORTFOLIO RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT IN HIGHER
BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
SHORT-TERM BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in debt obligations, such as corporate debt
obligations, and U.S. Treasury and Government agency obligations. The Fund
invests only in investment grade obligations, and may invest in, securities of
foreign issuers, mortgage- and asset-backed securities, variable and floating
rate instruments, futures and options. To some extent, the Fund may invest in
other securities and engage in other investment practices. See "FUND
INVESTMENTS."
The Fund intends to maintain a dollar-weighted average maturity of 3 years
or less, which may impact the Fund's exposure to interest rate risk. The Fund
may shorten its average weighted maturity to as little as 90 days for temporary
defensive purposes.
<PAGE>
PROSPECTUS 9
RISK CONSIDERATIONS
[LOGO]
The Short-Term Bond Fund is subject to the following types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Hedging Risks;
- Prepayment Risk;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. David Yealy has managed the Short-Term Bond Fund since July,
1996. He joined Trusco Capital Management, Inc. in 1991, and currently serves as
a Vice President.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the SHORT-TERM BOND FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 2.00% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51% .51%
12b-1 Distribution & Service Fees After Reimbursements(2) -- --
Other Expenses After Fee Waivers and Reimbursements(3) .34% .69%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .85% 1.20%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .23% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT FEE WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .70% FOR
INVESTOR SHARES AND 1.37% FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.58% FOR INVESTOR SHARES AND 3.02% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<PAGE>
10 PROSPECTUS
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR
SHARES $29 $47 $66 $123
contingent deferred sales charge* for
FLEX SHARES $32 $38 $66 $145
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through your financial institution, you may be
charged separate fees by the financial institution. The EXAMPLE reflects the
imposition of the maximum sales charge. However, you may qualify for a reduced
sales charge. See "Purchasing Fund Shares." Over the long-term, you may
indirectly pay more than the equivalent of the maximum permitted front-end sales
charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the SHORT-TERM BOND FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------
SHORT-TERM BOND FUND
- -----------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS NET ASSET
VALUE, INVESTMENT NET GAINS FROM NET DISTRIBUTIONS VALUE, NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED END OF END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ----------- ------------- ------------- --------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.88 $0.51 $ 0.06 $(0.51) $(0.03) $ 9.91 5.97% $2,182
1996 10.01 0.52 (0.10) (0.53) (0.02) 9.88 4.23% 2,700
1995 9.81 0.51 0.19 (0.50) -- 10.01 7.44% 2,609
1994 10.03 0.40 (0.21) (0.40) (0.01) 9.81 1.81% 2,381
1993(1) 10.06 0.06 0.03 (0.06) -- 10.03 1.65%* 716
FLEX SHARES
1997 $ 9.88 $0.48 $ 0.06 $(0.48) $(0.03) $ 9.91 5.62% $1,073
1996(2) 10.02 0.47 (0.12) (0.47) (0.02) 9.88 3.73%* 966
<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
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3)
---------- ------------ --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 0.85% 5.16% 1.58% 4.43% 118%
1996 0.85% 5.20% 1.72% 4.33% 163%
1995 0.85% 5.24% 1.56% 4.53% 200%
1994 0.85% 3.94% 2.52% 2.27% 75%
1993(1) 0.85%* 3.85%* 7.22%* (2.52)%* 64%
FLEX SHARES
1997 1.20% 4.82% 3.02% 3.00% 118%
1996(2) 1.20%* 4.77%* 4.06%* 1.91%* 163%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON MARCH 22, 1993.
(2) COMMENCED OPERATIONS ON JUNE 20, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
<PAGE>
PROSPECTUS 11
SHORT-TERM U.S. TREASURY
SECURITIES FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests exclusively in obligations issued by the U.S.
Treasury with remaining maturities of 3 years or less. The Fund will
not invest in repurchase agreements. To some extent, the Fund may invest in
other securities and engage in other investment practices. See "FUND
INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
maturity will range from 1 to 2 years, which may impact the Fund's exposure to
interest rate risk.
RISK CONSIDERATIONS
[LOGO]
The Short-Term U.S. Treasury Securities Fund is subject to the
following types of risk:
- Fund Risk; and
- Interest Rate Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. David Yealy has managed the Short-Term U.S. Treasury Securities
Fund since July, 1996. He joined Trusco Capital Management, Inc. in 1991 and
currently serves as a Vice President.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the SHORT-TERM U.S. TREASURY SECURITIES FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 1.00% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .35% .35%
12b-1 Distribution & Service Fees After Reimbursements(2) -- .02%
Other Expenses After Fee Waivers and Reimbursements(3) .45% .68%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .80% 1.05%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .18% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .52%
FOR INVESTOR SHARES AND .86% FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.35% FOR INVESTOR SHARES AND 2.51% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<PAGE>
12 PROSPECTUS
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR
SHARES $18 $35 $54 $108
contingent deferred sales charge* for
FLEX SHARES $31 $33 $58 $128
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the SHORT-TERM U.S. TREASURY
SECURITIES FUND. The financial highlights for the Fund for the periods
from inception through May 31, 1997 have been audited by Arthur Andersen
LLP, independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
- ------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE, INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE, END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.84 $0.50 $ 0.04 $(0.50) $-- $9.88 5.59% $3,921
1996 9.94 0.54 (0.10) (0.54) -- 9.84 4.52% 4,192
1995 9.83 0.46 0.11 (0.46) -- 9.94 6.03% 7,144
1994 9.99 0.32 (0.12) (0.31) (0.05) 9.83 2.01% 4,841
1993(1) 10.01 0.06 (0.02) (0.06) -- 9.99 1.84%* 2,423
FLEX SHARES
1997 $ 9.82 $0.47 $ 0.03 $(0.47) $-- $9.85 5.19% $1,091
1996(2) 9.96 0.48 (0.14) (0.48) -- 9.82 3.72%* 2,423
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ---------- --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 0.80% 5.05% 1.35% 4.50% 93%
1996 0.80% 5.43% 1.32% 4.91% 94%
1995 0.80% 4.74% 1.33% 4.21% 88%
1994 0.78% 3.11% 1.41% 2.48% 117%
1993(1) 0.80%* 3.16%* 3.42%* 0.54%* 36%
FLEX SHARES
1997 1.05% 4.75% 2.51% 3.29% 93%
1996(2) 1.05%* 5.03%* 2.97%* 3.11%* 94%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON MARCH 18, 1993.
(2) COMMENCED OPERATIONS ON JUNE 22, 1995.
<PAGE>
PROSPECTUS 13
INVESTMENT GRADE TAX-EXEMPT
BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment-grade municipal securities.
The Fund intends to be fully invested in federally tax-exempt
securities. The issuers of these securities can be located in:
- any of the 50 states;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets are invested in securities with
income exempt from regular federal income tax and not treated as a preference
item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments and investment
grade taxable debt obligations. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Investment Grade Tax-Exempt Bond Fund is subject to the following
types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ronald Schwartz, CFA, has managed the Investment Grade Tax-Exempt
Bond Fund since the Fund began operations. He joined STI Capital Management,
N.A. in 1988, and currently serves as a Senior Vice
President. Prior to joining STI Capital Management, N.A., he served as a trader
at the Bank of Boston.
<PAGE>
14 PROSPECTUS
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the INVESTMENT GRADE TAX-EXEMPT BOND FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .63% .63%
12b-1 Distribution & Service Fees After Reimbursements(2) .29% .71%
Other Expenses After Fee Waivers and Reimbursements(3) .23% .29%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) 1.15% 1.63%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .43% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .41%
FOR FLEX SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.40% FOR INVESTOR SHARES AND 2.15% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming
(1) a 5% annual return;
(2) redemption at the end of each time period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $49 $73 $98 $172
contingent deferred sales charge* for FLEX SHARES $37 $51 $89 $193
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term, you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
*IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
PROSPECTUS 15
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the INVESTMENT GRADE TAX-EXEMPT BOND
FUND. The financial highlights for the Fund for the periods from
inception through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
- ------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- --------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $11.12 $0.40 $0.33 $(0.40) $(0.21) $11.24 6.69% $31,857
1996 11.30 0.41 0.19 (0.41) (0.37) 11.12 5.40% 37,427
1995 10.69 0.42 0.61 (0.42) -- 11.30 9.91% 41,693
1994 10.79 0.33 0.25 (0.33) (0.35) 10.69 5.37% 46,182
1993(1) 10.00 0.35 0.82 (0.35) (0.03) 10.79 11.88%* 15,844
FLEX SHARES
1997 $11.11 $0.35 $0.33 $(0.35) $(0.21) $11.23 6.19% $4,681
1996(2) 11.30 0.37 0.18 (0.37) (0.37) 11.11 4.91%* 5,536
<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
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3)
---------- ------------ --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 1.15% 3.56% 1.38% 3.33% 489%
1996 1.15% 3.61% 1.42% 3.34% 514%
1995 1.15% 3.88% 1.43% 3.60% 592%
1994 1.14% 2.96% 1.51% 2.59% 432%
1993(1) 1.12%* 3.61%* 1.83%* 2.90%* 345%
FLEX SHARES
1997 1.63% 3.08% 2.15% 2.56% 489%
1996(2) 1.63%* 3.12%* 2.25%* 2.50%* 514%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON JUNE 9, 1992.
(2) COMMENCED OPERATIONS ON JUNE 1, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
FUND INFORMATION -- STATE
TAX-EXEMPT BOND FUNDS
FLORIDA TAX-EXEMPT BOND FUND
FUND OBJECTIVE
[LOGO]
The Florida Tax-Exempt Bond Fund seeks to provide current income
exempt from regular federal income tax for Florida residents without undue
investment risk.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment grade Florida municipal
securities. The Fund intends to be fully invested in municipal securities with
income exempt from regular federal income tax. The issuers of these securities
can be located in:
- Florida;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
<PAGE>
16 PROSPECTUS
At least 80% of the Fund's total assets will be invested in securities with
income exempt from regular federal income tax and not treated as a preference
item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments and investment
grade taxable debt obligations. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Florida Tax-Exempt Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Geographic Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ronald Schwartz, CFA, has managed of the Florida Tax-Exempt Bond
Fund since it began operating. He joined STI Capital Management, N.A. in 1988,
and currently serves as Senior Vice President. Prior to joining STI Capital
Management, N.A., he served as a trader at the Bank of Boston.
<PAGE>
PROSPECTUS 17
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the FLORIDA TAX-EXEMPT BOND FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .49% .49%
12b-1 Distribution & Service Fees After Reimbursements(2) -- .22%
Other Expenses After Fee Waivers and Reimbursements(3) .36% .64%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .85% 1.35%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .18% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .48%
FOR INVESTOR SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.31% FOR INVESTOR SHARES AND 2.29% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR SHARES $46 $64 $ 83 $138
contingent deferred sales charge* for FLEX
SHARES $34 $43 $ 74 $162
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
18 PROSPECTUS
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the FLORIDA TAX-EXEMPT BOND FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -------------------------------
FLORIDA TAX-EXEMPT BOND FUND
- -------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- --------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.07 $0.44 $0.25 $(0.44) $(0.03) $10.29 7.00% $3,226
1996 10.18 0.44 (0.06) (0.44) (0.05) 10.07 3.76% 4,025
1995 9.75 0.42 0.43 (0.42) -- 10.18 9.04% 3,320
1994(1) 10.00 0.13 (0.25) (0.13) -- 9.75 (1.22)%+ 2,280
FLEX SHARES
1997 $10.08 $0.39 $0.25 $(0.39) $(0.03) $10.30 6.48% $3,000
1996(2) 10.19 0.39 (0.06) (0.39) (0.05) 10.08 3.27%* 2,692
<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
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(3)
---------- ------------ --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 0.85% 4.28% 1.31% 3.82% 135%
1996 0.85% 4.28% 1.36% 3.77% 63%
1995 0.85% 4.36% 1.50% 3.71% 105%
1994(1) 0.85%* 3.67%* 3.20%* 1.32%* 53%
FLEX SHARES
1997 1.35% 3.78% 2.28% 2.85% 135%
1996(2) 1.35%* 3.79%* 2.54%* 2.60%* 63%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 18, 1994.
(2) COMMENCED OPERATIONS ON JUNE 1, 1995.
(3) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
GEORGIA TAX-EXEMPT BOND FUND
FUND OBJECTIVE
[LOGO]
The Georgia Tax-Exempt Bond Fund seeks to provide current income
exempt from regular federal income tax for Georgia residents without undue
investment risk.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment grade Georgia municipal
securities. The Fund intends to be fully invested in municipal securities with
income exempt from regular federal income tax and substantially exempt from
State of Georgia income tax. The issuers of these securities can be located in:
- Georgia;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets will be invested in securities with
income exempt from regular federal income tax and not treated as a preference
item for purposes of the federal alternative minimum tax.
<PAGE>
PROSPECTUS 19
The Fund may invest in variable and floating rate instruments, investment
grade taxable debt obligations. To some extent, the Fund may invest in other
securities and engage in other investment practices. See "FUND INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Georgia Tax-Exempt Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Geographic Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Ms. Gay Cash has managed the Georgia Tax-Exempt Bond Fund since it
began operating. She has more than 16 years of investment experience and has
served as a Vice President of SunTrust Bank, Atlanta since 1987.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the GEORGIA TAX-EXEMPT BOND FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .48% .48%
12b-1 Distribution & Service Fees After Reimbursements(2) -- .44%
Other Expenses After Fee Waivers and Reimbursements(3) .37% .43%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .85% 1.35%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .18% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .50%
FOR INVESTOR SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.33% FOR INVESTOR SHARES AND 2.08% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<PAGE>
20 PROSPECTUS
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for
INVESTOR SHARES $46 $64 $83 $138
contingent deferred sales charge*
for FLEX SHARES $34 $43 $74 $162
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the GEORGIA TAX-EXEMPT BOND FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- --------------------------------
GEORGIA TAX-EXEMPT BOND FUND
- --------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $9.58 $0.40 $0.21 $(0.40) $(0.05) $ 9.74 6.47% $ 3,511
1996 9.65 0.41 (0.05) (0.41) (0.02) 9.58 3.69% 3,418
1996 9.44 0.40 0.21 (0.40) -- 9.65 6.70% 3,268
1994(1) 10.00 0.13 (0.56) (0.13) -- 9.44 (4.29)%+ 3,300
FLEX SHARES
1997 $9.56 $0.35 $0.22 $(0.35) $(0.05) $ 9.73 6.06% $ 4,662
1996(2) 9.72 0.36 (0.14) (0.36) (0.02) 9.56 2.25%* 4,207
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ---------- --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 0.85% 4.10% 1.33% 3.62% 15%
1996 0.85% 4.17% 1.41% 1.61% 60%
1996 0.85% 4.31% 1.43% 3.73% 25%
1994(1) 0.85%* 3.93%* 2.36%* 2.42%* 26%
FLEX SHARES
1997 1.35% 3.60% 2.07% 2.88% 15%
1996(2) 1.35%* 3.66%* 2.35%* 2.66%* 60%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 19, 1994.
(2) COMMENCED OPERATIONS ON JUNE 6, 1995.
<PAGE>
PROSPECTUS 21
TENNESSEE TAX-EXEMPT BOND FUND
FUND OBJECTIVE
[LOGO]
The Tennessee Tax-Exempt Bond Fund seeks to provide current income
exempt from regular federal income tax for Tennessee residents without undue
investment risk.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in investment grade Tennessee municipal
securities. The Fund intends to be fully invested in municipal securities with
income exempt from regular federal income tax and substantially exempt from
State of Tennessee income tax. The issuers of these securities can be located
in:
- Tennessee;
- District of Columbia; and
- Puerto Rico and other U.S. territories and possessions.
At least 80% of the Fund's total assets will be invested in securities the
income from which is exempt from regular federal income tax and not treated as a
preference item for purposes of the federal alternative minimum tax.
The Fund may invest in variable and floating rate instruments and taxable
debt obligations. To some extent, the Fund may invest in other securities and
engage in other investment practices. See "FUND INVESTMENTS."
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 6 to 25 years, which may impact the Fund's
exposure to interest rate risk. The Fund may shorten its average weighted
maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Tennesee Tax-Exempt Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Geographic Risk; and
- Hedging Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Ronald Schwartz, CFA, has managed of the Tennessee Tax-Exempt
Bond Fund since the Fund began operating. He joined STI Capital Management, N.A.
in 1988 and currently serves as Vice President and Trust Investment Officer of
SunTrust Bank, Chattanooga. Prior to joining STI Capital Management, N.A., he
served as a trader at the Bank of Boston.
<PAGE>
22 PROSPECTUS
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor and Flex Shares of
the TENNESSEE TAX-EXEMPT BOND FUND.
<TABLE>
<CAPTION>
INVESTOR SHARES FLEX SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases* 3.75% None
Maximum Deferred Sales Charge None 2.00%
(*) SEE "PURCHASING FUND SHARES."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .00% .00%
12b-1 Distribution & Service Fees After Reimbursements(2) .14% .65%
Other Expenses After Fee Waivers and Reimbursements(3) .71% .70%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .85% 1.35%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .18% FOR INVESTOR SHARES AND 1.00% FOR FLEX SHARES.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .93%
FOR INVESTOR SHARES.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.76% FOR INVESTOR SHARES AND 2.35% FOR FLEX
SHARES. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming
(1) a 5% annual return;
(2) redemption at the end of each time
period; and
(3) the imposition of the maximum:
front-end sales charge for INVESTOR
SHARES $46 $64 $83 $138
contingent deferred sales charge* for
FLEX SHARES $34 $43 $74 $162
</TABLE>
YOU SHOULD NOT USE THE INFORMATION CONTAINED IN THIS TABLE AS AN INDICATOR
OF PAST OR FUTURE EXPENSES. ACTUAL FUND EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. The EXAMPLE reflects the imposition
of the maximum sales charge. However, you may qualify for a reduced sales
charge. See "Purchasing Fund Shares." Over the long-term you may indirectly pay
more than the equivalent of the maximum permitted front-end sales charges.
* IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF PURCHASE. SEE "PURCHASING FUND
SHARES."
<PAGE>
PROSPECTUS 23
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor and Flex Shares of the TENNESSEE TAX-EXEMPT BOND FUND.
The financial highlights for the Fund for the periods from inception
through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- ----------------------------------
TENNESEE TAX-EXEMPT BOND FUND
- ----------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $9.42 $ 0.41 $0.23 $(0.41) $-- $ 9.65 6.93% $ 1,602
1996 9.53 0.41 (0.10) (0.42) -- 9.42 3.28% 1,523
1996 9.23 0.44 0.29 (0.43) -- 9.53 8.24% 1,170
1994(1) 10.00 0.13 (0.77) (0.13) -- 9.23 (6.39)%+ 1,127
FLEX SHARES
1997 $9.41 $ 0.37 $0.23 $(0.37) $-- $ 9.64 6.42% $ 2,505
1996(2) 9.59 0.37 (0.18) (0.37) -- 9.41 1.98%* 2,017
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ---------- --------------- --------------- --------
INVESTOR
SHARES
<S> <C> <C> <C> <C> <C>
1997 0.85% 4.31% 1.76% 3.40% 16%
1996 0.85% 4.29% 2.08% 3.06% 41%
1996 0.85% 4.70%* 2.10% 3.45% 28%
1994(1) 0.85%* 3.74%* 6.60%* (2.01)%* 13%
FLEX SHARES
1997 1.35% 3.81% 2.34% 2.82% 16%
1996(2) 1.34%* 3.80%* 2.74%* 2.40%* 41%
</TABLE>
* ANNUALIZED.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 19, 1994.
(2) COMMENCED OPERATIONS ON JUNE 5, 1995.
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 SHAREHOLDER APPROVAL.
<PAGE>
24 PROSPECTUS
RISK CONSIDERATIONS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ----------------------------------------------------------------------------------------------
<S> <C>
FUND RISK -- The possibility that a Fund's performance All Funds
during a specific period may not meet, or exceed, that of
the market as a whole.
INTEREST RATE RISK -- The potential for a decline in the All Funds
price of fixed-income securities due to rising interest
rates. This risk will be greater for long-term securities
than for short-term securities.
CREDIT RISK -- The possibility that an issuer will be All Funds (except Short-Term
unable to make timely payments of either principal or U.S. Treasury Securities Fund)
interest.
CALL RISK -- The possibility that securities with high All Funds (except Short-Term
interest rates will be prepaid (or "called") by the issuer, U.S. Treasury Securities Fund)
prior to maturity, during periods of falling interest
rates. This would require a Fund to invest the resulting
proceeds elsewhere, at generally lower interest rates.
EVENT RISK -- The possibility that corporate debt All Funds (except Short-Term
securities may suffer substantial declines in credit U.S. Treasury Securities Fund)
quality and market value due to corporate restructurings.
While event risk may be high for certain corporate
securities held by a Fund, event risk overall should be low
because of the Fund's diversified holdings.
GEOGRAPHIC RISK -- The risk that a Fund's concentration of State Tax-Exempt Funds
investments in securities of issuers located in a single
state or geographic region subject a Fund to economic
conditions and government policies of that state or region
that could adversely affect the value of a Fund.
PREPAYMENT RISK -- The risk that mortgage-backed and asset- Investment Grade Bond Fund
backed securities may be retired substantially earlier than U.S. Government Securities Fund
their
</TABLE>
<PAGE>
PROSPECTUS 25
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ----------------------------------------------------------------------------------------------
<S> <C>
stated maturities or final distribution dates, resulting in Limited-Term Federal Mortgage
a loss of all, or part, of any premium paid. Securities Fund
Short-Term Bond Fund
HEDGING RISKS -- Hedging is an investment strategy designed Investment Grade Bond Fund
to offset investment risks. Hedging activities include Short-Term Bond Fund
among other things, the use of options and futures. There Investment Grade Tax-Exempt
are risks associated with hedging activities, including: Bond Fund
- - The success of a hedging strategy may depend on an State Tax-Exempt Funds
ability to predict movements in the prices of individual
securities, fluctuations in markets, and movements in
interest rates;
- - There may be an imperfect or no correlation between the
changes in market value of the securities held by a Fund
and the prices of futures and options on futures;
- - There may not be a liquid secondary market for a futures
contract or option;
- - Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading
in futures contracts and options.
FOREIGN SECURITY RISKS -- There are risks associated with Investment Grade Bond Fund
international investing, including: Short-Term Bond Fund
CURRENCY RISK -- The possibility that changes in
foreign exchange rates will affect, favorably or
unfavorably, the value of foreign securities or the
U.S. dollar amount of income or gain received on such
securities.
VOLATILITY -- Investments in foreign stock markets can
be more volatile than investments in U.S. markets.
Diplomatic, political, or economic developments could
affect investments in foreign countries.
EXPENSE CONSIDERATIONS -- Fixed commissions on many
foreign stock exchanges are generally higher than
negotiated commissions on U.S. exchanges. Expenses for
custodial arrangements of foreign securities may be
</TABLE>
<PAGE>
26 PROSPECTUS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ----------------------------------------------------------------------------------------------
<S> <C>
somewhat greater than typical expenses for custodial
arrangements for handling U.S. securities of equal
value.
FOREIGN TAXES -- Certain foreign governments levy
withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from
the securities comprising the portfolio.
REGULATORY ENVIRONMENT -- Foreign companies generally
are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those
applicable to U.S. domestic companies. Foreign branches
of U.S. banks, foreign banks, and foreign issuers may
be subject to less stringent reserve requirements and
to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic
issuers. There is generally less government regulation
of securities exchanges, brokers and listed companies
abroad than in the U.S.
CURRENCY RISK -- The possibility that changes in foreign Investment Grade Bond Fund
exchange rates will affect, favorably or unfavorably, the Short-Term Bond Fund
value of foreign securities or the U.S. dollar amount of
income or gain received on such securities.
</TABLE>
<PAGE>
PROSPECTUS 27
PURCHASING FUND SHARES
HOW TO BUY FUND SHARES
You may buy either Investor or Flex Shares (and fractions of shares) by
mail, telephone, or wire directly from the Transfer Agent, Federated Services
Company. You also may purchase shares through a SunTrust Investment Consultant,
certain correspondent banks of SunTrust Banks, Inc. or other financial
institutions that have executed dealer agreements with the Trust's Distributor.
Shares are offered continuously, and may be purchased on any day that the New
York Stock Exchange is open for business (a Business Day).
The price per share (the offering price) will be the net asset value per
share (NAV) next determined after your purchase order is received by the
Transfer Agent plus, in the case of Investor Shares, the applicable front-end
sales charge. NAV is calculated by (1) taking the current market value of a
Fund's total assets for that class of shares (either Investor or Flex), (2)
subtracting the liabilities applicable to that class of shares, and (3) dividing
that amount by the total number of shares of that class owned by shareholders.
In determining the market value of a Fund's assets, the Trust may use a pricing
service to provide market quotations or valuations for certain securities owned
by a Fund. The NAV is calculated once each Business Day at the close of the New
York Stock Exchange (4:00 p.m. Eastern time). So, to receive the current
Business Day's NAV, the Transfer Agent must receive your purchase order before
4:00 p.m. Eastern time. If you purchase shares through a financial institution
(rather than directly through the Transfer Agent), you may have to transmit your
purchase order to your financial institution at an earlier time for your
purchase to be effective that day. This allows the financial institution time to
process your order and transmit it to the Transfer Agent. For more information
about how to purchase shares through your financial institution, you should
contact your financial institution directly.
If you decide to buy shares directly, call 1-800-874-4770. Make your check
out to "STI Classic Funds" and include the name of the appropriate Fund(s) on
the check. The check must be payable in U.S. dollars. Third-party checks, credit
cards, credit card checks and cash are not accepted. PLEASE NOTE, IF YOU BUY
SHARES WITH A CHECK, AND THEN SELL THOSE SHARES IN A SHORT PERIOD OF TIME, THE
TRUST CAN DELAY PAYMENT TO YOU UNTIL YOUR CHECK CLEARS, OR FOR UP TO 15 BUSINESS
DAYS, WHICHEVER COMES FIRST.
FUNDLINK
FUNDLINK is a telephone activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK, you must first contact your SunTrust Bank
Investment Consultant and complete the FUNDLINK application and authorization
agreements. Once you have signed up to use FUNDLINK, simply call the Transfer
Agent at 1-800-428-6970 to complete all your purchase and redemption
transactions.
<PAGE>
28 PROSPECTUS
FRONT-END SALES CHARGES -- INVESTOR SHARES
The following table shows: (1) the sales charge you pay (i) as a percentage
of the offering price and (ii) as a percentage of your net investment (NAV
multiplied by the number of shares you purchase); and (2) the amount that is
paid to your Investment Consultant (Dealer) as a percentage of the offering
price.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER'S
AS A AS A REALLOWANCE
PERCENTAGE PERCENTAGE OF AS A % OF
OF OFFERING YOUR NET OFFERING
YOUR INVESTMENT PRICE INVESTMENT 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 over.................................. 1.50% 1.52% 1.350%
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 over.................................. 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 over.................................. 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 over.................................... None None None
</TABLE>
The front-end sales charge will be waived on Investor Shares purchased:
- through reinvestment of dividends and distributions;
- through a SunTrust Securities, Inc. asset allocation account;
- by persons repurchasing shares they redeemed within the last 60 days (see
REPURCHASE OF INVESTOR SHARES, below).
<PAGE>
PROSPECTUS 29
- by employees, and members of their immediate family, of SunTrust Banks,
Inc. and its affiliates;
- by persons reinvesting distributions from qualified employee benefit
retirement plans and rollovers from individual retirement accounts (IRAs)
previously with the trust department of a bank affiliated with SunTrust
Banks, Inc.; or
- by persons investing an amount less than or equal to the value of an
account distribution, when an account for which a bank affiliated with
SunTrust Banks, Inc. acted in a fiduciary, administrative, custodial, or
investment advisory capacity is closed.
REPURCHASE OF INVESTOR SHARES
You may repurchase any amount of Investor Shares of any Fund at NAV (without
the normal front-end sales charge), equal to or less than the value of any
amount of Investor Shares (for which you paid a front-end sales charge) that you
redeemed within the past 60 days. In effect, this allows you to repurchase
shares that you may have had to redeem, without repaying the front-end sales
charge. To exercise this privilege, your purchase order must be received by the
Transfer Agent within 60 days after your redemption. IN ADDITION, YOU MUST
NOTIFY THE TRANSFER AGENT, WHEN YOU SEND IN YOUR PURCHASE ORDER, THAT YOU ARE
REPURCHASING SHARES.
REDUCED SALES CHARGES -- INVESTOR SHARES
- - RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate (see
"Front-End Sales Charges"), this right allows you to add the value of the
Investor Shares you already own to the amount you are currently purchasing.
The Trust will combine the value of your current purchases with the current
value of any Investor Shares you purchased previously for (i) your account,
(ii) your spouse's account, (iii) a joint account with your spouse, or (iv)
your minor children's trust or custodial accounts. A fiduciary purchasing
shares for the same fiduciary account, trust or estate, may also use this
right of accumulation. The Trust will only consider the value of Investor
Shares purchased previously that were sold subject to a sales charge. TO BE
ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED, YOU MUST ASK
THE DISTRIBUTOR FOR THE REDUCTION AT THE TIME OF PURCHASE. You must provide
the Distributor with your account number(s) and, if applicable, the account
numbers for your spouse and/or children (and provide children's ages). The
Trust may amend or terminate this right of accumulation at any time.
- - LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate
applicable to the total amount the intended purchases you intend to make over
a 13-month period. In other words, a Letter of Intent allows you to purchase
Investor Shares of a Fund over a 13-month period and receive the same sales
charge as if you had purchased all the shares at the same time. The Trust will
only consider the value of Investor Shares sold subject to a sales charge. To
be entitled to a reduced sales charge based on shares you intend to purchase
over the 13-month period, you must
<PAGE>
30 PROSPECTUS
send a Letter of Intent to the Transfer Agent. As a result, neither Investor
Shares of STI Classic Money Market Funds nor Investor Shares purchased with
dividends or distributions will be included in the calculation. In calculating
the total amount of purchases you may include in your letter purchases made up
to 90 days before the date of the Letter. The 13-month period begins on the
date of the first purchase, including those purchases made in the 90-day
period before the date of the Letter. Please note the purchase price of these
prior purchases will not be adjusted.
You are not legally bound by the terms of your Letter of Intent to
purchase the amount of you shares stated in the Letter. The Letter does,
however, authorize the Transfer Agent to hold in escrow 3.75% of the total
amount you intend to purchase. If you do not complete the total intended
purchase at the end of the 13-month period, the transfer agent will redeem the
necessary portion of the escrowed shares to make up the difference between the
reduced rate sales charge (based on the amount you intend to purchase) and the
sales charge that would normally apply (based on the actual amount you
purchased).
- - COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the
appropriate sales charge rate, the Trust will combine same day purchases of
Investor Shares (that are subject to a sales charge) made by you, your spouse
and your minor children (under age 21). This combination also applies to
Investor Shares you purchase with a Letter of Intent.
CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES
You do not pay an initial sales charge when you purchase Flex Shares. If,
however, you redeem (sell) your shares within the first year after your
purchase, you will pay a contingent deferred sales charge (CDSC) equal to 2.00%
of either (1) NAV of the shares at the time of purchase, or (2) NAV of the
shares at the time of redemption, whichever is less. The CDSC does not apply to
shares you purchase through reinvestment of dividends or distributions. So, you
never pay a CDSC on any increase in your investment above the initial purchase
price. In addition, the CDSC does not apply to exchanges of Flex Shares of one
Fund for Flex Shares of another Fund.
The CDSC will be waived if you sell your Flex Shares for the following
reasons:
- to make certain withdrawals from a retirement plan;
- because of death or disability; or
- for certain payments under the Systematic Withdrawal Plan (discussed
below).
MINIMUM PURCHASE
To purchase Investor Shares for the first time, you must invest at least
$2,000 in any Fund. Employees of SunTrust Banks, Inc., and members of their
immediate family, however, may buy Investor Shares with an initial purchase of
$1,000. To purchase Flex Shares for the first time, you must invest at least
$10,000 in any Fund. To purchase additional shares of any Fund, you must invest
at least $1,000 or, via statement coupon, $100.
<PAGE>
PROSPECTUS 31
MINIMUM PURCHASE -- RETIREMENT PLANS
A retirement plan may purchase either Investor Shares or Flex Shares for the
first time with an investment of at least $2,000 in any Fund.
If you invest through the Systematic Investment Plan, described below, you
will be subject to lower minimum purchase amounts.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a Sun Trust Banks, Inc.
affiliate bank, you may purchase shares of either class automatically through
regular deductions from your account. With a $500 minimum initial investment,
you may begin regularly scheduled investments from $50 up to $100,000 once or
twice a month. If you are buying Flex Shares, you should plan on investing at
least $10,000 per Fund during the first two years. The Distributor may close
your account if you do not meet this minimum investment requirement at the end
of two years.
PURCHASING SHARES -- THE DISTRIBUTOR
The Distributor may accept investments of smaller amounts, for either class
of shares, at its discretion. In addition, the Trust reserves the right to
reject any purchase order when the Distributor determines that accepting the
order would not be in the best interests of the Trust and/or Shareholders.
REDEEMING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (redeem) your Investor or Flex Shares on any day that NAV is
calculated, by contacting the Transfer Agent directly by mail, telephone or, if
eligible, via FUNDLINK. You may also make redemption requests (in writing or by
telephone) through SunTrust Investment Consultants and through certain
correspondent banks of SunTrust Banks, Inc. Redemption requests made via
telephone or FUNDLINK (1-800-428-6970) must be for a redemption amount of at
least $1,000. Redemption requests for $25,000 or more must be in writing and
must include a signature guarantee (a notarized signature is not sufficient).
The redemption price of each share will be the next NAV determined after receipt
of your redemption request less, in the case of Flex Shares, any applicable
CDSC. Redemption requests must be received by the Transfer Agent by 4:00 p.m.
Eastern time to get that day's NAV. If you redeem your shares through a
financial institution (rather than directly through the Transfer Agent), you may
have to transmit your redemption request to the financial institution at an
earlier time for your redemption to be effective that day. This allows the
financial institution time to process your request and transmit it to the
Transfer Agent. For more information about how to request redemptions through
your financial institution, you should contact your financial institution
directly.
<PAGE>
32 PROSPECTUS
RECEIVING YOUR MONEY
Your redemption proceeds normally will be sent within five Business Days of
the Transfer Agent receiving your request. Your proceeds can be wired to your
bank account (subject to a $7.00 fee), transferred to your bank account via
FUNDLINK, or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK OR THROUGH AUTOMATED CLEARING HOUSE (ACH), REDEMPTION PROCEEDS MAY NOT BE
AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
REDEMPTIONS IN KIND
The Trust intends to pay your redemption proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the remaining shareholders of the Fund) the Trust reserves the right to pay
all or part of your redemption proceeds in liquid securities that have a market
value equal to the redemption price (redemption in kind). Although it is highly
unlikely that your shares would ever actually be redeemed in kind, if it did
happen, you would probably have to pay brokerage costs to sell the securities
distributed to you.
INVOLUNTARY REDEMPTIONS
If your account balance drops below the required minimum, $2,000 for
Investor Shares and $10,000 for Flex Shares, you may be required to redeem your
shares. You will always be given at least 60 days' written notice to give you
time to add to your account and avoid the redemption.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual,
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with a
Sun Trust Banks, Inc. affiliated bank, electronically transferred to your
account.
EXCHANGES
You may exchange your Investor or Flex Shares by contacting (1) an
Investment Consultant of a SunTrust Banks, Inc. affiliated bank, SunTrust
Securities, Inc., or certain correspondent banks of SunTrust Banks, Inc. in
writing or by telephone, or (2) the Transfer Agent directly via FUNDLINK.
Exchange requests must be for an exchange amount at least $1,000. You may
exchange your shares up to four times during a calendar year without
restriction. More than four exchanges during a year may be viewed as abuse of
the exchange privilege. In such a case, the Trust may charge you a $10.00 fee
for each additional exchange. You will, however, be notified before any fee is
charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT
BE ABLE TO EXCHANGE
<PAGE>
PROSPECTUS 33
YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS
DAYS). This exchange privilege may be changed or canceled at any time upon 60
days' notice.
INVESTOR SHARES
You may exchange Investor Shares of any Fund for Investor Shares of any
other Fund. Shares you exchange for the first time from a Money Market Fund
(which has no sales charge) into a Fund with a sales charge are subject to that
sales charge. Similarly, shares you exchange for the first time into a Fund with
a higher sales charge are subject to an incremental sales charge (the difference
between the lower and higher applicable sales charges). Should you exchange
shares into a Fund with the same, lower or no sales charge (a Money Market
Fund), there is no sales charge for the exchange.
FLEX SHARES
You may exchange Flex Shares of any Fund for Flex Shares of any other Fund
or for Investor Shares of the Money Market Funds of the Trust. No CDSC is
imposed on redemptions of Money Market Fund shares you acquire in an exchange,
provide you hold your shares for at least one year from your initial purchase
date. If you exchange Flex Shares of any Fund for Investor Shares of a Money
Market Fund, you may only exchange those Money Market Fund Investor Shares for
Flex Shares.
TRANSACTIONS OVER THE TELEPHONE
Telephone redemption and exchange transactions are extremely convenient, but
not without risk. To try to keep your telephone transactions as safe, secure and
risk free as possible, the Trust has developed certain safeguards and procedures
for determining the identity of callers and authenticity of instructions. As a
result, neither the Trust nor its Transfer Agent will be responsible for any
loss, liability, cost, or expense for following telephone or wire instructions
they reasonably believed to be genuine. If you choose to make telephone
transactions, you will generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Income dividends of each Fund are declared daily and paid monthly. If you
own Fund shares on the record date, you will be entitled to receive dividends.
The Funds make capital gains distributions at least annually.
You will receive dividends and distributions in the form of additional
Shares unless you have elected to receive payment in cash. To elect cash
payment, you must notify the Transfer Agent in writing prior to the date of
distribution. Your election will be effective for dividends paid after the
Transfer Agent receives your written notice. To cancel your election, simply
send written notice to the Transfer Agent.
<PAGE>
34 PROSPECTUS
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their Shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial, or administrative action. We have not
tried to present a detailed explanation of the tax treatment of the Funds or
their Shareholders. More information about taxes is in the SAI. WE URGE YOU TO
CONSULT YOUR TAX ADVISOR 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 income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies. As long as a Fund qualifies as a regulated investment
company, it pays no Federal income tax on the earnings it distributes to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME WHETHER
YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
Capital gains dividends will be treated as gain from the sale or exchange of
a capital asset held for more than 1 year.
Distributions paid in January, but declared as dividends by a Fund in
October, November or December of the previous year, are taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE, OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
TAX MANAGEMENT
The Funds use a tax management technique known as "highest in, first out."
Through this technique, a Fund's portfolio holdings which have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
TAX-EXEMPT DISTRIBUTIONS
The State Tax-Exempt Funds, the Tax-Exempt Money Market Fund, and the
Investment Grade Tax-Exempt Bond Fund may pay "exempt-interest" dividends.
Exempt-interest dividends are excludable from your gross income for Federal
income tax purposes, but may have other Federal income tax consequences (i.e.,
alternative minimum tax). Current Federal tax laws limit the types and number of
bonds that pay exempt interest. This may hinder a Fund's ability to pay
exempt-interest dividends.
<PAGE>
PROSPECTUS 35
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Massachusetts as
long as it qualifies as a regulated, investment company for Federal income tax
purposes.
Distributions by the Funds to you may be subject to state and local
taxation. However, a portion of the distributions you receive attributable to
interest on U.S. Government obligations may be exempt from state taxation. Each
year you will be notified of the percentage of income and distributions that may
be tax exempt under state law. You should verify your tax liability with your
tax advisor.
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust is organized as a Massachusetts business trust. The Trust is
permitted to offer separate portfolios of shares and different classes of each
Fund. All payments received by the Trust for shares of any Fund belong to that
Fund. Each Fund has its own assets and liabilities.
BOARD OF TRUSTEES
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services.
GENERAL INFORMATION
VOTING RIGHTS
You receive one vote for every full Fund share owned. 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
Shareholder meetings unless otherwise required by the Investment Company Act.
However, a meeting may be called by Shareholders owning at least 10% of the
outstanding shares of the Trust. If a meeting is requested by Shareholders, the
Trust will provide appropriate assistance and information to the Shareholders
who requested the meeting.
REPORTING
You will receive the Trust's unaudited financial information and audited
financial statements. In addition, the Trust will send you proxy statements and
other reports. If you are a customer of a financial institution that has
purchased shares of a Fund for your account, you may depending upon the nature
of your account, receive all or a portion of this information directly from your
financial institution.
<PAGE>
36 PROSPECTUS
SHAREHOLDER INQUIRIES
You may call 1-800-874-4770 to obtain information on account statements,
procedures, and other related information.
INVESTMENT ADVISORS
The Advisors make investment decisions for the assets of the Funds they
advise and continuously review, supervise, and administer their respective
Fund's investment program. The Trustees of the Trust supervise the Advisors and
establish policies that the Advisors must follow in their day-to-day management
activities.
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 May 31, 1997,
STI Capital had approximately $12.4 billion in assets under management. The
principal business address of STI Capital is P.O. Box 3808, Orlando, Florida
32802. For the fiscal year ended May 31, 1997, STI Capital received advisory
fees computed daily and paid monthly at the annual rate included in each Fund's
ANNUAL FUND OPERATING EXPENSES summary.
Trusco Capital Management, Inc. (Trusco) serves as the Advisor to the
Short-Term U.S. Treasury Securities, Short-Term Bond, and U.S. Government
Securities Funds. As of May 31, 1997, Trusco had approximately $17.4 billion in
assets under management. The principal business address of Trusco is 50 Hurt
Plaza, Suite 1400, Atlanta, Georgia 30303. For the fiscal year ended May 31,
1997, Trusco received advisory fees computed daily and paid monthly at the
annual rate included in each Fund's ANNUAL FUND OPERATING EXPENSES summary.
SunTrust Bank, Chattanooga, N.A. (SunTrust Chattanooga) serves as the
Advisor to the Tennessee Tax-Exempt Bond Fund. As of May 31, 1997, SunTrust
Chattanooga had approximately $3.7 billion in assets under management. The
principal business address of SunTrust Chattanooga is 736 Market Street,
Chattanooga, Tennessee 37402. For the fiscal year ended May 31, 1997, SunTrust
Chattanooga received advisory fees computed daily and paid monthly at the annual
rate included in the Tennessee Tax-Exempt Bond Fund's ANNUAL FUND OPERATING
EXPENSES summary.
SunTrust Bank, Atlanta (SunTrust Atlanta) serves as the Advisor to the
Georgia Tax-Exempt Bond Fund. As of December 31, 1996, SunTrust Atlanta had
approximately $12 billion in assets under management. The principal address for
SunTrust Atlanta is 25 Park Place, Atlanta, Georgia 30303. For the fiscal year
ended May 31, 1997, SunTrust Atlanta received advisory fees computed daily and
paid monthly at the annual rate included in the Georgia Tax-Exempt Bond Fund's
ANNUAL FUND OPERATING EXPENSES summary.
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks,
Inc.("SunTrust"). SunTrust is a southeastern regional bank holding company with
assets of $52.5 billion, as of December 31, 1996. SunTrust is one of the 20
largest banking companies in the U.S. Its three principal subsidiaries, SunTrust
Banks of Florida, Inc., SunTrust Banks of Georgia, Inc. and SunTrust Banks of
<PAGE>
PROSPECTUS 37
Tennessee, Inc., provide a wide range of personal and corporate banking, trust,
and investment services through more than 600 locations in the tri-state area.
SunTrust Banks, Inc. has discretionary assets under management of approximately
$53.4 billion, as of December 31, 1996.
The Advisors may use their affiliates as brokers for the Funds' portfolio
transactions.
DISTRIBUTION
SEI Investments Distribution Co. (the Distributor), a wholly-owned
subsidiary of SEI Investments Company, serves as each Fund's distributor under a
Distribution Agreement.
The Investor Shares of each Fund have a Distribution Plan. Under the
Distribution Plan, the Distributor is entitled to receive an annual fee of up
to:
- .18% of the average daily net assets of the Short-Term U.S. Treasury
Securities Fund, Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond
Fund, and Tennessee Tax-Exempt Bond Fund;
- .23% of the average daily net assets of the Short-Term Bond Fund and
Limited-Term Federal Mortgage Securities Fund;
- .43% of the average daily net assets of the Investment Grade Bond Fund and
Investment Grade Tax-Exempt Bond Fund; and
- .38% of the average daily net assets of the U.S. Government Securities
Fund.
The Distributor may use this fee:
- as compensation for its distribution-related services or shareholder
services; or
- to compensate financial institutions and intermediaries, such as banks
(including SunTrust Banks, Inc.'s affiliate and correspondent banks),
savings and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries for
performing distribution-related or shareholder services.
Flex Shares of each Fund have a Distribution Plan. Under the Distribution
Agreement and Plan, the Distributor is entitled to recover up to .75% of the
average daily assets of the Flex Shares of each Fund.
The Distributor may use these fees:
- as compensation for its distribution-related services or shareholder
services; or
- to compensate financial institutions and intermediaries, such as banks
(including Suntrust Banks, Inc.'s affiliates and subsidiaries) for
performing distribution-related or shareholder services.
The Distributor may waive all, or a portion of its fees to limit Total Fund
Operating Expenses.
Flex Shares also have a service fee of up to .25% of the average daily net
assets of the Flex Shares of each Fund. The service fee may be used for personal
service and maintenance of shareholder accounts.
The Distributor may waive all, or a portion of its fee to limit Total Fund
Operating Expenses.
<PAGE>
38 PROSPECTUS
You may visit any one of the Investment Services offices of SunTrust Banks,
Inc.'s affiliate banks (as listed on the last pages of this Prospectus),
SunTrust Securities, Inc. or certain correspondent banks of SunTrust Banks, Inc.
to receive copies of the Prospectuses for the Investor Shares and Flex Shares of
the Trust and application forms.
Each Fund may use the Distributor as its broker for portfolio transactions.
The Distributor receives compensation from the Funds for its brokerage services.
At times, the Distributor may use its own funds to provide promotional
incentives, in the form of cash or other compensation, to financial institutions
whose representatives have sold or are expected to sell significant amounts of
Fund Shares.
Trust Shares of each Fund are offered without a sales charge primarily to
financial institutions, and are described in a separate prospectus. You may call
1-800-874-4770 to receive more information about Trust Shares. Certain financial
institutions may offer different classes of shares to their customers and thus
receive different compensation with respect to different classes of shares.
ADMINISTRATION
SEI Fund Resources acts as the Trust's Administrator. For its administrative
services, the Administrator is entitled to a fee, 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>
The Administrator may voluntarily waive all or a portion of its fees to
limit Total Fund Operating Expenses.
<PAGE>
PROSPECTUS 39
FUND INVESTMENTS
% = Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net assets.
X = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
LIMITED-TERM SHORT-TERM
INVESTMENT U.S. FEDERAL U.S. INVESTMENT FLORIDA GEORGIA TENNESSEE
GRADE GOVERNMENT MORTGAGE SHORT-TERM TREASURY GRADE TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
SECURITY BOND SECURITIES SECURITIES BOND SECURITIES TAX-EXEMPT BOND BOND BOND
OR PRACTICE FUND FUND FUND FUND FUND BOND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TRADITIONAL
INVESTMENTS
ADRs X -- -- -- -- -- -- -- --
Asset-Backed
Securities X * 35% X -- -- -- -- --
Bank Obligations X 35% 35% -- -- -- -- -- --
Commercial Paper
(Two Highest
Ratings
Categories) X 35% 35% X -- -- -- -- --
Corporate Debt
Obligations
(Investment
Grade) X(4) 35% 35% X(4) -- 20% 20%(4) 20%(4) 20%(4)
Investment
Company Shares 10% 10% 10% 10% 10% 10% 10% 10% 10%
Mortgage-Backed
Securities X(1) X(7) X(7) X(2) -- * * * *
Municipal
Securities (Two
Highest Ratings
Categories) -- -- -- X(4) -- X(3,4,5) X(3,4,5) X(3,4,5) X(3,4,5)
Repurchase
Agreements X 35% 35% * -- 20% 20% 20% 20%
Restricted
Securities * * * * * * * * *
Securities of
Foreign Issuers X -- -- X -- -- -- -- --
Supranational
Agency
Obligations X -- -- 35% -- -- -- -- --
U.S. Treasury
and Government
Agency
Obligations X X X X X(6) 20% 20% 20% 20%
Zero Coupon
Obligations X -- -- X -- X X X X
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Dollar Rolls -- X X -- -- -- -- -- --
Illiquid
Securities 15% 15% 15% 15% 15% 15% 15% 15% 15%
Securities
Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Standby
Commitments X X X X X X X X X
When-Issued
Securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
LEVERAGING AND
HEDGING TOOLS
Futures and
Options on
Futures 35% * * 35% -- * 35% 35% 35%
Options 35% * * 35% * * 35% 35% 35%
Puts 35% -- -- 35% -- 35% 35% 35% 35%
Swaps, Caps,
Floors and
Collars 25% -- -- -- -- -- -- -- --
Variable and
Floating
Rate
Instruments X X X X X X X X X
</TABLE>
(1) MAY PURCHASE UP TO 35% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(2) MAY PURCHASE UP TO 25% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(3) INVESTS AT LEAST 65% OF ITS ASSETS IN MUNICIPAL SECURITIES. OF THIS 65%, 75%
MUST BE RATED A OR BETTER OR THEIR UNRATED EQUIVALENTS. EACH STATE
TAX-EXEMPT BOND FUND MUST INVEST AT LEAST 65% OF ITS ASSETS IN MUNICIPAL
SECURITIES ISSUED BY ITS RESPECTIVE STATE.
(4) MAY PURCHASE UP TO 25% RATED BBB OR BAA OR THEIR UNRATED EQUIVALENTS.
(5) MAY PURCHASE MUNICIPAL FORWARDS.
(6) U.S. TREASURY OBLIGATIONS ONLY.
(7) PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES PERMITTED BUT NOT TYPICALLY
USED.
Under normal market conditions, the Funds will follow the practices and
policies outlined above. However, for temporary defensive purposes during
periods when its Adviser determines that market conditions warrant, each Fund
may invest up to 100% of its assets in cash, money market instruments,
repurchase agreements and short-term obligations. When the Funds are investing
for temporary defensive purposes, they will not be pursuing their respective
investment objectives.
<PAGE>
40 PROSPECTUS
INVESTMENT RESTRICTIONS
Each Fund will not invest more than 25% of its assets in any one industry.
With respect to 75% of its assets, each Fund will not:
- Invest more than 5% of its assets in the securities of any one issuer.
- Purchase more than 10% of the outstanding voting securities of any one
issuer.
MORE ABOUT INVESTMENTS AND HEDGING TOOLS
The following is a description of some of the permitted investments for the
Funds. Further discussion is contained in the SAI.
AMERICAN DEPOSITARY RECEIPTS (ADRs) are securities, typically issued by a
U.S. financial institution (a depositary). The institution has 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. An unsponsored
facility may be established by a depositary without the participation of the
issuer of the underlying security. Eurodollar and Yankee bank obligations are
U.S. dollar-denominated certificates of deposit or time deposits issued outside
the U.S. by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the U.S. by
foreign banks.
ASSET-BACKED SECURITIES are backed by non-mortgage assets such as company
receivables, truck and auto loans, leases, and credit card receivables. These
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in the underlying pools of assets.
Asset-backed securities may also be DEBT OBLIGATIONS, 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
these assets and issuing DEBT OBLIGATIONS.
BANK OBLIGATIONS are SHORT-TERM OBLIGATIONS issued by U.S. and foreign
banks, including bankers' acceptances, certificates of deposit, custodial
receipts, and time deposits.
CORPORATE DEBT SECURITIES are DEBT OBLIGATIONS issued by corporations with
maturities exceeding 270 days.
DEBT OBLIGATIONS represent money borrowed that obligates the issuer, (E.G.,
a corporation, municipality, government, government agency) to repay the
borrowed amount at maturity (when the obligation is due and payable) and usually
to pay the holder interest at specific times (E.G., bonds, notes, debentures).
DOLLAR ROLLS are transactions in which securities are sold for delivery in
the current month and the seller contracts to repurchase substantially similar
securities on a specified future date. Any difference between the sale price and
the purchase price (plus interest earned on the cash proceeds of the sale) is
against the past interest income on the securities sold to arrive at an implied
borrowing rate.
<PAGE>
PROSPECTUS 41
EQUITY SECURITIES include COMMON AND PREFERRED STOCKS, WARRANTS, RIGHTS to
subscribe to common stock, and CONVERTIBLE SECURITIES. These securities may be
publicly or privately issued.
FUTURES CONTRACTS AND OPTIONS ON 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. They may also be used 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.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An 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 index at the
close of the last trading day of the contract and the price at which the
agreement is made.
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.
INVESTMENT COMPANY SHARES are shares of other mutual funds which may be
purchased by the Funds to the extent consistent with applicable law.
INVESTMENT GRADE OBLIGATIONS are DEBT OBLIGATIONS rated BBB or better by S&P
or Baa or better by Moody's, or their unrated equivalents. These securities are
deemed to have speculative characteristics.
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. In a
loan participation, the borrower corporation is 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.
MONEY MARKET INSTRUMENTS are high quality, dollar-denominated, SHORT-TERM
DEBT OBLIGATIONS, including BANK OBLIGATIONS, U.S. TREASURY OBLIGATIONS, U.S.
GOVERNMENT AGENCIES, and SHORT-TERM CORPORATE OBLIGATIONS.
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 fifteen-
and thirty-year fixed rate mortgages, graduated payment mortgages, and
adjustable rate mortgages, and floating rate mortgages.
<PAGE>
42 PROSPECTUS
During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities may accelerate. It is often not possible
to predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a
U.S. Government agency representing an interest in a pool of mortgage loans.
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 are mortgage-backed securities issued by a
non-governmental entity, such as a trust. 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
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government, or by private originators, or investors in mortgage loans.
Each class of a CMO is issued with a specific fixed or floating interest rate
and has a stated maturity or final distribution date.
REMICs are CMOs that qualify for special tax treatment under the Internal
Revenue Code. They invest in certain mortgages that are principally secured by
interests in real property. These securities are often guaranteed as to the
payment of principal and/or interest as payments are required to be made on the
underlying mortgage participation certificates.
STRIPPED MORTGAGE-BACKED SECURITIES (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 the other class may receive all of the principal
payments. SMBs are extremely sensitive to changes in interest rates because of
the impact of prepayment of principal on the underlying mortgage securities.
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.
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.
MUNICIPAL SECURITIES consist of:
- 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 these funds
to other public institutions and facilities, and;
<PAGE>
PROSPECTUS 43
- 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
(for example, tolls from a bridge). 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 totally
dependent 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 the
payment.
OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time. The
seller or writer of an option is obligated to sell (a call option) or buy (a put
option) the underlying security. All options written by a Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
currency ("options on currencies") or security. With respect to put options
written by the Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash or cash equivalents in an amount equal to the
amount the Fund would be required to pay upon exercise of the put option.
REPURCHASE AGREEMENTS are agreements by which a Fund obtains a security and
simultaneously agrees 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.
A Fund will enter into repurchase agreements only with financial institutions
judged to present minimal risk of bankruptcy during the term of the agreement
based on established guidelines.
RESTRICTED SECURITIES are securities that may not be sold freely to the
public without registering under the Securities Act of 1933 or an exemption from
registration. The Trust's Board of Trustees has adopted procedures for
determining the liquidity of restricted securities.
SECURITIES LENDING -- To generate additional income, a Fund may lend
securities which it owns under agreements requiring that the loan be
continuously secured by collateral equal to at least 100% of the market value of
the loaned securities. A Fund continues to receive interest on the loaned
securities while simultaneously earning interest on the investment of cash
collateral.
SECURITIES OF FOREIGN ISSUERS are securities issued by foreign corporation,
including foreign branches of U.S. banks and foreign banks, and by foreign
governments or their agencies or instrumentalities.
SENIOR FIXED INCOME SECURITIES are DEBT OBLIGATIONS that pay a fixed rate of
return.
SHORT-TERM OBLIGATIONS are DEBT OBLIGATIONS maturing (becoming payable) in
397 days or less, including COMMERCIAL PAPER and other short-term corporation
obligations. Short-term corporate obligations are short-term obligations issued
by corporations.
STANDBY COMMITMENTS AND PUTS -- Puts permit the holder to sell securities at
a fixed price prior to maturity. Securities subject to a standby commitment or
put may be sold at any time at
<PAGE>
44 PROSPECTUS
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.
SUPRANATIONAL AGENCY OBLIGATIONS are obligations established through the
joint participation of several governments, and including 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.
SWAPS, CAPS, FLOORS, and COLLARS -- Swaps, caps, floors, and collars are
hedging tools designed to permit the purchaser to preserve a return or spread on
a particular investment or portion of its portfolio. They are also used to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. 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 impace on a Fund's performance.
U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some of these securities
are supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and others are
supported only by the credit of the agency or instrumentality.
U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the
U.S. Treasury. They also consist of separately traded interest and principal
component parts of these 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 involve certain obligations that 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES 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 interest rate realized on these securities is fixed
as of the purchase date and no interest accrues to the Fund before settlement.
ZERO COUPON OBLIGATIONS are DEBT OBLIGATIONS that do not bear any interest,
but instead are issued at a deep discount from value or par. The value of a zero
coupon obligation increases over time to reflect the interest accumulated. 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 face
value or par and pay interest periodically.
<PAGE>
PROSPECTUS 45
SUNTRUST AND INVESTMENT SERVICES OFFICES OF SUNTRUST BANKS, INC. AFFILIATE
BANKS:
FLORIDA: (STATEWIDE TOLL
FREE) 1-800-526-1177
SUNTRUST SECURITIES, INC. --
FLORIDA
200 S. Orange Avenue
Tower 10
Orlando, FL 32801
(407) 237-4380
1-800-432-4760, ext. 4380
501 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
(954) 765-7422
777 Brickell Avenue
Miami, FL 33131
(305) 579-7450
401 E. Jackson Street
Tampa, FL 33602
(813) 224-2517
Osceola Office
111 E. Osceola Street
Stuart, FL 34994
(407) 223-6012
Belnova Office
120 S. Ridgewood Avenue
Daytona Beach, FL 32114
(904) 258-2390
200 W. Forsyth Street
Jacksonville, FL 32202
(904) 632-2534
Pelican Bay Office
801 Laurel Oak Drive
Naples, FL 33963
(941) 598-0515
210 Security Square
Winter Haven, FL 33880
(941) 297-6855
One East Jefferson Street
Brooksville, FL 34601
(352) 754-5798
3522 Thomasville Road
Tallahassee, FL 32308
(904) 298-5064
11 Hoffman Drive
Gulf Breeze, FL 32561
(904) 435-1264
GEORGIA:
SUNTRUST SECURITIES, INC. -- GEORGIA
55 Park Place
First Floor
Atlanta, GA 30303
(404) 588-8108
1-800-600-6350
101 N. Lumpkin Street
Athens, GA 30601
(706) 354-5346
2815 Wrightsboro Road
Augusta, GA 30909
(706) 821-2015
606 Cherry Street
Macon, GA 31201
(912) 755-5175
1246 First Avenue
Columbus, GA 31901
(706) 649-3631
33 Bull Street, Suite 208
Savannah, GA 31401
(912) 944-1165
410 W. Broad Avenue
Albany, GA 31701
(912) 430-5468
Coffee County Branch
201 S. Peterson Avenue
Douglas, GA 31533
(912) 383-5242
510 Gloucester Street
Brunswick, GA 31520
(912) 262-5322
<PAGE>
46 PROSPECTUS
TENNESSEE:
SUNTRUST SECURITIES, INC. -- TENNESSEE
424 Church Street
4th Floor
Nashville, TN 37219
(615) 748-4477
1-800-932-2652
736 Market Street
Chattanooga, TN 37402
(423) 757-3005
TN WATS 1-800-572-7306, Ext. 3005
Bordering States WATS
1-800-874-1083, Ext. 3005
Out of State WATS
1-800-251-6266, Ext. 3005
9950 Kingston Pike
Knoxville, TN 37997
(423) 544-2181
1-800-456-1177
207 Mockingbird Lane
Johnson City, TN 37604
(423) 461-1005
25 Public Square
Lawrenceburg, TN 38464
(615) 762-3511
ALABAMA:
SUNTRUST SECURITIES, INC. -- ALABAMA
201 South Court Street
Florence, AL 35630
(205) 767-8537
<PAGE>
PROSPECTUS 47
<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, Atlanta 25 Park Place
Atlanta, GA 30303
SunTrust Bank, Chattanooga, N.A. 736 Market Street
Chattanooga, TN 37402
* DISTRIBUTOR
SEI Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* 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 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
48 PROSPECTUS
Additional information about the Funds is included in the SAI dated October
1, 1997. The SAI has been filed with the SEC and is incorporated by reference
into this Prospectus. You may obtain a copy of the SAI, or of the annual or
semi-annual report, without charge by calling 1-800-874-4770, or by contacting
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR.
<PAGE>
STI CLASSIC FUNDS INVESTOR SHARES
PROSPECTUS
OCTOBER 1, 1997
PRIME QUALITY MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES MONEY
MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
INVESTMENT ADVISOR
TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
(the "Advisor")
STI CLASSIC FUNDS
<PAGE>
PROSPECTUS
GENERAL INFORMATION
AND CONTENTS
<TABLE>
<C> <S>
1 ABOUT THE TRUST
---
1 PRIME QUALITY MONEY MARKET FUND
---
3 U.S. GOVERNMENT SECURITIES MONEY
--- MARKET FUND
5 TAX-EXEMPT MONEY MARKET FUND
---
7 RISK CONSIDERATIONS
---
8 PURCHASING FUND SHARES
---
12 TAX INFORMATION
---
16 FUND INVESTMENTS
---
17 MORE ABOUT INVESTMENTS AND HEDGING TOOLS
---
</TABLE>
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 gives you important information about the Investor
Shares of the Money Market Funds that you should know before investing. Please
read this Prospectus, and keep it for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THE TRUST'S SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR
APPROVED OF THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY STATEMENT OR
INDICATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS:
- ARE NOT BANK DEPOSITS
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY BANK OR GOVERNMENT AGENCY
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS
INVESTING IN THE FUNDS INVOLVES RISK. YOU COULD LOSE MONEY.
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 CONSTANT VALUE OF $1.00 PER SHARE.
OCTOBER 1, 1997
<PAGE>
PROSPECTUS 1
ABOUT THE TRUST
STI CLASSIC FUNDS is a diversified, open-end management investment company. The
Funds provide a convenient and economical way for you to invest in a number of
professionally managed portfolios of securities. This Prospectus relates to the
Investor Shares of the Prime Quality Money Market Fund, U.S. Government
Securities Money Market Fund, and Tax-Exempt Money Market Fund (the Money Market
Funds).
ABOUT MONEY MARKET FUNDS
The Money Market Funds are governed by SEC rules which impose certain quality,
maturity, and diversification requirements. Each Fund's assets are valued using
the amortized cost method, which enables the Fund to maintain a stable net asset
value per share. All securities purchased by the Funds must have remaining
maturities of 13 months or less.
FUND INFORMATION
PRIME QUALITY MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests in U.S. and foreign money market instruments
denominated in U.S. dollars.
The Fund may invest in obligations of supranational entities rated in the
highest short-term ratings category or their unrated equivalents. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
RISK CONSIDERATIONS
[LOGO]
The Prime Quality Money Market Fund is subject to the following types
of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Prepayment Risk;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
<PAGE>
2 PROSPECTUS
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor Shares of the PRIME
QUALITY MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .50%
12b-1 Distribution & Service Fees After Reimbursements(2) .12%
Other Expenses After Fee Waivers and Reimbursements(3) .13%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .75%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .20%.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .16%.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE 1.01%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE
VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE
SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------
You 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. $ 8 $ 24 $ 42 $ 93
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor Shares of the PRIME QUALITY MONEY MARKET FUND. The
financial highlights for the Fund for the periods from inception through
May 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------------
PRIME QUALITY MONEY MARKET FUND
- -----------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ----------- ------------- ------------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $-- $(0.05) $-- $1.00 4.84%
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(1) 1.00 0.03 -- (0.03) -- 1.00 2.75%*
<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
END OF TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND
PERIOD (000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------ ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
1997 $ 283,544 0.75% 4.74% 0.97% 4.52%
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(1) 61,578 0.75%* 2.68%* 1.02%* 2.41%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON JUNE 8, 1992.
<PAGE>
PROSPECTUS 3
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund will invest exclusively in:
- U.S. Treasury obligations;
- securities of wholly-owned corporations
(E.G., GNMA, Fannie Mae, FHLMC) of the U.S. Government that are backed by
the
full faith and credit of the U.S. Government such as mortgage-backed
securities; and
- repurchase agreements.
To some extent, the Fund may invest in other securities and engage in other
investment practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
RISK CONSIDERATIONS
[LOGO]
The U.S. Government Securities Money Market Fund is subject to the
following types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
<PAGE>
4 PROSPECTUS
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor Shares of the U.S.
GOVERNMENT SECURITIES MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51%
12b-1 Distribution & Service Fees After Reimbursements(2) .11%
Other Expenses After Fee Waivers and Reimbursements(3) .13%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(4) .75%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD
.65%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .17%.
(3) ABSENT VOLUNTARY WAIVERS AND REIMBURSEMENTS, OTHER EXPENSES WOULD BE .14%.
(4) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE .96%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE
VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE
SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------
You 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. $ 8 $ 24 $ 42 $ 93
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor Shares of the U.S. GOVERNMENT SECURITIES MONEY MARKET
FUND. The financial highlights for the Fund for the periods from
inception through May 31, 1997 have been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in STI Classic
Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
- -------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- -------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND DISTRIBUTIONS
NET ASSET NET UNREALIZED DISTRIBUTIONS FROM
VALUE INVESTMENT NET GAINS FROM NET REALIZED NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN
--------- ---------- ----------- ------------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $ -- $(0.05) $ -- $1.00 4.69%
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(1) 1.00 0.03 -- (0.03) -- 1.00 2.65%*
<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
END OF TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND
PERIOD (000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------ ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
1997 $63,178 0.75% 4.59% 0.96% 4.38%
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(1) 16,688 0.75%* 2.57%* 1.11%* 2.21%*
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON JUNE 8, 1992.
<PAGE>
PROSPECTUS 5
TAX-EXEMPT MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund intends to be fully invested in securities the interest on
which is exempt from regular federal income taxes. The Fund primarily
invests in high quality, short-term municipal securities of issuers located in:
- all 50 states;
- District of Columbia; and
- Puerto Rico and other U.S. territories.
At least 80% of the Fund's total assets will be invested in securities with
income exempt from regular federal income taxes and not treated as a preference
item for purposes of the federal alternative minimum tax.
The Fund may invest in U.S. dollar denominated taxable money market
instruments. To some extent, the Fund may invest in other securities and engage
in other investment practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
RISK CONSIDERATIONS
[LOGO]
The Tax-Exempt Money Market Fund subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk; and
- Prepayment Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
<PAGE>
6 PROSPECTUS
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Investor Shares of the
TAX-EXEMPT MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .49%
12b-1 Distribution & Service Fees After Reimbursements(2) .09%
Other Expenses .14%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(3) .72%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .55%.
(2) ABSENT VOLUNTARY REIMBURSEMENTS BY THE DISTRIBUTOR, 12b-1 DISTRIBUTION AND
SERVICE FEES WOULD BE .15%.
(3) ABSENT THE FEE WAIVERS AND REIMBURSEMENTS DESCRIBED ABOVE, TOTAL FUND
OPERATING EXPENSES WOULD BE .84%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE
VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE
SERVICE PROVIDER THAT IS WAIVING OR REIMBURSING ITS FEE. FUND EXPENSES HAVE
BEEN RESTATED TO REFLECT CURRENT FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
You 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. $ 7 $ 23 $ 40 $ 89
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Investor Shares of the TAX-EXEMPT MONEY MARKET FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- ---------------------------------
TAX-EXEMPT MONEY MARKET FUND
- ---------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED
AND DISTRIBUTIONS
NET ASSET NET UNREALIZED DISTRIBUTIONS FROM
VALUE INVESTMENT NET GAINS FROM NET REALIZED NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN
--------- ---------- ----------- ------------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.03 $ -- $(0.03) $ -- $1.00 2.97%
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(1) 1.00 0.02 -- (0.02) -- 1.00 2.00%*
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
NET ASSETS RATIO OF INCOME ASSETS ASSETS
END OF EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING
PERIOD TO AVERAGE AVERAGE NET WAIVERS AND WAIVERS AND
(000) NET ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
---------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
1997 $102,013 0.62% 2.92% 0.83% 2.71%
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(1) 35,209 0.53%* 1.95%* 0.95%* 1.53%*
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON JUNE 8, 1992.
THERE CAN BE NO ASSURANCE THAT A FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
<PAGE>
PROSPECTUS 7
RISK CONSIDERATIONS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
<S> <C>
- ----------------------------------------------------------------------------------------------
FUND RISK -- The possibility that a Fund's performance during a All Funds
specific period may not meet, or exceed, that of the market as a
whole.
INTEREST RATE RISK -- The potential for a decline in the price of All Funds
fixed-income securities due to rising interest rates. This risk will
be greater for long-term securities than for short-term securities.
CREDIT RISK -- The possibility that an issuer will be unable to make All Funds
timely payments of either principal or interest.
CALL RISK -- The possibility that securities with high interest rates All Funds
will be prepaid (or "called") by the issuer, prior to maturity, during
periods of falling interest rates. This would require a Fund to invest
the resulting proceeds elsewhere, at generally lower interest rates.
EVENT RISK -- The possibility that corporate fixed-income securities Prime Quality Money
may suffer substantial declines in credit quality and market value due Market Fund
to corporate restructurings. While event risk may be high for certain Tax-Exempt Money
corporate securities held by a Fund, event risk overall should be low Market Fund
because of the Fund's diversified holdings.
PREPAYMENT RISK -- The risk that mortgage-backed and asset-backed All Funds
securities may be retired substantially earlier than their stated
maturities or final distribution dates, resulting in a loss of all or
part of any premium paid.
FOREIGN SECURITY RISKS -- There are risks associated with Prime Quality Money
international investing, including: Market Fund
</TABLE>
<TABLE>
<S> <C>
CURRENCY RISK -- The possibility that changes in foreign
exchange rates will affect, favorably or unfavorably, the
value of foreign securities or the U.S. dollar amount of
income or gain received on such securities.
</TABLE>
<PAGE>
8 PROSPECTUS
<TABLE>
<S> <C>
VOLATILITY -- Investments in foreign stock markets can be
more volatile than investments in U.S. markets. Diplomatic,
political, or economic developments could affect investments
in foreign countries.
EXPENSE CONSIDERATIONS -- Fixed commissions on many foreign
stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. Expenses for custodial
arrangements of foreign securities may be somewhat greater
than typical expenses for custodial arrangements for
handling U.S. securities of equal value.
FOREIGN TAXES -- Certain foreign governments levy
withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from the
securities comprising the portfolio.
REGULATORY ENVIRONMENT -- Foreign companies generally are
not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to U.S.
domestic companies. Foreign branches of U.S. banks, foreign
banks, and foreign issuers may be subject to less stringent
reserve requirements and to different accounting, auditing,
reporting and recordkeeping standards than those applicable
to domestic branches of U.S. banks and U.S. domestic
issuers. There is generally less government regulation of
securities exchanges, brokers, and listed companies abroad
than in the U.S.
</TABLE>
<TABLE>
<S> <C>
CURRENCY RISK -- The possibility that changes in foreign exchange Prime Quality Money
rates will affect, favorably or unfavorably, the value of foreign Market Fund
securities or the U.S. dollar amount of income or gain received on
such securities.
</TABLE>
PURCHASING FUND SHARES
HOW TO BUY FUND SHARES
You may buy Investor Shares (and fractions of shares) by mail, telephone, or
wire directly from the Transfer Agent, Federated Services Company. You also may
purchase shares through a SunTrust Investment Consultant, certain correspondent
banks of SunTrust Banks, Inc. or other financial institutions that have executed
dealer agreements with the Trust's Distributor. Shares are offered
<PAGE>
PROSPECTUS 9
continuously, and may be purchased on any day that the New York Stock Exchange
and the Federal Reserve are open for business (a Business Day).
The price per share (the offering price) will be the net asset value per
share (NAV) next determined after your purchase order is received by the
Transfer Agent. The Trust expects the NAV of each Money Market Fund to remain
constant at $1.00 per share. NAV for the Money Market Funds is calculated by (1)
taking the current market value of a Fund's total assets using the amortized
cost method of valuing securities, (2) subtracting the liabilities, and (3)
dividing that amount by the total number of shares of that class owned by
shareholders. The NAV is calculated once each Business Day at the close of the
New York Stock Exchange (4:00 p.m. Eastern time). All money market funds are
required to use the amortized cost valuation method, which is described in
detail in the Trust's Statement of Additional Information (SAI).
Your purchase order will be effective as of the Business Day it is received
by the Transfer Agent. You will be eligible to receive dividends declared the
same day if (1) the Transfer Agent receives the order (i) before 11:00 a.m.
Eastern time for the Tax-Exempt Money Market Fund, or (ii) before 1:00 p.m.
Eastern time for the Prime Quality Money Market Fund and U.S. Government
Securities Money Market Fund; and (2) the Custodian receives federal funds
(readily available funds) before 4:00 p.m. Eastern time on the same day.
Otherwise your purchase order will be effective the next Business Day, as long
as the Custodian receives readily available funds before 4:00 p.m. Eastern time
on the next Business Day. If you purchase shares through a financial institution
(rather than directly through the Transfer Agent), you may have to transmit your
purchase order to your financial institution at an earlier time for your
purchase to be effective that day. This allows the financial institution time to
process your order and transmit it to the Transfer Agent. For more information
about how to purchase shares through your financial institution, you should
contact your financial institution directly.
If you decide to buy shares directly, call 1-800-874-4770. Make your check
out to "STI Classic Funds" and include the name of the appropriate Fund(s) on
the check. Your check must be payable in U.S. dollars. Third-party checks,
credit cards, credit card checks and cash will not be accepted. PLEASE NOTE, IF
YOU BUY SHARES WITH A CHECK, AND THEN SELL THOSE SHARES IN A SHORT PERIOD OF
TIME, THE TRUST CAN DELAY PAYMENT TO YOU UNTIL YOUR CHECK CLEARS, OR FOR UP TO
15 BUSINESS DAYS, WHICHEVER COMES FIRST.
FUNDLINK
FUNDLINK is a telephone-activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK, you must first contact your SunTrust Investment
Consultant and complete the FUNDLINK application and authorization agreements.
Once you have signed up to use FUNDLINK, simply call the Transfer Agent at
1-800-428-6970 to complete all your purchase and redemption transactions.
<PAGE>
10 PROSPECTUS
MINIMUM PURCHASE
To purchase Investor Shares for the first time, you must invest at least
$5,000 in any Money Market Fund. To purchase additional shares, you must invest
$1,000, or, via a statement coupon, $100.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a SunTrust Banks, Inc.
affiliate bank, you may purchase shares automatically through regular deductions
from your account. With a $500 minimum initial investment, you may begin
regularly scheduled investments from $50 up to $100,000 once or twice a month.
PURCHASING SHARES -- THE DISTRIBUTOR
The Distributor may accept investments of smaller amounts at its discretion.
In addition, the Trust reserves the right to reject any purchase order when the
Distributor determines that accepting the order would not be in the best
interests of the Trust and/or Shareholders.
REDEEMING FUND SHARES
HOW TO SELL YOUR FUND SHARES
You may sell (redeem) your Shares on any day that NAV is calculated, by
contacting the Transfer Agent directly by mail, telephone or, if eligible, via
FUNDLINK. You may also make redemption requests (in writing or by telephone)
through Investment Consultants of a SunTrust Banks, Inc. affiliated bank,
SunTrust Securities, Inc., and through certain correspondent banks of SunTrust
Banks, Inc. Redemption requests made via telephone or FUNDLINK (1-800-428-6970)
must be for a redemption amount of at least $1,000. The redemption price of each
Share will be the next NAV determined after receipt of your redemption request.
Your redemption request will be effective as of the Business Day it is received
by the Transfer Agent (1) before 11:00 a.m. Eastern time for the Tax-Exempt
Money Market Fund, or (2) before 1:00 p.m. Eastern time for the Prime Quality
Money Market Fund and U.S. Government Securities Money Market Fund.
If you redeem your shares through a financial institution (rather than
directly through the Transfer Agent), you may have to transmit your redemption
request to the financial institution at an earlier time for your redemption to
be effective that day. This allows the financial institution time to process
your request and transmit it to the Transfer Agent. For more information about
how to request redemptions through your financial institution, you should
contact your financial institution directly.
RECEIVING YOUR MONEY
Your redemption proceeds normally will be sent within five Business Days of
the Transfer Agent receiving your request. Your proceeds can be wired to your
bank account (subject to a $7.00 fee),
<PAGE>
PROSPECTUS 11
transferred to your bank account via FUNDLINK, or sent to you by check. IF YOU
RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH AUTOMATED CLEARING HOUSE
(ACH), REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 BUSINESS DAYS).
REDEMPTIONS IN KIND
The Trust intends to pay your redemption proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the remaining shareholders in the Fund) the Trust reserves the right to pay
all or part of your redemption proceeds in liquid securities that have a market
value equal to the redemption price (redemption in kind). Although it is highly
unlikely that your shares would ever actually be redeemed in kind, if it did
happen, you would probably have to pay brokerage costs to sell the securities
distributed to you.
INVOLUNTARY REDEMPTIONS
If your account balance drops below the $5,000 required minimum, you may be
required to redeem your shares. You will always be given at least 60 days'
written notice to give you time to add to your account and avoid the redemption.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your Fund account, you may use the
systematic withdrawal plan. Under the plan you may arrange monthly, quarterly,
semi-annual, or annual automatic withdrawals of at least $50 from any Fund. The
proceeds of each withdrawal will be mailed to you by check, or, if you have an
account with a SunTrust Banks, Inc. affiliated bank, electronically transferred
to your account.
EXCHANGES
You may exchange Investor Shares of any Fund for Investor Shares of any
other Fund. Shares you exchange for the first time from a Money Market Fund
(which has no sales charge) into a Fund with a sales charge are subject to that
sales charge. Similarly, shares you exchange for the first time into a Fund with
a higher sales charge are subject to an incremental sales charge (the difference
between the lower and higher applicable sales charges). Should you exchange
shares into a Fund with the same, lower, or no sales charge (a Money Market
Fund), there is no sales charge for the exchange.
You may exchange your Investor Shares by contacting (1) an Investment
Consultant of a SunTrust Banks, Inc. affiliated bank, SunTrust Securities, Inc.,
or certain correspondent banks of SunTrust Banks, Inc. in writing or by
telephone, or (2) the Transfer Agent directly via FUNDLINK. Exchange requests
must be for an exchange amount of at least $1,000. You may exchange your shares
up to four times during a calendar year without restriction. More than four
exchanges during a year may be viewed as abuse of the exchange privilege. In
such a case, the Trust may charge you a $10.00
<PAGE>
12 PROSPECTUS
fee for each additional exchange. You will, however, be notified before any fee
is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY
NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE
UP TO 15 BUSINESS DAYS). This exchange privilege may be changed or canceled at
any time upon 60 days' notice.
TRANSACTIONS OVER THE TELEPHONE
Telephone redemption and exchange transactions are extremely convenient, but
not without risk. To try to keep your telephone transactions as safe, secure,
and risk free as possible, the Trust has developed certain safeguards and
procedures for determining the identity of callers and authenticity of
instructions. As a result, neither the Trust nor its Transfer Agent will be
responsible for any loss, liability, cost, or expense for following telephone or
wire instructions they reasonably believed to be genuine. If you choose to make
telephone transactions, you will generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Income dividends of each Fund are declared daily and paid monthly. The Funds
make capital gains distributions at least annually.
You will receive dividends and distributions in the form of additional
shares unless you have elected to receive payment in cash. To elect cash
payment, you must notify the Transfer Agent in writing prior to the date of
distribution. Your election will become effective for dividends paid after the
Transfer Agent receives your written notice. To cancel your election, simply
send written notice to the Transfer Agent.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their Shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial, or administrative action. We have not
tried to present a detailed explanation of the tax treatment of the Funds or
their Shareholders. More information about taxes is in the SAI. WE URGE YOU TO
CONSULT YOUR TAX ADVISOR 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 income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies. As long as a Fund qualifies as a regulated investment
company, it pays no Federal income tax on the earnings it distributes to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME WHETHER
YOU RECEIVE THE DIVIDEND IN CASH OR IN ADDITIONAL SHARES.
Capital gains dividends will be treated as gain from the sale or exchange of
a capital asset held for more than 1 year.
<PAGE>
PROSPECTUS 13
Distributions paid in January, but declared as dividends by a Fund in
October, November or December of the previous year, may be taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
TAX MANAGEMENT
The Funds use a tax management technique known as "highest in, first out."
Through this technique, a Fund's portfolio holdings which have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
TAX-EXEMPT DISTRIBUTIONS
The Tax-Exempt Money Market Fund may pay exempt-interest-dividends.
Exempt-interest dividends are excludable from your gross income for regular
Federal income tax purposes, but may have other Federal income tax consequences
(I.E., alternative minimum tax). Current Federal tax laws limit the types and
number of bonds that pay exempt interest. This may hinder a Fund's ability to
pay exempt-interest dividends.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Massachusetts as
long as it qualifies as a regulated investment company for Federal income tax
purposes.
Distributions by the Funds to you may be subject to state and local
taxation. However, a portion of the distributions you receive may be exempt from
state taxation. Each year you will be notified of the percentage of income and
distributions that may be tax exempt under state law. However, you should verify
your tax liability with your tax advisor.
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust is organized as a Massachusetts business trust. The Trust is
permitted to offer separate portfolios of shares and different classes of each
Fund. All payments received by the Trust for shares of any Fund belong to that
Fund. Each Fund has its own assets and liabilities.
BOARD OF TRUSTEES
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services.
GENERAL INFORMATION
VOTING RIGHTS
You receive one vote for every full Fund share owned. Each Fund or class of
a Fund will vote separately on matters relating solely to that Fund or class.
<PAGE>
14 PROSPECTUS
As a Massachusetts business trust, the Trust is not required to hold annual
Shareholder meetings unless otherwise required by the Investment Company Act.
However, a meeting may be called by Shareholders owning at least 10% of the
outstanding shares of the Trust. If a meeting is requested by Shareholders, the
Trust will provide appropriate assistance and information to the Shareholders
who requested the meeting.
REPORTING
You will receive the Trust's unaudited financial information and audited
financial statements. In addition, the Trust will send you proxy statements and
other reports. If you are a customer of a financial institution that has
purchased shares of a Fund for your account, you may, depending upon the nature
of your account, receive all or a portion of this information directly from your
financial institution.
SHAREHOLDER INQUIRIES
You may call your financial institution or 1-800-874-4770 to obtain
information on account statements, procedures, and other related information.
INVESTMENT ADVISOR
The Advisor makes investment decisions for the assets of the Funds it
advises and continuously reviews, supervises, and administers each Fund's
investment program. The Trustees of the Trust supervise the Advisor and
establish policies that the Advisor must follow in its day-to-day management
activities.
Trusco Capital Management, Inc. serves as the Advisor to the Prime Quality
Money Market, U.S. Government Securities Money Market, and Tax-Exempt Money
Market Fund. As of May 31, 1997, Trusco had approximately $17.4 billion in
assets under management. The principal business address of Trusco is 50 Hurt
Plaza, Suite 1400, Atlanta, Georgia 30303. For the fiscal year ended May 31,
1997, the Advisor received advisory fees computed daily and paid monthly at the
annual rate included in each Fund's ANNUAL FUND OPERATING EXPENSES summary,
except for the Tax-Exempt Money Market Fund. The Advisor received .39% for its
advisory services provided to the Tax-Exempt Money Market Fund.
The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc.
(SunTrust). SunTrust is a southeastern regional bank holding company with assets
of $52.5 billion, as of December 31, 1996. SunTrust is one of the 20 largest
banking companies in the U.S. 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 tri-state area.
SunTrust Banks, Inc. has discretionary assets under management of approximately
$53.4 billion, as of December 31, 1996.
<PAGE>
PROSPECTUS 15
The Advisor may use its affiliates as brokers for the Funds' portfolio
transactions.
DISTRIBUTION
SEI Investments Distribution Co. (the Distributor), a wholly-owned
subsidiary of SEI Investments Company, serves as each Fund's distributor under a
Distribution Agreement. The Investor Shares of each Fund have a Distribution
Plan. Under the Distribution Plan, the Distributor is entitled to receive an
annual fee 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; and
- .15% of the average daily net assets of the Tax-Exempt Money Market Fund.
The Distributor may use this fee:
- as compensation for its distribution-related services or shareholder
services or
- to compensate financial institutions and intermediaries, such as banks
(including SunTrust Banks, Inc.'s affiliate and correspondent banks),
savings and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries for
performing distribution-related or shareholder services.
The Distributor may waive all, or a portion of its fee to limit Total Fund
Operating Expenses.
You may visit any one of the Investment Services offices of SunTrust Banks,
Inc.'s affiliate banks (as listed on the last pages of this Prospectus),
SunTrust Securities, Inc. or certain correspondent banks of SunTrust Banks, Inc.
to receive copies of the Prospectuses for the Investor Shares and Flex Shares of
the Trust and application forms.
Each Fund may use the Distributor as its broker for portfolio transactions.
The Distributor receives compensation from the Funds for its brokerage services.
At times, the Distributor may use its own funds to provide promotional
incentives, in the form of cash or other compensation, to financial institutions
whose representatives have sold or are expected to sell significant amounts of
Fund Shares.
Trust Shares of the Funds are offered without a sales charge primarily to
financial institutions, and are described in a separate prospectus. You may call
1-800-874-4770 to receive more information about Trust Shares. Certain financial
institutions may offer different classes of shares to their customers and may
receive different compensation with respect to different classes of shares.
<PAGE>
16 PROSPECTUS
ADMINISTRATION
SEI Fund Resources acts as the Trust's Administrator. For its administrative
services, the Administrator is entitled to a fee, 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>
The Administrator may voluntarily waive all or a portion of its fees to
limit Total Fund Operating Expenses.
FUND INVESTMENTS
% = Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net assets.
X = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
U.S. GOVERNMENT
PRIME QUALITY SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET MONEY MARKET
SECURITY OR PRACTICE FUND FUND FUND
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
TRADITIONAL INVESTMENTS
Asset-Backed Securities * -- --
Bank Obligations X(1) -- 20%
Commercial Paper (Highest Quality) X -- X
Investment Company Shares 10% 10% 10%
Mortgage-Backed Securities *(2) X *
Municipal Securities -- -- X
Repurchase Agreements X X 20%
Restricted Securities * * *
Securities of Foreign Issuers X -- --
Short-Term Corporate Obligations X -- --
Supranational Agency Obligations X -- --
U.S. Treasury and Agency Obligations X X 20%
Zero Coupon Obligations X X X
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3%
Illiquid Securities 10% 10% 10%
Securities Lending 33 1/3% 33 1/3% 33 1/3%
Standby Commitments X X X
When-Issued Securities 33 1/3% 33 1/3% 33 1/3%
LEVERAGING AND HEDGING TOOLS
Variable and Floating Rate Instruments X X X
</TABLE>
(1) MAY INVEST UP TO 25% OF ITS ASSETS IN OBLIGATIONS ISSUED BY FOREIGN BRANCHES
OF U.S. BANKS AND BY LONDON BRANCHES OF FOREIGN BANKS.
(2) INCLUDES PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
<PAGE>
PROSPECTUS 17
Under normal market conditions, the Funds will follow the practices and
policies outlined above. However, for temporary defensive purposes during
periods when its Adviser determines that market conditions warrant each Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations. When the Funds are investing for
temporary defensive purposes, they will not be pursuing their respective
investment objectives.
INVESTMENT RESTRICTIONS
Each Fund will not invest more than 25% of its assets in any one industry.
With respect to 75% of its assets, each Fund will not:
- invest more than 5% of its assets in the securities of any one issuer;
- purchase more than 10% of the outstanding voting securities of any one
issuer.
MORE ABOUT INVESTMENTS AND HEDGING TOOLS
The following is a description of some of the permitted investments for the
Funds. Further discussion is contained in the SAI.
BANK OBLIGATIONS are SHORT-TERM OBLIGATIONS issued by U.S. and foreign
banks, including bankers' acceptances, certificates of deposit custodial
receipts, and time deposits. Eurodollar and Yankee Bank obligations are U.S.
dollar-denominated certificates of deposit or time deposits issued outside the
U.S. by foreign branches of U.S. banks or by foreign banks. Yankee bank
obligations are U.S. dollar denominated obligations issued in the U.S. by
foreign banks.
CORPORATE DEBT SECURITIES are DEBT OBLIGATIONS issued by corporations with
maturities exceeding 270 days.
DEBT OBLIGATIONS represent money borrowed that obligates the issuer, (E.G.,
a corporation, municipality, government, government agency) to repay the
borrowed amount at maturity (when the obligation is due and payable) and usually
to pay the holder interest at specific times (E.G., bonds, notes, debentures).
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.
INVESTMENT COMPANY SHARES are shares of other mutual funds which may be
purchased by the Funds to the extent consistent with applicable law.
MONEY MARKET INSTRUMENTS are high quality, dollar-denominated, SHORT-TERM
OBLIGATIONS, including BANK OBLIGATIONS, U.S. TREASURY OBLIGATIONS, U.S.
GOVERNMENT AGENCY OBLIGATIONS, and SHORT-TERM CORPORATE OBLIGATIONS.
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, adjustable rate
mortgages, and floating rate mortgages.
<PAGE>
18 PROSPECTUS
During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities may accelerate. It is often not possible
to predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a
U.S. Government agency representing an interest in a pool of mortgage loans.
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 are mortgage-backed securities issued by a
non-governmental entity such as a trust. 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
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators, or investors in mortgage loans.
Each class of a CMO is issued with a specific fixed or floating interest 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
than their stated maturities or final distribution dates. This can result in a
loss of all, or part, of any premium paid.
REMICS are CMOs that qualify for special tax treatment under the Internal
Revenue Code. They invest in certain mortgages that are principally secured by
interests in real property. These securities are often guaranteed as to the
payment of principal and/or interest as payments are required to be made on the
underlying mortgage participation certificates.
STRIPPED MORTGAGE-BACKED SECURITIES (SMBS) are usually structured with two
classes that receive specified proportions of the monthly interest and principal
payments from a pool of mortgage securities. Once class may receive all of the
interest payments, and the other class may receive all of the principal
payments, SMBs are extremely sensitive to changes in interest rates because of
the impact of prepayment of principal on the underlying mortgage securities.
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.
MUNICIPAL SECURITIES consist of:
- 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;
- 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.
<PAGE>
PROSPECTUS 19
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 totally
dependent 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 the
payment.
REPURCHASE AGREEMENTS are agreements by which a Fund obtains a security and
simultaneously agrees 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.
A Fund will enter into repurchase agreements only with financial institutions
judged 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.
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 equal to at least 100% of the market value of
the loaned securities. A Fund continues to receive interest on the securities
loaned while simultaneously earning interest on the investment of cash
collateral.
SECURITIES OF FOREIGN ISSUERS are securities issued by foreign corporation,
including foreign branches of U.S. banks and foreign banks, and by foreign
governments or their agencies or instrumentalities. There are special risk
considerations associated with foreign securities.
SHORT-TERM OBLIGATIONS are DEBT OBLIGATIONS maturing (becoming payable) in
397 days or less, including COMMERCIAL PAPER and other short-term corporation
obligations. Short-term corporate obligations are short-term obligations issued
by corporations.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder 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.
SUPRANATIONAL AGENCY OBLIGATIONS -- Supranational entities are established
through the joint participation of several governments, including 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.
U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some of these securities
are supported by the full faith
<PAGE>
20 PROSPECTUS
and credit of the U.S. Treasury, others are supported by the right of the issuer
to borrow from the Treasury, and others are supported only by the credit of the
agency or instrumentality.
U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the
U.S. Treasury. They also consist of separately traded interest and principal
component parts of these 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 involve certain obligations that 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES 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 interest rate realized on these securities is fixed
as of the purchase date and no interest accrues to the Fund before settlement.
ZERO COUPON OBLIGATIONS are DEBT OBLIGATIONS that do not bear any interest,
but instead are issued at a deep discount from face value or 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 great price volatility than similar securities that are issued at face
value or par and pay interest periodically.
<PAGE>
PROSPECTUS 21
SUNTRUST AND INVESTMENT SERVICES OFFICES OF SUNTRUST BANKS, INC. AFFILIATE
BANKS:
FLORIDA: (STATEWIDE TOLL FREE) 1-800-526-1177
SUNTRUST SECURITIES, INC. -- FLORIDA
200 S. Orange Avenue
Tower 10
Orlando, FL 32801
(407) 237-4380
1-800-432-4760, ext. 4380
501 E. Las Olas Boulevard
Ft. Lauderdale, FL 33301
(954) 765-7422
777 Brickell Avenue
Miami, FL 33131
(305) 579-7450
401 E. Jackson Street
Tampa, FL 33602
(813) 224-2517
Osceola Office
111 E. Osceola Street
Stuart, FL 34994
(407) 223-6012
Belnova Office
120 S. Ridgewood Avenue
Daytona Beach, FL 32114
(904) 258-2390
200 W. Forsyth Street
Jacksonville, FL 32202
(904) 632-2534
Pelican Bay Office
801 Laurel Oak Drive
Naples, FL 33963
(941) 598-0515
210 Security Square
Winter Haven, FL 33880
(941) 297-6855
One East Jefferson Street
Brooksville, FL 34601
(352) 754-5798
3522 Thomasville Road
Tallahassee, FL 32308
(904) 298-5064
11 Hoffman Drive
Gulf Breeze, FL 32561
(904) 435-1264
GEORGIA:
SUNTRUST SECURITIES, INC. -- GEORGIA
55 Park Place
First Floor
Atlanta, GA 30303
(404) 588-8108
1-800-600-6350
101 N. Lumpkin Street
Athens, GA 30601
(706) 354-5346
2815 Wrightsboro Road
Augusta, GA 30909
(706) 821-2015
<PAGE>
22 PROSPECTUS
606 Cherry Street
Macon, GA 31201
(912) 755-5175
1246 First Avenue
Columbus, GA 31901
(706) 649-3631
33 Bull Street, Suite 208
Savannah, GA 31401
(912) 944-1165
410 W. Broad Avenue
Albany, GA 31701
(912) 430-5468
Coffee County Branch
201 S. Peterson Avenue
Douglas, GA 31533
(912) 383-5242
510 Gloucester Street
Brunswick, GA 31520
(912) 262-5322
TENNESSEE:
SUNTRUST SECURITIES, INC. -- TENNESSEE
424 Church Street
4th Floor
Nashville, TN 37219
(615) 748-4477
1-800-932-2652
736 Market Street
Chattanooga, TN 37402
(423) 757-3005
TN WATS 1-800-572-7306, Ext. 3005
Bordering States WATS
1-800-874-1083, Ext. 3005
Out of State WATS
1-800-251-6266, Ext. 3005
9950 Kingston Pike
Knoxville, TN 37997
(423) 544-2181
1-800-456-1177
207 Mockingbird Lane
Johnson City, TN 37604
(423) 461-1005
25 Public Square
Lawrenceburg, TN 38464
(615) 762-3511
ALABAMA:
SUNTRUST SECURITIES, INC. -- ALABAMA
201 South Court Street
Florence, AL 35630
(205) 767-8537
<PAGE>
PROSPECTUS 23
<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISOR
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
* DISTRIBUTOR
SEI Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* 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 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
24 PROSPECTUS
Additional information about the Funds is included in the SAI dated October
1, 1997. The SAI has been filed with the SEC and is incorporated by reference
into this Prospectus. You may obtain a copy of the SAI, or of the annual or
semi-annual report, without charge by calling 1-800-874-4770, or by contacting
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR.
<PAGE>
Blank Page
<PAGE>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES
MONEY MARKET FUND
INVESTMENT ADVISOR TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios. This Prospectus sets forth concisely
the information about the Shares of the Classic Institutional Cash Management
Money Market Fund and the Classic Institutional U.S. Treasury Securities Money
Market Fund (each a "Fund" and, together, the "Classic Institutional Money
Market Funds"). THE CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET
FUND SEEKS TO MANAGE ITS INVESTMENTS IN A MANNER CONSISTENT WITH THE CRITERIA
FOR OBTAINING AN AAA RATING BY MOODY'S INVESTORS SERVICE AND/OR AN AAA RATING BY
STANDARD & POOR'S CORPORATION. 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
Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling
1-800-874-4770. 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 NOR HAS THE SECURITIES AND EXCHANGE 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 ADVISOR OR ANY OF ITS 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, 1997
<PAGE>
2
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
3
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 Investments Distribution Co.
(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.
Shares of the Classic Institutional Money Market Funds are offered primarily to
various types of institutional investors ("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.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary...................... 4
Financial Highlights................. 5
The Trust............................ 6
Funds and Investment Objectives...... 6
Investment Policies and Strategies... 6
General Investment Policies and
Strategies.......................... 7
Investment Risks..................... 7
Investment Limitations............... 8
Performance Information.............. 9
Purchase of Fund Shares.............. 9
Redemption of Fund Shares............ 10
Dividends and Distributions.......... 10
Tax Information...................... 11
STI Classic Funds Information........ 12
The Trust............................ 12
Board of Trustees.................... 12
Investment Advisor................... 12
Banking Laws......................... 13
Distribution......................... 13
Administration....................... 14
Transfer Agent and Dividend
Disbursing Agent.................... 14
Custodian............................ 14
Legal Counsel........................ 14
Independent Public Accountants....... 14
Other Information.................... 14
Voting Rights........................ 14
Reporting............................ 15
Shareholder Inquiries................ 15
Description of Permitted
Investments......................... 15
Appendix............................. A-1
</TABLE>
<PAGE>
4
EXPENSE SUMMARY
Below is a summary of the estimated annual operating expenses for shares of each
Classic Institutional Money Market Fund. A hypothetical example based on the
summary is also shown. Actual expenses may vary.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASSIC
INSTITUTIONAL CLASSIC INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY SECURITIES
MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Management Fees (after voluntary reductions)(1)............. -- --
All Other Expenses (after voluntary reductions)............. .20% .20%
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after voluntary reductions)(2).... .20% .20%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 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: Classic Institutional Cash Management
Money Market Fund--.20%, Classic Institutional U.S. Treasury Securities
Money Market Fund-- .20%. See "Investment Advisors." A person that purchases
shares through an account with a financial institution may be charged
separate fees by the financial institution.
(2) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Classic Institutional Cash Management Money
Market Fund--.40%, Classic Institutional U.S. Treasury Securities Money
Market Fund--.40%.
<TABLE>
<CAPTION>
CLASSIC
INSTITUTIONAL CLASSIC INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY SECURITIES
MONEY MARKET FUND MONEY MARKET FUND
<S> <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:
One Year................................................ $ 2 $ 2
Three Years............................................. 6 6
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON THE ESTIMATED 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. The purpose of this table is
to assist the investor in understanding the various costs and expenses that may
be directly or indirectly borne by investors in the Trust.
<PAGE>
5
FINANCIAL HIGHLIGHTS
The table that follows presents information about the investment results of the
Classic Institutional Money Market Funds. The financial highlights for the Funds
for the periods from inception through May 31, 1997 have been audited by Arthur
Andersen LLP, independent public accountants, whose report appears in STI
Classic Fund's annual report and accompanies the Statement of Additional
Information. The annual report for the Fund, which contains more information
about performance, is available at no charge by calling 1-800-874-4770.
For the Period From Inception Through May 31, 1997
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET REALIZED
AND
NET ASSET UNREALIZED DISTRIBUTIONS
VALUE NET GAINS OR 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>
- ---------------------------------------------------------
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
- ---------------------------------------------------------
1997*.................... $ 1.00 $ 0.02 -- $ (0.02 ) -- $ 1.00 2.51 %
- --------------------------------------------------------------
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------
1997*.................... $ 1.00 $ 0.02 -- $ (0.02 ) -- $ 1.00 2.46 %
<CAPTION>
RATIO OF NET
RATIO OF NET RATIO OF EXPENSES INVESTMENT INCOME
RATIO OF INVESTMENT TO AVERAGE NET TO AVERAGE NET
NET ASSETS EXPENSES TO INCOME TO ASSETS (EXCLUDING ASSETS (EXCLUDING
END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND
PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
------------ ------------- ------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------
CLASSIC INSTITUTIONAL CASH
- ---------------------------
1997*.................... $ 395,673 0.06 % 5.49 % 0.52 % 5.03 %
- ---------------------------
CLASSIC INSTITUTIONAL U.S.
- ---------------------------
1997*.................... $ 20,238 0.09 % 5.27 % 0.51 % 4.85 %
</TABLE>
*Commenced operations on December 12, 1996. Total return is for the period
indicated and has not been annualized. All ratios for the period have been
annualized.
<PAGE>
6
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. This
Prospectus relates to the Classic Institutional Money Market Funds described
below.
FUNDS AND INVESTMENT OBJECTIVES
THE CLASSIC INSTITUTIONAL CASH MANAGEMENT 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
issued by corporations and the U.S. Government.
THE CLASSIC INSTITUTIONAL U.S. TREASURY 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 repurchase agreements ("U.S. Treasury obligations")
with approved dealers collateralized by U.S. Treasury obligations.
It is a fundamental policy of each Classic Institutional 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 either Fund will achieve its investment objective
or maintain a net asset value of $1.00 per share on a continuous basis.
Each Classic Institutional 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. The Classic
Institutional U.S. Treasury Securities Money Market Fund seeks to manage its
investments in a manner consistent with the criteria for obtaining an Aaa rating
by Moody's Investors Service ("Moody's") and/or an AAA rating by Standard &
Poor's Corporation ("S&P"). These requirements will also limit the Classic
Institutional U.S. Treasury Securities Money Market Fund's ability to generate
high current income. For a further discussion of these rules, see "Description
of Permitted Investments."
INVESTMENT POLICIES AND STRATEGIES
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
The Classic Institutional Cash Management Money Market Fund will invest in money
market instruments denominated in U.S. dollars consisting of: (i) U.S. Treasury
obligations; (ii) receipts; (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 nationally recognized
statistical rating organizations (an "NRSRO") as described in the "Appendix" or,
if not rated, determined by the 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
<PAGE>
7
members of the Federal Reserve System, the Federal Deposit Insurance
Corporation, or savings and loan associations; (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 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 Advisor to be of comparable quality; (ix) high quality medium
term notes; (x) municipal securities; (xi) mortgage-backed securities and (xii)
asset-backed securities. 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. The Fund may also purchase restricted securities. 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.
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
The Classic U.S. Treasury Securities Money Market Fund will invest exclusively
in U.S. Treasury obligations and any repurchase agreements with dealers will be
selected pursuant to guidelines adopted by the Trust's Board of Trustees and
collateralized by U.S. Treasury obligations.
The Fund, however, seeks to invest exclusively in securities that would qualify
to be rated in the highest ratings category of an NRSRO, such as S&P or Moody's.
As a result, the Fund's ability to maintain an average dollar-weighted portfolio
maturity to the maximum extent permitted by Rule 2a-7 will be limited, and the
Fund's performance may be affected adversely.
GENERAL INVESTMENT POLICIES AND STRATEGIES
In the event that a security owned by a Fund is downgraded below the stated
rating categories, the Advisor will review and take appropriate action with
regard to the security.
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 10% 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. Rule 144A securities and Section 4(2)
commercial paper that meet the criteria established by the Board of Trustees of
the Trust may be considered liquid.
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
FOREIGN SECURITIES
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
<PAGE>
8
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 the Fund's Shareholders. Foreign securities often trade with
less frequency and volume than domestic securities and, therefore, may exhibit
greater price volatility.
GOVERNMENT SECURITIES
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.
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.
ZERO COUPON OBLIGATIONS
Each Fund may invest, subject to its investment objective and policies, in zero
coupon obligations. Zero coupon obligations are sold at original issue discount
and do not make periodic payments. Zero coupon obligations may be subject to
greater fluctuations in value due to interest rate changes 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, the Fund may have to sell portfolio
securities to distribute the income attributable to these obligations and
securities at a time when the 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 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 assets in "first tier" securities of a single
issuer for a period of up to three business days.
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
<PAGE>
9
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, its agencies and instrumentalities,
repurchase agreements involving such securities and, with respect to only the
Classic Institutional Cash Management Money Market Fund, 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.
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 each Classic Institutional Money Market Fund may advertise its
"current yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"current yield" of a Fund refers to the income generated by an investment in the
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.
PURCHASE OF FUND SHARES
Shares of the Fund are sold primarily to various types of institutional
investors, 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. Shares are sold without a sales charge, although
the institutional investors may charge their customer accounts for services
provided in connection with the purchase of shares. The minimum initial
investment is $10,000,000. Institutional investors 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 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 institutional
investors. Shares will be held of record by the institutional investors,
although customers may have or be given the right to vote the shares depending
upon the terms of their relationship with the institutional investor.
Confirmations of share purchases and redemptions will be sent to the
institutional investor 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, shares cannot be purchased or redeemed for
same day settlement on days the Federal Reserve is closed.
<PAGE>
10
Purchase orders for the Funds will be effective as of the Business Day received
by the Transfer Agent and eligible to receive dividends declared the same day if
the Transfer Agent receives the order before 1:00 p.m. Eastern time, and the
Custodian receives federal funds before 4:00 p.m. Eastern time on such day.
Otherwise, purchase orders for the 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 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.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or
Shareholder(s).
Neither the Trust's Transfer Agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon telephone or wire instructions
reasonably believed to be genuine. The Trust maintains procedures, including
identification methods and other means, for ascertaining the identity of callers
and authenticity of instructions.
REDEMPTION OF FUND SHARES
An order to redeem shares must be transmitted to the Transfer Agent by the
institutional investor as the record owner of shares. Institutional investors
may establish procedures for their customers to request redemption of shares
held in their account with the institutional investor. Customers should contact
their institutional investor for information concerning these procedures.
Redemption orders must be received by the Transfer Agent on a Business Day
before 1:00 p.m. Eastern time. Redemption orders received after the time noted
above will 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.
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) of each of the
Classic Institutional 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 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. 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
<PAGE>
11
paid within ten Business Days after the end of each month in the form of
additional 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 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. 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
The Institutional Money Market Funds 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. 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 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.
A sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
<PAGE>
12
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 ADVISOR
Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the
Institutional Money Market Funds. As of May 31, 1997, Trusco had approximately
$17.4 billion in assets under management. The principal business address of
Trusco is 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303.
The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $52.5
billion as of December 31, 1996. 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 $53.4 billion as of December 31, 1996.
The Trust and the Advisor have entered into an advisory agreement (the "Advisory
Agreement"). Under the Advisory Agreement, the Advisor makes the investment
decisions for the assets of the Funds and continuously reviews, supervises and
administers each Fund's investment program. The Advisor discharges its
responsibilities subject to the supervision of, and policies established by, the
Trustees of the Trust. STI CLASSIC FUNDS ARE NOT DEPOSITS, ARE NOT INSURED OR
GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY, AND ARE NOT ENDORSED OR
GUARANTEED BY AND DO NOT CONSTITUTE OBLIGATIONS OF SUNTRUST BANKS, INC. OR ANY
OF ITS AFFILIATES. INVESTMENTS IN THE 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 each Fund, the Advisor may execute brokerage or other agency
transactions through affiliates of the Advisor.
For the services provided and expenses incurred pursuant to the Advisory
Agreement: Trusco is entitled to receive advisory fees
<PAGE>
13
computed daily and paid monthly at the annual rate of .20% of the average daily
net assets of each Fund.
From time to time, the Advisor may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a
Fund. Currently, the Advisor has agreed to voluntary reductions in its fees in
amounts necessary to maintain the total operating expenses at the amounts set
forth in the Expense Summary. Voluntary reductions of fees may be terminated at
anytime.
For the fiscal year ended May 31, 1997, the Advisor received advisory fees
computed daily and paid monthly at the annual rate of .00% of the average daily
net assets of each Fund.
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
Advisor believes that it may perform the services for STI Classic Funds
contemplated by its Advisory Agreement described in this Prospectus without
violation of applicable banking laws or regulations. However, future changes in
legal requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent the Advisor from continuing to perform services for the Funds. If the
Advisor was prohibited from providing services to the Funds, the Board of
Trustees would consider selecting another qualified firm. Any new investment
advisory agreements would be subject to Shareholder approval.
If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the Advisor, or its affiliates, would consider the
possibility of offering to perform additional services for 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 Advisor, 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 Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company ("SEI Investments"), and the Trust are parties to a
distribution agreement. No compensation is paid to the Distributor for
distribution services. Shares of the Classic Institutional Money Market Funds
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.
Each Fund may execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
<PAGE>
14
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as Administrator to 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, which is calculated daily and paid
monthly, at an annual rate as follows:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS FEE
- --------------------------------------------- ---------
<S> <C>
$1 - $1 billion .10%
over $1 billion to $5 billion .07%
over $5 billion to $8 billion .05%
over $8 billion to $10 billion .045%
over $10 billion .04%
</TABLE>
From time to time, the Administrator may voluntarily waive all or a portion of
its fee to limit the net expenses of the Funds to the amounts in the Funds'
Expense Summary.
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 Funds as required by the Investment Company Act of 1940.
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>
15
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 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.
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 or
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.
<PAGE>
16
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.
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 interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and 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.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"): 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
<PAGE>
17
earlier than 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 investes 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.
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.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax-exempt commercial paper 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.
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.
TAXABLE MUNICIPAL SECURITIES -- Taxable municipal securities are municipal
securities the interest on which is not exempt from federal income tax. Taxable
municipal securities include "private activity bonds" that are issued by or on
behalf of states or political subdivisions thereof to finance privately-owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking lots, and low income
housing. The payment of the principal and interest on private activity bonds is
not backed by a pledge of tax revenues, and is dependent solely on the ability
of the facility's user to meet its financial obligations, and may be secured by
a pledge of real and personal property so financed. Interest on these bonds may
not be exempt from federal income tax.
<PAGE>
18
RECEIPTS -- Receipts are interests in separately traded interest and principal
component parts of U.S. Treasury obligations that are issued by banks and
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 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 amortized over the life of the
security and such amortization will constitute the income earned on the security
for both accounting and tax purposes. Because of these features, receipts may be
subject to greater price volatility than interest paying U.S. Treasury
obligations. See also "Taxes".
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 NRSROs 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 securities 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
<PAGE>
19
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.
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.
SUPRANATIONAL AGENCY OBLIGATIONS -- 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.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits are considered to be illiquid
securities.
U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Federal Farm Credit Bank, the
Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association 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., Fannie Mae 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.
<PAGE>
20
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.
A 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
X. COMMERCIAL PAPER AND SHORT-TERM RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc.
("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 ADVISOR
Trusco Capital Management, Inc. 50 Hurt Plaza
Suite 1400
Atlanta, GA 30303
* DISTRIBUTOR
SEI Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* 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 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
DISTRIBUTOR
SEI Investments
Distribution Co.
PROSPECTUS
CLASSIC INSTITUTIONAL
CASH MANAGEMENT
MONEY MARKET FUND
CLASSIC INSTITUTIONAL
U.S. TREASURY SECURITIES
MONEY MARKET FUND
INVESTMENT ADVISOR
TRUSCO CAPITAL MANAGEMENT, INC.
OCTOBER 1, 1997
[LOGO]
<PAGE>
PROSPECTUS
GENERAL INFORMATION
AND CONTENTS
<TABLE>
<C> <S>
1 ABOUT THE TRUST
---
1 CAPITAL GROWTH FUND
---
3 VALUE INCOME STOCK FUND
---
5 SUNBELT EQUITY FUND
---
7 INVESTMENT GRADE BOND FUND
---
9 SHORT-TERM BOND FUND
---
11 PRIME QUALITY MONEY MARKET FUND
---
14 RISK CONSIDERATIONS
---
19 PURCHASING FUND SHARES
---
21 TAX INFORMATION
---
25 FUND INVESTMENTS
---
26 MORE ABOUT INVESTMENTS AND HEDGING TOOLS
---
</TABLE>
OCTOBER 1, 1997
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 gives you important information about the Funds that you
should know before investing. Please read this Prospectus, and keep it for
future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THE TRUST'S SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED OR
APPROVED OF THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY STATEMENT OR
INDICATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS:
- ARE NOT BANK DEPOSITS
- ARE NOT FEDERALLY INSURED
- ARE NOT GUARANTEED BY ANY BANK OR GOVERNMENT AGENCY
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS.
INVESTING IN THE FUNDS INVOLVES RISK. YOU COULD LOSE MONEY.
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET FUND WILL
BE ABLE TO MAINTAIN A CONSTANT VALUE OF $1.00 PER SHARE.
<PAGE>
PROSPECTUS 1
ABOUT THE TRUST
STI CLASSIC FUNDS is a diversified, open-end management investment
company.The Funds provide a convenient and economical way for you to invest in a
number of professionally managed portfolios of securities. This Prospectus
relates to the Trust Shares of the Capital Growth Fund, Value Income Stock Fund,
and Sunbelt Equity Fund, (the Equity Funds) Investment Grade Bond Fund and
Short-Term Bond Fund (the Fixed Income Funds) and Prime Quality Money Market
Fund (the Money Market Fund).
ABOUT MONEY MARKET FUNDS
The Money Market Fund is governed by SEC rules which impose certain quality,
maturity, and diversification requirements. The Fund's assets are valued using
the amortized cost method, which enables the Money Market Fund to maintain a
stable net asset value per share. All securities purchased by the Money Market
Fund must have remaining maturities of 13 months or less.
FUND INFORMATION -- EQUITY FUNDS
CAPITAL GROWTH FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of undervalued
equity securities traded in the United States.
Based on its analysis of overall business cycles, the Advisor rotates the
Fund's investments between various market sectors.
The Fund may invest in securities of foreign issuers, high yield securities,
and shares issued by money market investment companies. To some extent, the Fund
may invest in other securities and engage in other investment practices. See
"FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Capital Growth Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Event Risk;
- High-Yield Security Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
<PAGE>
2 PROSPECTUS
FUND MANAGEMENT
[LOGO]
Mr. Anthony Gray has managed the Capital Growth Fund since it began
operating. He has more than 30 years of investment experience, and has served as
Chairman and Chief Executive Officer of STI Capital Management, N.A. since 1979.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the CAPITAL
GROWTH FUND.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.05%
Other Expenses After Fee Waivers .10%
Total Fund Operating Expenses After Fee Waivers(2) 1.15%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.25%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY
TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
You 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. $12 $37 $63 $ 140
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 3
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the CAPITAL GROWTH FUND. The financial highlights
for the Fund for the periods from inception through May 31, 1997 have
been audited by Arthur Andersen LLP, independent public accountants,
whose report appears in STI Classic Fund's annual report and accompanies
the Statement of Additional Information. The annual report for the Fund,
which contains more information about performance, is available at no
charge by calling 1-800-874-4770.
- ---------------------
CAPITAL GROWTH FUND
- ---------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $14.90 $0.12 $3.13 $(0.12) $(2.94) $15.09 24.66%
1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97%
1995 11.99 0.16 0.57 (0.14) (0.40) 12.18 6.63%
1994 11.95 0.16 0.31 (0.17) (0.26) 11.99 3.87%
1993(1) 10.36 0.12 1.57 (0.10) -- 11.95 17.90%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
END OF TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
------------ ---------- ---------- --------------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $1,085,128 1.15% 0.83% 1.25% 0.73% 141% $0.0620
1996 981,498 1.15% 0.90% 1.27% 0.78% 156% --
1995 984,205 1.15% 1.38% 1.28% 1.25% 128% --
1994 891,870 1.15% 1.25% 1.29% 1.11% 124% --
1993(1) 507,692 1.15%* 1.43%* 1.28%* 1.30%* 95% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON JUNE 8, 1992.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
VALUE INCOME STOCK FUND
FUND OBJECTIVE
[LOGO]
The Value Income Stock Fund seeks to provide current income with a
secondary goal of achieving capital appreciation by investing primarily in
equity securities.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund strives to provide a yield, above that of the S&P 500 Stock
Index. The Fund primarily invests in equity securities of companies that have a
market capitalization of at least $500 million and that have a history of paying
regular dividends.
The Fund may invest in securities of foreign issuers, high yield securities,
futures, options, and securities issued by companies with smaller market
capitalizations. To some extent, the Fund may invest in other securities and
engage in other investment practices. See "FUND INVESTMENTS."
<PAGE>
4 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Value Income Stock Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Small Issuer Risk;
- Credit Risk;
- Event Risk;
- Hedging Risks;
- High-Yield Security Risks;
- Foreign Security Risks and;
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. Mills Riddick, CFA, is Senior Vice President, STI Capital
Management, N.A. and has managed the Value Income Stock Fund since April, 1995.
He has more than 15 years of investment experience, and has been a value
portfolio manager at STI Capital Management since 1989. Prior to joining STI
Capital Management, N.A., Mr. Riddick served as a broker with Drexel Burnham
Lambert.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the VALUE
INCOME STOCK FUND.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees .80%
Other Expenses .15%
Total Fund Operating Expenses .95%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
You 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. $10 $30 $53 $ 117
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 5
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the VALUE INCOME STOCK FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -------------------------
VALUE INCOME STOCK FUND
- -------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND NET
NET ASSET NET UNREALIZED DISTRIBUTIONS ASSET
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS VALUE
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED END OF TOTAL
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
1997 $13.15 $0.30 $2.32 $(0.30) $(1.76) $ 13.71 22.18%
<S> <C> <C> <C> <C> <C> <C> <C>
1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91%
1995 10.54 0.32 1.56 (0.32) (0.51) 11.59 19.06%
1994 10.23 0.29 0.70 (0.32) (0.36) 10.54 9.95%
1993(1) 10.00 0.11 0.16 (0.04) -- 10.23 9.05%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
NET INVESTMENT AVERAGE NET TO AVERAGE NET
ASSETS RATIO OF INCOME ASSETS ASSETS
END OF EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
PERIOD TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
(000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
------------ ---------- ---------- --------------- --------------- -------- --------
1997 $1,488,062 0.91% 2.40% 0.91% 2.40% 105% $0.0609
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1,244,399 0.92% 2.86% 0.92% 2.86% 134% --
1995 991,977 0.95% 3.16% 0.95% 3.16% 126% --
1994 573,082 0.88% 3.21% 0.97% 3.12% 149% --
1993(1) 137,761 0.80%* 4.32%* 0.96%* 4.16%* 35% --
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
(1) COMMENCED OPERATIONS ON FEBRUARY 12, 1993.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
SUNBELT EQUITY FUND
FUND OBJECTIVE
[LOGO]
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 U.S.
Current income will not be an important criterion of investment selection and
any such income should be considered incidental.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in a diversified portfolio of equity
securities of
U.S. companies headquartered and/or conducting a substantial portion of their
operations in the southern region of the U.S. Stocks chosen for the Fund are
primarily 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
- Louisiana
<PAGE>
6 PROSPECTUS
The Fund may invest in high yield securities, futures and options. To some
extent, the Fund may invest in other securities and engage in other investment
practices. See "FUND INVESTMENTS."
RISK CONSIDERATIONS
[LOGO]
The Sunbelt Equity Fund is subject to the following types of risk:
- Fund Risk;
- Market Risk;
- Credit Risk;
- Geographic Risk;
- Hedging Risks; and
- High-Yield Security Risks.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. James Foster has managed the Sunbelt Equity Fund since it began
operating. He has served as Vice President of Trusco Capital Management, Inc.
since 1989, and has more than 27 years of investment experience.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the SUNBELT
EQUITY FUND.
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) 1.04%
Other Expenses .11%
Total Fund Operating Expenses After Fee Waivers(2) 1.15%
</TABLE>
(1) ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE 1.15%.
(2) ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE 1.26%.THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS YEARS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
You 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. $12 $37 $63 $140
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 7
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the SUNBELT EQUITY FUND. The financial highlights
for the Fund for the periods from inception through May 31, 1997 have
been audited by Arthur Andersen LLP, independent public accountants,
whose report appears in STI Classic Fund's annual report and accompanies
the Statement of Additional Information. The annual report for the Fund,
which contains more information about performance, is available at no charge by
calling 1-800-874-4770.
- --------------------
SUNBELT EQUITY FUND
- --------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN
--------- ---------- ------------ ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $14.11 $(0.09) $ 0.25 $-- $(0.99) $ 13.28 1.48%
1996 10.03 (0.04) 4.32 -- (0.20) 14.11 43.19%
1995 9.70 (0.01) 0.38 -- (0.04) 10.03 3.81%
1994(1) 10.00 -- (0.30) -- -- 9.70 (2.99)%+
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO AVERAGE
END OF TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2) RATE**
------------ ---------- ---------- --------------- --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $ 381,371 1.15% (0.65)% 1.26% (0.76)% 72.17% $ 0.0674
1996 412,430 1.15% (0.34)% 1.28% (0.47)% 106%
1995 258,908 1.15% (0.12)% 1.30% (0.27)% 80%
1994(1) 128,280 1.15%* (0.19)%* 1.58%* (0.62)%* 21%
</TABLE>
* ANNUALIZED.
** AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
+ CUMULATIVE SINCE COMMENCEMENT OF OPERATIONS.
(1) COMMENCED OPERATIONS ON JANUARY 3, 1994.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS
AND ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
FUND INFORMATION --
FIXED-INCOME FUNDS
INVESTMENT GRADE BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in debt obligations, such as corporate debt
obligations, and U.S. Treasury and Government agency obligations. The Fund
invests only in investment grade obligations and may invest in mortgage- and
asset-backed securities, securities of foreign issuers, variable and floating
rate instruments which may be subject to "caps" or "floors," futures and
options. To some extent, the Fund may invest in other securities and engage in
other investment practices. See "FUND INVESTMENTS."
It is anticipated that the Fund's average weighted maturity will range from
four to ten
<PAGE>
8 PROSPECTUS
years, which may impact the Fund's exposure to interest rate risk. The Fund may
shorten its average weighted maturity to as little as 90 days for temporary
defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Investment Grade Bond Fund is subject to the following types of
risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Prepayment Risk;
- Hedging Risks;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. L. Earl Denney, CFA, has managed the Investment Grade Bond Fund
since it began operating. He has been Senior Vice President of STI Capital
Management, N.A. since 1983. Mr. Denney has over 20 years experience in fixed
income investment management. Prior to joining STI Capital Management, N.A., he
was fixed income portfolio manager with American National Bank.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
INVESTMENT GRADE BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .64%
Other Expenses .11%
Total Fund Operating Expenses After Fee Waivers(2) .75%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .74%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .85%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
You 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. $ 8 $ 24 $ 42 $ 93
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 9
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the INVESTMENT GRADE BOND FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------
INVESTMENT GRADE BOND FUND
- -----------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.07 $0.60 $ 0.09 $(0.60) $ -- $10.16 6.99% $ 633,646 0.75%
1996 10.26 0.60 (0.19) (0.60) -- 10.07 4.02% 599,514 0.75%
1995 9.89 0.61 0.37 (0.61) -- 10.26 10.39% 543,308 0.75%
1994 10.45 0.50 (0.36) (0.50) (0.20) 9.89 1.17% 460,538 0.75%
1993(1) 10.09 0.45 0.36 (0.45) -- 10.45 9.34%* 336,132 0.74%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 5.89% 0.85% 5.79% 298%
1996 5.81% 0.87% 5.69% 184%
1995 6.22% 0.88% 6.09% 238%
1994 4.77% 0.88% 4.64% 259%
1993(1) 5.14%* 0.87%* 5.01%* 299%
</TABLE>
* ANNUALIZED.
(1)COMMENCED OPERATIONS ON JULY 16, 1992.
(2)A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
SHORT-TERM BOND FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund primarily invests in debt obligations, such as corporate debt
obligations and U.S. Treasury and Government agency obligations. The Fund
invests only in investment grade obligations and may invest in securities of
foreign issuers, mortgage- and asset-backed securities, variable and floating
rate instruments, futures and options. To some extent, the Fund may invest in
other securities and engage in other investment practices. See "FUND
INVESTMENTS."
The Fund intends to maintain a dollar-weighted average maturity of 3 years
or less, which may impact the Fund's exposure to interest rate risk. The Fund
may shorten its average
<PAGE>
10 PROSPECTUS
weighted maturity to as little as 90 days for temporary defensive purposes.
RISK CONSIDERATIONS
[LOGO]
The Short-Term Bond Fund is subject to the following types of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Event Risk;
- Hedging Risks;
- Prepayment Risk;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, see "RISK CONSIDERATIONS."
FUND MANAGEMENT
[LOGO]
Mr. David Yealy has managed the Short-Term Bond Fund since July,
1996. He joined Trusco Capital Management, Inc. in 1991, and currently serves as
a Vice President.
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the
SHORT-TERM BOND FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .51%
Other Expenses .14%
Total Fund Operating Expenses After Fee Waivers(2) .65%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .79%. THESE FEE WAIVERS ARE VOLUNTARY AND MAY BE DISCONTINUED AT ANY TIME
AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS WAIVING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
You 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. $ 7 $ 21 $ 36 $ 81
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 11
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the SHORT-TERM BOND FUND. The financial highlights
for the Fund for the periods from inception through May 31, 1997 have
been audited by Arthur Andersen LLP, independent public accountants,
whose report appears in STI Classic Fund's annual report and accompanies
the Statement of Additional Information. The annual report for the Fund,
which contains more information about performance, is available at no charge by
calling 1-800-874-4770.
- -----------------------
SHORT-TERM BOND FUND
- -----------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS RATIO OF
VALUE INVESTMENT NET GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000) NET ASSETS
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.86 $0.53 $ 0.07 $(0.53) $(0.03) $ 9.90 6.30% $89,701 0.65%
1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45% 91,156 0.65%
1995 9.79 0.53 0.19 (0.53) -- 9.98 7.60% 60,952 0.65%
1994 10.01 0.42 (0.21) (0.42) (0.01) 9.79 2.02% 34,772 0.65%
1993(1) 10.00 0.08 0.01 (0.08) -- 10.01 4.45%* 25,334 0.64%*
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
INCOME ASSETS ASSETS
(LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO
AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE(2)
---------- --------------- --------------- --------
<S> <C> <C> <C> <C>
1997 5.37% 0.78% 5.24% 118%
1996 5.39% 0.81% 5.23% 163%
1995 5.49% 0.85% 5.29% 200%
1994 4.15% 0.85% 3.95% 75%
1993(1) 3.88%* 1.11%* 3.41%* 64%
</TABLE>
* ANNUALIZED.
(1) COMMENCED OPERATIONS ON MARCH 15, 1993.
(2) A PORTFOLIO TURNOVER RATE OF 100% OR MORE, IF CONTINUED, WILL LIKELY RESULT
IN HIGHER BROKERAGE COMMISSIONS, HIGHER LEVELS OF REALIZED CAPITAL GAINS AND
ADDITIONAL TAXES THAN IF THE TURNOVER RATE WAS LOWER.
FUND INFORMATION -- MONEY
MARKET FUND
PRIME QUALITY MONEY MARKET FUND
FUND OBJECTIVE
[LOGO]
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.
PORTFOLIO INVESTMENTS
[LOGO]
The Fund invests in U.S. and foreign money market instruments
denominated in U.S. dollars.
The Fund may invest in obligations of supranational entities rated in the
highest short-term ratings category or their unrated equivalents.
To some extent, the Fund may invest in other securities and engage in other
investment practices. See "FUND INVESTMENTS."
Although the Fund is managed to maintain a stable price per share of $1.00,
there is no guarantee that price will be constantly maintained.
<PAGE>
12 PROSPECTUS
RISK CONSIDERATIONS
[LOGO]
The Prime Quality Money Market Fund is subject to the following types
of risk:
- Fund Risk;
- Interest Rate Risk;
- Credit Risk;
- Call Risk;
- Prepayment Risk;
- Event Risk;
- Foreign Security Risks; and
- Currency Risk.
For a description of these risks, please see "RISK CONSIDERATIONS."
TRANSACTION AND OPERATING EXPENSES
[LOGO]
The purpose of the following table is to help you understand the
various costs and expenses that you, as a shareholder, will bear
directly or indirectly when you invest in Trust Shares of the PRIME
QUALITY MONEY MARKET FUND.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fees After Fee Waivers(1) .50%
Other Expenses After Fee Waivers and Reimbursements(2) .08%
Total Fund Operating Expenses After Fee Waivers and Reimbursements(3) .58%
</TABLE>
(1)ABSENT VOLUNTARY WAIVERS, INVESTMENT ADVISORY FEES WOULD BE .65%.
(2)ABSENT VOLUNTARY WAIVERS, OTHER EXPENSES WOULD BE .11%.
(3)ABSENT THE FEE WAIVERS DESCRIBED ABOVE, TOTAL FUND OPERATING EXPENSES WOULD
BE .76%. THESE FEE WAIVERS AND REIMBURSEMENTS ARE VOLUNTARY AND MAY BE
DISCONTINUED AT ANY TIME AT THE DISCRETION OF THE SERVICE PROVIDER THAT IS
WAIVING OR REIMBURSING ITS FEE.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
You 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. $ 6 $ 19 $ 32 $ 73
</TABLE>
THE INFORMATION CONTAINED IN THIS TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
<PAGE>
PROSPECTUS 13
FINANCIAL AND PERFORMANCE HIGHLIGHTS
[LOGO]
The table that follows presents information about the investment results
of the Trust Shares of the PRIME QUALITY MONEY MARKET FUND. The financial
highlights for the Fund for the periods from inception through May 31,
1997 have been audited by Arthur Andersen LLP, independent public
accountants, whose report appears in STI Classic Fund's annual report and
accompanies the Statement of Additional Information. The annual report
for the Fund, which contains more information about performance, is available at
no charge by calling 1-800-874-4770.
- -----------------------------------
PRIME QUALITY MONEY MARKET FUND
- -----------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED MAY 31,
<TABLE>
<CAPTION>
REALIZED AND
NET ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVESTMENT GAINS FROM NET DISTRIBUTIONS NET ASSET NET ASSETS
BEGINNING INCOME (LOSSES) ON INVESTMENT FROM REALIZED VALUE END END OF
OF PERIOD (LOSS) INVESTMENTS INCOME CAPITAL GAINS OF PERIOD TOTAL RETURN PERIOD (000)
--------- ---------- ------------ ------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $ -- $(0.05) $ -- $1.00 5.01% $ 1,086,555
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(1) 1.00 0.03 -- (0.03) -- 1.00 2.92%* 410,991
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME (LOSS)
INVESTMENT AVERAGE NET TO AVERAGE NET
RATIO OF INCOME ASSETS ASSETS
EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING
TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND
NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
1997 0.58% 4.90% 0.76% 4.72%
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(1) 0.58%* 2.85%* 0.78%* 2.65%*
</TABLE>
*ANNUALIZED.
(1)COMMENCED OPERATIONS ON JUNE 8, 1992.
THERE CAN BE NO ASSURANCE THAT A FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
THE INVESTMENT OBJECTIVES OF THE CAPITAL GROWTH, VALUE INCOME STOCK, SUNBELT
EQUITY, INVESTMENT GRADE BOND AND SHORT-TERM BOND FUNDS ARE NON-FUNDAMENTAL AND
MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
<PAGE>
14 PROSPECTUS
RISK CONSIDERATIONS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
<S> <C>
- ------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
FUND RISK -- The possibility that a Fund's performance during a All Funds
specific period may not meet, or exceed that of the market as a whole.
MARKET RISK -- The possibility that stock prices in general will Equity Funds
decline over short, or even extended, periods of time. Stock markets
tend to be cyclical, with periods when stock prices generally rise and
periods when stock prices generally decline.
SMALL ISSUER RISK -- Small and medium capitalization companies may be Value Income Stock Fund
more vulnerable than larger, more established organizations to adverse
business or economic developments. In particular, small capitalization
companies may have limited product lines, markets and financial
resources and may be dependent upon a relatively small management
group. These securities may be traded over-the-counter or listed on an
exchange and may or may not pay dividends.
INTEREST RATE RISK -- The potential for a decline in the price of Fixed Income Funds Prime
fixed-income securities due to rising interest rates. This risk will Quality Money
be greater for long-term securities than for short-term securities. Market Fund
CREDIT RISK -- The possibility that an issuer will be unable to make All Funds
timely payments of either principal or interest.
CALL RISK -- The possibility that securities with high interest rates Fixed Income Funds Prime
will be prepaid (or "called") by the issuer, prior to maturity, during Quality Money
periods of falling interest rates. This would require a Fund to invest Market Fund
the resulting proceeds elsewhere, at generally lower interest rates.
</TABLE>
<PAGE>
PROSPECTUS 15
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
EVENT RISK -- The possibility that corporate debt securities may All Funds (except
suffer substantial declines in credit quality and market value due to Sunbelt Equity Fund)
corporate restructurings. While event risk may be high for certain
corporate securities held by a Fund, event risk overall should be low
because of the Fund's diversified holdings.
GEOGRAPHIC RISK -- The risk that a Fund's concentration of investments Sunbelt Equity Fund
in securities of issuers located in a single state or geographic
region subject the Fund to economic conditions and government policies
of that state or region that could adversely affect the value of the
Fund.
PREPAYMENT RISK -- The risk that mortgage-backed and asset-backed Fixed Income Funds
securities may be retired substantially earlier than their stated Prime Quality Money
maturities or final distribution dates, resulting in a loss of all, or Market Fund
part, of any premium paid.
HEDGING RISKS -- Hedging is a strategy designed to offset investment Value Income Fund
risks. Hedging activities include, among other things, the use of Sunbelt Equity Fund
options and futures. There are risks associated with hedging Fixed Income Funds
activities, including:
- - 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;
- - There may be an imperfect, or no correlation, between the changes in
market value of the securities held by a Fund and the prices of
futures and options on futures;
- - There may not be a liquid secondary market for a futures contract or
option;
- - Trading restrictions or limitations may be imposed by an exchange,
and government regulations may restrict trading in futures contracts
and options.
HIGH-YIELD SECURITY RISKS -- There are risks associated with investing Equity Funds
in high-yield securities, including:
- - 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
</TABLE>
<PAGE>
16 PROSPECTUS
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
active, causing market price volatility and limited liquidity in the
secondary market. This may limit the ability of a Fund to sell these
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.
- - The market for high risk, high-yield securities may be adversely
affected by legislative and regulatory developments.
FOREIGN SECURITY RISKS -- There are risks associated with All Funds
international investing, including:
CURRENCY RISK -- The possibility that changes in foreign
exchange rates will affect, favorably or unfavorably, the
value of foreign securities or the U.S. dollar amount of
income or gain received on such securities.
VOLATILITY -- Investments in foreign stock markets can be
more volatile than investments in U.S. markets. Diplomatic,
political, or economic developments could affect investments
in foreign countries.
EXPENSE CONSIDERATIONS -- Fixed commissions on many foreign
stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. Expenses for custodial
arrangements of foreign securities may be somewhat greater
than typical expenses for custodial arrangements for
handling U.S. securities of equal value.
FOREIGN TAXES -- Certain foreign governments levy
withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from the
securities comprising the portfolio.
REGULATORY ENVIRONMENT -- Foreign companies generally are
not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to U.S.
domestic companies. Foreign branches of U.S. banks, foreign
banks, and
</TABLE>
<PAGE>
PROSPECTUS 17
<TABLE>
<CAPTION>
TYPE OF RISK FUNDS SUBJECT TO RISK
- ------------------------------------------------------------------------------------------------
<S> <C>
foreign issuers may be subject to less stringent reserve
requirements and to different accounting, auditing,
reporting and recordkeeping standards than those applicable
to domestic branches of U.S. banks and U.S., domestic
issuers. There is generally less government regulation of
securities exchanges, brokers, and listed companies abroad
than in the U.S.
CURRENCY RISK -- The possibility that changes in foreign exchange All Funds
rates will affect, favorably or unfavorably, the value of foreign
securities or the U.S. dollar amount of income or gain received on
such securities.
</TABLE>
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE FUNDS
The Value Income Stock and Sunbelt Equity Funds are each the successor to
collective investment funds. The collective investment funds were previously
managed by STI Capital Management, Inc. and Trusco Capital Management, Inc.
Substantially all of the assets of those collective investment funds was
transferred to the Funds when each Fund started operating. Total return, a type
of performance calculation, for the predecessor collective investment funds, is
presented below. You may find this performance information helpful because the
collective investment funds were managed using the same investment objectives,
policies, and restrictions as those used by each of the Funds. The performance
information relates to a period of time before the effective date of each Fund's
registration.
The total return of a fund refers to the average compounded rate of return
on a hypothetical investment. When we compute total return, we assume that your
entire investment is redeemed at the end of each period and that you reinvest
all income dividends and capital gains distributions.
Please keep in mind that performance information, such as total return, is
not necessarily indicative of the future performance of a Fund. Also, keep in
mind that the performance of the collective investment funds does not represent
the historical performance of any Fund. The predecessor collective investment
funds were not subject to certain investment limitations diversification
requirements, and other restrictions imposed by the 1940 Act and the Internal
Revenue Code. If these had been imposed, a collective investment funds
performance would have been adversely affected. The predecessor collective
investment funds did not incur expenses that correspond to the advisory,
administrative, and other fees to which each Fund is now subject. Accordingly,
the following performance information has been adjusted by applying the total
expense ratios for the corresponding Trust Shares of the Funds, as disclosed in
the Prospectus at the time the Funds started operating. This adjustment reduced
the actual performance of the collective investment funds.
<PAGE>
18 PROSPECTUS
The average annual total returns (adjusted to reflect Fund expenses, before
voluntary waivers, and reimbursements) for the following periods:
<TABLE>
<CAPTION>
ONE TWO FIVE TEN SINCE
YEAR YEARS YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Value Income Stock 15.87% 18.70% N/A N/A 16.31%
Collective Fund (ending 1/31/93) (ending 1/31/93) (10/31/89-1/31/93)
Sunbelt Equity 22.70% 29.73% 21.29 16.14% 16.94%
Collective Fund (ending (ending (ending (ending (12/1/80-12/31/93)
12/31/93) 12/31/93) 12/31/93) 12/31/93)
</TABLE>
FUND PERFORMANCE
The average annual total returns for the Funds (net of voluntary waivers and
reimbursements) for the following periods ended May 31, 1997:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS SINCE INCEPTION
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Value Income Stock Fund* 22.18% 23.00% 18.87%
Sunbelt Equity Fund* 1.48% 14.69% 11.83%
</TABLE>
- ----------
* COMMENCED FUND OPERATIONS ON FEBRUARY 12, 1993 AND JANUARY 3, 1994,
RESPECTIVELY
The performance of Trust Shares will normally be higher than Investor Shares
or Flex Shares because Trust Shares are not subject to the service fees and
other expenses charged to Investor Shares and Flex Shares.
<PAGE>
PROSPECTUS 19
PURCHASING FUND SHARES
WHO MAY BUY TRUST SHARES OF THE FUNDS
Individuals generally may not purchase Trust Shares directly. Instead, Trust
Shares are sold to financial institutions or intermediaries, including
subsidiaries of SunTrust Banks, Inc. (SunTrust), on behalf of accounts for which
they act as fiduciary, agent, investment advisor, or custodian. As a result, you
as a customer of a financial institution, may own Trust Shares through accounts
maintained with financial institutions and potentially through the Preferred
Portfolio Account (an asset allocation account available through SunTrust
Securities, Inc.). Trust Shares will be held of record by (in the name of) your
financial institution. Depending upon the terms of your account, however, you
may have, or be given, the right to vote the Trust Shares.
HOW TO BUY FUND SHARES
Trust Shares are offered continuously, and may be purchased on any day that
the New York Stock Exchange is open for business (a Business Day). However, you
may not purchase or redeem shares of a Money Market Fund on days that the
Federal Reserve is closed (Federal holidays).
- MONEY MARKET FUND. Your price per share (the offering price) will be the
net asset value per share (NAV) next determined after your purchase order
is received by the Transfer Agent. The Trust expects the NAV of the Money
Market Fund to remain constant at $1.00 per share. NAV for the Money
Market Fund is calculated by (1) taking the current market value of the
Fund's total assets using the amortized cost method of valuing securities,
(2) subtracting the liabilities, and (3) dividing that amount by the total
number of shares of that class owned by shareholders. The NAV is
determined once each Business Day at the close of the New York Stock
Exchange (4:00 p.m. Eastern time). All money market funds are required to
use the amortized cost valuation method, which is described in detail in
the Statement of Additional Information (SAI).
Your purchase order will be effective as of the Business Day it is
received by the Transfer Agent. You will be eligible to receive dividends
declared the same day if (1) the Transfer Agent receives the order before
1:00 p.m. Eastern time; and (2) the Custodian receives federal funds
(readily available funds) before 4:00 p.m. Eastern time on the same day.
Otherwise your purchase order will be effective the next Business Day, as
long as the Custodian receives readily available funds before 4:00 p.m.
Eastern time on the next Business Day.
- NON-MONEY MARKET FUNDS. Your price per share (the offering price) will be
the net asset value per share (NAV) next determined after your purchase
order is received by the Transfer Agent. NAV for the non-Money Market
Funds is calculated by (1) taking the current market value of a Fund's
total assets, (2) subtracting the liabilities, and (3) dividing that
amount by the total number of shares owned by shareholders. In determining
the market value of a Fund's assets, the Trust may use a pricing service
to provide market quotations or valuations for
<PAGE>
20 PROSPECTUS
certain securities owned by a Fund. The NAV is calculated once each
Business Day at the close of the New York Stock Exchange (4:00 p.m.
Eastern time). So, to receive the current Business Day's NAV, purchase
orders must be received before 4:00 p.m. Eastern time.
Trust Shares are sold without a sales charge. Certain financial institutions
may, however, charge for services provided in connection with the purchase of
Trust Shares. Financial institutions also may impose an earlier time for a
purchase order to be effective on the same day. This allows the financial
institution time to process your order and transmit it to the Transfer Agent.
For more information about how to purchase shares, you should contact your
financial institution directly.
The Trust reserves the right to reject any purchase order when the
Distributor determines that accepting the order would not be in the best
interests of the Trust and/or Shareholders.
REDEEMING FUND SHARES
HOW TO SELL YOUR SHARES
Redemption requests should be sent to the Transfer Agent by your financial
institution. Your financial institution will provide you with information about
how to request redemption of Trust Shares held in your account.
- MONEY MARKET FUND. For the Money Market Fund, a redemption request will be
effective as of the Business Day it is received by the Transfer Agent
before 1:00 p.m. Eastern time.
- NON-MONEY MARKET FUNDS. Redemption requests for non-Money Market Funds
must be received by the Transfer Agent by 4:00 p.m. Eastern time to get
that day's NAV.
Requests received after these times will normally be executed the next
Business Day. You may have to transmit your redemption request to your financial
institution at an earlier time for your redemption to be effective that day. For
more information about how to redeem your shares, you should contact your
financial institution directly. The Trust reserves the right to wire redemption
proceeds within five Business Days of the Transfer Agent receiving the
redemption request if, in the judgment of the Advisor, an earlier payment could
adversely impact a Fund.
REDEMPTIONS IN KIND
The Trust intends to pay redemption proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
remaining shareholders in the Fund) the Trust reserves the right to pay all, or
part, of your redemption proceeds in liquid securities that have a market value
equal to the redemption price (redemption in kind). Although it is highly
unlikely that your shares would ever actually be redeemed in kind, if it did
happen, you would probably have to pay brokerage costs to sell the securities
distributed to you.
<PAGE>
PROSPECTUS 21
TRANSACTIONS OVER THE TELEPHONE
Telephone redemption and exchange transactions are extremely convenient, but
not without risk. To try to keep your telephone transactions as safe, secure,
and risk free as possible, the Trust has developed certain safeguards and
procedures for determining the identity of callers and authenticity of
instructions. As a result, neither the Trust nor its Transfer Agent will be
responsible for any loss, liability, cost, or expense for following telephone or
wire instructions they reasonably believed to be genuine. If you choose to make
telephone transactions, you will generally bear the risk of any loss.
DIVIDENDS AND DISTRIBUTIONS
Income dividends are declared and paid quarterly by each of the Equity
Funds. The Fixed Income and Money Market Funds declare and pay income dividends
annually. If you own Fund shares on the record date, you will be entitled to
receive dividends. The Funds make distributions of capital gains at least
annually.
You will receive dividends and distributions in the form of additional Fund
shares unless you have elected to receive payment in cash. To elect cash
payment, you must notify the Transfer Agent in writing prior to the date of
distribution. Your election will become effective for dividends paid after the
Transfer Agent receives your written notice. To cancel your election, simply
send written notice to the Transfer Agent.
TAX INFORMATION
The following is a summary of some important tax issues that affect the
Funds and their Shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. Further
information concerning taxes is set forth in the Statement of Additional
Information (SAI). We have not tried to present a detailed explanation of the
tax treatment of the Funds or their Shareholders. WE URGE YOU TO CONSULT YOUR
TAX ADVISOR 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 income tax purposes
and intends to qualify for the special tax treatment afforded regulated
investment companies. As long as a Fund qualifies as a regulated investment
company, it pays no Federal income tax on the earnings it distributes to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its income. THE INCOME
DIVIDENDS YOU RECEIVE FROM THE FUNDS WILL BE TAXED AS ORDINARY INCOME WHETHER
YOU RECEIVE THE DIVIDENDS IN CASH OR IN ADDITIONAL SHARES.
<PAGE>
22 PROSPECTUS
Corporate Shareholders may be entitled to a dividends-received deduction for
a portion of dividends they receive attributable to dividends received by a Fund
from U.S. corporations.
Capital gains dividends will be treated as gain from the sale or exchange of
a capital asset held for more than 1 year.
Distributions paid in January but declared as dividends by a Fund in
October, November or December of the previous year, are taxable to you in the
previous year.
TAX STATUS OF SHARE TRANSACTIONS
EACH SALE, EXCHANGE OR REDEMPTION OF FUND SHARES IS A TAXABLE EVENT TO YOU.
TAX MANAGEMENT
The Funds use a tax management technique known as "highest in, first out."
Through this technique, a Fund's portfolio holdings which have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
STATE TAX CONSIDERATIONS
A Fund is not liable for any income or franchise tax in Massachusetts as
long as it qualifies as a regulated investment company for Federal income tax
purposes.
Distributions by Funds to you may be subject to state and local taxation.
You should verify your tax liability with your tax advisor.
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust is organized as a Massachusetts business trust. The Trust is
permitted to offer separate portfolios of shares and different classes of each
Fund. All payments received by the Trust for shares of any Fund belong to that
Fund. Each Fund has its own assets and liabilities.
BOARD OF TRUSTEES
The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services.
GENERAL INFORMATION
VOTING RIGHTS
Shareholders of record receive one vote for every full Fund share owned.
Each Fund or class of a Fund will vote separately on matters relating solely to
that Fund or class. If you are a customer of a financial institution that has
purchased shares of a Fund for your account, you may, depending on the nature of
your account, have certain voting rights.
<PAGE>
PROSPECTUS 23
As a Massachusetts business trust, the Trust is not required to hold annual
Shareholder meetings unless otherwise required by the Investment Company Act.
However, a meeting may be called by Shareholders owning at least 10% of the
outstanding shares of the Trust. If a meeting is requested by Shareholders, the
Trust will provide appropriate assistance and information to the Shareholders
who requested the meeting.
REPORTING
Shareholders of record will receive the Trust's unaudited financial
information and audited financial statements, proxy statements and other
reports. If you are a customer of a financial institution that has purchased
shares of a Fund for your account, you may, depending on the nature of your
account, receive all or a portion of this information directly from your
financial institution.
SHAREHOLDER INQUIRIES
You may contact your financial institution's representative to obtain
information on account statements, procedures, and other related information.
INVESTMENT ADVISORS
The Advisors make investment decisions for the assets of the Funds and
continuously review, supervise, and administer their Fund's respective
investment program. The Trustees of the Trust supervise the Advisors and
establish policies that the Advisors must follow in their day-to-day management
activities.
STI Capital Management, N.A. (STI Capital) serves as the Advisor to the
Capital Growth, Value Income, and Investment Grade Bond Funds. As of May 31,
1997, STI Capital had approximately $12.4 billion in assets under management.
The principal business address of STI Capital is P.O. Box 3808, Orlando, Florida
32802. For the fiscal year ended May 31, 1997, STI Capital received advisory
fees computed daily and paid monthly at the annual rate included in each Fund's
ANNUAL FUND OPERATING EXPENSES summary.
Trusco Capital Management, Inc. (Trusco) serves as the Advisor to the
Sunbelt Equity, Short-Term Bond, and Prime Quality Money Market Funds. As of May
31, 1997, Trusco had approximately $17.4 billion in assets under management. The
principal business address of Trusco is 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303. For the fiscal year ended May 31, 1997, Trusco received advisory
fees computed daily and paid monthly at the annual rate included in each Fund's
ANNUAL FUND OPERATING EXPENSES summary.
The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc.
(SunTrust). SunTrust is a southeastern regional bank holding company with assets
of $52.5 billion, as of December 31, 1996. SunTrust is one of the 20 largest
banking companies in the U.S. Its three principal subsidiaries, SunTrust Banks
of Florida, Inc., SunTrust Banks of Georgia, Inc. and SunTrust Banks of
<PAGE>
24 PROSPECTUS
Tennessee, Inc, provide a wide range of personal and corporate banking, trust,
and investment services through more than 600 locations in the tri-state area.
SunTrust Banks, Inc. has discretionary assets under management of approximately
$53.4 billion, as of December 31, 1996.
The Advisors may use their affiliates as brokers for the Funds' portfolio
transactions.
DISTRIBUTION
SEI Investments Distribution Co. (the Distributor), a wholly-owned
subsidiary of SEI Investments Company, serves as each Fund's distributor under a
Distribution Agreement. The Distributor receives no compensation for
distribution services rendered to the Trust Shares of each Fund.
Each Fund may use the Distributor as its broker for portfolio transactions.
The Distributor receives compensation from the Funds for its brokerage services.
Flex and Investor Shares are offered primarily to individual investors, and
are described in a separate prospectus. Flex Shares are offered subject to a
contingent deferred sales charge. Investor Shares are offered subject to a
front-end sales charge. You may call 1-800-874-4770 to receive more information
about Investor Shares or Flex Shares. It is possible that a financial
institution may offer different classes of shares to its customers. As a result,
the financial institution may receive different compensation with respect to
different classes of shares.
ADMINISTRATION
SEI Fund Resources acts as the Trust's Administrator. For its administrative
services, the Administrator is entitled to a fee, 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>
The Administrator may voluntarily waive all or a portion of its fees to
limit Total Fund Operating Expenses.
<PAGE>
PROSPECTUS 25
FUND INVESTMENTS
% = Maximum percentage permissible. All percentages shown are of total assets,
except for illiquid securities, which are shown as a percentage of net
assets.
X = No policy limitation; Fund may be using currently.
* = Permitted, but not typically used.
- -- = Not permitted.
<TABLE>
<CAPTION>
PRIME
QUALITY
CAPITAL VALUE INVESTMENTS MONEY
GROWTH INCOME SUNBELT GRADE BOND SHORT-TERM MARKET
SECURITY OR PRACTICE FUND FUND EQUITY FUND FUND BOND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TRADITIONAL INVESTMENTS
ADRs 35% 35% -- X -- X
Asset-Backed Securities -- -- -- X X *
Bank Obligations -- -- -- X -- X(6)
Commercial Paper(7) -- -- -- X X X
Convertible Securities X 35%(2) X(2) -- -- --
Corporate Debt Obligations 35%(2) 20%(2) -- X(3) X(3) --
Equity Securities X X X -- -- --
Investment Company Shares 10% 10% 10% 10% 10% 10%
Mortgage-Backed Securities -- * -- X(4) X(1) *(5)
Municipal Securities (Two Highest Ratings -- -- -- -- X(3) --
Categories)
Pay-In-Kind Securities 35% -- -- -- -- --
Repurchase Agreements 35% 35% 35% X * X
Restricted Securities 15% 15% 15% * * *
Securities of Foreign Issuers * * -- X X X
Short-Term Corporate Obligations -- -- -- -- -- X
Supranational Agency Obligations -- -- -- X 35% X
U.S. Treasury and Government Agency Obligations -- 20% -- X X X
Zero Coupon Obligations -- -- -- X X X
INVESTMENT PRACTICES
Borrowing 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Illiquid Securities 15% 15% 15% 15% 15% 10%
Securities Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Standby Commitments X X X X X X
When-Issued Securities 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
LEVERAGING AND HEDGING TOOLS
Futures and Options on Futures -- 20% 20% 35% 35% --
Options -- 20% 35% 35% 35% --
Puts -- -- -- 35% 35% --
Swaps, Caps, Floors, and Collars -- -- -- 25% -- --
Variable and Floating Rate Instruments -- * -- X X X
</TABLE>
(1) MAY INVEST UP TO 25% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(2) MAY INVEST UP TO 10% OF ITS ASSETS IN HIGH YIELD SECURITIES.
(3) MAY PURCHASE UP TO 25% RATED BBB OR Baa OR THEIR UNRATED EQUIVALENTS.
(4) MAY PURCHASE UP TO 35% PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(5) INCLUDES PRIVATELY-ISSUED MORTGAGE-BACKED SECURITIES.
(6) MAY INVEST UP TO 25% OF ITS ASSETS IN OBLIGATIONS ISSUED BY FOREIGN BRANCHES
OF U.S. BANKS AND BY LONDON BRANCHES OF FOREIGN BANKS.
(7) HIGHEST QUALITY -- PRIME QUALITY MONEY MARKET FUND; TWO HIGHEST RATINGS
CATEGORIES -- INVESTMENT GRADE BOND FUND AND SHORT-TERM BOND FUND.
<PAGE>
26 PROSPECTUS
Under normal market conditions, the Funds will follow the practices and
policies outlined above. However, for temporary defensive purposes during
periods when its Adviser determines that market conditions warrant each Fund may
invest up to 100% of its assets in cash, money market instruments, repurchase
agreements and short-term obligations. When the Funds are investing for
temporary defensive purposes, they will not be pursuing their respective
investment objectives.
INVESTMENT RESTRICTIONS
Each Fund will not invest more than 25% of its assets in any one industry.
With respect to 75% of its assets, each Fund will not:
- Invest more than 5% of its assets in the securities of any one issuer.
- Purchase more than 10% of the outstanding voting securities of any one
issuer.
MORE ABOUT INVESTMENTS AND HEDGING TOOLS
The following is a description of some of the permitted investments for the
Funds. Further discussion is contained in the SAI.
AMERICAN DEPOSITARY RECEIPTS (ADRs) are securities, typically issued by a
U.S. financial institution (a depositary). The institution has 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. An unsponsored
facility may be established by a depositary without participation by the issuer
of the underlying security.
ASSET-BACKED SECURITIES are securities backed by non-mortgage assets such as
company receivables, truck and auto loans, leases, and credit card receivables.
These securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Asset-backed securities may also be DEBT OBLIGATIONS, 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 these assets and issuing these DEBT OBLIGATIONS.
BANK OBLIGATIONS are SHORT-TERM CORPORATE OBLIGATIONS issued by U.S. and
foreign banks, including bankers' acceptances, certificates of deposit,
custodial receipts, and time deposits.
COMMON AND PREFERRED STOCKS represent units of ownership in a corporation.
Owners of common stock typically are entitled to vote on important matters.
Owners of preferred stock ordinarily do not have voting rights, but are entitled
to dividends at a specified rate. Preferred stock has a prior claim to common
stockholders with respect to dividends.
CONVERTIBLE SECURITIES are securities issued by corporations that are
exchangeable for a set number of another security at a prestated price. The
market value of a convertible security tends to
<PAGE>
PROSPECTUS 27
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 OPTION provisions.
CORPORATE DEBT SECURITIES are DEBT OBLIGATIONS issued by corporations with
maturities exceeding 270 days.
DEBT OBLIGATIONS represent money borrowed that obligates the issuer, (E.G.,
a corporation, municipality, government, government agency) to repay the
borrowed amount at maturity (when the obligation is due and payable) and usually
to pay the holder interest at specific times (E.G., bonds, notes, debentures.)
EQUITY SECURITIES include COMMON AND PREFERRED STOCKS, WARRANTS, RIGHTS to
subscribe to common stock, and CONVERTIBLE SECURITIES. These securities may be
publicly or privately issued.
FORWARD FOREIGN CURRENCY CONTRACTS involve obligations 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 the foreign currency. A Fund may realize a gain or
loss from currency transactions.
FUTURES CONTRACTS AND OPTIONS ON 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. They may also be used 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.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An 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 index at the
close of the last trading day of the contract and the price at which the
agreement is made.
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.
INVESTMENT COMPANY SHARES are shares of other mutual funds which may be
purchased by the Funds to the extent consistent with applicable law. Closed-end
mutual funds usually trade at discount from net asset value.
<PAGE>
28 PROSPECTUS
MONEY MARKET INSTRUMENTS are high quality, dollar-denominated, SHORT-TERM
OBLIGATIONS, including BANK OBLIGATIONS, U.S. TREASURY OBLIGATIONS, U.S.
GOVERNMENT AGENCY OBLIGATIONS, and SHORT-TERM CORPORATE OBLIGATIONS.
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 fifteen-
and thirty-year fixed rate mortgages, graduated payment mortgages, adjustable
rate mortgages, and floating rate mortgages.
During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities may accelerate. It is often not possible
to predict accurately the average life or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES are securities issued or guaranteed by a
U.S. Government agency representing an interest in a pool of mortgage loans.
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 are mortgage-backed securities issued by a
non-governmental entity, such as a trust. 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
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government, or by private originators, or investors in mortgage loans.
Each class of a CMO is issued with a specific fixed or floating interest rate
and has a stated maturity or final distribution date.
REMICS are CMOS that qualify for special tax treatment under the Internal
Revenue Code. They invest in certain mortgages that are principally secured by
interests in real property. These securities are often guaranteed as to the
payment of principal and/or interest as payments are required to be made on the
underlying mortgage participation certificates.
STRIPPED MORTGAGE-BACKED SECURITIES (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 the other class may receive all of the principal
payments. SMBs are extremely sensitive to changes in interest rates because of
the impact of prepayment of principal on the underlying mortgage securities.
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.
MUNICIPAL SECURITIES consist of:
<PAGE>
PROSPECTUS 29
- 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 these funds
to other public institutions and facilities; and
- 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
(for example, tolls from a bridge). 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 totally
dependent 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 the
payment.
OPTIONS -- The buyer of an option acquires the right to buy (a call option)
or sell (a put option) a certain quantity of a security (the underlying
security) or instrument at a certain price up to a specified point in time. The
seller or writer of an option is obligated to sell (a call option) or buy (a put
option) the underlying security. All options written by a Fund will be
"covered," which means that the Fund will own an equal amount of the underlying
currency ("options on currencies") or security. With respect to put options
written by the Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash or cash equivalents in an amount equal to the
amount the Fund would be required to pay upon exercise of the put option.
PAY-IN-KIND SECURITIES are DEBT OBLIGATIONS, or PREFERRED STOCK, that pay
interest or dividends in the form of additional DEBT OBLIGATIONS or PREFERRED
STOCK.
REPURCHASE AGREEMENTS are agreements by which a Fund obtains a security and
simultaneously agrees 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.
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.
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. The Trust's Board of Trustees has adopted procedures for
determining the liquidity of restricted securities.
RIGHTS give existing shareholders of a corporation the right, but not the
obligation, to buy shares of the corporation at a given price, usually below the
offering price, during a specified period.
SECURITIES LENDING -- To generate additional income, a Fund may lend
securities which it owns under agreements requiring that the loan be
continuously secured by collateral equal to at least 100% of the market value of
the loaned securities. A Fund continues to receive interest on the loaned
securities while simultaneously earning interest on the investment of cash
collateral.
<PAGE>
30 PROSPECTUS
SECURITIES OF FOREIGN ISSUERS are securities issued by foreign corporations,
including foreign branches of U.S. banks and foreign banks, and by foreign
governments or their agencies or instrumentalities.
SHORT-TERM OBLIGATIONS are DEBT OBLIGATIONS maturing (becoming payable) in
397 days or less, including commercial paper and short-term corporate
obligations. Short-term corporate obligations are short-term obligations issued
by corporations.
STANDBY COMMITMENTS AND PUTS permit the holder to sell 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.
SUPRANATIONAL AGENCY OBLIGATIONS -- Obligations of supranational entities
are established through the joint participation of several governments,
including 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.
SWAPS, CAPS, FLOORS, AND COLLARS -- Swaps, caps, floors, and collars are
hedging tools designed to permit the purchaser to preserve a return or spread on
a particular investment or portion of its portfolio. They are also used to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. 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.
U.S. GOVERNMENT AGENCY OBLIGATIONS are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some of these securities
are supported by the full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and others are
supported only by the credit of the agency or instrumentality.
U.S. TREASURY OBLIGATIONS consist of bills, notes, and bonds issued by the
U.S. Treasury. They also consist of separately traded interest and principal
component parts of these 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 are certain obligations that 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.
WARRANTS give holders the right, but not the obligation, to buy shares of a
company at a given price, usually higher than the market price, during a
specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES involve the purchase of an
instrument with payment and delivery taking place in the future. Delivery of,
and payment for, these securities
<PAGE>
PROSPECTUS 31
may occur a month or more after the date of the purchase commitment. The
interest rate realized on these securities is fixed as of the purchase date and
no interest accrues to the Fund before settlement.
ZERO COUPON OBLIGATIONS are DEBT SECURITIES that do not bear any interest,
but instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
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
face value or par and pay interest periodically.
<PAGE>
32 PROSPECTUS
<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 Investments Distribution Co. Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* 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 1800 M Street, N.W.
Washington, D.C. 20036
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA
19103-2499
</TABLE>
<PAGE>
PROSPECTUS 33
Additional information about the Funds is included in the SAI dated October
1, 1997. The SAI has been filed with the SEC and is incorporated by reference
into this Prospectus. You may obtain a copy of the SAI, or of the annual or
semi-annual reports, without charge by calling 1-800-874-4770, or by contacting
the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456.
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE TRUST'S SAI IN
CONNECTION WITH THE OFFERING OF FUND SHARES. DO NOT RELY ON ANY SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR.
<PAGE>
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE>
STI CLASSIC FUNDS
INVESTMENT ADVISORS:
STI CAPITAL MANAGEMENT, N.A.
TRUSCO CAPITAL MANAGEMENT, INC.
SUNTRUST BANK, CHATTANOOGA, N.A.
SUNTRUST BANK, ATLANTA
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, 1997. Prospectuses may be obtained through the Distributor,
SEI Investments Distribution Co., One Freedom Valley Road, Oaks, Pennsylvania
19456.
TABLE OF CONTENTS
PAGE
THE TRUST.....................................................................B-
DESCRIPTION OF PERMITTED INVESTMENTS..........................................B-
INVESTMENT LIMITATIONS........................................................B-
INVESTMENT ADVISORS...........................................................B-
THE ADMINISTRATOR.............................................................B-
THE DISTRIBUTOR...............................................................B-
TRUSTEES AND OFFICERS OF THE TRUST............................................B-
PERFORMANCE INFORMATION.......................................................B-
COMPUTATION OF YIELD..........................................................B-
CALCULATION OF TOTAL RETURN...................................................B-
PURCHASE AND REDEMPTION OF SHARES.............................................B-
DETERMINATION OF NET ASSET VALUE..............................................B-
TAXES.........................................................................B-
FUND TRANSACTIONS.............................................................B-
TRADING PRACTICES AND BROKERAGE...............................................B-
DESCRIPTION OF SHARES.........................................................B-
SHAREHOLDER LIABILITY.........................................................B-
LIMITATION OF TRUSTEES' LIABILITY.............................................B-
5% AND 25% SHAREHOLDERS.......................................................B-
EXPERTS.......................................................................B-
October 1, 1997
<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"):
- 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, International Equity Fund, (the
"Equity Funds"); and the Balanced Fund:
- Trust Shares and Flex Shares of the Small Cap Equity Fund (an
"Equity Fund"); and
- Trust Shares of the Emerging Markets Fund (an "Equity Fund").
These various series are collectively referred to herein as the "Funds."
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.
DESCRIPTION OF PERMITTED INVESTMENTS
CUSTODIAL 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.
STRIPS
Separately Traded Interest and Principal Securities ("STRIPS") 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
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<PAGE>
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.
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 instruments and will similarly monitor the
ability of an issuer of a demand instrument to pay principal and interest on
demand.
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, Fannie Mae 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., Fannie Mae 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
MORTGAGE-BACKED SECURITIES--GOVERNMENT PASSTHROUGH SECURITIES
The primary issuers or guarantors of these mortgage-backed securities are the
Government National Mortgage Association ("GNMA"), Fannie Mae, and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S.
Government as GNMA certificates are, but Fannie Mae and FHLMC securities are
supported by the instrumentalities' right to borrow from the U.S. Treasury.
GNMA, Fannie Mae, and FHLMC each guarantees timely distributions of interest
to certificate holders. GNMA and Fannie Mae also guarantee timely
distributions of scheduled principal. In the past, FHLMC has only guaranteed
the
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<PAGE>
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.
Each of the Funds except the Short-Term U.S. Treasury Securities Fund,
Sunbelt Equity Fund, Mid-Cap Equity Fund and International Equity Index Fund
may invest in mortgage-backed securities issued or guaranteed by U.S.
Government agencies or instrumentalities such as GNMA, Fannie Mae and FHLMC.
Obligations of GNMA are backed by the full faith and credit of the United
States Government. Obligations of Fannie Mae 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 asmuch 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 mortgage pass-throughs issued or guaranteed by U.S. Government
agencies or instrumentalities, the CMOs themselves are not generally
guaranteed.
MORTGAGE-BACKED SECURITIES--REMICS
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.
B-4
<PAGE>
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 Fannie Mae or FHLMC represent
beneficial ownership interests in a REMIC trust consisting principally of
mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through
certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely
payment of interest.
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.
DOLLAR ROLLS
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.
GICS
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.
B-5
<PAGE>
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.
LOAN PARTICIPATIONS
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 the
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 the 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.
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 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.
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.
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)
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<PAGE>
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 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 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.
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
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
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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 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
B-8
<PAGE>
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
originally issued held in the Fund will not exceed 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,
International Equity, and Emerging Markets 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, International Equity, and Emerging
Markets 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, International
Equity, and Emerging Markets Equity Funds seek increased diversification by
combining securities from various countries and geographic areas that offer
different investment opportunities and are affected by different economic
trends. The international investments of the International Equity Index,
International Equity, and Emerging Markets 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.
B-9
<PAGE>
The Emerging Markets Equity Fund considers countries having developing
markets to be all countries that are considered to be developing or emerging
countries by the World Bank or the International Finance Corporation, as well
as countries classified by the United Nations or otherwise regarded by the
international financial community as developing. Currently, the countries
excluded from this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan and
Switzerland.
ADRS
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.
SUPRANATIONAL AGENCY OBLIGATIONS
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-10
<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 net 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, Value Income Stock Fund, and Emerging
Markets Equity 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 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.
B-11
<PAGE>
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.
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, Value Income Stock Fund, Small Cap
Equity Fund, and Emerging Markets Equity 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.
B-12
<PAGE>
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.
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.
SWAPS/FLOORS/COLLARS
In a typical interest rate swap, one party agrees to make regular payments
equal to a floating interest rate times a "notional principal amount." This
is done 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. This is 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. Meanwhile, 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 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.
B-13
<PAGE>
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.
VARIABLE AND FLOATING RATE SECURITIES
The interest rates on these securities may be reset daily, weekly, quarterly,
or some other reset period, and may have a set 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.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Investments Company ("SEI Investments"), 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.
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, Value Income Stock Fund, Small Cap Equity
Fund and
B-14
<PAGE>
Emerging Markets Equity 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.
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,
International Equity, Small Cap Equity and Emerging Market 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 hold illiquid securities (I.E., securities that
cannot be disposed of for their approximate carrying value in seven days or
less (which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
(10% for the Prime Quality Money Market, U.S. Government Securities Money
Market, and Tax-Exempt Money Market Funds) would be invested in illiquid
securities.
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.
INVESTMENT ADVISORS
B-15
<PAGE>
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 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, 1997, 1996, and 1995, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
FEES PAID FEES WAIVED
OR REIMBURSED
----------------------------------------- --------------------------------------
FUND 1997 1996 1995 1997 1996 1995
---- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Prime Quality Money Market $ 7,586,108 $ 5,346,850 $ 4,052,982 $2,181,008 $1,602,546 $1,215,895
Fund
U.S. Government Securities $ 1,935,898 $ 2,068,133 $ 1,729,860 $ 518,656 $ 577,384 $ 507,624
Money Market Fund
Tax-Exempt Money Market Fund $ 1,687,976 $ 1,422,777 $ 910,742 $ 673,486 $ 685,205 $ 583,588
Investment Grade Bond Fund $ 4,147,888 $ 3,868,222 $ 3,274,146 $ 644,859 $ 709,139 $ 636,033
Investment Grade Tax-Exempt $ 1,081,635 $ 917,948 $ 627,607 $ 190,250 $ 202,552 $ 138,553
Bond Fund
Short-Term Bond Fund $ 485,613 $ 361,936 $ 212,070 $ 138,732 $ 149,827 $ 118,030
Florida Tax-Exempt Bond Fund1 $ 220,701 $ 107,618 $ 10,562 $ 72,605 $ 72,476 $ 45,986
Georgia Tax-Exempt Bond Fund2 $ 181,715 $ 83,243 $ 35,579 $ 63,837 $ 63,991 $ 50,699
Tennessee Tax-Exempt Bond Fund3 $ 0 $ 0 $ 0 $ 35,475 $ 46,809 $ 14,014
U.S. Government Securities $ 91,748 $ 16,097 $ 0 $ 58,637 $ 53,312 $ 7,817
Fund4
Short-Term U.S. Treasury $ 83,694 $ 36,729 $ 26,399 $ 72,064 $ 72,116 $ 64,786
Securities Fund
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
FEES PAID FEES WAIVED
OR REIMBURSED
----------------------------------------- --------------------------------------
FUND 1997 1996 1995 1997 1996 1995
---- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Limited-Term Federal Mortgage $ 540,017 $ 224,595 $ 78,778 $ 150,604 $ 119,538 $ 74,494
Securities Fund
Capital Growth Fund $12,775,800 $12,099,047 $11,023,563 $1,227,247 $1,408,275 $1,393,475
Sunbelt Equity Fund $ 4,399,351 $ 3,424,453 $ 2,353,943 $ 442,535 $ 465,317 $ 407,677
Value Income Stock Fund $12,025,425 $ 9,447,738 $ 6,976,518 $ 392 $ 318,958 $ 28,394
Mid-Cap Equity Fund $ 3,008,690 $ 2,057,932 $ 940,045 $ 318,871 $ 318,958 $ 195,873
Balanced Fund $ 1,025,089 $ 823,692 $ 823,692 $ 151,557 $ 166,361 $ 149,133
Small Cap Equity Fund $ 273,710 * * $ 48,251 * *
Emerging Markets Equity Fund $ 84,210 * * $ 52,769 * *
International Equity Fund $ 4,336,172 $ 746,780 * $ 157,567 $ 151,947 *
International Equity Index Fund $ 578,197 $ 740,676 $ 340,065 $ 80,147 $ 144,349 $ 135,043
</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 $17,277
for the fiscal year ended May 31, 1996 and $9,933 for the fiscal year
ended May 31, 1997
(4) Trusco Capital Management, Inc., advisor to the U.S. Government
Securities Fund, reimbursed expenses of $27,216.
BANKING LAWS
Current interpretations of federal banking laws and regulations:
- - prohibit SunTrust and the Advisors from sponsoring, organizing,
controlling, or distributing the Funds= shares;
- - but, do not prohibit SunTrust or the Advisors generally from acting as
an investment advisor, transfer agent, or custodian to the Funds or from
purchasing Fund shares as agent for and upon the order of a customer.
The Advisors believe that they may perform advisory and related services for
STI Classic Funds without violating applicable banking laws or regulations.
However, the legal requirements and interpretations about the permissible
activities of banks and their affiliates may change in the future. These
changes could prevent the Advisors from continuing to perform services for
STI Classic Funds. If this happens, the Board of Trustees would consider
selecting other qualified firms. Shareholders would approve any new
investment advisory agreements would be subject to Shareholder approval.
If current restrictions on bank activities with mutual funds were relaxed,
the Advisors, or their affiliates, would consider performing additional
services for STI Classic Funds. We cannot predict whether these changes will
be enacted. We also cannot predict the terms that the Advisors, or their
affiliates, might offer to provide additional services.
B-17
<PAGE>
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") are parties to an
Administrative Agreement. 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 Administration Agreement shall remain
in effect for a period of five years after the date of the Agreement and
shall continue in effect for successive periods of two years subject to
review at least annually by the Trustees of the Trust unless terminated by
either party on not less than ninety days= written notice to the other party.
The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("ASEI
Investments"), is the owner of all beneficial interest in the Administrator.
SEI Investments 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 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, Boston 1784 Funds-Registered
Trademark-, CoreFunds, Inc., CrestFunds, Inc., CUFUND, The Expedition Funds,
FMB Funds, Inc., First American Funds, Inc., First American Investment Funds,
Inc., First American Strategy Funds, Inc., HighMark Funds, Marquis
Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell Investment Trust,
The PBHG Funds, Inc., The PBHG Insurance Series Fund, Inc., The Pillar Funds,
Profit Funds Investment Trust, Rembrandt Funds-Registered Trademark-, Santa
Barbara Group of Mutual Funds, Inc., 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, STI Classic Variable Trust, and TIP Funds.
For the fiscal years ended May 31, 1997, 1996, and 1995, the Funds paid the
following administration fees:
<TABLE>
<CAPTION>
FEES PAID FEES WAIVED
----------------------------------------- --------------------------------------
FUND 1997 1996 1995 1997 1996 1995
---- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Prime Quality Money Market Fund $ 661,962 $315,880 $155,054 $347,518 $449,492 $465,158
U.S. Government Securities $ 212,454 $219,380 $129,165 $ 41,257 $ 72,463 $134,192
Money Market Fund
Tax-Exempt Money Market Fund $ 288,647 $274,701 $128,912 $ 0 $ 0 $ 79,032
Investment Grade Bond Fund $ 435,278 $443,569 $404,413 $ 0 $ 0 $ 0
Investment Grade Tax-Exempt $ 115,500 $108,204 $ 77,499 $ 0 $ 0 $ 1,745
Bond Fund
Florida Tax-Exempt Bond Fund $ 30,279 $ 19,989 $ 6,645 $ 0 $ 0 $ 0
Georgia Tax-Exempt Bond Fund $ 25,353 $ 16,304 $ 10,140 $ 0 $ 0 $ 0
Tennessee Tax-Exempt Bond Fund $ 3,669 $ 3,148 $ 1,648 $ 0 $ 0 $ 0
Short-Term Bond Fund $ 64,664 $ 56,317 $ 38,813 $ 0 $ 0 $ 0
</TABLE>
B-18
<PAGE>
<TABLE>
<CAPTION>
FEES PAID FEES WAIVED
----------------------------------------- --------------------------------------
FUND 1997 1996 1995 1997 1996 1995
---- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Securities Fund $ 13,641 $ 7,311 $ 807 $ 0 $ 0 $ 0
Short-Term U.S. Treasury $ 16,075 $ 12,012 $ 10,761 $ 0 $ 0 $ 0
Securities Fund
Limited-Term Federal Mortgage $ 71,264 $ 37,854 $ 17,962 $ 0 $ 0 $ 0
Securities Fund
Capital Growth Fund $ 817,905 $842,411 $826,735 $ 0 $ 0 $ 0
Sunbelt Equity Fund $ 283,101 $842,411 $183,657 $ 0 $ 0 $ 0
Value Income Stock Fund $1,009,167 $845,706 $669,692 $ 0 $ 0 $ 0
Mid-Cap Equity Fund $ 194,430 $147,613 $ 75,507 $ 0 $ 0 $ 0
Balanced Fund $ 83,063 $ 74,634 $ 64,645 $ 0 $ 0 $ 0
Small Cap Equity Fund $ 18,406 * * $ 0 * *
Emerging Markets Equity Fund * * * *
International Equity Fund $ 50,404 * $ 0 *
International Equity Index Fund $ 70,690 $ 40,223 $ 0 $ 0
</TABLE>
* Not in operation during the period.
THE DISTRIBUTOR
SEI Investments Distribution Co. (formerly 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 and service 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, 1997, 1996, and 1995, the aggregate sales
charges payable to the Distributor with respect to the Investor Shares of the
Funds were as follows:
B-19
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE SALES
CHARGE PAYABLE TO AMOUNT RETAINED BY
FUND DISTRIBUTOR DISTRIBUTOR
--------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund $ 50,016 $ 61,948 $ 143 $ 0
Georgia Tax-Exempt Bond Fund $ 1,208 $ 1,495 $ 6 $ 762
Florida Tax-Exempt Bond Fund $ 1,386 $ 8,271 $ 14 $ 0
Tennessee Tax-Exempt Bond Fund $ 515 $ 0 $ 0 $ 0
Short-Term Bond Fund $ 1,204 $ 0 $ 0 $ 0
Investment Grade Tax-Exempt Bond Fund $ 12,005 $ 13,613 $ 30 $ 2,133
U.S. Government Securities Fund $ 7,279 $ 4,006 $ 0 $ 0
Short-Term U.S. Treasury Securities Fund $ 2,641 $ 4,241 $ 9 $ 0
Limited-Term Federal Mortgage Securities Fund $ 4,067 $ 1,541 $ 50 $ 100
Capital Growth Fund $258,267 $373,314 $ 243 $ 2,078
Sunbelt Equity Fund $ 46,854 $135,566 $ 61 $ 1,981
Value Income Stock Fund $306,061 $406,633 $ 3,104 $ 3,774
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 $ 197 $ 858
Balanced Fund $ 16,540 $ 37,732 $ 22 $ 0
</TABLE>
*Not in operation during the period.
For the fiscal years ended May 31, 1997, 1996, and 1995, the aggregate sales
charges payable to the Distributor with respect to the Flex Shares of the
Funds were as follows:
B-20
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE SALES CHARGE AMOUNT RETAINED
FUND PAYABLE TO DISTRIBUTOR BY DISTRIBUTOR
----------------------------------- -----------------------------------
1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
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
</TABLE>
*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
B-21
<PAGE>
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.
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.
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, 1997, 1996, and 1995, the Funds paid the
following amounts pursuant to the Investor Plan:
B-22
<PAGE>
DISTRIBUTION FEES
AMOUNT PAID
---------------------------------
FUND 1997 1996 1995
--- ---------- -------- --------
Prime Quality Money Market Fund $ 342,798 $273,316 $179,128
U.S. Government Securities Money Market
Fund $ 66,016 $ 44,107 $ 16,661
Tax-Exempt Money Market Fund $ 89,912 $ 80,845 $ 44,182
Investment Grade Bond Fund $ 94,495 $ 78,963 $ 54,455
Investment Grade Tax-Exempt Bond
Fund $ 100,819 $113,467 $107,645
Short-Term Bond Fund $ 0 $ 5,067 $ 2,141
Florida Tax-Exempt Bond Fund $ 0 $ 6,021 $ 1,471
Georgia Tax-Exempt Bond Fund $ 0 $ 5,001 $ 1,548
Tennessee Tax-Exempt Bond Fund $ 2,177 $ 1,266 $ 1,347
U.S. Government Securities Fund $ 1,150 $ 4,218 $ 386
Short-Term U.S. Treasury Securities Fund $ 0 $ 8,499 $ 5,291
Limited-Term Federal Mortgage Securities
Fund $ 0 $ 2,360 $ 241
Capital Growth Fund $1,109,436 $912,685 $806,373
Sunbelt Equity Fund $ 80,282 $ 99,366 $ 49,826
Value Income Stock Fund $ 437,882 $304,282 $217,152
Mid-Cap Equity Fund $ 56,187 $ 51,485 $ 8,123
Balanced Fund $ 2,390 $ 10,808 $ 3,233
Small Cap Equity Fund $ 0 * *
Emerging Markets Equity Fund * * *
International Equity Fund $ 10,778 $ 0
International Equity Index Fund $ 8,005 $ 369 $ 1,649
*Not in operation during the period.
For the fiscal years ended May 31, 1997 and 1996, the Funds paid the
following amounts pursuant to the Flex Plan:
B-23
<PAGE>
DISTRIBUTION FEES
AMOUNT PAID
---------------------
FUND 1997 1996
---- -------- -------
Investment Grade Bond Fund $ 29,558 $ 9,277
Investment Grade Tax-Exempt Bond Fund $ 36,489 $21,786
Short-Term Bond Fund $ 0 $ 0
Florida Tax-Exempt Bond Fund $ 5,962 $ 2,675
Georgia Tax-Exempt Bond Fund $ 20,094 $ 7,409
Tennessee Tax-Exempt Bond Fund $ 14,991 $ 7,238
U.S. Government Securities Fund $ 15,260 $ 4,460
Short-Term U.S. Treasury Securities Fund $ 510 $ 321
Limited-Term Federal Mortgage Securities Fund $ 0 $ 169
Capital Growth Fund $201,520 $37,344
Sunbelt Equity Fund $ 27,568 $ 1,560
Value Income Stock Fund $433,655 $99,703
Mid-Cap Equity Fund $ 53,907 $10,115
Balanced Fund $ 28,723 $ 6,985
Small Cap Equity Fund N/A *
Emerging Markets Equity Fund N/A N/A
International Equity Fund $ 18,519 $ 0
International Equity Index Fund $ 0 $ 580
*Not in operation during the period.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during
that period. The business address of each Trustee and each Executive Officer
is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of
the Trust also serve as officers of some or all of the following: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK
Funds, Bishop Street Funds, Boston 1784 Funds7, CoreFunds, Inc., CrestFunds,
Inc., CUFUND, The Expedition Funds, FMB Funds, Inc., First American Funds,
Inc., First American Investment Funds, Inc., First American Strategy Funds,
Inc., HighMark Funds, Marquis Funds7, Monitor Funds, Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The
Pillar Funds, Profit Funds Investment Trust, Rembrandt Funds7, Santa Barbara
Group of Mutual Funds, Inc., 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, STI Classic Variable Trust and TIP Funds, each of which
is an open-end management investment company managed by SEI Fund Resources or
its affiliates and, except for Profit Funds Investment Trust, Rembrandt
Fund-REGISTRATION TRADEMARK-, and Santa Barbara Group of Mutual Funds, Inc.,
are distributed by SEI Investments Distribution Co.
DANIEL S. GOODRUM (7/11/26) - Trustee - 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 - President of Genuine Parts Company,
1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board,
1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee - 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 - Retired. President, Orange County
Publishing Co., Inc., 1981-1997, publisher of the Paoli News and the Paoli
Republican and Editor of the Paoli Republican, 1981-1997, President, H & W
Distribution, Inc., 1984-1997. 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 (11/28/25) -Trustee - 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 - 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 four 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 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* - 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.
CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of
SEI Fund Resources since 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.
B-25
<PAGE>
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 Investments, 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 Investments, the Administrator and
Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.
TODD CIPPERMAN (2/14/66) - 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 (6/18/56) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of SEI Investments, the Distributor and
Administrator, Associate, Drinker Biddle & Reath (law firm), 1994-1996.
Assistant Vice President/Administration, Delaware Service Company, Inc.,
1981-1994.
MARC H. CAHN (6/19/57) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of SEI Investments, the Distributor and
Administrator, Associate General Counsel, Barclays Bank PLC., 1995-1996.
Counsel for First Fidelity Bancorporation prior to 1995.
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, 1997, the Trust paid the following amounts to
Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION PENSION OR TOTAL COMPENSATION
FROM RETIREMENT ESTIMATED FROM REGISTRANT AND
REGISTRANT FOR BENEFITS ACCRUED ANNUAL FUND COMPLEX PAID TO
FISCAL YEAR AS PART OF FUND BENEFITS UPON DIRECTORS FOR FISCAL YEAR
NAME OF PERSON, POSITION ENDED 1997 EXPENSES RETIREMENT ENDED 1997
- ------------------------ -------------- ---------------- ------------- -------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, Trustee $15,625 N/A N/A $15,625 for service on two boards
Wilton Looney, Trustee $16,750 N/A N/A $16,750 for service on two boards
Champney A. McNair, Trustee $15,625 N/A N/A $15,625 for service on two boards
</TABLE>
B26
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION PENSION OR TOTAL COMPENSATION
FROM RETIREMENT ESTIMATED FROM REGISTRANT AND
REGISTRANT FOR BENEFITS ACCRUED ANNUAL FUND COMPLEX PAID TO
FISCAL YEAR AS PART OF FUND BENEFITS UPON DIRECTORS FOR FISCAL YEAR
NAME OF PERSON, POSITION ENDED 1997 EXPENSES RETIREMENT ENDED 1997
- ------------------------ -------------- ---------------- ------------- -------------------------
<S> <C> <C> <C> <C>
F. Wendell Gooch, Trustee $15,625 N/A N/A $15,625 for service on two boards
T. Gordy Germany,
Trustee $15,625 N/A N/A $15,625 for service on two boards
Dr. Bernard F. Sliger, Trustee $15,625 N/A N/A $15,625 for service on two boards
Jesse S. Hall, Trustee $15,625 N/A N/A $15,625 for service on two boards
</TABLE>
PERFORMANCE INFORMATION
From time to time a Fund may advertise its performance. Performance figures
are based on historical earnings and are not intended to indicate future
performance.
CLASSES OF SHARES AND PERFORMANCE
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.
PERFORMANCE COMPARISONS
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. These comparisons may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
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 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
B-27
<PAGE>
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]. 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, 1997 the Money Market Funds' current
effective and tax-equivalent yields were as follows:
<TABLE>
<CAPTION>
7-DAY 7-DAY
7-DAY TAX-EQUIVALENT TAX-EQUIVALENT
FUND CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD
---- -------- ----------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Prime Quality Money Investor 4.91% 5.03% N/A N/A
Market Fund Trust 5.08% 5.20% N/A N/A
U.S. Government Investor 4.77% 4.86% N/A N/A
Securities Money Trust 4.91% 5.00% N/A N/A
Market Fund
Tax-Exempt Money Investor 3.23% 3.28% 5.35% 5.43%
Market Fund Trust 3.35% 3.40% 5.55% 5.63%
</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
achieved 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%.
B-28
<PAGE>
For the 30-day period ended May 31, 1997, the tax-equivalent yields for the
Trust Shares were as follows: for the Investment Grade Tax-Exempt Bond Fund
- -6.62%, Georgia Tax-Exempt Bond Fund - 8.14%, Florida Tax-Exempt Bond Fund
- -8.00%, and Tennessee Tax-Exempt Bond Fund - 8.24%.
For the 30-day period ended May 31, 1997, the tax-equivalent yields for the
Investor Shares of the Tax-Exempt Funds were as follows: for the Investment
Grade Tax-Exempt Bond Fund - 5.75%, Georgia Tax-Exempt Bond Fund -7.50%,
Florida Tax-Exempt Bond Fund - 7.32% and Tennessee Tax-Exempt Bond Fund -
7.54%.
For the 30-day period ended May 31, 1997, the tax-equivalent yields for the
Flex Shares of the Tax-Exempt Funds were as follows: for the Investment
Grade Tax-Exempt Bond Fund - 5.15%, Georgia Tax-Exempt Bond Fund - 6.91%,
Florida Tax-Exempt Bond Fund - 6.73% and Tennessee Tax-Exempt Bond Fund -
6.91%.
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, 1997, yields on the Funds other than the
Money Market Funds were as follows:
FUND CLASS YIELD
- ---------------------------------------------------------------------
Investment Grade Bond Trust Class 6.31%
Fund Investor Class 5.68%
Flex Shares 5.42%
Investment Grade Tax- Trust Class 4.00%
Exempt Bond Fund Investor Class 3.47%
Flex Shares 3.11%
Short-Term Bond Fund Trust Class 5.97%
Investor Class 5.65%
Flex Shares 5.42%
B-29
<PAGE>
FUND CLASS YIELD
- ---------------------------------------------------------------------
Florida Tax-Exempt Bond Trust Class 4.35%
Fund Investor Class 3.98%
Flex Shares 3.66%
Georgia Tax-Exempt Bond Trust Class 4.43%
Fund Investor Class 4.08%
Flex Shares 3.76%
Tennessee Tax-Exempt Trust Class 4.48%
Bond Fund Investor Class 4.10%
Flex Shares 3.76%
Short-Term U.S. Treasury Trust Class 5.64%
Securities Fund Investor Class 5.43%
Flex Shares 5.20%
U.S. Government Trust Class 6.21%
Securities Fund Investor Class 5.56%
Flex Shares 5.28%
Limited-Term Federal Trust Class 5.91%
Mortgage Securities Fund Investor Class 5.50%
Flex Shares 5.29%
Capital Growth Fund Trust Class .70%
Investor Class .08%
Flex Shares 0%
Sunbelt Equity Fund Trust Class 0%
Investor Class 0%
Flex Shares 0%
Value Income Stock Fund Trust Class 2.24%
Investor Class 1.82%
Flex Shares 1.22%
Mid-Cap Equity Fund Trust Class 0%
Investor Class 0%
Flex Shares 0%
B-30
<PAGE>
FUND CLASS YIELD
- ---------------------------------------------------------------------
Balanced Fund Trust Class 2.98%
Investor Class 2.59%
Flex Shares 1.95%
Small Cap Equity Fund Trust Class 1.31%
Investor Class N/A
Flex Class N/A
Emerging Markets Equity Trust Class
Fund
International Equity Trust Class
Fund Investor Class
Flex Shares
International Equity Trust Class
Index Fund Investor Class
Flex Shares
*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 be calculated according to the following formula: P (1 + T)n =
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 Investment'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, 1997 and for the one year period ended May 31, 1997
were as follows:
B-31
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
FUND CLASS ONE YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------
Prime Quality Money Trust(1) 5.01% 4.17%
Market Fund
Investor(1) 4.84% 4.00%
U.S. Government Trust(1) 4.83% 4.04%
Securities Money
Market Fund Investor(1) 4.69% 3.90%
Tax-Exempt Money Trust(1) 3.09% 2.74%
Market Fund
Investor(1) 2.97% 2.62%
Investment Grade Bond Trust(3) 6.99% 6.26%
Fund
Investor--With 2.68% 5.18%
Sales Load(2)
Investor--Without 6.66% 5.99%
Sales Load(2)
Flex--With Sales 4.16% 4.33%
Load(25)
Flex--Without 6.16% 4.33%
Sales Load(25)
Investment Grade Tax- Trust(5) 7.13% 6.04%
Exempt Bond Fund
Investor--With 2.72% 6.98%
Sales Load(4)
Investor--Without 6.69% 7.80%
Sales Load(4)
Flex--With Sales 4.19% 5.55%
Load(26)
Flex--Without 6.19% 5.55%
Sales Load(26)
Short-Term Bond Fund Trust(7) 6.30% 5.04%
Investor--With 3.87% 4.18%
Sales Load(8)
Investor--Without 5.97% 4.69%
Sales Load(8)
Flex--With Sales 3.62% 4.70%
Load(28)
Flex-Without Sales 5.62% 4.70%
Load(28)
Florida Tax-Exempt Trust(10) 7.22% 5.66%
Bond Fund
Investor--With 3.01% 4.27%
Sales Load(9)
Investor--Without 7.00% 5.46%
Sales Load(9)
Flex--With Sales 4.48% 4.86%
Load(26)
Flex--Without 6.48% 4.86%
Sales Load(26)
B-32
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
FUND CLASS ONE YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------
Georgia Tax-Exempt Trust(9) 6.79% 3.81%
Bond Fund
Investor--With 2.51% 2.46%
Sales Load(11)
Investor--Without 6.47% 3.63%
Sales Load(11)
Flex--With Sales 4.06% 4.15%
Load(31)
Flex--Without 6.06% 4.15%
Sales Load(31)
Tennessee Tax-Exempt Trust(12) 7.16% 3.47%
Bond Fund
Investor--With 2.89% 2.23%
Sales Load(11)
Investor--Without 6.93% 3.40%
Sales Load(11)
Flex--With Sales 4.42% 4.19%
Load(29)
Flex--Without 6.42% 4.19%
Sales Load(29)
Short-Term U.S. Trust(7) 5.76% 4.56%
Treasury Securities
Fund Investor--With 4.53% 4.15%
Sales Load(6)
Investor--Without 5.59% 4.40%
Sales Load(6)
Flex--With Sales 3.19% 4.48%
Load(27)
Flex--Without 5.19% 4.48%
Sales Load(27)
U.S. Government Trust(21) 7.54% 6.67%
Securities Fund
Investor--With 3.14% 4.74%
Sales Load(20)
Investor--Without 7.21% 6.09%
Sales Load(20)
Flex-With Sales 4.57% 3.98%
Load(25)
Flex--Without 6.57% 3.98%
Sales Load(25)
Limited-Term Federal Trust(23) 6.43% 6.29%
Mortgage Fund
Investor--With 3.47% 5.40%
Sales Load(22)
Investor--Without 6.17% 6.35%
Sales Load(22)
Flex--With Sales 3.80% 4.95%
Load(25)
Flex--Without 5.80% 4.95%
Sales Load(25)
B-33
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
FUND CLASS ONE YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------
Capital Growth Fund Trust(13) 24.66% 15.98%
Investor--With 19.10% 14.98%
Sales Load(4)
Investor--Without 23.74% 15.86%
Sales Load(4)
Flex--With Sales 21.24% 25.34%
Load(26)
Flex--Without 23.24% 25.34%
Sales Load(26)
Sunbelt Equity Fund Trust(19) 1.48% 11.83%
Investor--With (2.71)% 10.08%
Sales Load(18)
Investor--Without 1.05% 11.32%
Sales Load(18)
Flex--With Sales (1.40)% 18.46%
Load(29)
Flex--Without 0.46% 18.46%
Sales Load(29)
Value Income Stock Trust(15) 22.18% 18.87%
Fund
Investor--With 17.14% 18.14%
Sales Load(14)
Investor--Without 21.69% 19.20%
Sales Load(14)
Flex--With Sales 18.91% 23.68%
Load(26)
Flex--Without 20.91% 23.68%
Sales Load(26)
Mid-Cap Equity Fund Trust(17) 14.23% 15.01%
Investor--With 9.46% 13.11%
Sales Load(16)
Investor--Without 13.76% 14.42%
Sales Load(16)
Flex--With Sales 11.06% 17.91%
Load(29)
Flex--Without 13.06% 17.91%
Sales Load(29)
Balanced Fund Trust(19) 16.66% 11.77%
Investor--With 11.92% 10.07%
Sales Load(18)
Investor--Without 16.27% 11.32%
Sales Load(18)
Flex--With Sales 13.40% 15.51%
Load(30)
Flex--Without 15.40% 15.51%
Sales Load(30)
B-34
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
FUND CLASS ONE YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------
Small Cap Equity Fund Trust * 10.97%
Flex--With Sales * *
Load
Flex--Without * *
Sales Load
Emerging Markets Trust(35) * 7.90%
Equity Fund
International Equity Trust(33) 23.29% 25.50%
Fund
Investor--With 18.28% 19.68%
Sales Load(32)
Investor--Without 22.85% 22.99%
Sales Load(32)
Flex--With Sales 19.98% 22.30%
Load(32)
Flex--Without 21.98% 22.30%
Sales Load(32)
International Equity Trust(24) 7.48% 6.48%
Index Fund
Investor--With 3.14% 4.71%
Sales Load(24)
Investor--Without 7.12% 6.06%
Sales Load(24)
Flex--With Sales 4.41% 7.34%
Load(34)
Flex--Without 6.41% 7.34%
Sales Load(34)
(1) Commenced operations 6/8/92
(2) Commenced operations 6/11/92
(3) Commenced operations 7/16/92
(4) Commenced operations 6/9/92
(5) Commenced operations 10/21/93
(6) Commenced operations 3/18/93
(7) Commenced operations 3/15/93
(8) Commenced operations 3/22/93
(9) Commenced operations 1/18/94
(10) Commenced operations 1/25/94
(11) Commenced operations 1/19/94
(12) Commenced operations 1/27/94
(13) Commenced operations 7/1/92
(14) Commenced operations 2/17/93
(15) Commenced operations 2/12/93
(16) Commenced operations 2/1/94
(17) Commenced operations 2/2/94
(18) Commenced operations 1/4/94
(19) Commenced operations 1/3/94
(20) Commenced operations 6/9/94
(21) Commenced operations 7/31/94
(22) Commenced operations 7/17/94
(23) Commenced operations 6/7/94
(24) Commenced operations 6/6/94
(25) Commenced operations 6/2/95
(26) Commenced operations 6/2/95
(27) Commenced operations 6/23/95
(28) Commenced operations 6/21/95
(29) Commenced operations 6/6/95
(30) Commenced operations 6/15/95
(31) Commenced operations 6/7/95
(31) Commenced operations 6/7/95
(32) Commenced operations 1/2/96
(33) Commenced operations 12/1/95
(34) Commenced operations 6/8/95
(35) Commenced operations 1/31/97
*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,
Martin Luther King, Jr. 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
B-35
<PAGE>
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 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 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
B-36
<PAGE>
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
The following is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders that are not described
in the Funds' prospectus. No attempt is made to present a detailed
explanation of the Federal tax treatment of the funds or their Shareholders,
and the discussion here and in the Funds' prospectus is not intended as a
substitute for careful tax planning.
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
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 of 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. Requirement (ii) no longer applies for
tax years beginning after August 5, 1997.
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 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. 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.
B-37
<PAGE>
If, at the close of each quarter of its taxable year, at least 50% of the
value of a Fund's total assets consists of obligations the interest on which
is excludable from gross income, a Fund may pay "exempt-interest dividends,"
as defined in Section 852(b)(5) of the Code, to its shareholders.
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 for both
corporate and non-corporate taxpayers and the Environmental Tax for corporate
taxpayers only. 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. For tax
years beginning after December 31, 1997, the Alternative Minimum Tax is
repealed for certain corporations.
Distributions of exempt-interest dividends may result in additional Federal
income tax consequences to shareholders in Tax-Exempt Funds. For example,
interest on indebtedness incurred by Shareholders to purchase or carry shares
of a Tax-Exempt 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
exempt-interest dividends. Up to 85% 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-Exempt 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 in a trade or business
a facility financed from the proceeds of industrial development bonds or
private activity bonds. Such entities or persons should consult their tax
advisors before purchasing shares of a Tax-Exempt Fund.
Issuers of bonds purchased by a Tax-Exempt 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 of issuance of the bonds to which
such dividends are attributable 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.
B-38
<PAGE>
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
long-term capital gain or loss if the shares have been held for more than
eighteen months, mid-term if the shares have been held for over one year but
not for over eighteen months, and short-term if for a year or less.*
Long-term capital gains are currently taxed at a maximum rate or 20%;
mid-term capital gains are currently taxed at a maximum rate of 28%; and
short-term gains are currently taxed at ordinary income tax rates.] If
shares held for six months or less are sold or redeemed for a loss, two
special rules apply: First, 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 long-term capital loss to the extent of the long-term capital gain
distributions. Second, any loss recognized by a Shareholder upon the sale or
redemption of shares of a Tax-Exempt Fund held for six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
Shareholder with respect to such shares.
The Funds will make annual reports to Shareholders of the Federal income tax
status of all distributions.
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 stock or 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 any of the International Equity Index, International Equity, and Emerging
Markets Equity Funds meets the Distribution Requirement, and if more than 50%
of the value of such Fund's total assets at the close of its taxable year
consists of stock or securities of foreign corporations, such Fund 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 Fund. 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. 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. In no event shall a Shareholder be allowed a foreign tax credit with
respect to shares in a Fund if such shares are held by the Shareholder for 15
days or less during the 30-day period beginning on the date which is 15 days
before the date on which such shares become ex-dividend with respect to such
dividend. If any of the three above-mentioned 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, International Equity, and Emerging
Markets 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 RIC and minimize the
imposition of income and excise taxes.
B-39
<PAGE>
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.
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
B-40
<PAGE>
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 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 Conduct Rules 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, 1997, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
B-41
<PAGE>
<TABLE>
<CAPTION>
TOTAL
BROKERAGE
COMMISSIONS
% OF TOTAL % OF TOTAL PAID TO
BROKERAGE BROKERED SFS IN
TOTAL $ TOTAL $ COMMISSIONS TRANSACTIONS CONNECTION
TOTAL $ AMOUNT TOTAL $ AMOUNT OF PAID TO EFFECTED WITH
AMOUNT OF BROKERED AMOUNT OF BROKERAGE AFFILIATED THROUGH REPURCHASE
OF BROKERED TRANSACTIONS BROKERAGE COMMISSIONS BROKERS AFFILIATED AGREEMENT
TRANSACTIONS THROUGH COMMISSIONS PAID TO IN BROKERS TRANSACTIONS
FOR FYE AFFILIATES FOR PAID IN AFFILIATES IN FYE FYE FOR FYE
PORTFOLIO 5/31/97 FYE 5/31/97 FYE 5/31/97 FYE 5/31/97 5/31/97 5/31/97 5/31/97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Prime Quality $33,193,764,625 $9,634,801,779 $ 122,053 $ 122,053 100% 29% $122,053
Money Market
Fund
U.S. $ 7,444,430,857 $3,325,557,692 $ 141,850 $ 141,850 100% 45% $141,850
Government
Securities
Money Market
Fund
Tax-Exempt $ 2,204,750,530 -- $ 0 $ 0 0% 0% --
Money Market
Fund
Investment $ 8,374,366,900 $2,344,004,813 $ 17,502 $ 17,502 100% 28% $ 17,502
Grade Bond
Fund
Investment $ 3,131,088,439 $ 563,350,800 $ 3,552 $ 3,552 100% 18% $ 3,552
Grade Tax-
Exempt Bond
Fund
Capital $ 2,855,601,252 $1,175,677,501 $ 3,228,364 $ 3,228,364 1% 41% $ 39,856
Growth Fund
Value Income $ 2,597,768,470 $1,261,283,784 $ 4,600,079 $ 4,600,079 1% 49% $ 47,933
Stock Fund
Short-Term $ 79,710,242 -- $ 0 $ 0 0% 0% --
Bond Fund
Short-Term $ 318,014,674 -- $ 0 $ 0 0% 0% --
U.S. Treasury
Securities
Fund
Sunbelt $ 1,315,787,519 $ 508,559,524 $ 903,669 $ 903,669 .49% 39% $ 4,453
Equity Fund
Balanced Fund $ 926,906,986 $ 313,685,467 $ 195,918 $ 195,918 3% 34% $ 5,475
Mid-Cap $ 984,028,459 $ 401,976,085 $ 1,090,599 $ 1,090,599 1% 41% $ 12,836
Equity Fund
Florida Tax- $ 284,768,149 $ 35,224,997 $ 169 $ 169 100% 12% $ 169
Exempt Bond
Fund
</TABLE>
B-42
<PAGE>
<TABLE>
<CAPTION>
TOTAL
BROKERAGE
COMMISSIONS
% OF TOTAL % OF TOTAL PAID TO
BROKERAGE BROKERED SFS IN
TOTAL $ TOTAL $ COMMISSIONS TRANSACTIONS CONNECTION
TOTAL $ AMOUNT TOTAL $ AMOUNT OF PAID TO EFFECTED WITH
AMOUNT OF BROKERED AMOUNT OF BROKERAGE AFFILIATED THROUGH REPURCHASE
OF BROKERED TRANSACTIONS BROKERAGE COMMISSIONS BROKERS AFFILIATED AGREEMENT
TRANSACTIONS THROUGH COMMISSIONS PAID TO IN BROKERS TRANSACTIONS
FOR FYE AFFILIATES FOR PAID IN AFFILIATES IN FYE FYE FOR FYE
PORTFOLIO 5/31/97 FYE 5/31/97 FYE 5/31/97 FYE 5/31/97 5/31/97 5/31/97 5/31/97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Georgia Tax- $ 101,269,058 $ 18,350,406 $ 201 $ 201 100% 18% $ 201
Exempt Bond
Fund
Tennessee $ 9,344,425 $ 1,881,035 $ 36 $ 36 100% 20% $ 36
Tax-Exempt
Bond Fund
U.S. $ 60,753,621 $ 60,753,621 $ 0 $ 0 0% 0% --
Government
Securities
Fund
Limited-Term $ 798,951,267 $ 798,951,267 $ 2,053 $ 2,053 100% 28% $ 2,053
Federal
Mortgage
Securities
Fund
Small Cap $ 227,315,887 $ 227,315,887 $ 229,856 $ 229,856 .38% 35% $ 867
Equity Fund
Emerging $ 26,947,913 $ 0 $ 144,635 $ 0 0% 0% --
Markets
Equity Fund
International $ 44,036,638 $ 0 $ 94,672 $ 0 0% 0% --
Equity Index
Fund
International $ 999,491,675 $ 0 $ 2,875,911 $ 0 0% 0% --
Equity Fund
</TABLE>
For the fiscal years ended May 31, 1996 and 1995, the Funds paid the
following brokerage commissions with respect to portfolio
transactions:
<TABLE>
<CAPTION>
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED
COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES
--------------------------- ------------------------------
FUND 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prime Quality Money Market Fund $ 0 $ 108,992
</TABLE>
B-43
<PAGE>
<TABLE>
<CAPTION>
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED
COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES
--------------------------- ------------------------------
FUND 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities Money Market Fund $ 0 $ 173,038
Tax-Exempt Money Market Fund $ 0 $ 0
Investment Grade Bond Fund $ 0 $ 18,536
Investment Grade Tax-Exempt Bond Fund $ 0 $ 3,392
Short-Term Bond Fund $ 0 $ 0
Florida Tax-Exempt Bond Fund $ 0 $ 200
Georgia Tax-Exempt Bond Fund $ 0 $ 135
Tennessee Tax-Exempt Bond Fund $ 0 $ 69
U.S. Government Securities Fund $ 0 $ 0
Limited-Term Federal Mortgage Securities Fund $ 0 $ 73
Capital Growth Fund $3,399,393 $2,641,999 $ 34,827 $46,411
Sunbelt Equity Fund $ 904,698 $ 654,499 $ 5,202 $ 4,802
Value Income Stock Fund $4,325,977 $3,542,773 $ 37,379 $17,510
Mid-Cap Equity Fund $ 528,220 $ 191,298 $ 18,224 $11,418
Balanced Fund $ 169,222 $ 140,109 $ 4,280 $ 4,063
Small Cap Equity Fund * * * *
Emerging Markets Equity Fund * * * *
International Equity Index Fund $1,532,834 $ 176,784 $ 71 $ 0
International Equity Fund $ 129,411 * $ 0 *
</TABLE>
*Not in operation during the period.
For the fiscal years ended May 31, 1997 and 1996, the portfolio
turnover rate for each of the non-money market Funds was as follows:
<TABLE>
<CAPTION>
TURNOVER RATE
----------------------
FUND 1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Investment Grade Bond Fund 298% 184%
Investment Grade Tax-Exempt Bond Fund 489% 514%
</TABLE>
B-44
<PAGE>
<TABLE>
<CAPTION>
TURNOVER RATE
----------------------
FUND 1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Short-Term U.S. Treasury Securities Fund 93% 94%
Short-Term Bond Fund 118% 163%
U.S. Government Securities Fund 21% 83%
Limited-Term Federal Mortgage Securities 133% 83%
Fund
Florida Tax-Exempt Bond Fund 135% 63%
Georgia Tax-Exempt Bond Fund 15% 60%
Tennessee Tax-Exempt Bond Fund 16% 41%
Capital Growth Fund 141% 156%
Value Income Stock Fund 105% 134%
Mid-Cap Equity Fund 152% 116%
Balanced Fund 197% 155%
Sunbelt Equity Fund 72% 106%
Emerging Markets Equity 24% *
International Equity Fund 139% 113%
International Equity Index Fund 2% 30%
</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 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
B-45
<PAGE>
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 September 2, 1997, 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.
TRUST SHARES
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Prime Quality Money Market Fund SunTrust Bank, Atlanta 1,501,684,056.9000 95.94%
P.O. Box 105504
Atlanta, GA 30348
US Government Securities Money SunTrust Bank, Atlanta 330,351,631.2500 97.98%
Market Fund P.O. Box 105504
Atlanta, GA 30348
Tax Exempt Money Market Fund SunTrust Bank, Atlanta 403,515,749.3900 100.00%
P.O. Box 105504
Atlanta, GA 30348
Investment Grade Bond Fund Trustman 50,816,431.0230 76.11%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Investment Grade Tax Exempt Bond Trustman 7,062,669.8730 55.42%
Fund Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 3,255,166.6420 25.55%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
B-46
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Capital Growth Fund Trustman 59,831,226.6850 75.79%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Value Income Stock Fund Trustman 76,452,547.3750 69.72%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Short-Term U.S. Treasury Securities Trustman 1,192,275.2610 55.44%
Fund Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Short-Term Bond Fund Trustman 5,818,699.3640 57.44%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 3,747,105.6450 36.99%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Sunbelt Equity Fund Trustman 19,850,769.7470 73.41%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Mid-Cap Equity Fund Trustman 13,599,373.2790 59.37%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 7,723,553.0810 33.72%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Balanced Fund Trustman 11,817,880.0600 96.56%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Florida Tax-Exempt Bond Fund Trustman 4,399,572.5730 67.99%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Georgia Tax-Exempt Bond Fund Trustman 2,097,210.1470 46.40%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 1,789,602.1880 39.59%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
B-47
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Tennessee Tax-Exempt Bond Fund Trustman 107,883.8000 53.83%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 57,878.6610 28.88%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
International Equity Index Fund Trustman 3,735,378.7720 84.59%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
International Equity Fund Trustman 23,156,973.4110 61.10%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 12,280,833.8800 32.40%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
U.S. Government Securities Fund Trustman 967,116.5540 40.72%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 834,048.3510 35.12%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Limited Term Federal Mortgage Trustman 8,717,381.5800 67.34%
Securities Fund Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 3,555,214.8200 27.46%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Emerging Markets Equity Fund Trustman 3,412,803.7780 74.46%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Small Cap Equity Fund Trustman 13,615,497.0400 63.94%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
Trustman 6,720,125.4650 31.56%
Mail Center 3144
P.O. Box 105870
Atlanta, GA 30348-5870
</TABLE>
B-48
<PAGE>
INVESTOR SHARES
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Prime Quality Money Market Fund BHC Securities Inc 255,429,882.7100 79.02%
Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103-7042
STCM 19,725,000.0000 6.10%
Omnibus Account
Attn: Melinda Felice
P.O. Box 4418, Ctr. 3910
Atlanta, GA 30302-4418
U.S. Government Securities Money BHC Securities Inc 32,197,846.6100 53.36%
Market Fund Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103-7042
Akerman, Senterfitt & Eidson 4,896,620.4900 8.11%
Attorney Account
P.O. Box 231
Orlando, FL 32802-0231
Tax Exempt Money Market Fund BHC Securities Inc 89,444,549.9300 69.41%
Attn: Cash Sweeps Dept.
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103-7042
STCM 15,400,000.0000 11.95%
Omnibus Account
P.O. Box 4418, Ctr.3910
Atlanta, GA 30302-4418
Investment Grade Bond Fund BHC Securities Inc. 1,474,597.4460 46.96%
Trade House Account
Attn: Mutual Funds
One Commerce Square,
2005 Market Street
Philadelphia, PA 19103-7042
Investment Grade Tax-Exempt Bond BHC Securities Inc. 623,246.3210 23.95%
Fund Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
B-49
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Capital Growth Fund BHC Securities Inc. 4,778,120.0840 33.41%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Value Income Stock Fund BHC Securities Inc. 5,882,796.8910 47.61%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Short-Term U.S. Treasury BHC Securities Inc. 139,953.9270 38.27%
Securities Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Clarence A. Rittenhouse 61,601.4910 16.84%
Margaret S. Rittenhouse JT WROS
700 Golden Beach Blvd #126
Venice, FL 34285-3311
Georgia Academy for Children 53,632.6810 14.66%
and Youth Prof
100 Peachtree Street, Suite 500
Atlanta, GA 30303-1908
International Investment 47,744.7470 13.05%
Conference Inc.
Attn: Sandy Lawrence
6310 Sunset Drive
Miami, FL 33143-4823
Short-Term Bond Fund BHC Securities Inc. 143,685.2460 67.67%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Bartow Memorial Hospital 12,193.5780 5.74%
Foundation Inc.
1239 East Main Street
Bartow, FL 33830-5005
Betty H. Anderson 10,671.5260 5.03%
207 Suburban Drive
Brunswick, GA 31520-2920
Sunbelt Equity Fund BHC Securities Inc. 1,003,585.5730 49.39%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
B-50
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
Mid-Cap Equity Fund BHC Securities Inc. 887,258.4840 57.94%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Anthony R. Gray 75,450.4840 57.94%
460 Virginia Drive
Winter Park, FL 32789-5805
Balanced Fund BHC Securities Inc. 20,751.8530 47.40%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Florida Tax-Exempt Bond Fund BHC Securities Inc. 111,335.3360 35.79%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Mildred Meinhart Rast 30,176.0880 9.70%
1303 South 8th Street
Leesburg, FL 34748-6822
Georgia Tax-Exempt Bond Fund BHC Securities Inc. 191,213.4220 53.07%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Patrick J. Doran & 29,577.3030 8.21%
Norma R. Doran JTTEN
2024 Fisher Trail NE
Atlanta, GA 30345-3429
Tennessee Tax-Exempt Bond Fund BHC Securities, Inc. 75,554.0850 58.10%
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Grace M. Bryan 18,894.1970 14.53%
P.O. Box 176
St. Joseph, TN 38481-0176
Ralph Laine 13,213.5310 10.16%
2823 Lumar Lane
Nashville, TN 37214-1834
B-51
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF FUND
---- ---------------- ---------------- ---------
<S> <C> <C> <C>
International Equity Index Fund BHC Securities Inc. 315,159.4950 64.54%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Community First National Bank 27,151.2400 5.56%
RPO Tyler 401(k) RSP
Attn: Kathy Lindstrom
Main At Broadway
Fargo, ND 58103-1906
International Equity Fund BHC Securities Inc. 674,984.7650 70.82%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
U.S. Government Securities Fund BHC Securities, Inc. 206,382.1450 91.35%
Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Limited-Term Federal Mortgage BHC Securities Inc. 200,361.6770 84.30%
Securities Fund Trade House Account
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
</TABLE>
FLEX SHARES
<TABLE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF SHARES
---- ---------------- ---------------- -----------
<S> <C> <C> <C>
Short-Term Bond Fund BHC Securities Inc. 26,775.8010 20.24%
FAO21549889
Attn: Mutual FundsDept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 16,110.4250 12.18%
FAO 21180400
Attn: Mutual FundsDept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 8,109.6240 6.13%
FAO 21107805
Attn: Mutual FundsDept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
B-52
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF SHARES
---- ---------------- ---------------- -----------
<S> <C> <C> <C>
Florida Tax-Exempt Bond Fund BHC Securities, Inc. 48,493.6580 10.75%
FAO 20951046
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
H. Lorene Kleinlein TTEE 28,183.2200 6.25%
H. Lorene Kleinlein Trust
9519 Sun Point Drive
Boynton Beach, FL 33437-3343
BHC Securities Inc. 27,413.4470 6.08%
FAO 21471055
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 25,661.0310 5.69%
FAO 21738535
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
Tennessee Tax-Exempt Bond Fund BHC Securities Inc. 41,152.2630 12.24%
FAO 21627721
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 32,630.8020 9.70%
FAO 21610240
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 32,154.3410 9.56%
FAO 20931807
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
International Equity Index Fund BHC Securities Inc. 7,594.1720 8.74%
FAO 21547376
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
B-53
<PAGE>
<CAPTION>
FUND NAME AND ADDRESS NUMBER OF SHARES % OF SHARES
---- ---------------- ---------------- -----------
<S> <C> <C> <C>
BHC Securities, Inc. 5,208.0800 5.99%
FAO 21549889
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities, Inc. 4,814.00 5.54%
FAO 21119083
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
U.S. Government Securities Fund BHC Securities, Inc. 26,852.5970 9.62%
FAO 21180443
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 16,088.2850 5.76%
FAO 21180400
Attn: Mutual FundsDept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 16,026.7870 5.74%
FAO 21531479
Attn: Mutual Funds
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
Ralph L. Struever 14,519.5660 5.20%
5350 Woodland Lakes Drive
Palm Beach Gardens, FL 33418
Limited-Term Federal Mortgage BHC Securities Inc. 10,648.2850 6.93%
Security Fund FAO 21838525
Attn: Mutual Funds
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
Viola T. High 10,398.8620 6.77%
Richard T. High TEN ENT
528 Hearthstone Circle
Brentwood, TN 37027-4323
</TABLE>
B-54
<PAGE>
EXPERTS
The financial statements as of May 31, 1997 have been audited by Arthur Andersen
LLP, Independent Public Accountants, as indicated in their report dated July 11,
1997 with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
B-55
<PAGE>
STI CLASSIC FUNDS
INVESTMENT ADVISOR:
TRUSCO CAPITAL MANAGEMENT, INC.
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 Classic
Institutional Cash Management and Classic Institutional U.S. Treasury
Securities Money Market Fund prospectus dated October 1, 1997. The
prospectus may be obtained through the Distributor, SEI Investments
Distribution Co., Oaks, Pennsylvania 19456.
TABLE OF CONTENTS
PAGE
THE TRUST.....................................................................B-
DESCRIPTION OF PERMITTED INVESTMENTS..........................................B-
INVESTMENT LIMITATIONS........................................................B-
INVESTMENT ADVISOR............................................................B-
THE ADMINISTRATOR.............................................................B-
THE DISTRIBUTOR...............................................................B-
TRUSTEES AND OFFICERS OF THE TRUST............................................B-
COMPUTATION OF YIELD..........................................................B-
ADVERTISING...................................................................B-
PURCHASE AND REDEMPTION OF SHARES.............................................B-
DETERMINATION OF NET ASSET VALUE..............................................B-
TAXES.........................................................................B-
FUND TRANSACTIONS.............................................................B-
DESCRIPTION OF SHARES.........................................................B-
SHAREHOLDER LIABILITY.........................................................B-
LIMITATION OF TRUSTEES' LIABILITY.............................................B-
5% AND 25% SHAREHOLDERS.......................................................B-
EXPERTS.......................................................................B-
October 1, 1997
<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. This Statement of Additional Information relates to the Trust's
Classic Institutional Cash Management Money Market Fund and Classic
Institutional U.S. Treasury Securities Money Market Fund (collectively, the
"Funds"), each of which currently offers one class of shares.
DESCRIPTION OF PERMITTED INVESTMENTS
FOREIGN SECURITIES
The Institutional Cash Management Money Market Fund may invest in U.S. dollar
denominated 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, Europaper and
foreign securities. These instruments may subject the Fund 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.
INVESTMENT COMPANY SHARES
Investment companies typically incur fees that are separate from those fees
incurred directly by the Funds. 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.
B-2
<PAGE>
MUNICIPAL SECURITIES
The Funds may invest in municipal securities. The two principal
classifications of municipal securities are "general obligation" and
"revenue" issues. General obligation issues are issues involving the credit
of an issuer possessing taxing power and are payable from the issuer's
general unrestricted revenues, although the characteristics and method of
enforcement of general obligation issues may vary according to the law
applicable to the particular issue. Revenue issues are payable only from the
revenues derived from a particular facility or class of facilities or other
specific revenue source. A Fund may also invest in "moral obligation"
issues, which are normally issued by special purpose authorities. Moral
obligation issues are not backed by the full faith and credit of the state
and are generally backed by the agreement of the issuing authority to request
appropriations from the state legislative body. Municipal securities include
debt obligations issued by governmental entities to obtain funds for various
public purposes, such as the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses, and the extension of loans to other public institutions
and facilities. Certain private activity bonds that are issued by or on
behalf of public authorities to finance various privately-owned or operated
facilities are included within the term "Municipal Securities." Private
activity bonds are industrial development bonds are generally revenue bonds,
the credit and quality of which are directly related to the credit of the
private user of the facilities.
Municipal securities may also include general obligation notes, tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
project notes, certificates of indebtedness, demand notes, tax-exempt
commercial paper, construction loan notes and other forms of short-term,
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of fax funds, the proceeds of bond placements or
other revenues. Project notes are issued by a state or local housing agency
and are sold by the Department of Housing and Urban Development. While the
issuing agency has the primary obligation with respect to its project notes,
they are also secured by the full faith and credit of the United States
through agreements with the issuing authority which provide that, if
required, the federal government will end the issuer an amount equal to the
principal of and interest on the project notes.
The quality of municipal securities, both within a particular classification
and between classifications, will vary, and the yields on municipal
securities depend upon a variety of factors, including general money market
conditions, the financial condition of the issuer (or other entity whose
financial resources are supporting the securities), general conditions of the
municipal bond market, the size of a particular offering, the maturity of the
obligation and the rating(s) of the issue. In this regard, it should be
emphasized that the ratings of any NRSRO are general and are not absolute
standards of quality. Municipal securities with the same maturity, interest
rate and rating(s) may have different yields, while municipal securities of
the same maturity and interest rate with different rating(s) may have the
same yield.
An issuer's obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
B-3
<PAGE>
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for
the payment of interest on and principal of its municipal securities may be
materially adversely affected by litigation or other conditions.
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
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 rate 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.
SUPRANATIONAL AGENCY OBLIGATIONS
The Institutional Cash Management Money Market Fund may purchase obligations
of supranational agencies. Currently the Fund intends 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.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Investments Company ("SEI Investments"), the parent company of
the Administrator and the Distributor. The purchase of shares of the Trust
by such banks or by their customers will not be a consideration in
B-4
<PAGE>
determining which bank obligations the Trust will purchase. However, the
Trust will not purchase obligations issued by the Advisor.
REPURCHASE AGREEMENTS
Each 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 Advisor
monitors compliance with this requirement). Under all repurchase agreements
entered into by a Fund, the 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 a Fund is treated as an unsecured creditor
and required to return the underlying security to the seller's estate.
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 FUNDS INCLUDE
RESTRICTED SECURITIES, AND EACH FUND MAY INVEST UP TO 10% OF ITS NET 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 the Fund's Advisor pursuant to guidelines adopted by the Board of
Trustees. Under these guidelines, the 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, the Advisor intends to
purchase securities that are exempt from registration under Rule 144A under
the 1933 Act.
B-5
<PAGE>
SECURITIES LENDING
The Funds 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 Advisor to be of good standing
and when, in the judgment of the 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 the Advisor as a broker in these transactions.
STANDBY COMMITMENTS AND PUTS
The Institutional Cash Management Money Market Fund 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 it 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 Fund to meet redemptions and remain as fully invested as possible
in municipal securities. The Fund reserves 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. The
Institutional Cash Management Money Market 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, the 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.
B-6
<PAGE>
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
originally issued held in the Fund will not exceed 1/2 of 1% of the value of
its total assets of such Fund calculated immediately after any such put is
acquired.
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. The Advisor will only purchase STRIPS
that it determines are liquid or, if illiquid, do not violate each 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 Advisor will only purchase STRIPS for the Funds that have a
remaining maturity of 397 days or less; therefore, the 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 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 Funds.
U.S. GOVERNMENT AGENCY SECURITIES
Certain investments of the Institutional Cash Management Money Market 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, Federal Intermediate
Credit Banks, Federal Land Banks, Fannie Mae, 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., Fannie Mae 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.
B-7
<PAGE>
VARIABLE RATE MASTER DEMAND NOTES
The Institutional Cash Management Money Market 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 the Fund, as
lender, and the 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 Advisor, be equivalent
to the ratings applicable to permitted investments for the Fund. The Advisor
will monitor on an ongoing basis the earning power, cash flow and liquidity
ratios of the issuers of such instruments and will similarly monitor the
ability of an issuer of a demand instrument to pay principal and interest on
demand.
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 a
Fund's outstanding shares.
The term "a majority of the outstanding shares" of a Fund means the vote of
the lesser of (i) 67% or more of the shares of such Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of such
Fund are present or represented by proxy or (ii) more than 50% of the
outstanding shares of such Fund.
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.
B-8
<PAGE>
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) a Fund may
engage in securities lending as described in the Prospectus 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 and interests in a pool
of securities that are secured by interests in real estate. However,
subject to their permitted investment spectrum, any Fund may invest in
companies which invest in real estate commodities or commodities
contracts.
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 1940 Act and the rules and regulations
thereunder. 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 hold illiquid securities, I.E., securities that
cannot be disposed of for their approximate carrying value in seven days or
less (which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 10% of its net assets
would be invested in illiquid securities.
The foregoing percentages, except with respect to holding illiquid
securities, 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.
B-9
<PAGE>
INVESTMENT ADVISOR
The Trust and Trusco Capital Management, Inc. (the "Advisor") have entered
into an advisory agreement (the "Advisory Agreement"). The Advisory
Agreement provides that the 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.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of a Fund (including amounts payable to the 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 the 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 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. The 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 year ended May 31, 1997, the Funds paid the following advisory
fees:
Fees Paid Fees Waived
Fund 1997 1997
- ---- --------- -----------
Classic Institutional Cash Management Money $0 $100,270
Market Fund
Classic Institutional U.S. Treasury Securities $0 $ 18,255
Money Market Fund
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator"), are parties to 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.
B-10
<PAGE>
The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), 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 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 PBHG Insurance Series
Fund, 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 year ended May 31, 1997, the Funds paid the following
administration fees:
Fees Paid Fees Waived
Fund 1997 1997
- ---- --------- -----------
Classic Institutional Cash Management Money $32,389 $0
Market Fund
Classic Institutional U.S. Treasury Securities $ 6,047 $0
Money Market Fund
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned
subsidiary of SEI Investments, 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 Shares.
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees (as defined in the Distribution
Agreement), or by a majority vote of the outstanding securities of the Trust
upon not more than 60 days' written notice by either party.
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, their respective dates of birth
and principal occupations for the last five years are set forth below. The
principal business address for each officer listed below is Oaks,
Pennsylvania 19456.
B-11
<PAGE>
DANIEL S. GOODRUM (7/11/26) - Trustee - 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 - President of Genuine Parts Company,
1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board,
1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee - 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 - Retired. President, Orange County
Publishing Co., Inc., 1981 - 1997, Publisher of the Paoli News and the Paoli
Republican and Editor of the Paoli Republican, 1981 - 1997, President, H & W
Distribution, Inc., 1984 - 1997. 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 (11/28/25) -Trustee - 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 - 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 four 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 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* - 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.
CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of
SEI Fund Resources since 1992.
B-12
<PAGE>
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 Investments, 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 Investments, the Administrator and
Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.
TODD CIPPERMAN (2/14/66) - 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 (6/18/56) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of SEI Investments, the Distributor and
Administrator, Associate, Drinker Biddle & Reath (law firm), 1994-1996.
Assistant Vice President/Administration, Delaware Service Company, Inc.,
1981-1994.
MARC H. CAHN (6/19/57) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of SEI Investments, the Distributor and
Administrator, Associate General Counsel, Barclays Bank PLC., 1995-1996.
Counsel for First Fidelity Bancorporation prior to 1995.
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, 1997, the Trust paid the following amounts to
Trustees and Officers of the Trust:
B-13
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Aggregate Pension or Total Compensation from
Compensation Retirement Registrant and Fund
From Registrant Benefits Accrued Estimated Annual Complex Paid to
Name of Person, for Fiscal Year as Part of Fund Benefits Upon Directors for Fiscal Year
Position Ended 1997 Expenses Retirement Ended 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, $15,625 N/A N/A $15,625 for service on
Trustee two boards
- ---------------------------------------------------------------------------------------------------------
Wilton Looney, $16,750 N/A N/A $16,750 for service on
Trustee two boards
- ---------------------------------------------------------------------------------------------------------
Champney A. McNair, $15,625 N/A N/A $15,625 for service on
Trustee two boards
- ---------------------------------------------------------------------------------------------------------
F. Wendell Gooch, $15,625 N/A N/A $15,625 for service on
Trustee two boards
- ---------------------------------------------------------------------------------------------------------
T. Gordy Germany, $15,625 N/A N/A $15,625 for service on
Trustee two boards
- ---------------------------------------------------------------------------------------------------------
Dr. Bernard F. Sliger, $15,625 N/A N/A $15,625 for service on
Trustee two boards
- ---------------------------------------------------------------------------------------------------------
Jesse S. Hall, Trustee $15,625 N/A N/A $15,625 for service on
two boards
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE INFORMATION
From time to time a Fund may advertise its performance. Performance figures
are based on historical earnings and are not intended to indicate future
performance.
PERFORMANCE COMPARISONS
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. These comparisons may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
COMPUTATION OF YIELD
The current yield of the 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 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
B-14
<PAGE>
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.
- -------------------------------------------------------------------------------
Fund 7-Day Yield 7-Day Effective Yield
- -------------------------------------------------------------------------------
Classic Institutional Cash 5.59% 5.73%
Management Money Market Fund
- -------------------------------------------------------------------------------
Classic Institutional U.S. 5.36% 5.49%
Treasury Securities Fund
- -------------------------------------------------------------------------------
The yield of these Funds fluctuates, 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
the 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.
CALCULATION OF TOTAL RETURN
From time to time, the Trust may include the names of clients of the Advisor
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 affiliate, Trusco Capital
Management, has been in the top 1% of the SEI Funds Evaluation database for
equity managers over the past ten years. SEI Investment'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, 1997 were as follows:
B-15
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
FUND AVERAGE ANNUAL TOTAL RETURN
---------------------------
SINCE INCEPTION
- -----------------------------------------------------------------------------------
<S> <C>
Classic Institutional Cash Management Money Market 5.47%
Fund*
- -----------------------------------------------------------------------------------
Classic Institutional U.S. Treasury Securities Money 5.36%
Market Fund*
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
* Commenced operations December 12, 1996
ADVERTISING
From time to time, the Trust may include the names of clients of the Advisor
in advertisements and/or sales literature for the Trust.
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 following holidays are observed: New Year's Day,
Martin Luther King, Jr. 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 shares of a Fund for any period during which the NYSE, an
Advisor, the Administrator and/or the Custodian are not open for business.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective.
Certain state securities laws may require those financial institutions
providing certain distribution services to the Trust to register as dealers
pursuant to state law.
B-16
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the 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 dividends while
each other Fund must annually distribute at least 90% of its investment
company taxable income.
TAXES
The following is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders that are not described
in the Funds' prospectus. No attempt is made to
B-17
<PAGE>
present a detailed explanation of the Federal tax treatment of the Funds or
their Shareholders, and the discussion here and in the Funds' prospectus is
not intended as a substitute for careful tax planning.
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.
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 of 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. Requirement (ii) no longer applies for
tax years beginning after August 5, 1997.
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 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. 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.
B-18
<PAGE>
If, at the close of each quarter of its taxable year, at least 50% of the
value of a Fund's total assets consists of obligations the interest on which
is excludable from gross income, a Fund may pay "exempt-interest dividends,"
as defined in Section 852(b)(5) of the Code, to its Shareholders.
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
eighteen months, mid-term if the shares have been held for over one year but
not for over eighteen months, and short-term if for a year or less. If
shares held for six months or less are sold or redeemed for a loss, two
special rules apply: First, 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 long-term capital loss to the extent of the long-term capital gain
distributions. Second, any loss recognized by a Shareholder upon the sale or
redemption of shares of a tax-exempt fund held for six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
Shareholder with respect to such shares.
The Funds will make annual reports to Shareholders of the Federal income tax
status of all distributions.
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, the 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 the 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, the
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.
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
B-19
<PAGE>
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 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
B-20
<PAGE>
Trust's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules 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, 1997, the Funds paid the following
brokerage commissions with respect to portfolio transactions:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Total $ Total $ Total $ Total $ % of Total % of Total Total
Amount of Amount of Amount of Amount of Brokerage Brokered Brokerage
Brokered Brokered Brokerage Brokerage Commissions Transactions Commissions
Transactions Transactions Commissions Commissions Paid to Effected Paid to SFS in
for FYE Through Paid in FYE Paid to Affiliated Through Connection
5/31/97 Affiliates for 5/31/97 Affiliates in Brokers in Affiliated with
FYE 5/31/97 FYE 5/31/97 FYE 5/31/97 Brokers in Repurchase
FYE 5/31/97 Agreement
Transactions
for FYE
5/31/97
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Classic Institutional $3,981,691,204 $1,109,513,576 $ 13,324 $ 13,324 100% 28% $13,324
Cash Management
Money Market Fund
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-21
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Total $ Total $ Total $ Total $ % of Total % of Total Total
Amount of Amount of Amount of Amount of Brokerage Brokered Brokerage
Brokered Brokered Brokerage Brokerage Commissions Transactions Commissions
Transactions Transactions Commissions Commissions Paid to Effected Paid to SFS in
for FYE Through Paid in FYE Paid to Affiliated Through Connection
5/31/97 Affiliates for 5/31/97 Affiliates in Brokers in Affiliated with
FYE 5/31/97 FYE 5/31/97 FYE 5/31/97 Brokers in Repurchase
FYE 5/31/97 Agreement
Transactions
for FYE
5/31/97
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Classic Institutional $ 701,083,896 $ 339,610,033 $ 4,235 $ 4,235 100% 48% $ 4,235
U.S. Treasury
Securities Money
Market Fund
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 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
B-22
<PAGE>
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 September 29, 1997, 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.
SunTrust Capital Markets ACH 192,561,104.3300 99.48%
Attn: Anita Woods Center 3910
303 Peachtree Street, 24th Floor
Atlanta, GA 30308-3201
SunTrust Capital Markets ACH 101,508,926.6000 99.02%
Attn: Anita Woods Center 3910
303 Peachtree Street, 24th Floor
Atlanta, GA 30308-3201
EXPERTS
The financial statements as of May 31, 1997 have been audited by Arthur
Andersen LLP, Independent Public Accountants, as indicated in their report
dated July 11, 1997 with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said report.
B-23
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
VALUE INCOME STOCK FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.6%)
BASIC MATERIALS (14.8%)
Consolidated Papers 233,700 $ 12,737
Cyprus AMAX Minerals 707,200 17,238
Eastman Chemical 119,700 7,122
Ethyl 1,428,100 13,388
Georgia Pacific 246,700 21,771
Hercules 617,800 28,959
Imperial Chemical Industries 315,900 17,217
International Flavors & Fragrances
592,100 26,274
International Paper 531,300 25,502
Nalco Chemical 394,600 14,650
Olin 464,700 19,053
Reynolds Metals 247,100 16,772
Union Camp 338,100 17,750
Witco Chemical 467,200 17,286
----------
Total Basic Materials 255,719
----------
CAPITAL GOODS (12.8%)
AMP 1,034,400 42,540
Cooper Industries 329,100 16,784
Federal Signal 198,300 5,057
Foster Wheeler 544,000 21,080
General Signal 563,300 23,729
National Service Industries 278,100 12,202
Pall 556,500 13,147
Tenneco 770,100 34,462
Thomas & Betts 362,200 18,427
Trinity Industries 319,800 9,594
Waste Management 769,100 24,419
----------
Total Capital Goods 221,441
----------
COMMUNICATIONS SERVICES (7.7%)
Alltel 538,700 17,710
BellSouth 460,200 20,882
Frontier 984,100 18,083
GTE 899,600 39,695
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Southern New England Telecommunications 577,200 $ 22,511
Sprint 269,400 13,167
----------
Total Communication Services 132,048
----------
CONSUMER CYCLICALS (15.9%)
American Greetings, Cl A 514,900 17,635
Dana 617,300 22,300
Echlin 597,300 19,935
Ford Motor 455,500 17,081
H & R Block 497,800 16,427
ITT Industries 1,291,700 31,970
J.C. Penney 767,200 39,511
Masco 428,800 16,670
May Department Stores 532,100 25,075
Maytag 683,900 18,294
McGraw-Hill 307,300 16,786
Mercantile Stores 287,700 15,464
Reader's Digest, Cl A 200,800 4,970
Shaw Industries 1,033,200 12,915
----------
Total Consumer Cyclicals 275,033
----------
CONSUMER STAPLES (9.3%)
Cadbury Schweppes ADR 461,800 16,740
CPC International 271,900 23,383
Deluxe 261,600 8,502
Food Lion, Cl A 1,101,900 7,369
Kelly Services, Cl A 334,900 9,838
McCormick 617,100 16,122
R.R. Donnelley & Sons 660,200 24,510
Rubbermaid 896,400 24,987
UST 620,200 17,676
Whitman 495,500 11,954
----------
Total Consumer Staples 161,081
----------
ENERGY (9.2%)
Amoco 291,400 26,044
Chevron 358,900 25,123
Dresser Industries 753,100 25,794
Kerr-McGee 352,700 22,837
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
ENERGY--CONTINUED
Mobil 179,400 $ 25,094
Phillips Petroleum 612,900 26,048
Sun 278,200 8,311
----------
Total Energy 159,251
----------
FINANCIALS (8.2%)
American Financial Group 435,700 16,557
American General 397,500 17,589
AmSouth Bancorp 233,850 9,149
Central Fidelity Banks 292,000 8,541
Crestar Financial 259,600 9,865
First American Bank 127,400 8,775
First American of Tennessee 281,600 10,278
Hibernia, Cl A 651,800 8,636
Magna Group 273,000 8,804
Merchantile Bancorp 150,700 8,891
Signet Banking 260,900 8,577
Summit Bancorp 183,854 9,078
TIG Holdings 624,000 16,848
----------
Total Financials 141,588
----------
HEALTH CARE (6.2%)
American Home Products 345,600 26,352
Baxter International 490,800 25,890
C.R. Bard 525,400 16,813
Pharmacia Upjohn ADR 1,118,900 38,742
----------
Total Health Care 107,797
----------
TECHNOLOGY (1.5%)
Eastman Kodak 307,900 25,517
----------
TRANSPORTATION (2.2%)
KLM Royal Dutch Air* 664,000 19,505
Illinois Central 493,400 17,824
----------
Total Transportation 37,329
----------
UTILITIES (4.8%)
Central & South West 697,200 14,815
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Duke Power 201,300 $ 9,058
Pacificorp 873,000 17,351
Questar 445,900 17,502
Southern 1,124,800 23,902
----------
Total Utilities 82,628
----------
Total Common Stocks
(Cost $1,445,015) 1,599,432
----------
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS (6.8%)
Deutsche Bank
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $70,160,347 (collateralized by FHLMC
obligation, par value $69,192,840, 6.63%, 05/15/08:
FNMA obligation, par value $54,184,000, 8.50%,
04/01/17: total market value $71,530,412) $ 70,128 70,128
Salomon Brothers
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $46,073,839 (collateralized by various FHLMC
obligations, total par value $68,587,421,
6.00%-9.50%, 11/01/01-05/01/27: various FNMA
obligations total par value $71,651,398,
5.50%-9.00%, 06/01/01-05/01/27: total market value
$44,159,361) 43,054 43,054
</TABLE>
43
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--CONTINUED
Swiss Bank
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $4,954,044 (collateralized by FNMA
obligation, par value $6,319,000, 6.071%, matures
04/01/34: market value $5,075,690) $ 4,952 $ 4,952
----------
Total Repurchase Agreements
(Cost $118,134) 118,134
----------
Total Investments (99.4%)
(Cost $1,563,149) 1,717,566
----------
OTHER ASSETS AND LIABILITIES, NET (0.6%) 9,961
----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 108,557,380
outstanding shares of beneficial interest 1,171,719
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 12,133,042
outstanding shares of beneficial interest 134,021
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 5,399,733
outstanding shares of beneficial interest 68,125
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Undistributed net investment income $ 6,428
Accumulated net realized gain on investments 192,817
Unrealized appreciation on investments 154,417
----------
Total Net Assets (100.0%) $1,727,527
----------
----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 13.71
----------
----------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 13.68
----------
----------
Maximum Offering Price Per Share -- Investor Class
($13.68 DIVIDED BY 96.25%) $ 14.21
----------
----------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 13.61
----------
----------
</TABLE>
(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 110.
44
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
MID-CAP EQUITY FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.6%)
BASIC MATERIALS (5.0%)
IMC Fertilizer Group 168,800 $ 6,604
James River 94,300 3,312
Potash of Saskatchewan 71,800 5,897
-----------
Total Basic Materials 15,813
-----------
CAPITAL GOODS (15.1%)
Agco 111,400 3,551
Fisher Scientific International 86,500 3,136
Foster Wheeler 79,400 3,077
Hubbell, Cl B 84,540 3,847
Molten Metal Technology* 203,300 1,449
Philip Services* 405,600 5,932
Solectron* 119,100 7,444
Sundstrand 90,200 4,487
United Waste Systems* 136,200 5,227
U.S. Filter* 156,900 4,942
York International 100,850 4,891
-----------
Total Capital Goods 47,983
-----------
COMMUNICATIONS SERVICES (1.1%)
Nextel Communications, Cl A* 243,500 3,592
-----------
CONSUMER CYCLICALS (15.5%)
Bed Bath and Beyond* 116,000 3,292
Dollar General 183,200 6,160
Harley-Davidson 158,900 7,111
International Speedway* 123,500 2,439
Men's Wearhouse* 123,600 4,125
Nine West Group* 113,000 4,350
Saks Holdings* 224,300 5,579
Stanley Works 87,700 3,596
Staples* 336,700 7,407
West Marine* 203,800 5,350
-----------
Total Consumer Cyclicals 49,409
-----------
CONSUMER STAPLES (12.0%)
Boston Chicken* 313,700 5,647
Cracker Barrel Old
Country Stores 182,700 5,298
Dial 186,500 3,124
Hannaford Brothers 137,600 4,799
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
JP Foodservice* 152,000 $ 4,408
McKesson 75,300 5,657
Nabisco Holdings, Cl A 130,200 5,159
Papa John's International* 122,400 3,902
-----------
Total Consumer Staples 37,994
-----------
ENERGY (6.3%)
Anadarko Petroleum 105,400 6,640
Kerr-McGee 47,400 3,069
Tosco 91,600 2,988
Western Atlas* 106,300 7,215
-----------
Total Energy 19,912
-----------
FINANCIALS (9.9%)
Crestar Financial 139,000 5,282
First Security 162,075 3,971
Hartford Life, Cl A* 62,400 2,090
North Fork Bancorporation 88,000 1,848
Regions Financial 57,500 3,436
SouthTrust 77,100 2,997
Summit Bancorp 111,000 5,481
Union Planters 66,700 3,152
PMI Group 56,600 3,106
-----------
Total Financials 31,363
-----------
HEALTH CARE (9.9%)
Allergan 112,200 3,324
Biogen* 187,300 6,216
DePuy* 136,500 3,310
Medpartners* 179,700 3,414
Pacificare Health Systems, Cl B* 91,400 7,243
Teva Pharmaceuticals ADR 65,600 3,936
Watson Pharmaceuticals* 105,100 4,112
-----------
Total Health Care 31,555
-----------
TECHNOLOGY (15.0%)
ADC Telecommunications* 177,500 6,079
Adobe Systems 110,300 4,922
Analog Devices* 240,133 6,424
Atmel* 151,900 4,367
Ceridian* 141,000 5,182
Flextronics International* 207,000 4,890
Micron Electronics* 193,600 2,940
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
Network General* 226,600 $ 4,164
Teradyne* 214,400 8,790
-----------
Total Technology 47,758
-----------
TRANSPORTATION (1.4%)
ASA Holdings 172,300 4,501
-----------
UTILITIES (1.4%)
Wisconsin Energy 185,200 4,468
-----------
Total Common Stocks
(Cost $268,513) 294,348
-----------
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS (6.8%)
Deutsche Bank 5.55%, dated 05/30/97, matures
06/02/97, repurchase price $12,270,617
(collateralized by FNMA obligation, par value
$13,389,534, 0.000%, 01/01/26: market value
$12,510,245) $ 12,265 12,265
Merrill Lynch 5.55%, dated 05/30/97, matures
06/02/97, repurchase price $9,389,853
(collateralized by FNMA obligation, par value
$465,000, 0.000%, 11/25/22; and various GNMA
obligations, total par value $10,608,368,
6.000%-8.500%, 05/20/06-05/15/26: total market
value $9,577,430) 9,386 9,386
-----------
Total Repurchase Agreements
(Cost $21,651) 21,651
-----------
Total Investments (99.4%)
(Cost $290,164) 315,999
-----------
OTHER ASSETS AND LIABILITIES, NET (0.6%) 1,736
-----------
<CAPTION>
--------------------------------------------------------------------------------
VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 21,752,271
outstanding shares of beneficial interest $ 239,440
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 1,537,279
outstanding shares of beneficial interest 17,180
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 776,273
outstanding shares of beneficial interest 9,538
Accumulated net investment loss (10)
Accumulated net realized gain on investments 25,752
Net unrealized appreciation on investments 25,835
-----------
Total Net Assets (100.0%) $ 317,735
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 13.21
-----------
-----------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 13.17
-----------
-----------
Maximum Offering Price Per Share -- Investor Shares
($13.17 DIVIDED BY 96.25%) $ 13.68
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 13.04
-----------
-----------
</TABLE>
(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 110.
46
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (95.2%)
BASIC MATERIALS (3.1%)
Columbus Mckinnon 63,700 $ 1,147
Commonwealth Industries 94,700 1,788
Lilly Industries Incorporated, Cl A 9,000 189
Schnitzer Steel Industries, Cl A 38,800 970
-----------
Total Basic Materials 4,094
-----------
CAPITAL GOODS (11.7%)
A.M. Castle 87,600 1,905
Applied Industrial Technology 45,500 1,598
Barnes Group 13,300 357
Fisher Scientific International 69,000 2,501
Regal Beloit 115,700 3,081
Valmont Industries 24,100 1,012
Thomas Industries 34,000 956
Zurn Industries 145,900 3,866
-----------
Total Capital Goods 15,276
-----------
CONSUMER CYCLICALS (27.4%)
Ameron 6,600 366
Angelica 104,900 1,888
Brown Group 107,000 1,926
Bush Industries 116,300 2,617
Cross A.T., Cl A 54,800 610
Guilford Mills 132,250 2,595
Hardinge 38,000 988
Harman International 84,800 3,540
K2 55,500 1,603
Libbey 74,800 2,497
LSI Industries 72,300 1,103
Movado Group 86,625 1,917
Optical Coating Laboratories 43,900 466
Rock Tenn, Cl A 63,000 953
Sotheby's Holdings, Cl A 124,000 1,922
Springs Industries, Cl A 75,200 3,807
Talbots 143,700 3,772
WD-40 32,700 1,856
Wellman 73,100 1,307
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Winnebago Industries 20,400 $ 140
-----------
Total Consumer Cyclicals 35,873
-----------
CONSUMER STAPLES (15.4%)
ABM Industries 99,700 1,932
Banta 87,000 2,414
Bowne & Company 106,000 3,167
Earthgrains 34,200 1,949
Ingles Markets, Cl A 136,000 1,964
John H. Harland 163,300 3,736
Kelly Services, Cl A 61,000 1,792
Rykoff-Sexton 52,100 996
Smucker (J.M.), Cl B 115,100 2,144
TCA Cable Television 3,000 101
-----------
Total Consumer Staples 20,195
-----------
ENERGY (5.6%)
Giant Industries 44,700 648
Monterey Resources 118,500 1,866
Pittston Minerals Group 73,400 1,009
Quaker State 255,400 3,863
-----------
Total Energy 7,386
-----------
FINANCIALS (10.1%)
Banco Latinamericano de Exportaciones 46,600 2,196
Bank United, Cl A 28,700 997
GCR Holdings 7,800 209
Interwest Bancorp 26,700 935
IPC Holdings 79,300 2,022
Klamath First Bancorp 61,500 1,138
Lawyers Title 43,800 788
National Bancorp of Alaska 14,400 1,130
Seacoast Banking of Florida 49,000 1,286
West Coast Bancorp 40,625 1,016
Willis Corroon Public Limited 132,900 1,495
-----------
Total Financials 13,212
-----------
HEALTH CARE (8.9%)
Bindley Western Industries 75,600 1,663
</TABLE>
47
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE--CONTINUED
Chemed 26,300 $ 960
Invacare 117,000 2,516
Morrison Health Care 103,100 1,675
Vital Signs 101,000 2,007
West Company 96,100 2,835
-----------
Total Health Care 11,656
-----------
TECHNOLOGY (3.0%)
Methode Electronics, Cl A 231,200 3,902
-----------
TRANSPORTATION (4.3%)
Arnold Industries 107,300 1,797
Knightsbridge Tankers Limited* 50,000 1,231
Sea Containers 127,200 2,544
-----------
Total Transportation 5,572
-----------
UTILITIES (5.7%)
Eastern Enterprises 12,800 442
Enron Global Power & Pipelines 12,800 422
Minnesota Power & Light 65,300 1,894
Northwest Natural Gas 39,050 952
TNP Enterprises 56,000 1,232
United Water Resources 74,100 1,334
Wicor 33,900 1,246
-----------
Total Utilities 7,522
-----------
Total Common Stocks
(Cost $117,054) 124,688
-----------
PREFERRED STOCKS (1.9%)
PRECIOUS METALS (1.9%)
Coeur D'Alene Mines 151,100 2,512
-----------
Total Preferred Stocks
(Cost $2,502) 2,512
-----------
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (3.7%)
Deutsche Bank
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $4,900,504 (collateralized by FHLMC
obligation, total par value $5,062,244, 6.092%,
10/01/32, market value: $4,996,199) $ 4,898 $ 4,898
-----------
Total Repurchase Agreements
(Cost $4,898) 4,898
-----------
Total Investments (100.8%)
(Cost $124,454) 132,098
-----------
OTHER ASSETS AND LIABILITIES, NET (-0.8%) (1,049)
-----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 11,836,719
outstanding shares of beneficial interest 121,332
Undistributed net investment income 316
Accumulated net realized gain on investments 1,757
Net unrealized appreciation on investments 7,644
-----------
Total Net Assets (100.0%) $ 131,049
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 11.07
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
48
<PAGE>
- --------------------------------------------------------------------------
CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (88.6%)
BASIC MATERIALS (4.7%)
Aluminum Company of America 117,500 $ 8,651
Air Products & Chemicals 27,100 2,107
Fort Howard* 179,000 8,223
Hercules 228,800 10,725
Monsanto 265,100 11,664
Morton International 198,000 6,386
Potash of Saskatchewan 54,100 4,443
Praxair 123,900 6,520
W.R. Grace 67,500 3,527
----------
Total Basic Materials 62,246
----------
CAPITAL GOODS (13.9%)
Allied Signal 361,100 27,714
Avery Dennison 62,300 2,344
Deere 163,000 8,333
Emerson Electric 285,000 15,390
Fluor 57,500 3,040
General Electric 688,700 41,580
General Signal 311,700 13,130
Keystone International 54,400 1,775
Lockheed Martin 96,000 8,988
McDonnell Douglas 58,200 3,747
Molten Metal Technology* 243,500 1,735
Pall 140,000 3,308
Rockwell International 171,400 11,055
Thomas & Betts 34,064 1,733
Tyco International 359,100 22,803
United Technologies 164,400 13,214
United Waste Systems* 8,700 334
USA Waste Services* 112,900 4,093
Waste Management 21,000 667
Wheelabrator Technologies 135,900 1,750
----------
Total Capital Goods 186,733
----------
COMMUNICATION SERVICES (1.6%)
Airtouch Communications* 12,700 354
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
BellSouth 71,700 $ 3,253
Ericsson Telephone ADR* 263,800 9,398
GTE 196,000 8,649
----------
Total Communication Services 21,654
----------
CONSUMER CYCLICALS (8.4%)
American Stores 157,900 7,184
Borders Group* 6,700 146
Carnival 282,300 10,727
Costco* 211,100 7,125
CUC International* 291,700 6,709
Federated Department Stores* 309,400 11,448
Ford Motor 82,100 3,079
Fruit of the Loom* 90,400 3,153
Gannett 44,500 4,116
Hollinger International 64,200 714
Home Depot 244,432 15,399
Intimate Brands 190,900 4,081
ITT* 33,400 1,991
Lear* 332,100 12,703
Marriott 27,100 1,565
Mattel 348,500 10,411
McGraw-Hill 35,900 1,961
Office Depot* 407,400 7,028
TJX 9,800 470
Tribune 46,900 2,028
----------
Total Consumer Cyclicals 112,038
----------
CONSUMER STAPLES (11.7%)
American Standard* 27,700 1,388
Avon Products 276,600 17,633
Colgate-Palmolive 24,400 1,513
CPC International 37,800 3,251
CVS 360,600 17,264
Dial 28,300 474
Gillette 171,817 15,270
Kimberly Clark 101,400 5,083
JP Foodservice* 132,900 3,854
Nabisco Holdings, Cl A 30,700 1,216
</TABLE>
49
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--CONTINUED
PepsiCo 12,400 $ 456
Philip Morris 574,650 25,285
Ralston Purina Group 61,500 5,243
RJR Nabisco 105,600 3,419
Safeway* 259,300 11,669
Sara Lee 138,700 5,669
Sysco 335,700 11,708
Tele-Communications, Cl A* 375,800 5,684
Time Warner 57,500 2,674
Unilever ADR 12,400 2,403
Viacom, Cl B* 321,021 9,530
Walt Disney 55,366 4,533
Wendy's International 53,200 1,244
William Wrigley Jr. 11,300 670
----------
Total Consumer Staples 157,133
----------
ENERGY (5.7%)
Amoco 66,500 5,943
British Petroleum ADR 53,500 7,751
Dresser Industries 186,200 6,377
Halliburton 142,100 10,995
Kerr-McGee 49,200 3,186
Mobil 138,200 19,331
Royal Dutch Petroleum, ADR 26,800 5,233
Schlumberger 40,700 4,848
Tosco 88,100 2,874
Union Pacific Resources Group 330,358 9,539
----------
Total Energy 76,077
----------
FINANCIALS (12.9%)
American International Group 76,350 10,336
BankAmerica 126,300 14,761
Bank of New York 82,600 3,521
Capital One Financial 36,400 1,169
Chase Manhattan Bank 314,200 29,692
Citicorp 10,100 1,155
Conseco 19,100 764
Cullen/Frost Bankers 23,900 941
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Dean Witter Discover 50,800 $ 2,096
FHLMC 221,100 7,296
FNMA 206,100 8,991
First Union 59,300 5,092
First USA 267,800 13,256
GCR Holdings 60,000 1,605
General Re 53,500 9,376
Great Western Financial 191,900 9,307
Hartford Financial Services Group 266,800 20,810
Nationsbank 45,040 2,643
Norwest 24,400 1,305
PMI Group 104,100 5,713
Sphere Drake Holdings 214,900 1,907
Summit Bancorp 43,900 2,168
Travelers 160,296 8,796
Washington National 354,600 9,929
Wells Fargo 2,500 659
----------
Total Financials 173,288
----------
HEALTH CARE (13.6%)
Alza, Cl A* 7,900 233
American Home Products 427,000 32,559
Amgen* 71,200 4,762
Baxter International 173,100 9,131
Becton Dickinson 19,300 951
Boston Scientific* 83,111 4,436
Bristol-Myers Squibb 276,800 20,310
Columbia/HCA Healthcare 493,196 18,063
Eli Lilly 107,400 9,988
Healthsouth* 467,000 10,683
Horizon/CMS Healthcare* 50,000 913
Johnson & Johnson 386,888 23,165
Medpartners* 413,600 7,858
Medtronic 22,400 1,658
Merck 196,082 17,623
Pacificare Health Systems, Cl B* 39,200 3,107
Schering Plough 89,400 8,113
Tenet Healthcare* 222,800 6,127
</TABLE>
50
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE--CONTINUED
Warner Lambert 30,900 $ 3,113
----------
Total Health Care 182,793
----------
TECHNOLOGY (12.7%)
Atmel* 50,900 1,463
Automatic Data Processing 44,500 2,186
Cadence Design Systems* 28,000 931
Ceridian* 119,000 4,373
Cisco Systems* 243,600 16,504
Compaq Computer* 13,800 1,494
Eastman Kodak 137,200 11,370
First Data 390,100 15,604
Hewlett Packard 112,600 5,799
IBM 115,600 9,999
Intel 154,900 23,467
Lucent Technologies 136,131 8,661
Microsoft* 185,100 22,952
Motorola 163,300 10,839
Oracle* 165,450 7,714
Scientific-Atlanta 644,900 11,689
Xerox 231,600 15,691
----------
Total Technology 170,736
----------
TRANSPORTATION (1.0%)
Burlington Northern Santa Fe 102,800 8,532
Delta Air Lines 21,000 1,969
Union Pacific 39,500 2,676
----------
Total Transportation 13,177
----------
UTILITIES (0.4%)
Consolidated Natural Gas 23,700 1,259
Enron 64,000 2,608
Sonat 27,100 1,558
----------
Total Utilities 5,425
----------
Total Common Stocks
(Cost $982,524) 1,161,300
----------
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (1.7%)
BASIC MATERIALS (0.2%)
International Paper,
CV to .9259 Shares 45,000 $ 2,278
----------
FINANCIALS (0.2%)
National Bank of Australia,
CV to .3273 Shares* 74,600 2,014
----------
TECHNOLOGY (1.2%)
Microsoft, CV to 1 share 186,700 16,080
----------
TRANSPORTATION (0.2%)
Continental Air Finance Trust,
CV to 2.0678 Shares* 28,500 2,230
----------
Total Preferred Stocks
(Cost $20,294) 22,602
----------
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS (5.0%)
Alza, CV to 12.987 Shares (A)
0.000%, 07/14/14 $ 11,500 5,103
Automatic Commercial Exchange
Security, CV to 0.8333 Shares
6.500%, 05/15/00 123 2,958
Continental Airlines,
CV to 16.559 Shares
6.750%, 04/15/06 3,600 4,707
Cuc International,
CV to 32.6531
3.000%, 02/15/02 7,000 6,913
Home Depot,
CV to 14.4665 Shares
3.250%, 10/01/01 9,000 9,630
Mariott LYON, (A) (B)
0.000%, 03/25/11 5,000 2,906
Molten Metal Technology,
CV to 25.8065 Shares (B)
5.750%, 05/01/06 5,500 2,365
Roche, CV to 3.5626 Shares (A)
0.000%, 05/06/12 19,000 7,648
</TABLE>
CAPITAL GROWTH FUND
<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS--CONTINUED
Times Mirror, CV to 5.8280
Shares (A) (B)
0.000%, 04/15/17 $ 10,000 $ 3,925
U.S. Filter, CV to 25.3164 Shares,
Callable 12/15/99 @ 101.8
4.500%, 12/15/01 5,200 5,298
</TABLE>
51
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
USA Waste Services,
CV to 35.3243 Shares
5.000%, 03/01/06 2,350 3,243
USA Waste Services,
CV to 22.9594 Shares, Callable
02/01/2000 @101.6
4.000%, 02/01/02 3,000 3,116
WMX Technologies,
CV to 26.078 Shares
2.000%, 01/24/05 9,500 8,752
----------
Total Convertible Bonds
(Cost $66,837) 66,564
----------
REPURCHASE AGREEMENTS (8.2%)
Deutsche Bank
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $76,351,152 (collateralized by various FHLMC
obligations, total par value $41,261,658,
6.092%-6.230%, 12/15/23-10/01/32; and various FNMA
obligations, total par value $40,818,728, 0.000%,
01/01/26-04/25/27: total market value $77,842,108) 76,316 76,316
Salomon Brothers
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $33,282,808 (collateralized by various FHLMC
obligations, total par value $25,236,419,
5.500%-9.000%, 01/01/00-06/01/26; and various FNMA
obligations, total par value $37,520,630,
5.500%-9.500%, 04/01/01-04/01/27: total market
value $34,062,576) $ 33,267 $ 33,267
----------
Total Repurchase Agreements
(Cost $109,583) 109,583
----------
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Total Investments (101.5%)
(Cost $1,179,238) 1,360,049
----------
OTHER ASSETS AND LIABILITIES, NET (-1.5%) (19,508)
----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 71,924,416
outstanding shares of beneficial interest 807,086
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 14,515,982
outstanding shares of beneficial interest 167,543
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 2,456,856
outstanding shares of beneficial interest 34,522
Undistributed net investment income 3,569
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:--CONTINUED
Accumulated net realized gain on investments $ 147,010
Net unrealized appreciation on investments 180,811
----------
Total Net Assets (100.0%) $1,340,541
----------
----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 15.09
----------
----------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 15.06
----------
----------
</TABLE>
52
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Maximum Offering Price Per Share -- Investor Class
($15.06 DIVIDED BY 96.25%) $ 15.65
----------
----------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 14.96
----------
----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SHARES VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (51.7%)
BASIC MATERIALS (2.7%)
Air Products & Chemicals 1,900 $ 148
Aluminum Company of America 7,800 574
Fort Howard* 12,000 551
Hercules 15,500 727
Monsanto 19,400 854
Morton International 13,900 448
Potash of Saskatchewan 3,600 296
Praxair 8,300 437
W.R. Grace 7,300 381
-------
Total Basic Materials 4,416
-------
CAPITAL GOODS (8.6%)
Allied Signal 27,800 2,134
Avery Dennison 8,200 309
Deere 11,600 593
Emerson Electric 20,500 1,107
Fisher Scientific International 5,000 181
Fluor 4,000 211
General Electric 50,100 3,025
General Signal 20,600 868
Keystone International 11,800 385
Lockheed Martin 7,000 655
McDonnell Douglas 6,600 425
Molten Metal Technology* 19,100 136
Pall 9,500 224
Rockwell International 12,500 806
Thomas & Betts 2,300 117
Tyco International 26,100 1,657
United Technologies 11,900 956
United Waste Systems* 400 15
USA Waste Services* 7,100 257
Waste Management 1,500 48
-------
Total Capital Goods 14,109
-------
COMMUNICATION SERVICES (1.2%)
Airtouch Communications* 8,600 240
BellSouth 8,100 368
Ericsson Telephone ADR* 19,200 684
<CAPTION>
- ------------------------------------------------------------------------------
SHARES
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
GTE 15,900 $ 702
-------
Total Communication Services 1,994
-------
CONSUMER CYCLICALS (4.7%)
American Standard* 2,000 100
Carnival 20,600 783
Costco* 14,200 479
CUC International* 21,200 488
Federated Department Stores* 21,000 777
Ford Motor 5,600 210
Fruit of the Loom* 8,600 300
Gannett 3,000 277
Home Depot 19,200 1,210
Intimate Brands 12,900 276
ITT* 2,400 143
Lear* 22,700 868
Marriott 1,700 98
Mattel 21,950 656
McGraw-Hill 2,900 158
Office Depot* 25,800 445
Tribune 10,000 432
-------
Total Consumer Cyclicals 7,700
-------
CONSUMER STAPLES (7.2%)
American Stores 10,700 487
Avon Products 19,800 1,262
Colgate-Palmolive 1,600 99
CPC International 2,600 224
CVS 25,700 1,230
Dial 1,900 32
Gillette 12,548 1,115
JP Foodservice* 11,900 345
Kimberly Clark 9,000 451
Nabisco Holdings, Cl A 1,200 48
PepsiCo 900 33
Philip Morris 41,800 1,839
Ralston Purina Group 4,500 384
RJR Nabisco 7,800 253
Safeway* 21,200 954
Sara Lee 9,400 384
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SHARES
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--CONTINUED
Sysco 24,500 $ 854
Tele-Communications, Cl A* 27,100 410
Time Warner 4,200 195
Unilever ADR 900 174
Viacom, Cl B* 20,944 622
Walt Disney 3,395 278
Wendy's International 6,900 161
-------
Total Consumer Staples 11,834
-------
ENERGY (3.4%)
Amoco 4,800 429
British Petroleum ADR 3,900 565
Dresser Industries 13,300 456
Halliburton 11,300 874
Kerr-McGee 7,100 460
Mobil 8,900 1,245
Royal Dutch Petroleum ADR 1,900 371
Schlumberger 2,800 334
Tosco 5,900 192
Union Pacific Resources Group 21,922 633
-------
Total Energy 5,559
-------
FINANCIALS (7.8%)
American International Group 5,200 704
Bank of New York 5,600 239
BankAmerica 9,100 1,064
BB&T 8,600 344
Capital One Financial 2,600 84
Chase Manhattan Bank 23,400 2,211
Citicorp 700 80
Conseco 1,400 56
Cullen/Frost Bankers 1,900 75
Dean Witter Discover 3,700 153
FHLMC 16,200 535
FNMA 13,400 585
First Union 4,300 369
First USA 18,700 926
GCR Holdings 7,000 187
General Re 3,600 631
<CAPTION>
- ------------------------------------------------------------------------------
SHARES
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Great Western Financial 13,900 $ 674
Hartford Financial Services Group 19,500 1,521
Norwest 5,500 294
PMI Group 7,600 417
Sphere Drake Holdings 21,000 186
Summit Bancorp 3,000 148
Travelers 11,133 611
U.S. Bancorp 700 43
Washington National 19,500 546
-------
Total Financials 12,683
-------
HEALTH CARE (7.9%)
American Home Products 28,400 2,165
Amgen* 6,500 435
Baxter International 12,600 665
Becton Dickinson 1,300 64
Boston Scientific* 5,910 315
Bristol-Myers Squibb 20,300 1,490
Columbia/HCA Healthcare 33,310 1,220
Healthsouth* 32,868 752
Johnson & Johnson 28,100 1,682
Eli Lilly 7,800 725
Medpartners* 27,600 524
Medtronic 1,600 118
Merck 14,200 1,276
Pacificare Health Systems, Cl B* 3,400 269
Schering Plough 6,600 599
Tenet Healthcare* 15,000 412
Warner Lambert 2,300 232
-------
Total Health Care 12,943
-------
TECHNOLOGY (7.4%)
Atmel* 3,600 103
Automatic Data Processing 2,270 112
Cadence Design Systems* 9,000 299
Ceridian* 6,300 232
Cisco Systems* 16,400 1,111
Compaq Computer* 600 65
Eastman Kodak 10,000 829
First Data 28,000 1,120
</TABLE>
55
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SHARES
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
Hewlett Packard 7,900 $ 407
IBM 7,800 675
Intel 11,500 1,742
Lucent Technologies 9,214 586
Microsoft* 12,200 1,513
Motorola 11,000 730
Oracle* 10,900 508
Scientific-Atlanta 42,300 767
Xerox 18,200 1,233
-------
Total Technology 12,032
-------
TRANSPORTATION (0.6%)
Burlington Northern Santa Fe 7,400 614
Delta Air Lines 1,400 131
Union Pacific 2,800 190
-------
Total Transportation 935
-------
UTILITIES (0.2%)
Consolidated Natural Gas 1,500 80
Enron 4,200 171
Sonat 1,800 103
-------
Total Utilities 354
-------
Total Common Stocks
(Cost $72,954) 84,559
-------
PREFERRED STOCKS (1.1%)
AIR TRANSPORTATION (0.2%)
Continental Airline Financial (B) 5,000 391
-------
BANKS (0.2%)
National Bank of Australia, CV to 0.3273 shares* 10,000 270
-------
TECHNOLOGY (0.7%)
Microsoft, CV to 1 share 12,500 1,077
-------
Total Preferred Stocks
(Cost $1,573) 1,738
-------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (23.1%)
American General Finance
6.875%, 07/01/99 $ 1,000 $ 1,007
Aristar
6.750%, 05/15/99 1,500 1,507
Associates of North America, MTN
6.650%, 08/30/99 750 752
AT&T Capital, MTN
6.920%, 04/29/99 2,250 2,261
Bear Stearns
7.000%, 03/01/07 1,900 1,853
Ford Capital
9.500%, 06/01/10 1,350 1,558
General Electric Capital
6.660%, 05/01/18 1,000 1,003
General Motors Acceptance
7.125%, 05/01/01 1,900 1,914
6.750%, 11/04/04 1,500 1,459
Homeside Lending, MTN
6.875%, 05/15/00 2,000 1,998
Household Finance, MTN
7.150%, 06/15/00 1,000 1,010
International Lease Finance
6.700%, 04/30/99 1,900 1,910
Lockheed Martin
6.550%, 05/15/99 1,000 1,001
Marriott International, (A) (B)
0.000%, 03/25/11 1,000 581
Mascotech, Callable 12/22/96 @ 103
4.500%, 12/15/03 500 445
Merrill Lynch, MTN
6.640%, 04/09/99 1,500 1,506
Morgan Stanley Group
6.875%, 03/01/07 1,000 974
Philip Morris
7.250%, 09/15/01 2,100 2,108
6.800%, 12/01/03 500 488
7.500%, 04/01/04 1,000 1,005
</TABLE>
56
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
RHG Finance
8.875%, 10/01/05 $ 1,500 $ 1,622
Salomon
6.500%, 03/01/00 2,500 2,478
6.750%, 02/15/03 1,150 1,118
Service International
7.375%, 04/15/04 1,750 1,772
SunAmerica
6.200%, 10/31/99 2,000 1,985
US West Capital Funding
7.300%, 01/15/07 2,500 2,484
--------
Total Corporate Obligations
(Cost $37,869) 37,799
--------
CONVERTIBLE BONDS (2.5%)
Alza, CV to 26.1840 Shares, Callable 05/01/00 @ 100
5.000%, 05/01/06 500 501
Automatic Commercial Exchange Security, CV to 0.8333
shares
6.500%, 05/15/00 9 215
Roche, CV to 3.5626 Shares (A)
0.000%, 05/06/12 1,000 403
Staples, CV to 30.303 Shares (B)
4.500%, 10/01/00 500 585
Time Warner Finance, CV to 7.7589 Shares (A) 0.000%,
06/22/13 900 411
U.S. Filter, CV to 25.3164 shares, Callable 12/15/99
@ 101.8
4.500%, 12/15/01 500 509
USA Waste Services, CV to 35.3243 Shares 5.000%,
03/01/06 355 490
WMX Technologies, CV to 26.078 shares 2.000%,
01/24/05 1,000 921
--------
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Total Convertible Bonds
(Cost $3,864) $ 4,035
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (1.2%)
FHLMC
8.000%, 06/01/02 $ 574 589
7.500%, 09/01/03 1,308 1,326
--------
Total U.S. Agency Mortgage-Backed Obligations
(Cost $1,916) 1,915
--------
U.S. TREASURY OBLIGATIONS (10.6%)
U.S. Treasury Bonds
7.500%, 11/15/16 3,000 3,163
8.125%, 08/15/19 7,800 8,775
6.625%, 02/15/27 3,450 3,324
U.S. Treasury Notes
6.750%, 04/30/00 2,000 2,020
--------
Total U.S. Treasury Obligations
(Cost $17,245) 17,282
--------
REPURCHASE AGREEMENT (8.9%)
Merrill Lynch
5.55%, dated 05/30/97, matures 06/02/97, repurchase
price $14,570,241 (collateralized by various GNMA
obligations, total par value $26,629,425,
7.000%-13.250%, 04/20/00-11/20/22: total market
value $14,856,427) 14,563 14,563
--------
Total Repurchase Agreement
(Cost $14,563) 14,563
--------
Total Investments (99.1%)
(Cost $149,984) 161,891
--------
OTHER ASSETS AND LIABILITIES, NET (0.9%) 1,546
--------
</TABLE>
57
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
BALANCED FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 12,674,232
outstanding shares of beneficial interest $131,876
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 501,289
outstanding shares of beneficial interest 5,143
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 509,658
outstanding shares of beneficial interest 5,720
Undistributed net investment income 781
Accumulated net realized gain on investments 8,010
Net unrealized appreciation on investments 11,907
--------
Total Net Assets (100.0%) $163,437
--------
--------
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 11.94
--------
--------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 11.99
--------
--------
Maximum Offering Price Per Share -- Investor Class
($11.99 DIVIDED BY 96.25%) $ 12.46
--------
--------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1)(2) $ 11.90
--------
--------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
(2) REPRESENTS NAV ON LAST BUSINESS DAY -- MAY 30, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
58
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCKS (84.7%)
ARGENTINA (6.9%)
Banco Frances del Rio de la Plata ADR* 16,000 $ 526
Capex, Cl A 33,700 324
Massalin Particulares, Cl B 38,800 231
Metrogas ADR 32,204 314
Quilmes Industrial 37,000 430
Transportadora de Gas del Sur ADR 33,000 417
YPF ADR, Cl D 16,000 480
-----------
Total Argentina 2,722
-----------
BRAZIL (4.3%)
Makro Atacadista GDR 27,500 344
Souza Cruz 50,000 467
Telebras ADR 3,230 444
Votorantim Celelose Papel Receibos* 1,476,876 40
Unibanco 12,000 414
-----------
Total Brazil 1,709
-----------
CHILE (1.1%)
Administradora de Fondos de Pensiones Provida
ADR 21,500 441
-----------
COLOMBIA (1.6%)
Banco de Colombia GDS 24,700 152
Banco Ganadero ADR 15,600 476
-----------
Total Colombia 628
-----------
CZECH REPUBLIC (0.5%)
Komercni Banka GDR 8,400 204
-----------
ECUADOR (0.4%)
La Cemento Nacional GDR 800 158
-----------
GREECE (5.3%)
Greek Telecom 7,800 194
Hellas Can Packaging 25,500 467
Papastratos Cigarettes 15,400 316
Teletypos 130,000 533
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Titan Cement Company 5,700 $ 568
-----------
Total Greece 2,078
-----------
HONG KONG (9.2%)
China Hong Kong Photo 1,086,000 315
Esprit Asia Holdings 616,000 354
First Pacific 142,000 181
National Mutual Asia 358,000 390
Peregrine Investment Holdings 137,000 244
Peregrine Investment Warrants* 6,600 2
Road King Infrastructure* 400,000 390
Seoul Horizon Trust 17,000 212
Shenzhen Express* 700,000 235
Sinocan 920,000 365
South China Morning Post Holdings 460,000 442
Wing Hang Bank 108,000 514
-----------
Total Hong Kong 3,644
-----------
HUNGARY (1.4%)
Egis* 6,000 353
Gedeon Richter GDR 2,500 207
-----------
Total Hungary 560
-----------
INDIA (4.5%)
Hindalco GDR 6,700 221
India Cements GDR 54,000 124
Indian Aluminum GDR 15,800 58
Indian Aluminum GDS 15,300 57
Tata Electric GDR 210 71
Videsh Sanchar Nigam GDR 60,000 1,236
-----------
Total India 1,767
-----------
INDONESIA (8.8%)
Budi Acid Jaya, F 185,000 228
Citra Marga Nusaphala 472,000 471
Dankos Laboratories, F 665,000 561
Indonesian Satellite ADR 13,500 403
Matahari Putra Prima 251,000 447
Modern Photo Film, F 150,000 546
</TABLE>
59
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA--CONTINUED
Tambang Timah, F 281,000 $ 451
Tempo Scan Pacific 164,000 351
-----------
Total Indonesia 3,458
-----------
ISRAEL (5.8%)
Blue Square Stores* 57,300 587
ECI Telecommunications 22,000 509
Koor Industries ADR 20,300 355
Nice Systems ADR* 18,000 549
Orbotech* 10,000 279
-----------
Total Israel 2,279
-----------
MALAYSIA (3.4%)
Aluminium of Malaysia 231,000 325
Edaran Otomobil 28,000 244
Petronas Dagangan 170,000 403
Southern Bank Warrants* 15,000 10
UMW Holdings 72,000 370
-----------
Total Malaysia 1,352
-----------
MEXICO (8.3%)
Femsa, Cl B 106,000 562
Grupo Carso 66,000 375
Grupo Continental 167,750 418
Grupo Elektra GDR 21,100 401
Herdez, Cl B 1,035,000 458
Kimberly Clark, Cl A 95,500 331
Nacional de Drogas, Cl L 139,000 459
Telefonos de Mexico ADR 6,500 288
-----------
Total Mexico 3,292
-----------
PANAMA (1.1%)
Banco Latinamericano de Exportaciones 9,000 424
-----------
PERU (2.1%)
Cerveceria Backus & Johnston 356,240 320
CPT Telefoncia del Peru 15,000 381
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Telefonica del Peru, Cl B 50,500 $ 125
-----------
Total Peru 826
-----------
PHILIPPINES (3.6%)
Bacnotan Consolidated 135,600 250
Benpres GDR* 65,800 467
First Philippine Holdings 174,375 288
Philippine Long Distance 14,000 414
-----------
Total Philippines 1,419
-----------
PORTUGAL (2.5%)
Banco Totta & Acores 21,700 309
Cimentos de Portugal 15,020 330
Portugal Telecom 600 23
Portugal Telecom ADR 8,200 316
-----------
Total Portugal 978
-----------
SINGAPORE (2.0%)
Amtek Engineering 180,000 311
Elec & Eltek International 84,000 496
-----------
Total Singapore 807
-----------
SOUTH AFRICA (8.6%)
Amalgated Banks of South Africa 39,642 245
Anglo American Coal 3,260 216
Barlow 37,700 399
De Beers Consolidated Mines ADR 5,500 194
Gencor 44,000 193
Kersaf Investments 48,600 381
Liberty Life Association of Africa 14,000 392
Rembrandt Group 30,400 306
Richemont 26,500 360
Sasol 26,200 321
Suncrush 181,000 387
-----------
Total South Africa 3,394
-----------
SOUTH KOREA (1.5%)
Pohang Iron & Steel ADR 21,000 609
-----------
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
THAILAND (1.7%)
K.R. Precision, F 46,500 $ 324
Nation Publishing 120,000 344
-----------
Total Thailand 668
-----------
TURKEY (0.1%)
Dogan Holding* 2,800,000 60
-----------
Total Foreign Common Stocks
(Cost $31,409) 33,477
-----------
FOREIGN PREFERRED STOCKS (6.2%)
BRAZIL (6.2%)
Banco Bradesco 42,150,000 336
Banco Itau SA 800,000 411
Brahma 440,000 319
Cemig 2,800,000 128
Centrais Eletricas de Santa Catarina, Cl B 103,000 124
Globex Utilidades 15,500 235
Lojas Renner 7,800,000 452
Multibras Eletrodomes* 228,400 233
Votorantim Celulose Papel* 7,500,000 203
-----------
Total Foreign Preferred Stocks
(Cost $2,386) 2,441
-----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT (G)
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN CONVERTIBLE BOND (0.4%)
TURKEY (0.4%)
Medya Holdings Int'l 10.000%, 06/28/01 $ 200 160
-----------
Total Foreign Convertible Bond
(Cost $175) 160
-----------
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT (7.6%)
Cayman Island 5.250%, 06/02/97 $ 3,000 $ 3,000
-----------
Total Time Deposit
(Cost $3,000) 3,000
-----------
Total Investments (98.9%)
(Cost $36,970) 39,078
-----------
OTHER ASSETS AND LIABILITIES, NET (1.1%) 417
-----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on
3,660,064 outstanding shares of beneficial
interest 37,181
Undistributed net investment income 144
Accumulated net realized gain on investments and
foreign currency transactions 62
Net unrealized appreciation on investments 2,108
-----------
Total Net Assets (100.0%) $ 39,495
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 10.79
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
61
<PAGE>
- --------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. AND FOREIGN COMMON STOCKS (95.4%)
AUSTRALIA (2.7%)
Amcor 13,361 $ 88
Broken Hill Proprietary 20,656 297
Coles Myer 30,235 141
CRA 5,542 91
CSR 27,994 103
Lend Lease 4,481 89
Mount Isa Mines Holdings 42,910 64
National Australia Bank 13,886 199
Newscorp 33,881 150
Pacific Dunlop 28,455 79
Western Mining 20,202 131
Westpac Banking 36,880 200
-------
Total Australia 1,632
-------
AUSTRIA (1.6%)
Bank of Austria 3,058 197
Creditanstalt Bankverein 3,535 209
Ea-Generali 343 85
Oest El Wirtsch, Cl A 2,245 161
OMV 1,715 218
Wienerberger Baustoff 401 82
-------
Total Austria 952
-------
BELGIUM (2.1%)
Bekaert 30 18
Delhaize Freres 1,000 50
Electrabel 1,000 224
Fortis 1,000 194
Generale Banque 470 186
Groupe Bruxelles Lambert 700 112
Kredietbank 290 119
Petrofina 500 176
Royale Belge 175 50
Solvay, Cl A 125 75
Union Minere* 680 55
-------
Total Belgium 1,259
-------
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
DENMARK (1.6%)
Carlsberg, Cl B 1,427 $ 84
D/S 1912, Cl B 6 209
D/S Svendborg, Cl B 4 200
Danisco 2,210 131
Novo Nordisk, Cl B 1,670 179
Sophus Berendsen, Cl B 251 38
Tele Danmark, Cl B 2,208 109
-------
Total Denmark 950
-------
FINLAND (0.8%)
Merita* 25,000 85
Nokia, Cl K 2,300 150
Outokumpu Oy Akt, Cl A 3,100 61
Rauma 303 7
UPM-Kymmene 8,500 195
-------
Total Finland 498
-------
FRANCE (11.4%)
Accor 847 117
Air Liquide 1,886 289
Alcatel Alsthom 2,238 242
Axa 4,748 284
Banque National Paris, Cl A 3,350 137
Bouygues 950 82
Carrefour 603 396
Cie Bancaire 710 78
Cie de Saint Gobain 2,265 312
Cie Financiara Paribas 958 62
Cie Generale des Eaux 2,045 251
Cie Generale des Eaux Warrants* 2,045 1
Compagnie de Suez 2,963 151
Elf Aquitaine 4,282 428
Elf Sanofi 2,573 223
Eridania Beghin-Say 1,209 169
Groupe Danone 1,764 265
Havas 1,300 87
L'Oreal 1,084 393
Lafarge Coppee 2,218 142
</TABLE>
62
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
FRANCE--CONTINUED
Legrand 950 $ 153
Louis Vuitton-Moet Hennessy 1,881 455
Lyonnaise des Eaux Dumez 1,650 162
Michelin, Cl B 2,844 155
Pernod-Ricard 2,179 104
Peugeot 1,790 177
Pinault-Printemps Redoute 400 168
Promodes 478 162
Rhone-Poulenc, Cl A 8,500 275
Schneider 3,877 186
Societe Generale 2,280 253
Total Compaigne, Cl B 4,470 408
Unibail 400 39
-------
Total France 6,806
-------
GERMANY (19.2%)
Aachener & Munchener Bete 166 154
Allianz 5,080 1,085
BASF 15,100 561
Bayer 21,960 857
Bayerische Hypotheken und Wechselbank 9,900 316
Bayerische Vereinsbank 2,360 98
Biersdorf 3,340 179
Colonia Konzern 310 31
Daimler-Benz 13,630 1,053
Degussa 2,490 121
Deutsche Bank 14,620 811
Dresdner Bank Frankfurt 10,600 372
Heidelberger Zement 2,490 235
Hochtief 260 11
Karstadt 625 219
Linde 391 271
Lufthansa 14,580 232
Man Muenchen 31 9
Mannesmann 853 349
Metro AG 3,063 333
Munchener Ruckvers 256 656
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Preussag 11 $ 3
RWE 6,340 273
SAP 1,900 339
Schering 1,810 182
Siemens 14,340 811
Thyssen 1,301 294
Veba 12,660 720
Viag 683 310
Volkswagen 961 624
-------
Total Germany 11,509
-------
HONG KONG (1.9%)
Cathay Pacific Airways 9,000 14
Cheung Kong Holdings 13,000 133
China Light & Power 15,000 75
Hang Seng Bank 10,200 122
Hong Kong Telecommunications 50,000 111
HSBC Holdings 13,068 396
Hutchison Whampoa 14,800 123
Sun Hung Kai Properties 6,600 81
Swire Pacific, Cl A 9,000 75
-------
Total Hong Kong 1,130
-------
ITALY (9.0%)
Assicurazioni Generali 42,670 731
Banca Commerciale Italiana 33,500 66
Benetton Group 9,448 132
Credito Italiano 23,000 34
Edison 42,500 201
ENI 76,000 379
Fiat 139,000 456
Fiat Non-Convertible 42,000 74
Istituto Bancario san Paolo di Torino 42,091 265
Istituto Nazionale 323,919 447
Italgas 5,000 15
Mediobanca 30,950 176
Montedison* 134,680 82
Olivetti* 142,500 41
</TABLE>
63
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
ITALY--CONTINUED
Parmalat Finanziaria 102,800 $ 147
Pirelli 120,000 261
RAS 10,135 77
Sirti 19,500 112
Telecom Italia 265,000 730
Telecom Italia di Risp 63,000 138
Telecom Italia Mobile 195,802 575
Telecom Italia Mobile di Risp 154,164 269
-------
Total Italy 5,408
-------
JAPAN (23.5%)
Ajinomoto 15,000 151
Asahi Bank 20,000 131
Asahi Chemical Industries 15,000 83
Asahi Glass 12,000 116
Bank of Tokyo-Mitsubushi 24,000 416
Bank of Yokohama 11,000 55
Bridgestone 9,000 203
Chiba Bank 12,000 62
Chiyoda 5,000 24
Citizen Watch 11,000 83
Cosmo Oil 12,000 55
Dai Nippon Printing 12,000 240
Daiei* 11,000 72
Daiwa Kosho Lease 5,000 38
Daiwa Securities 18,000 132
Ebara 8,000 116
Fanuc 900 32
Fuji Bank 24,000 309
Fuji Photo Film 5,000 194
Fujitsu 18,000 220
Furukawa Electric 15,000 89
Hankyu 2,000 10
Hitachi 32,000 341
Honda Motor 5,000 147
Industrial Bank of Japan 20,000 241
Ito Ham Foods 1,000 6
Ito Yokado 4,000 228
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Itochu 31,000 $ 158
Japan Air Lines* 16,000 68
Japan Energy 11,000 28
Joyo Bank 14,300 70
Jusco 3,000 101
Kansai Electric Power 9,800 184
Kao 7,000 95
Kawasaki Steel 19,000 56
Kinki Nippon Railway 26,000 156
Kirin Brewery 15,000 148
Komatsu 13,000 98
Kubota 23,000 106
Kyocera 3,000 216
Marui 4,000 75
Matsushita Electric 18,000 339
Mitsubishi 21,000 247
Mitsubishi Chemical 16,000 49
Mitsubishi Electric 23,000 130
Mitsubishi Estate 5,000 68
Mitsubishi Heavy Industries 43,000 310
Mitsubishi Materials 35,000 136
Mitsubishi Trust & Banking 13,000 186
Mitsui 17,000 150
Mitsui Trust & Banking 13,000 98
Mitsukoshi 7,000 49
Murata Manufacturing 1,000 40
NEC 15,000 209
New Oji Paper 9,000 52
Nichido Fire & Marine Insurance 15,000 91
Nippon Express 5,000 39
Nippon Oil 16,000 81
Nippon Paper Industries* 1,000 5
Nippon Sharyo 5,000 32
Nippon Steel 39,000 114
Nippon Yusen 27,000 111
Nippondenso 7,000 175
Nissan Motor 32,000 212
NKK 24,000 47
Nomura Securities 19,000 225
</TABLE>
64
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
JAPAN--CONTINUED
Obayashi 13,000 $ 80
Odakyu Electric Railway 24,000 133
Olympus Optical 8,000 68
Osaka Gas 44,000 116
Sakura Bank 25,000 150
Sankyo 7,000 222
Sanyo Electric 4,000 17
Sega Enterprises 1,600 54
Sekisui Chemical 7,000 73
Sekisui House 7,000 69
Sharp 10,000 129
Shimizu 3,000 18
Shin-Etsu Chemical 7,000 176
Shizuoka Bank 9,000 87
Skylark 3,000 50
Sony 3,500 295
Sumitomo Bank 28,000 387
Sumitomo Chemical 20,000 83
Sumitomo Metal 26,000 66
Taisei 35,000 150
Takeda Chemical 15,000 380
Tobu Railway 15,000 67
Tohoku Electric Power 5,300 91
Tokai Bank 20,000 165
Tokio Marine & Fire Insurance 34,000 400
Tokyo Electric Power 15,900 303
Tokyo Gas 26,000 66
Tokyu 10,000 57
Toppan Printing 11,000 151
Toray 24,000 163
Tostem 3,000 80
Toto 7,700 87
Toyo Seikan Kaisha 3,300 63
Toyoda Automatic Loom 4,000 87
Toyota Motor 31,000 889
Yamaichi Securities 15,000 43
Yamanouchi Pharmaceutical 1,000 25
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Yasuda Trust & Banking 5,000 $ 15
-------
Total Japan 14,103
-------
NETHERLANDS (3.1%)
ABN-Amro Holdings 10,668 197
Akzo Nobel 470 63
ING Groep 5,816 257
Koninklijke 3,789 132
Koninklijke Nederlanden Papierfabriek 960 20
Philips Electronics 2,550 139
Royal Dutch Petroleum 3,580 691
Unilever 1,065 205
Wolters Kluwer 1,479 178
-------
Total Netherlands 1,882
-------
NORWAY (1.2%)
Bergesen, Cl A 4,150 96
Hafslund Nycomed, Cl B 5,900 33
Kvaerner 2,000 115
Norsk Hydro 7,825 391
Nycomed Asa, Cl B 2,300 31
Uni Storebrand* 9,987 66
-------
Total Norway 732
-------
</TABLE>
INTERNATIONAL EQUITY INDEX FUND
<TABLE>
<S> <C> <C>
SPAIN (4.7%)
Argentaria Bancaria de Espana 2,916 145
Autopistas CESA 6,347 78
Banco Bilbao Vizcaya 4,571 324
Banco Central Hispano 4,255 137
Banco de Santander 3,510 299
Dragados Construccion 2,565 50
Empresa Nacional de Electricidad 5,473 418
Fomento de Construcciones Contratas 598 67
Gas Natural 828 158
Iberdola 16,206 199
Mapfre 1,018 55
Repsol 6,279 263
Telefonica de Espana 19,933 575
</TABLE>
65
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
SPAIN--CONTINUED
Union Electrica Fenosa 7,629 $ 68
-------
Total Spain 2,836
-------
SWEDEN (2.0%)
Asea, Cl A 12,000 162
Astra, Cl A 14,666 237
Diligentia* 1,350 15
Electrolux, Cl B 1,100 66
Ericsson, Cl B 8,100 284
Granges* 550 7
Skandinaviska Enskilda Banken 7,700 79
Skanska Rights* 1,800 --
Skanska, Cl B 1,800 72
Stora Kopparbergs Bergslags, Cl A 5,000 74
Svenska Cellulosa, Cl B 4,000 84
Swedish Match 4,500 15
Volvo, Cl B 3,950 109
-------
Total Sweden 1,204
-------
SWITZERLAND (2.3%)
Nestle 222 276
Novartis 244 331
Roche Holdings, Bearer 7 92
Roche Holdings, Genusshein 34 302
Schweizerische Bankgesellschaft 170 186
Swiss Bank* 875 210
-------
Total Switzerland 1,397
-------
UNITED KINGDOM (8.2%)
Abbey National 8,291 119
Barclays Bank 14,416 280
Bass 9,466 123
BAT Industries 22,460 201
BG 20,778 69
Blue Circle Industries 12,797 88
British Petroleum 41,753 495
British Telecommunications 20,475 148
BTR 43,929 143
Cable & Wireless 22,390 183
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Centrica* 20,778 $ 22
Energy Group* 9,677 87
General Electric 21,236 121
Glaxo Wellcome 19,999 399
Grand Metropolitan 23,365 217
Great Universal Stores 7,352 78
Guinness 18,085 168
Hanson 12,096 62
HSBC Holdings 7,895 245
Imperial Chemical 11,454 152
Marks & Spencer 40,514 337
National Power 9,177 83
Reuters 13,125 147
RMC Group 2,799 42
RTZ 13,785 236
Sainsbury, J. 11,344 65
Smithkline Beecham 20,334 350
Unilever 6,230 167
Vodafone Group 22,646 100
-------
Total United Kingdom 4,927
-------
UNITED STATES (0.1%)
Millennium Chemicals* 1,382 27
-------
Total U.S. and Foreign Common Stocks (Cost $48,937)
57,252
-------
FOREIGN PREFERRED STOCKS (1.3%)
FINLAND (0.3%)
Nokia, Cl A 2,400 157
-------
GERMANY (0.9%)
RWE 3,730 131
SAP 1,380 251
Volkswagen 297 146
-------
Total Germany 528
-------
ITALY (0.1%)
Fiat 42,800 72
-------
Total Foreign Preferred Stocks (Cost $571) 757
-------
</TABLE>
66
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Total Investments (96.7%)
(Cost $49,508) $58,009
-------
OTHER ASSETS AND LIABILITIES, NET (3.3%) 1,999
-------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 4,717,839
outstanding shares of beneficial interest 43,186
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 496,770
outstanding shares of beneficial interest 4,962
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 80,102
outstanding shares of beneficial interest 829
Undistributed net investment income 220
Accumulated net realized gain on investments and
foreign currency transactions 2,335
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net unrealized appreciation on investments $ 8,501
Net unrealized depreciation on foreign currency and
translation of other assets and liabilities in
foreign currency (25)
-------
Total Net Assets (100.0%) $60,008
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 11.34
-------
-------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 11.26
-------
-------
Maximum Offering Price Per Share -- Investor Shares
($11.26 DIVIDED BY 96.25%) $ 11.70
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 11.24
-------
-------
</TABLE>
(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 110.
67
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCKS (97.3%)
ARGENTINA (0.9%)
YPF ADR, Cl D 160,000 $ 4,800
-----------
AUSTRALIA (2.0%)
Australia & New Zealand Bank Group 350,000 2,396
Faulding (F.H.) &Co. 405,124 2,412
QBE Insurance 922,000 5,486
-----------
Total Australia 10,294
-----------
BRAZIL (2.8%)
Souza Cruz 838,000 7,827
Telecom Brasileiras ADR 47,800 6,567
-----------
Total Brazil 14,394
-----------
CANADA (3.3%)
Bank of Montreal 71,991 2,744
Bombardier, Cl B 201,000 4,220
CAE 436,729 3,431
Royal Bank of Canada 57,000 2,468
Suncor 158,000 3,918
-----------
Total Canada 16,781
-----------
DENMARK (0.9%)
Sophus Berendsen, Cl B 29,550 4,471
-----------
FINLAND (4.3%)
Cultor, Ser 2 82,400 4,129
Finnlines 100,000 2,777
Metra, Cl B 195,000 5,529
Nokia ADR, Cl A 41,000 2,706
Rauma 72,200 1,683
UPM - Kymmene 208,000 4,774
-----------
Total Finland 21,598
-----------
FRANCE (9.7%)
Accor 34,000 4,708
Christian Dior 30,850 4,832
Cie Generale d'Industrie et de Participations 23,000 6,524
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Credit Local de France 55,000 $ 5,131
Lafarge Coppee 38,000 2,427
Lagardere Groupe 158,000 4,643
SGS-Thomson Microelectronics ADR* 66,000 5,511
Technip 153,113 15,714
-----------
Total France 49,490
-----------
GERMANY (3.3%)
Siemens 48,000 2,713
Veba 79,600 4,525
Volkswagen 14,300 9,288
-----------
Total Germany 16,526
-----------
GREECE (2.0%)
Greek Telecom 411,840 10,253
-----------
HONG KONG (1.2%)
HSBC Holdings 192,645 5,843
-----------
HUNGARY (0.6%)
Gedeon Richter 32,000 2,656
Gedeon Richter GDR 3,000 249
-----------
Total Hungary 2,905
-----------
INDONESIA (0.5%)
Modern Photo Film, F 736,500 2,681
-----------
ISRAEL (2.1%)
ECI Telecommunications 319,000 7,377
Technomatrix Technologies 105,500 3,244
-----------
Total Israel 10,621
-----------
ITALY (3.1%)
Banca Popolare di Milano 500,000 2,686
ENI 933,000 4,655
Istituto Bancario san Paolo di Torino 450,002 2,831
Saipem 1,057,000 5,376
-----------
Total Italy 15,548
-----------
</TABLE>
68
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (8.8%)
Canon 215,000 $ 5,448
FCC 97,000 2,516
Fuji Photo Film 139,000 5,385
Honda Motor 282,000 8,285
Sony 99,400 8,377
TDK 69,000 5,299
Terumo 546,000 9,615
-----------
Total Japan 44,925
-----------
MALAYSIA (0.9%)
UMW Holdings 844,000 4,334
-----------
MEXICO (2.5%)
Fomento Econo Mexicana, Cl B 1,676,000 8,906
Panamerican Beverage, Cl A 130,200 3,776
-----------
Total Mexico 12,682
-----------
NETHERLANDS (5.5%)
Akzo Nobel 53,000 7,051
Hollandsche Beton Groep 28,658 6,590
ING Groep 327,938 14,486
-----------
Total Netherlands 28,127
-----------
NEW ZEALAND (1.0%)
Fletcher Challenge Building Division 1,831,500 5,114
-----------
PANAMA (1.4%)
Banco Latinamericano de Exportaciones 150,400 7,088
-----------
PERU (1.1%)
CPT Telefoncia del Peru 109,000 2,766
Credicorp 124,449 2,816
-----------
Total Peru 5,582
-----------
PHILIPPINES (1.1%)
Benpres GDR* 775,961 5,509
-----------
PORTUGAL (1.5%)
Banco Espirito Santo 120,400 2,493
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Portugal Telecom ADR 134,300 $ 5,171
-----------
Total Portugal 7,664
-----------
SINGAPORE (0.7%)
Elec & Eltek International 599,000 3,534
-----------
SOUTH AFRICA (5.0%)
Barlow 442,000 4,676
De Beers Consolidated Mines ADR 70,200 2,475
First National Bank 373,000 2,911
Gencor 1,048,000 4,599
Liberty Life Association of Africa 50,000 1,399
Rembrandt Group 446,000 4,494
Sasol 385,000 4,720
-----------
Total South Africa 25,274
-----------
SOUTH KOREA (3.4%)
Pohang Iron & Steel 107,531 9,209
Samsung Electronics 29,590 2,897
Samsung Electronics Rights* 490 11
Sindo Ricoh 91,400 5,282
-----------
Total South Korea 17,399
-----------
SPAIN (3.4%)
Corporacion Financiera Alba 49,000 5,391
Telefonica de Espana 414,000 11,946
-----------
Total Spain 17,337
-----------
SWEDEN (3.1%)
Castellum AB* 130,000 906
Ericsson, Cl B 168,100 5,899
Skandia Forsakrings 250,000 8,822
-----------
Total Sweden 15,627
-----------
SWITZERLAND (6.7%)
Asea Brown Boveri 4,215 5,785
Nestle 9,000 11,194
Novartis, Registered 12,640 17,151
-----------
Total Switzerland 34,130
-----------
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (14.5%)
Avis Europe* 2,500,000 $ 5,356
Bank of Ireland 769,715 8,327
Bass 400,000 5,187
BOC Group 163,000 2,735
Granada Group 315,000 4,464
Halma 1,196,000 3,442
London Forfaiting 1,763,200 11,577
Morgan Crucible 717,432 5,344
Powerscreen 513,100 5,232
Railtrack Group* 462,000 4,835
Reckit & Colman 554,000 7,791
Smithkline Beecham 306,484 5,270
Vodafone Group 980,000 4,343
-----------
Total United Kingdom 73,903
-----------
Total Foreign Common Stocks
(Cost $429,604) 494,434
-----------
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT (2.8%)
Cayman Island
5.250%, 06/02/97 $ 14,500 14,500
-----------
Total Time Deposit
(Cost $14,500) 14,500
-----------
Total Investments (100.1%)
(Cost $444,104) 508,934
-----------
OTHER ASSETS AND LIABILITIES, NET (-0.1%) (560)
-----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 35,898,515
outstanding shares of beneficial interest 399,733
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 786,012
outstanding shares of beneficial interest 9,162
<CAPTION>
--------------------------------------------------------------------------------
VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 621,903
outstanding shares of beneficial interest $ 7,607
Undistributed net investment income 834
Accumulated net realized gain on investments and
foreign currency transactions 26,202
Net unrealized appreciation on investments 64,830
Net unrealized appreciation on foreign currency and
translation of other assets and liabilities in
foreign currency 6
-----------
Total Net Assets (100.0%) $ 508,374
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 13.63
-----------
-----------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 13.58
-----------
-----------
Maximum Offering Price Per Share -- Investor Shares
($13.58 DIVIDED BY 96.25%) $ 14.11
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 13.47
-----------
-----------
</TABLE>
(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 110.
70
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
SUNBELT EQUITY FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.3%)
BASIC MATERIALS (1.2%)
Blount International 100,649 $ 4,152
Citation* 65,268 971
--------
Total Basic Materials 5,123
--------
CAPITAL GOODS (9.2%)
Agco 145,197 4,628
American Buildings* 156,275 4,415
American Homestar* 156,914 3,138
Browning Ferris Industries 60,659 1,987
Greenfield Industries 143,198 3,723
Intermet 301,822 4,226
Maverick Tube* 126,699 3,833
Palm Harbor Homes* 126,814 3,583
Roper Industries 41,105 2,019
Tracor* 79,461 2,016
Watsco 164,769 4,778
--------
Total Capital Goods 38,346
--------
COMMUNICATION SERVICES (2.3%)
Premiere Technologies* 162,964 4,380
U.S. Long Distance* 335,286 5,197
--------
Total Communication Services 9,577
--------
CONSUMER CYCLICALS (19.1%)
Barnett* 251,979 5,607
Books-A-Million* 364,468 1,868
Central Parking 86,890 2,715
Claire's Stores 190,753 3,672
Dollar General 236,344 7,947
Family Dollar Stores 159,553 4,108
Heilig-Meyers 413,167 6,817
Home Depot 64,703 4,076
Miller Industries* 524,807 8,594
O'Charleys* 109,669 1,563
Pier 1 Imports 79,777 1,785
Play By Play Toys & Novelties* 90,204 1,409
Promus Hotel* 199,826 7,219
Rare Hospitality International* 221,310 3,486
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Richfood Holdings 275,860 $ 6,379
Stein Mart* 198,738 6,012
Tractor Supply* 169,673 3,478
Suburban Lodges of America* 119,666 2,513
--------
Total Consumer Cyclicals 79,248
--------
CONSUMER STAPLES (1.9%)
Flowers Industries 179,497 3,164
Tyson Foods 224,809 4,609
--------
Total Consumer Staples 7,773
--------
ENERGY (21.7%)
Anadarko Petroleum 74,294 4,681
BJ Services* 86,013 4,752
Baker Hughes 110,638 4,149
Cairn Energy USA* 70,547 833
Diamond Offshore Drilling* 122,095 8,684
Ensco International* 109,330 5,453
Global Industries* 264,743 5,824
Global Marine* 289,298 6,509
Nuevo Energy* 218,321 9,524
Oceaneering International* 104,407 1,775
Offshore Logistics* 167,668 3,039
Pride Petroleum Service* 365,188 8,125
Production Operators 80,518 5,385
St Mary Land & Exploration 79,777 2,533
Stone Energy* 288,296 8,072
Tidewater 126,926 5,347
Transocean Offshore 45,716 3,154
World Fuel Services 104,839 2,110
--------
Total Energy 89,949
--------
FINANCIALS (6.9%)
AmSouth Bancorp 60,660 2,373
BB&T 21,029 841
CCB Financial 52,650 3,699
Central Fidelity Banks 28,307 828
Cullen/Frost Bankers 22,646 892
Equity Inns REIT 222,416 2,919
Fairfield Communities* 131,638 4,393
</TABLE>
71
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
FINANCIALS--CONTINUED
First Enterprise Financial Group* 161,692 $ 950
First Virginia Banks 16,176 906
Regions Financial 13,749 822
Texas Regional Bancshares, Cl A 44,300 1,384
Triad Guaranty* 122,286 4,249
Union Planters 62,171 2,938
Winston Hotels REIT 117,435 1,541
--------
Total Financials 28,735
--------
HEALTH CARE (9.7%)
Beverly Enterprises* 487,197 6,882
Compdent* 186,165 3,374
Gulf South Medical Supply* 271,411 5,360
Healthsouth* 151,776 3,472
Owens & Minor Holding 197,426 2,493
Phycor* 255,733 7,320
Quorum Health Group* 241,231 8,534
Serologicals* 139,340 2,665
--------
Total Health Care 40,100
--------
SERVICE INDUSTRIES (5.5%)
Billing Information Concepts* 40,440 1,173
Education Medical* 159,694 1,437
Norrell 240,634 7,760
Nova* 198,384 3,596
PMT Services* 343,137 5,490
Staffmark* 183,054 3,432
--------
Total Service Industries 22,888
--------
TECHNOLOGY (12.5%)
Acxiom* 165,803 2,819
BDM International* 191,467 4,978
Benchmark Electronics* 136,047 4,779
Cybex Computer Products* 79,847 1,452
Harbinger* 155,395 4,817
Input/Output* 250,551 4,447
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
National Data 133,001 $ 5,835
Nichols Research* 252,683 4,927
SCB Computer Technology* 342,063 7,867
SCI Systems* 5,905 384
Sterling Commerce* 240,417 7,994
Wandel & Goltermann Technologies* 135,258 1,691
--------
Total Technology 51,990
--------
TRANSPORTATION (4.3%)
American Freightways* 388,181 5,338
Hunt J B Transportation Services 538,819 8,217
MTL* 85,327 1,963
USA Truck* 228,340 2,169
--------
Total Transportation 17,687
--------
Total Common Stocks (Cost $310,998) 391,416
--------
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS (3.4%)
Career Horizons,
CV to 88.1340 Shares
7.000%, 11/01/02 $ 2,507 5,534
Pride Petroleum Services,
CV to 81.6327 Shares
6.250%, 02/15/06 792 1,465
SCI Finance LLC,
CV to 1.6617 Shares 37 4,247
Sci Systems,
CV to 20.5128 Shares
5.000%, 05/01/06 2,059 3,009
--------
Total Convertible Bonds
(Cost $13,110) 14,255
--------
</TABLE>
72
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.8%)
Deutsche Bank
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $3,328,353 (collateralized by U.S. Treasury
Note, par value $3,373,000, 5.125%, 12/31/98: total
market value $3,393,654) $ 3,327 $ 3,327
--------
Total Repurchase Agreement
(Cost $3,327) 3,327
--------
Total Investments (98.5%)
(Cost $327,435) 408,998
--------
OTHER ASSETS AND LIABILITIES, NET (1.5%) 6,157
--------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 28,714,327
outstanding shares of beneficial interest 292,778
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 2,151,656
outstanding shares of beneficial interest 21,236
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 437,822
outstanding shares of beneficial interest 5,505
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Undistributed net investment income $ 39
Accumulated net realized gain on investments 14,034
Net unrealized appreciation on investments 81,563
--------
Total Net Assets (100.0%) $415,155
--------
--------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 13.28
--------
--------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 13.06
--------
--------
Maximum Offering Price Per
Share -- Investor Class
($13.06 DIVIDED BY 96.25%) $ 13.57
--------
--------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1)(2) $ 13.00
--------
--------
</TABLE>
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A
DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE
FINANCIAL STATEMENTS.
(2) REPRESENTS NAV ON LAST BUSINESS DAY -- MAY 30, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
73
<PAGE>
- --------------------------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (102.3%)
ARIZONA (1.7%)
Northern Arizona University Revenue, RB,
Callable 06/01/02 @ 101 (FGIC)
6.300%, 06/01/05 $ 2,770 $ 2,948
------------
CALIFORNIA (4.2%)
Los Angeles, California Participation Note, COP,
Pre-Refunded 06/01/99 @ 102 (F)
7.000%, 06/01/09 3,765 4,039
Northern California, Power Agency, RB (AMBAC)
5.850%, 07/01/10 1,295 1,384
State University, California Public Works, RB,
Pre-Refunded 10/01/02 @ 102 (F)
6.700%, 10/01/17 1,800 2,012
------------
Total California 7,435
------------
FLORIDA (12.2%)
Hillsborough County, Capital Improvement
Program, Ser B, RB, Callable 07/01/06
@ 102 (MBIA)
5.125%, 07/01/22 3,300 3,073
Okeechobee Correctional Facility, COP (AMBAC)
5.800%, 03/01/03 1,000 1,044
Orange County, Health Facilities Authority, RB
(MBIA)
6.250%, 10/01/13 1,000 1,093
Reedy Creek, Improvement District Utility, Ser
1991-1, RB, Pre-Refunded 10/01/01 @ 101 (MBIA)
(F)
6.500%, 10/01/16 2,000 2,169
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
State Board of Education, Capital Outlay, Ser C,
GO, Pre-Refunded 06/01/02 @ 101 (F)
6.625%, 06/01/22 $ 1,950 $ 2,139
State Department of Natural Resources,
Environmental Preservation 2000 Project, Ser
A, RB, Callable 07/01/01 @ 102 (AMBAC)
6.750%, 07/01/13 2,000 2,164
Tampa, Allegany Health, RB, Pre-Refunded
12/01/99 @ 102 (FGIC) (F) 7.375%, 12/01/23 3,500 3,814
Tampa, Capital Improvement Program, Ser B, RB,
Callable 10/01/98 @ 100 (E)
8.375%, 10/01/18 1,000 1,051
Volusia County, Health Facility Authority, Aces
Pooled Hospital Program, RB, VRDN, (FGIC) (C)
(D)
3.900%, 11/01/15 2,700 2,700
Volusia County, Master Lease Program, COP,
Pre-Refunded 08/01/01 @ 102 (FSA) (F)
6.625%, 08/01/06 2,000 2,190
------------
Total Florida 21,437
------------
GEORGIA (5.7%)
Cobb County, School District, GO
6.000%, 02/01/01 5,900 6,194
Murray County, School District, GO
4.800%, 04/01/00 1,150 1,160
4.875%, 10/01/00 1,200 1,214
</TABLE>
74
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
GEORGIA--CONTINUED
State, GO
7.250%, 07/01/99 $ 1,305 $ 1,381
------------
Total Georgia 9,949
------------
HAWAII (3.1%)
State, GO
5.750%, 01/01/07 5,150 5,421
------------
ILLINOIS (3.6%)
Chicago, Board of Education, GO (AMBAC)
6.750%, 12/01/09 1,000 1,132
Chicago, State Board of Education, GO (MBIA)
6.250%, 12/01/09 2,745 3,021
State Health Facilities Authority, Trinity
Medical Center Project, RB, Callable 07/01/02
@ 102 (FSA)
7.000%, 07/01/12 2,000 2,189
------------
Total Illinois 6,342
------------
INDIANA (3.6%)
Beech Grove, School Building, RB (MBIA)
6.250%, 07/05/16 2,265 2,464
Health Facilities Financing Authority, Community
Hospitals of Indiana, RB, Pre-Refunded
07/01/01 @ 102 (MBIA) (F)
7.000%, 07/01/21 3,500 3,869
------------
Total Indiana 6,333
------------
MARYLAND (5.1%)
Baltimore, Metropolitan District, GO, Callable
07/01/02 @ 102
5.900%, 07/01/04 1,000 1,067
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
Montgomery County Public Improvement, Ser A, GO
5.200%, 10/01/00 $ 5,725 $ 5,866
Montgomery County, Ser A, GO
5.100%, 04/01/99 2,000 2,032
------------
Total Maryland 8,965
------------
MASSACHUSETTS (4.8%)
Boston, City Hospital Project, RB, Callable
08/15/00 @ 102 (FHA)
7.650%, 02/15/10 1,275 1,410
Commonwealth of Massachusetts, GO, VRDN (C) (D)
4.000%, 12/01/97 7,010 7,010
------------
Total Massachusetts 8,420
------------
NEBRASKA (1.2%)
Omaha, Public Power & Electric Authority, Ser A,
RB, Pre-Refunded 02/01/02 @ 101.50 (F)
6.500%, 02/01/17 2,000 2,180
------------
NEW JERSEY (21.1%)
Economic Development Authority, Water
Facilities,
Ser PJ-B, RB, VRDN (AMBAC) (C) (D)
3.750%, 11/01/25 7,000 7,000
State, Transportation Anticipation Note, Ser A,
RB, Callable 03/01/01 @ 100 (FSA)
4.900%, 09/01/01 3,750 3,793
State, Transportation Anticipation Note, Ser A,
RB, Callable 03/01/03 @ 100 (FSA)
5.400%, 09/01/02 7,000 7,218
5.500%, 09/01/03 13,000 13,478
</TABLE>
75
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
NEW JERSEY--CONTINUED
State, Transportation Anticipation Note, Ser A,
RB, Callable 03/01/00 @ 100 (FSA)
4.800%, 09/01/00 $ 5,500 $ 5,546
------------
Total New Jersey 37,035
------------
NEW YORK (20.2%)
New York, Ser B, GO
5.600%, 08/15/06 1,500 1,513
New York, Ser J, GO (MBIA)
6.000%, 02/15/05 3,000 3,194
State, Pre-Refunded 03/01/00 @ 102 (AMBAC) (F)
7.100%, 03/01/20 1,650 1,794
State Dorm Authority, RB, Callable 07/01/14 @
100 (FSA)
5.750%, 07/01/18 1,800 1,860
State Dorm Authority, State University
Educational Facilities, RB (FGIC)
5.875%, 05/15/11 2,000 2,115
State Dorm Authority, State University
Educational Facilities, Ser A, RB,
Pre-Refunded 05/15/00 @ 102 (F)
7.700%, 05/15/12 5,000 5,539
State Local Assistance Corporation, Ser A, RB,
Pre-Refunded 04/01/01 @ 102 (F)
7.000%, 04/01/16 5,000 5,524
State Urban Development RB, Callable 01/01/03 @
102 (AMBAC)
5.625%, 01/01/07 2,300 2,391
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
State Urban Development, RB, Pre-Refunded
01/01/01 @ 102 (F)
7.875%, 01/01/10 $ 3,000 $ 3,383
State Urban Development, Ser A, RB (MBIA)
6.250%, 04/01/06 2,000 2,186
Triborough, New York, State Bridge & Tunnel
Authority, Ser S, RB, Pre-Refunded 01/01/01 @
101.5 (F)
7.000%, 01/01/11 2,000 2,191
Triborough, New York, State Bridge & Tunnel
Authority,
Ser X, RB, Callable 01/01/02 @ 101.50 6.250%,
01/01/04 3,550 3,802
------------
Total New York 35,492
------------
NORTH CAROLINA (0.8%)
Johnston County, COP (MBIA)
4.150%, 09/01/98 1,380 1,382
------------
PENNSYLVANIA (0.6%)
Philadelphia, Water & Waste, RB (MBIA)
6.250%, 08/01/12 1,050 1,150
------------
TENNESSEE (3.7%)
Shelby County, GO, Pre-Refunded 12/01/00 @ 102
(F)
6.250%, 12/01/09 2,000 2,149
State, GO
5.000%, 05/01/99 4,220 4,284
------------
Total Tennessee 6,433
------------
TEXAS (5.3%)
El Paso, GO, Callable 08/15/07 @ 100 (FGIC)
5.000%, 08/15/11 1,000 964
5.000%, 08/15/12 1,000 958
</TABLE>
76
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
INVESTMENT GRADE TAX-EXEMPT BOND FUND
<TABLE>
<S> <C> <C>
TEXAS--CONTINUED
Harris County, Health Facility Development, Ser
A, RB
6.000%, 06/01/12 $ 3,990 $ 4,234
Texas Water Development Board State Revolving
Fund - Senior Lien, RB, Callable 07/15/02 @
102
6.000%, 07/15/03 2,000 2,133
University of Texas, RB
6.300%, 08/15/99 1,000 1,041
------------
Total Texas 9,330
------------
UTAH (1.0%)
Intermountain Power Agency,
Ser E, RB (FSA)
6.250%, 07/01/09 1,545 1,699
------------
VIRGINIA (2.9%)
Fairfax County, Ser C, GO, Callable 05/01/03 @
102
5.250%, 05/01/07 5,000 5,107
------------
WASHINGTON (0.6%)
Grant County, Washington School District, GO
(FGIC)
6.000%, 12/01/08 1,000 1,073
------------
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
WISCONSIN (0.9%)
Milwaukee County, Ser A, GO (MBIA)
5.250%, 10/01/03 $ 1,550 $ 1,593
------------
Total Municipal Bonds
(Cost $178,251) 179,724
------------
CASH EQUIVALENTS (9.9%)
AIM Management Institutional Tax-Free Portfolio
(C) 8,685 8,685
SEI Tax Exempt Trust Institutional Tax Free
Portfolio (C) 8,753 8,753
------------
Total Cash Equivalents
(Cost $17,438) 17,438
------------
Total Investments (112.2%) (Cost $195,689) 197,162
------------
OTHER ASSETS AND LIABILITIES (-12.2%)
Investment securities purchased payable (24,673)
Other assets and liabilities, net 3,193
------------
Total Other Assets and Liabilities (21,480)
------------
</TABLE>
77
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
VALUE
(000)
- -----------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on
12,396,746 outstanding shares of beneficial
interest $ 137,067
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on
2,834,763 outstanding shares of beneficial
interest 30,459
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on
416,782 outstanding shares of beneficial
interest 4,716
Accumulated net realized gain on investments 1,967
Net unrealized appreciation on investments 1,473
------------
Total Net Assets (100.0%) $ 175,682
------------
------------
<CAPTION>
- -----------------------------------------------------------------------------
VALUE
(000)
- -----------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 11.22
------------
------------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 11.24
------------
------------
Maximum Offering Price Per Share -- Investor Class
($11.24 DIVIDED BY 96.25%) $ 11.68
------------
------------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 11.23
------------
------------
</TABLE>
(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 110.
78
<PAGE>
- --------------------------------------------------------------------------
FLORIDA TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (89.0%)
FLORIDA (78.7%)
Alachua County, State Health Facilities Authority,
Ser B, RB, VRDN (MBIA) (C) (D)
3.900%, 12/01/26 $2,300 $ 2,300
Brevard County, School Board, Ser A, COP (AMBAC)
5.400%, 07/01/12 1,500 1,510
Brevard County, State Health Facilities Authority,
Holmes Medical Center Project, RB, Callable
10/01/03 @ 102 (MBIA)
5.700%, 10/01/08 3,000 3,103
Brevard County, State Health Facilities Authority,
Wuesthoff Memorial Hospital Project, RB (MBIA)
6.250%, 04/01/06 930 1,018
Broward County, School District GO, Pre-Refunded
02/15/99 @ 102 (F)
7.125%, 02/15/08 400 426
Dade County, Aviation Revenue, Ser A, RB, Callable
10/01/05 @ 102 (AMBAC)
6.000%, 10/01/09 500 534
Dade County, School Board, COP (AMBAC)
5.750%, 08/01/03 600 631
Dade County, School District, GO Pre-Refunded
07/01/99 @ 102 (F)
7.200%, 07/01/02 2,000 2,151
7.375%, 07/01/08 250 270
Dade County, Seaport, RB (MBIA)
6.200%, 10/01/08 750 826
6.200%, 10/01/10 1,000 1,094
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Dade County, State Educational Facilities Authority,
University of Miami, Ser A, RB (MBIA)
6.000%, 04/01/08 $ 755 $ 814
Dade County, Water & Sewer System, RB (FGIC)
6.250%, 10/01/09 750 827
5.250%, 10/01/21 825 790
Deerfield Beach, Water & Sewer Revenue, RB (FGIC)
6.125%, 10/01/06 250 273
Gainsville, Utilities Systems,
Ser A, RB
5.750%, 10/01/04 1,300 1,379
5.750%, 10/01/09 500 529
Gulf Breeze, Local Government Lien, Ser B, RB,
Mandatory Tender 12/01/08 (FGIC)
5.650%, 12/01/15 460 472
Gulf Breeze, Local Government Lien, Ser B, RB,
Mandatory Tender 12/01/09 (FGIC)
5.750%, 12/01/15 410 421
Hillsborough County, Capital Improvement Program Ser
B, RB Callable 07/01/06 @ 102 (MBIA)
5.125%, 07/01/22 3,000 2,794
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 1,060
Hillsborough County, University Community Hospital,
RB (MBIA)
6.500%, 08/15/19 145 163
</TABLE>
79
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA--CONTINUED
Indian Trace Community, Water Management Split
Benefit, Ser A-1, RB, Callable 05/01/05 @ 102
(MBIA)
5.500%, 05/01/07 $ 455 $ 474
Jacksonville Excise Taxes, Ser B, RB, AMT, Callable
10/01/01 @ 101 (FGIC)
4.900%, 10/01/02 590 595
Jacksonville, Florida Excise Tax, Ser B, RB, AMT,
Callable 10/01/03 @ 100 (FGIC)
5.200%, 10/01/04 1,500 1,527
Lakeland, Electric & Water Revenue, RB (FGIC)
6.500%, 10/01/05 1,000 1,113
Lakeland, Electric & Water Revenue, RB
6.650%, 10/01/98 100 103
Manatee County, Community Redevelopment
Administration, Center Project, RB, Callable
04/01/00 @ 102.00 (MBIA)
7.000%, 04/01/08 1,000 1,076
North Broward, Hospital District Revenue, RB (MBIA)
5.950%, 01/01/01 1,000 1,044
Orange County, Health Facilities Authority, RB (MBIA)
6.250%, 10/01/13 1,000 1,093
Orange County, Public Facilities Revenue, Ser A, RB,
Callable 10/01/04 @ 102 (AMBAC)
5.650%, 10/01/07 200 210
Orlando, Community Water & Electric Revenue, RB (ETM)
9.625%, 10/01/03 450 569
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Orlando, Community Water & Electric Revenue, Ser D,
RB
6.750%, 10/01/17 $ 500 $ 582
Palm Beach, Health Facilities Revenue, JFK Medical
Center Project, RB, Pre-Refunded 12/01/03 @ 102
(FSA) (F)
5.750%, 12/01/14 165 177
Pinellas County, Morton Plant Health Systems Project,
RB, Callable 11/15/03 @ 102 (MBIA)
5.500%, 11/15/08 1,500 1,541
Plant City, Utility System Revenue, RB, Callable
10/01/04 @ 101 (MBIA)
6.000%, 10/01/15 400 426
Reedy Creek, Utility Revenue, Ser 1991-1, RB,
Pre-Refunded 10/01/01 @ 101 (MBIA) (F)
6.250%, 10/01/11 240 258
South Broward, Hospital District, RB, Callable
05/01/03 @ 102 (AMBAC)
7.500%, 05/01/08 1,920 2,195
State Board General Financial Services, Department of
Environmental Preservation, RB (AMBAC)
5.125%, 07/01/07 1,500 1,518
State Board of Education, Capital Outlay, RB
6.600%, 06/01/98 125 128
State Board of Education Capital Outlay, GO,
Pre-Refunded 06/01/00 @ 102 (F)
7.250%, 06/01/23 2,695 2,953
</TABLE>
80
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA--CONTINUED
State Board of Education, Capital Outlay, Ser B, GO,
Callable 06/01/02 @ 101
5.900%, 06/01/12 $ 450 $ 463
State Board of Education, Capital Outlay, Ser B, RB,
Callable 06/01/02 @ 101
6.000%, 06/01/15 170 175
State Board of Education, Ser C, GO, Pre-Refunded
06/01/97 @ 102 (ETM) (F)
7.100%, 06/01/07 190 194
State Board of Finance Department, General Services
Revenue, Environmental Preservation 2000, Ser A, RB
(AMBAC)
5.300%, 07/01/04 460 474
State Department of Natural Resources, Preservation
2000 Project, Ser A, RB, Callable 07/01/01 @ 102
(AMBAC)
6.750%, 07/01/06 80 87
State Keys, Aqueduct Authority Revenue, RB,
Pre-Refunded 09/01/01 @ 101 (AMBAC) (F)
6.750%, 09/01/21 170 186
State Pollution Control, Ser N, GO, Callable 07/01/96
@ 102
8.000%, 07/01/97 420 422
Tallahassee Construction Utility System, RB,
Pre-Refunded 10/01/99 @ 102 (F)
6.900%, 10/01/14 240 258
Tampa, RB, Callable 10/1/01 @ 102 (AMBAC)
7.050%, 10/01/07 1,000 1,105
-------
Total Florida 44,651
-------
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
PUERTO RICO (10.3%)
Commonwealth, Highway & Transportation Authority, Ser
Z, RB (MBIA)
6.250%, 07/01/14 $2,000 $ 2,193
Commonwealth, GO, (MBIA)
5.650%, 07/01/15 1,000 1,026
Electric Power Authority, Ser S, RB
5.500%, 07/01/00 200 205
Electric Power Authority, RB, (MBIA)
6.125%, 07/01/09 1,000 1,094
Public Buildings Authority, Guaranteed Government
Facilities, Ser A, RB (AMBAC)
6.250%, 07/01/14 750 822
Public Buildings Authority Revenue, Public Education
& Health Facilities, RB
5.300%, 07/01/03 475 483
-------
Total Puerto Rico 5,823
-------
Total Municipal Bonds
(Cost $49,674) 50,474
-------
CASH EQUIVALENTS (9.8%)
AIM Management Institutional Tax-Free Portfolio 2,782 2,782
SEI Tax Exempt Trust Institutional Tax Free Portfolio 2,767 2,767
-------
Total Cash Equivalents
(Cost $5,549) 5,549
-------
Total Investments (98.8%)
(Cost $55,223) 56,023
-------
OTHER ASSETS AND LIABILITIES, NET (1.2%) 690
-------
</TABLE>
81
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
FLORIDA TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 4,910,796
outstanding shares of beneficial interest $50,028
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 313,587
outstanding shares of beneficial interest 3,103
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 291,278
outstanding shares of beneficial interest 2,992
Accumulated net realized loss on investments (210)
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net unrealized appreciation on investments $ 800
-------
Total Net Assets (100.0%) $56,713
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 10.28
-------
-------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 10.29
-------
-------
Maximum Offering Price Per Share -- Investor Class
($10.29 DIVIDED BY 96.25%) $ 10.69
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 10.30
-------
-------
</TABLE>
(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 110.
82
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
TENNESSEE TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (89.1%)
PUERTO RICO (11.9%)
Commonwealth, GO, Callable 07/01/05 @ 100 (MBIA)
5.500%, 07/01/13 $175 $ 176
Commonwealth, Highway & Transportation Authority, Ser
Z, RB (MBIA)
6.250%, 07/01/15 500 549
------
Total Puerto Rico 725
------
TENNESSEE (77.2%)
Chattanooga, GO, Callable 08/01/02 @ 102
5.900%, 08/01/05 50 53
Chattanooga, Health Facilities Board, Memorial
Hospital Project, Ser A, RB (MBIA)
6.300%, 09/01/05 20 22
Chattanooga-Hamilton County, Erlanger Medical Center
Project, RB (FSA)
5.600%, 10/01/08 50 52
Hamilton County, GO, Callable 07/01/04 @ 102
5.500%, 07/01/08 100 103
Harpeth Valley, Utility District Revenue, RB,
Callable 09/01/03 @ 102
5.625%, 09/01/07 100 104
Jackson, Water & Sewer Utilities Revenue, RB,
Callable 07/01/06 @ 100 (AMBAC)
5.250%, 07/01/11 200 198
Johnson City, Water & Sewer Regulation System, GO,
Callable 05/01/06 @ 100 (AMBAC)
5.800%, 05/01/09 100 104
Kingsport, GO
5.500%, 09/01/02 50 52
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
Knox County, First Utility District Sewer Revenue,
RB, Callable 12/01/97 @ 100 (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 51
Knoxville, Natural Gas Revenue, Ser E, RB, Callable
03/01/03 @ 100
5.900%, 03/01/10 100 103
Madison County, Ser A, GO, Callable 08/01/01 @ 102
6.000%, 08/01/05 40 42
Madison County, Water Revenue, RB, Callable 02/01/08
@ 100 (MBIA)
5.500%, 02/01/09 250 255
Memphis-Shelby County, Airport Authority, Ser B, RB,
AMT (MBIA)
6.500%, 02/15/09 85 94
Memphis-Shelby County, Airport Authority, RB,
Callable 09/01/05 @ 100 (MBIA)
5.550%, 09/01/08 50 52
Metro Government, Nashville & Davidson County,
Convention Center Project, GO (ETM)
6.250%, 03/01/10 200 219
Metro Government, Nashville & Davidson County,
Correctional Facility Improvements, RB, Callable
09/01/01 @ 102
7.000%, 09/01/11 100 109
Metro Government, Nashville & Davidson County,
Electric System Revenue, RB (ETM)
6.000%, 07/01/04 100 107
Metro Government, Nashville & Davidson County,
Electric System Revenue, RB
5.625%, 05/15/14 200 203
</TABLE>
83
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
TENNESSEE--CONTINUED
Metro Government, Nashville & Davidson County,
Vanderbilt University Hospital, RB, Callable
07/01/06 @ 100 (ETM)
6.100%, 07/01/10 $100 $ 106
Metro Government, Nashville & Davidson County,
Vanderbilt University, Ser A, RB
5.500%, 01/01/06 125 130
Metro Government, Nashville & Davidson County, Water
& Sewer Revenue, RB (ETM)
6.500%, 12/01/14 225 251
Metro Government, Nashville & Davidson County, Water
& Sewer, RB, Callable 01/01/04 @ 100 (AMBAC)
5.900%, 01/01/07 100 105
Nashville & Davidson County, State Sports Authority
Stadium Project, RB, Callable 07/01/06 @ 101
(AMBAC)
5.750%, 07/01/15 100 102
Shelby County, School Boards, GO, Callable 03/01/02 @
101
5.800%, 03/01/10 300 309
Shelby County, Ser A, GO
5.500%, 03/01/10 300 307
Shelby County, Ser B, GO
5.100%, 03/01/00 750 763
State GO, Ser A, Callable 03/01/07 @ 100
5.500%, 03/01/09 50 52
State GO, Ser C
5.000%, 03/01/04 100 102
State Housing Development Agency, Ser A, RB (AMBAC)
6.550%, 01/01/08 50 52
<CAPTION>
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------------
<S> <C> <C>
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)(F)
7.750%, 07/01/06 100 113
State School Board Authority, Higher Education
Facilities, Ser A, RB, Callable 05/01/02 @ 101.50
5.800%, 05/01/04 150 158
Sullivan County, Health Facilities Board, Holston
Valley Health, RB, Callable 02/15/03 @ 102 (MBIA)
5.750%, 02/15/13 50 51
Williamson County, Rural School, GO, Callable
09/01/06 @ 100
5.400%, 09/01/07 50 52
------
Total Tennessee 4,694
------
Total Municipal Bonds
(Cost $5,299) 5,419
------
CASH EQUIVALENTS (9.8%)
Aim Management Institutional Tax Free Portfolio 292 292
SEI Tax-Exempt Trust Institutional Tax-Free Portfolio 302 302
------
Total Cash Equivalents
(Cost $594) 594
------
Total Investments (98.9%)
(Cost $5,893) 6,013
------
OTHER ASSETS AND LIABILITIES, NET (1.1%) 67
------
</TABLE>
84
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------
VALUE
(000)
- -----------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 204,829
outstanding shares of beneficial interest $1,913
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 166,059
outstanding shares of beneficial interest 1,570
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 259,932
outstanding shares of beneficial interest 2,489
Accumulated net realized loss on investments (12)
Net unrealized appreciation on investments 120
------
Total Net Assets (100.0%) $6,080
------
------
<CAPTION>
------------------------------------------------------------
VALUE
(000)
- -----------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 9.63
------
------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 9.65
------
------
Maximum Offering Price Per Share -- Investor Class
($9.65 DIVIDED BY 96.25%) $10.03
------
------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 9.64
------
------
</TABLE>
(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 110.
85
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
GEORGIA TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (89.6%)
GEORGIA (89.6%)
Albany-Dougherty County, State Hospital Authority,
Ser B, Anticipation Certificate, Pre-Refunded
09/01/00 @ 102 (AMBAC)(F)
7.500%, 09/01/20 $ 255 $ 282
Athens, Water & Sewer Revenue, RB (ETM)(F)
5.700%, 07/01/00 165 171
Atlanta Airport Facility, RB
6.000%, 01/01/03 500 531
6.000%, 01/01/04 500 534
Augusta, Water & Sewer, RB, Callable 05/01/02 @ 102
6.200%, 05/01/03 130 141
Bibb County, GO
7.000%, 01/01/04 985 1,103
Bulloch County School District, GO
5.250%, 02/01/17 1,000 968
Clayton County, Water & Sewer Authority, RB (AMBAC)
5.350%, 05/01/09 1,500 1,519
Cobb County & Marietta, Coliseum & Exhibit Hall
Authority, RB (MBIA)
5.500%, 10/01/12 940 956
Cobb County & Marietta, Water Authority, RB
5.100%, 11/01/04 1,000 1,019
Cobb County, GO
5.000%, 02/01/03 1,025 1,040
Cobb County, Water & Sewer Authority, Callable
07/01/04 @ 102
5.125%, 07/01/05 345 352
Columbus Water & Sewer, RB (FGIC)
5.625%, 05/01/13 1,055 1,070
Dalton-Whitfield County, Hospital Authority, RB,
Pre-Refunded 07/01/00 @ 102 (F)
7.000%, 07/01/03 355 386
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
DeKalb County, Development Authority, Emory
University Project, RB (F)
5.375%, 11/01/05 $1,650 $ 1,710
DeKalb County, Development Authority, Emory
University Project, Ser A, RB
5.200%, 11/01/08 500 506
DeKalb County, School District, Ser A, GO
6.250%, 07/01/11 1,500 1,649
DeKalb County, Water & Sewer Authority, RB, Callable
10/01/03 @ 102
5.125%, 10/01/14 1,455 1,398
Douglas County, School District, GO (MBIA)
5.650%, 01/01/09 805 832
Douglasville -- Douglas County, Water and Sewer
Authority, RB (AMBAC)
5.625%, 06/01/15 350 357
East Point Building Authority, RB (AMBAC)
4.800%, 02/01/07 535 525
Fayette County, School District, GO
6.250%, 03/01/07 450 494
Fayette County, Water Authority, RB (MBIA) (ETM)
8.550%, 10/01/01 300 346
Forsyth County, School District, GO (MBIA)
5.350%, 07/01/10 680 685
Forsyth County, GO
6.500%, 07/01/06 1,000 1,113
Fulton County, Hospital Authority, Northside Hospital
Project, Ser B, RB, Pre-Refunded 10/01/02 @ 102
(MBIA)(F)
6.600%, 10/01/11 2,000 2,214
</TABLE>
86
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
GEORGIA--CONTINUED
Gwinnett County Recreation Authority, RB
5.800%, 02/01/06 $ 785 $ 835
5.875%, 02/01/07 1,390 1,489
Gwinnett County, School District, GO
6.400%, 02/01/06 500 553
Gwinnett County, School District, Ser B, GO
6.400%, 02/01/07 1,000 1,113
Hall County, GO
6.300%, 12/01/05 675 739
Hartwell, Combined Utility Revenue, RB, Callable
01/01/06 @ 102 (FSA)
5.500%, 01/01/16 1,000 991
Henry County, GO
6.300%, 08/01/08 300 331
Henry County, School District, School Improvements,
RB
6.450%, 08/01/11 500 555
Henry County, School District, Ser A, GO
6.150%, 08/01/06 150 163
Henry County, School District, Ser B, GO (MBIA)
5.500%, 08/01/01 350 363
Housing Authority, Single Family Mortgage, Ser B,
Sub-ser B-1, RB
5.550%, 12/01/07 550 561
Medical Center Hospital Authority, Columbus Regional
Healthcare System, RB (MBIA)
6.000%, 08/01/06 1,000 1,070
Meriwether County, School District, GO (FSA)
7.000%, 02/01/06 740 847
5.500%, 02/01/16 1,000 990
Milledgeville, Water & Sewer, RB (FSA)
6.000%, 12/01/16 1,000 1,069
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Paulding County, School District, Ser A, GO
6.625%, 02/01/07 $1,000 $ 1,123
6.625%, 02/01/08 500 563
Private Colleges & Universities Facilities Authority,
Emory University Project, Ser C, RB, Callable
10/01/02 @ 102
5.900%, 10/01/04 305 325
Private Colleges & Universities Facilities Authority,
Spelman College Project, RB (FGIC)
6.000%, 06/01/09 475 502
Richmond County Georgia Water & Sewer, Ser A, RB
(FGIC)
5.125%, 10/01/17 1,000 951
Rockdale County, School District, RB, Pre-Refunded
01/01/99 @ 102 (F)
6.400%, 01/01/05 150 157
Savannah, Water & Sewer Revenue, RB (ETM)(F)
6.450%, 12/01/04 1,000 1,104
State GO, Ser B, Pre-Refunded 07/01/99 @ 102 (F)
6.800%, 07/01/06 460 491
State GO, Ser C
6.500%, 04/01/08 1,000 1,127
State Housing & Financial Authority, Single Family
Mortgage, Ser B, Sub-ser B-1, RB (FHA)
5.550%, 12/01/10 325 325
State Housing & Financial Authority, Single Family
Mortgage, Ser B, Sub-ser B-1, RB (FHA)
5.600%, 12/01/11 450 450
State Municipal Electric Authority, RB (ETM)(F)
8.000%, 01/01/15 465 587
Vidalia, Water & Sewer Revenue, RB (ETM)(F)
6.000%, 07/01/07 605 654
</TABLE>
87
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
GEORGIA--CONTINUED
Walker County School District, GO
5.000%, 02/01/03 $1,000 $ 1,010
-------
Total Georgia 42,939
-------
Total Municipal Bonds
(Cost $42,637) 42,939
-------
REPURCHASE AGREEMENT (2.6%)
Lehman Brothers 5.02%, dated 05/30/97, matures
06/02/97, repurchase price $1,233,287
(collateralized by U.S. Treasury Note, par value
$1,247,488, 5.625%, 08/31/97: total market value
$1,265,810) 1,233 1,233
-------
Total Repurchase Agreement
(Cost $1,233) 1,233
-------
CASH EQUIVALENTS (8.4%)
AIM Management Institutional Tax-Free Portfolio (C) 2,025 2,025
SEI Tax Exempt Trust Institutional Tax Free Portfolio
(C) 2,007 2,007
-------
Total Cash Equivalents
(Cost $4,032) 4,032
-------
Total Investments (100.6%)
(Cost $47,902) 48,204
-------
OTHER ASSETS AND LIABILITIES, NET (-0.6%) (299)
-------
<CAPTION>
------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 4,084,294
outstanding shares of beneficial interest $39,434
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 360,308
outstanding shares of beneficial interest 3,511
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 479,124
outstanding shares of beneficial interest 4,651
Accumulated net realized gain on investments 7
Net unrealized appreciation on investments 302
-------
Total Net Assets (100.0%) $47,905
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 9.73
-------
-------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 9.74
-------
-------
Maximum Offering Price Per Share -- Investor Class
($9.74 DIVIDED BY 96.25%) $ 10.12
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 9.73
-------
-------
</TABLE>
(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 110.
88
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (21.2%)
U.S. Treasury Bonds
7.500%, 11/15/16 $36,100 $ 38,056
8.125%, 08/15/19 81,000 91,127
6.625%, 02/15/27 10,000 9,635
U.S. Treasury Note
6.750%, 04/30/00 4,000 4,039
-----------
Total U.S. Treasury Obligations
(Cost $141,586) 142,857
-----------
CORPORATE OBLIGATIONS (69.9%)
FINANCE (51.7%)
American General Finance
6.875%, 07/01/99 13,000 13,097
Aristar
6.750%, 05/15/99 23,000 23,115
Associates of North America, MTN
6.650%, 08/30/99 9,500 9,524
Bear Stearns
7.000%, 03/01/07 23,000 22,425
General Motors Acceptance, MTN
6.750%, 11/04/04 21,000 20,422
General Motors Acceptance
7.125%, 05/01/01 23,500 23,676
Homeside Lending, MTN
6.875%, 05/15/00 21,600 21,573
Household Finance, MTN
7.150%, 06/15/00 13,000 13,130
International Lease Finance
6.700%, 04/30/99 23,500 23,618
Merrill Lynch, MTN
6.640%, 04/09/99 19,000 19,071
Morgan Stanley Group
6.875%, 03/01/07 17,000 16,554
RHG Finance
8.875%,10/01/05 17,100 18,489
Salomon
6.500%, 03/01/00 28,000 27,755
6.750%, 02/15/03 23,000 22,368
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Service International
7.375%, 04/15/04 $20,500 $ 20,756
Sunamerica
6.200%, 10/31/99 25,000 24,813
US West Capital Funding
7.300%, 01/15/07 27,500 27,328
-----------
Total Finance 347,714
-----------
INDUSTRIAL (11.3%)
Ford Capital
9.500%, 06/01/10 15,000 17,306
Lockheed Martin
6.550%, 05/15/99 16,000 16,020
Philip Morris
7.250%, 09/15/01 24,500 24,592
6.800%, 12/01/03 4,000 3,900
7.500%, 04/01/04 14,500 14,573
-----------
Total Industrial 76,391
-----------
UTILITIES (6.9%)
AT&T Capital, MTN
6.920%, 04/29/99 25,000 25,125
General Electric Capital (C)
6.660%, 05/01/18 21,000 21,052
-----------
Total Utilities 46,177
-----------
Total Corporate Obligations
(Cost $471,229) 470,282
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.2%)
FHLMC
8.000%, 06/01/02 8,047 8,244
7.500%, 09/01/03 19,625 19,896
-----------
Total U.S. Government Agency Obligations
(Cost $28,159) 28,140
-----------
</TABLE>
89
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.4%)
Deutsche Bank
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $2,739,802 (collateralized by U.S. Treasury
Note, par value $2,777,000, 5.125%, 12/31/98:
market value $2,794,004) $ 2,739 $ 2,739
-----------
Total Repurchase Agreement
(Cost $2,739) 2,739
-----------
Total Investments (95.7%)
(Cost $643,713) 644,018
-----------
OTHER ASSETS AND LIABILITIES, NET (4.3%) 28,556
-----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 62,361,667
outstanding shares of beneficial interest 644,729
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 3,264,729
outstanding shares of beneficial interest 34,279
<CAPTION>
--------------------------------------------------------------------------------
VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 566,749
outstanding shares of beneficial interest $ 5,854
Accumulated net realized loss on investments (12,593)
Net unrealized appreciation on investments 305
-----------
Total Net Assets (100.0%) $ 672,574
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 10.16
-----------
-----------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 10.16
-----------
-----------
Maximum Offering Price Per Share -- Investor Class
($10.16 DIVIDED BY 96.25%) $ 10.56
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 10.17
-----------
-----------
</TABLE>
(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 110.
90
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (36.0%)
U.S. Treasury Bond
6.125%, 05/15/98 $ 2,000 $ 2,005
U.S. Treasury Notes
5.875%, 08/15/98 1,750 1,747
4.750%, 09/30/98 1,500 1,476
4.750%, 10/31/98 9,000 8,843
5.500%, 02/28/99 8,750 8,659
5.875%, 11/15/99 3,000 2,971
7.500%, 11/15/01 3,750 3,892
U.S. Treasury STRIPS
0.000%, 08/15/03 5,750 3,851
-----------
Total U.S. Treasury Obligations
(Cost $33,597) 33,444
-----------
CORPORATE OBLIGATIONS (43.1%)
FINANCE (22.7%)
American General
6.250%, 03/15/03 1,100 1,060
Associates of North America, MTN
5.980%, 12/19/00 1,250 1,220
7.080%, 04/15/03 1,500 1,502
Bankers Trust New York
6.625%, 07/30/99 2,250 2,250
Chrysler Financial
6.440%, 06/23/99 1,000 1,000
Dean Witter Discover, MTN
6.000%, 02/08/01 1,000 966
First Chicago NBD
6.500%, 11/01/01 2,250 2,214
FNMA, MTN
5.760%, 02/26/01 2,100 2,034
Ford Motor Credit
6.250%, 11/08/00 1,500 1,476
General Motors Acceptance
7.125%, 05/01/01 1,750 1,763
Household Finance
9.625%, 07/15/00 1,250 1,349
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
International Lease Finance, MTN
6.050%, 02/01/00 $ 2,250 $ 2,216
Norwest Financial
7.200%, 04/01/04 2,000 2,020
-----------
Total Finance 21,070
-----------
INDUSTRIAL (13.7%)
Dayton Hudson
6.800%, 10/01/01 2,250 2,230
Federal Express
6.250%, 04/15/98 750 752
Philip Morris (D)
9.000%, 05/15/98 1,500 1,540
Philip Morris
7.500%, 01/15/02 1,250 1,264
RJR Nabisco
8.300%, 04/15/99 1,000 1,031
Sears Roebuck Acceptance, MTN
6.820%, 10/17/02 500 496
6.540%, 02/20/03 1,200 1,170
Sherwin-Williams
6.250%, 02/01/00 1,000 991
Tenneco
10.075%, 02/01/01 3,000 3,296
-----------
Total Industrial 12,770
-----------
UTILITIES (6.7%)
General Electric Capital, Callable & Putable 4/14/98
@ 100 (C)(D)
6.650%, 04/14/08 2,000 2,006
Indiana & Michigan Power, MTN
6.400%, 03/01/00 2,250 2,230
NYNEX Credit, MTN
6.900%, 06/15/99 2,000 2,015
-----------
Total Utilities 6,251
-----------
Total Corporate Obligations
(Cost $40,297) 40,091
-----------
</TABLE>
91
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (4.9%)
FHLMC
6.500%, 04/01/98 $ 892 $ 884
8.000%, 01/01/00 894 910
5.375%, 04/13/00 1,000 989
FNMA
8.500%, 11/01/01 1,758 1,801
-----------
Total U.S. Agency Mortgage-Backed Obligations
(Cost $4,534) 4,584
-----------
ASSET-BACKED SECURITIES (9.4%)
Chase Manhattan Auto Grantor
Trust, Ser 1996-B, Cl A
6.610%, 09/15/02 1,947 1,955
Metris Master Trust,
Ser 1997-1, Cl A
6.870%, 11/20/05 2,750 2,767
Olympic Automobile Receivables
Trust, Ser 1996-D, Cl A3
5.950%, 06/15/01 2,500 2,477
Union Pacific Equipment Trust, Ser 96-A
7.060%, 05/15/03 1,500 1,506
-----------
Total Asset-Backed Securities
(Cost $8,697) 8,705
-----------
CASH EQUIVALENTS (2.8%)
SEI Daily Income Trust Prime
Obligation Portfolio 2,583 2,583
-----------
Total Cash Equivalents
(Cost $2,583) 2,583
-----------
Total Investments (96.2%)
(Cost $89,708) 89,407
-----------
Other Assets and Liabilities, Net (3.8%) 3,549
-----------
<CAPTION>
--------------------------------------------------------------------------------
VALUE
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 9,063,741
outstanding shares of beneficial interest $ 90,146
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 220,117
outstanding shares of beneficial interest 2,202
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 108,300
outstanding shares of beneficial interest 1,087
Undistributed net investment income 141
Accumulated net realized loss on investments (319)
Net unrealized depreciation on investments (301)
-----------
Total Net Assets (100.0%) $ 92,956
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 9.90
-----------
-----------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 9.91
-----------
-----------
Maximum Offering Price Per Share -- Investor Class
($9.91 DIVIDED BY 98.00%) $ 10.11
-----------
-----------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 9.91
-----------
-----------
</TABLE>
(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 110.
92
<PAGE>
SHORT-TERM U.S. TREASURY SECURITIES FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (97.3%)
U.S. Treasury Bonds
6.125%, 05/15/98 $2,250 $ 2,255
6.000%, 08/15/99 2,500 2,487
U.S. Treasury Notes
5.125%, 06/30/98 2,250 2,233
5.875%, 08/15/98 3,400 3,394
5.500%, 11/15/98 1,600 1,588
8.875%, 02/15/99 4,200 4,382
6.375%, 05/15/99 1,900 1,905
6.875%, 07/31/99 4,250 4,303
5.875%, 11/15/99 2,000 1,980
5.875%, 02/15/00 1,000 988
6.875%, 03/31/00 750 760
-------
Total U.S. Treasury Obligations
(Cost $26,305) 26,275
-------
CASH EQUIVALENT (1.6%)
SEI Daily Income Trust
Treasury II Portfolio 437 437
-------
Total Cash Equivalent
(Cost $437) 437
-------
Total Investments (98.9%)
(Cost $26,742) 26,712
-------
OTHER ASSETS AND LIABILITIES, NET (1.1%) 288
-------
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 2,225,584
outstanding shares of beneficial interest $22,198
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 396,977
outstanding shares of beneficial interest 3,986
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 110,713
outstanding shares of beneficial interest 1,103
Accumulated net realized loss on investments (257)
Net unrealized depreciation on investments (30)
-------
Total Net Assets (100.0%) $27,000
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 9.88
-------
-------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 9.88
-------
-------
Maximum Offering Price Per Share -- Investor Class
($9.88 DIVIDED BY 99.00%) $ 9.98
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 9.85
-------
-------
</TABLE>
(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 110.
93
<PAGE>
- --------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (33.7%)
U.S. Treasury Notes
8.875%, 02/15/99 $10,300 $ 10,747
9.125%, 05/15/99 11,200 11,789
8.000%, 08/15/99 6,000 6,210
7.500%, 10/31/99 8,800 9,030
8.500%, 11/15/00 5,000 5,317
--------
Total U.S. Treasury Obligations
(Cost $43,159) 43,093
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (64.0%)
FHLMC
6.000%, 07/01/00 4,568 4,415
8.000%, 06/01/02 1,149 1,178
7.000%, 10/01/02 4,532 4,543
8.000%, 12/01/02 2,855 2,886
7.000%, 03/01/04 14,946 14,947
FHLMC REMIC, Ser 1910-Ac
6.500%, 10/15/15 10,000 9,946
FHLMC REMIC, Ser 1637-E
5.750%, 02/15/19 2,699 2,645
FHLMC REMIC, Ser 1614-H
6.000%, 06/15/20 4,550 4,411
FNMA
7.500%, 07/01/03 8,811 8,924
7.000%, 03/01/04 14,834 14,830
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
8.500%, 04/01/17 $ 1,106 $ 1,157
FNMA REMIC, Ser G96-1PC
7.000%, 08/17/12 4,921 4,954
FNMA REMIC, Ser 1992-134G
6.000%, 11/25/18 5,586 5,460
GNMA
9.000%, 11/15/17 1,412 1,513
--------
Total U.S. Government Agency Obligations
(Cost $81,888) 81,809
--------
REPURCHASE AGREEMENT (1.9%)
J.P. Morgan
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $2,376,897 (collateralized by various FNMA
obligations, total par value $3,182,000,
7.500%-8.115%, 05/25/23-05/01/27; total market
value $2,425,338) 2,376 2,376
--------
Total Repurchase Agreement
(Cost $2,376) 2,376
--------
Total Investments (99.6%)
(Cost $127,423) 127,278
--------
OTHER ASSETS AND LIABILITIES, NET (0.4%) 460
--------
</TABLE>
94
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 12,371,227
outstanding shares of beneficial interest $124,063
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 242,520
outstanding shares of beneficial interest 2,441
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 140,719
outstanding shares of beneficial interest 1,424
Distributions in excess of net investment income (2)
Accumulated net realized loss on investments (43)
Net unrealized depreciation on investments (145)
--------
Total Net Assets (100.0%) $127,738
--------
--------
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 10.02
--------
--------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 10.00
--------
--------
Maximum Offering Price Per Share -- Investor Class
($10.00 DIVIDED BY 97.50%) $ 10.26
--------
--------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 10.02
--------
--------
</TABLE>
(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 110.
95
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (28.0%)
U.S. Treasury Bonds
7.250%, 05/15/16 $1,000 $ 1,029
6.875%, 08/15/25 1,000 988
6.750%, 08/15/26 550 535
6.500%, 11/15/26 565 533
U.S. Treasury Notes
7.750%, 11/30/99 200 207
8.500%, 11/15/00 1,000 1,063
8.000%, 05/15/01 200 210
7.500%, 11/15/01 200 208
7.500%, 05/15/02 750 781
7.875%, 11/15/04 275 295
7.500%, 02/15/05 500 525
6.500%, 10/15/06 50 49
7.625%, 02/15/25 400 431
-------
Total U.S. Treasury Obligations
(Cost $6,994) 6,854
-------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (66.1%)
FHLMC
6.000%, 02/01/01 112 108
7.000%, 01/01/09 127 126
7.000%, 04/01/09 611 608
7.000%, 08/01/10 888 883
7.000%, 05/01/12 990 984
FNMA
7.500%, 06/01/11 947 958
7.000%, 09/17/11 1,430 1,421
7.000%, 10/25/16 951 926
7.500%, 04/01/27 987 983
FNMA REMIC, Ser 1997-6, Cl H
7.000%, 08/18/08 1,058 1,037
FNMA REMIC, Ser G93-40, Cl VC
6.500%, 08/25/10 261 248
FNMA REMIC, Ser 1997-34, Cl VC
7.500%, 05/01/12 1,000 1,009
FNMA REMIC, Ser 1996-9, Cl H
6.500%, 11/25/13 1,337 1,265
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
FNMA REMIC, Ser 993-156, Cl B
6.500%, 04/25/18 $ 100 $ 95
FNMA REMIC, Ser 1990-143, Cl J
8.750%, 12/25/20 140 146
GNMA
7.500%, 10/20/09 72 73
8.250%, 01/15/12 99 102
10.000%, 06/15/19 4 5
7.000%, 11/15/22 466 453
8.000%, 02/15/23 37 38
8.500%, 03/15/23 81 84
7.500%, 04/15/23 132 132
7.500%, 09/15/23 875 872
7.000%, 01/15/24 161 157
7.500%, 04/15/24 861 857
7.000%, 06/15/24 902 877
8.000%, 08/15/24 83 85
8.000%, 09/15/24 27 28
8.000%, 10/15/24 35 36
8.000%, 11/15/24 37 39
8.500%, 12/15/24 73 77
8.500%, 02/15/25 36 37
7.000%, 12/15/25 489 476
GNMA REMIC, Ser 1995-6A, Cl E
7.500%, 05/20/23 1,000 990
-------
Total U.S. Agency Mortgage-Backed Obligations (Cost
$16,289) 16,215
-------
CASH EQUIVALENTS (5.8%)
SEI Daily Income Trust
Government II Portfolio (C) 229 229
SEI Daily Income Trust
Treasury II Portfolio (C) 1,188 1,188
-------
Total Cash Equivalents
(Cost $1,417) 1,417
-------
Total Investments (99.9%)
(Cost $24,700) 24,486
-------
</TABLE>
96
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES, NET (0.1%) $ 29
-------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 1,943,402
outstanding shares of beneficial interest 19,658
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 223,920
outstanding shares of beneficial interest 2,266
Fund shares of the Flex Shares (unlimited
authorization -- no par value) based on 279,601
outstanding shares of beneficial interest 2,866
Accumulated net realized loss on investments (61)
Net unrealized depreciation on investments (214)
-------
Total Net Assets (100.0%) $24,515
-------
-------
<CAPTION>
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 10.02
-------
-------
Net Asset Value and Redemption Price Per Share --
Investor Shares $ 10.02
-------
-------
Maximum Offering Price Per Share -- Investor Class
($10.02 DIVIDED BY 96.25%) $ 10.41
-------
-------
Net Asset Value, Offering and Redemption Price Per
Share -- Flex Shares (1) $ 10.02
-------
-------
</TABLE>
(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 110.
97
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
PRIME QUALITY MONEY MARKET FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (45.9%)
ABN-Amro Finance
5.350%, 06/05/97 $ 1,500 $ 1,499
Banc One Funding
5.600%, 08/04/97 10,211 10,109
Bank of Montreal
5.520%, 07/01/97 20,000 19,908
Bankers Trust
5.500%, 11/17/97 1,000 974
BAT Capital
5.530%, 06/24/97 5,000 4,982
5.700%, 07/14/97 10,450 10,379
5.580%, 07/15/97 20,127 19,990
Cargill Financial
5.550%, 06/16/97 20,000 19,954
Caterpillar Financial Services
5.600%, 09/11/97 16,000 15,746
Central Illinois Public Services
5.500%, 06/05/97 5,700 5,697
Commerzbank
5.350%, 06/10/97 9,135 9,123
Deutsche Bank Finance
5.350%, 06/06/97 30,000 29,978
Dominion Semiconductor
5.650%, 06/04/97 18,497 18,488
5.550%, 06/23/97 5,000 4,983
5.550%, 06/24/97 15,000 14,947
Dresser Industries
5.550%, 06/30/97 20,500 20,408
Ford Motor Credit
5.650%, 07/03/97 1,800 1,791
Ford Motor Credit Puerto Rico
5.620%, 07/08/97 2,000 1,988
General Electric Capital
5.520%, 06/24/97 10,000 9,965
5.380%, 07/09/97 15,000 14,915
Golden Peanut
5.400%, 07/15/97 3,750 3,725
GTE Funding
5.510%, 06/09/97 16,000 15,980
Hertz
5.620%, 07/25/97 25,000 24,789
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
International Business Machines Credit
5.550%, 06/19/97 $35,000 $ 34,908
J.C. Penny Funding
5.350%, 06/09/97 21,000 20,975
Mobil Australia Finance
5.580%, 06/30/97 1,500 1,493
National Australia Funding
5.550%, 06/02/97 35,000 34,995
5.430%, 08/13/97 4,500 4,450
National City Credit
5.650%, 07/28/97 8,000 7,928
5.665%, 08/21/97 15,000 14,809
New England Power
5.520%, 06/06/97 3,500 3,497
Paccar Financial
5.350%, 06/04/97 1,500 1,499
Pactel Capital Resources
5.510%, 06/23/97 26,000 25,912
Panasonic
5.350%, 06/09/97 13,000 12,985
RTZ America
5.550%, 06/25/97 10,000 9,963
5.650%, 11/17/97 12,475 12,144
Sherwin Williams
5.620%, 07/21/97 4,000 3,969
5.640%, 08/04/97 8,325 8,242
5.640%, 08/05/97 4,800 4,751
5.640%, 08/11/97 7,500 7,417
5.680%, 08/22/97 3,000 2,961
Society Generale North America
5.500%, 09/10/97 5,000 4,923
Sony Capital
5.500%, 06/05/97 6,690 6,686
Southern New England Telcommunications
5.580%, 06/11/97 2,000 1,997
Transamerica Finance
5.520%, 06/04/97 9,700 9,696
5.540%, 06/19/97 4,955 4,941
</TABLE>
98
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--CONTINUED
U.S. Borax
5.400%, 06/09/97 $ 3,700 $ 3,696
5.370%, 06/20/97 40,000 39,887
5.650%, 07/16/97 6,000 5,958
5.670%, 07/28/97 5,000 4,955
Virginia Electric & Power
5.650%, 07/16/97 8,000 7,943
Waste Management Technologies
5.580%, 06/24/97 25,000 24,911
5.650%, 06/27/97 5,000 4,980
5.720%, 08/12/97 14,700 14,532
----------
Total Commercial Paper
(Cost $628,321) 628,321
----------
CORPORATE OBLIGATIONS (15.5%)
FINANCE (10.0%)
American General Finance
7.700%, 11/15/97 5,000 5,034
8.250%, 01/15/98 1,250 1,269
American General, MTN
9.750%, 10/15/97 2,650 2,690
9.950%, 10/29/97 2,100 2,136
Associates of North America
5.875%, 08/15/97 750 750
6.625%, 11/15/97 16,755 16,811
8.125%, 01/15/98 1,000 1,014
Bank America, MTN
6.875%, 11/20/97 2,000 2,009
BAT Capital, MTN
6.470%, 09/15/97 10,000 10,022
Beneficial
9.125%, 02/15/98 1,875 1,914
Caterpillar Finance (C)
5.619%, 07/28/97 1,000 1,000
Corestates Capital (C)
5.610%, 09/02/97 30,000 30,000
Dean Witter Discover
6.000%, 03/01/98 19,865 19,873
First Chicago, MTN
11.150%, 10/31/97 5,000 5,102
Ford Motor Credit, MTN
6.450%, 02/05/98 5,000 5,018
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Household Finance, MTN (C)
5.460%, 08/04/97 $ 5,000 $ 5,000
International Lease Finance, MTN
7.500%, 01/15/98 3,000 3,030
5.750%, 02/02/98 5,000 4,997
5.740%, 02/03/98 5,000 4,997
International Lease Finance
5.840%, 06/09/97 5,000 5,000
5.625%, 03/01/98 4,800 4,791
NationsBank
6.625%, 01/15/98 1,000 1,004
Texaco Capital
8.650%, 01/30/98 2,000 2,035
Toyota Motor Credit, MTN
7.750%, 12/19/97 1,500 1,514
----------
Total Finance 137,010
----------
INDUSTRIAL (2.8%)
Ford Capital
9.750%, 06/05/97 2,150 2,151
9.375%, 01/01/98 6,351 6,476
Philip Morris
8.750%, 06/15/97 2,000 2,002
9.250%, 12/01/97 15,180 15,414
6.375%, 01/15/98 1,000 1,003
Rockwell International
7.625%, 02/17/98 1,000 1,010
Smithkline Beecham, MTN
6.200%, 01/20/98 5,250 5,261
Walt Disney
8.000%, 12/19/97 3,595 3,634
Waste Management Technologies
8.125%, 02/01/98 2,000 2,029
----------
Total Industrial 38,980
----------
UTILITIES (2.7%)
Hydro-Quebec, MTN
7.120%, 12/19/97 2,500 2,517
Northern State Power
5.875%, 10/01/97 12,000 12,004
Pacific Gas & Electric, MTN
6.900%, 06/23/97 4,500 4,503
Pacific
5.880%, 10/15/97 5,000 4,997
</TABLE>
99
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES--CONTINUED
Pacificorp, MTN
8.850%, 06/20/97 $10,000 $ 10,014
Southern California Edison
5.875%, 02/01/98 2,500 2,499
----------
Total Utilities 36,534
----------
Total Corporate Obligations
(Cost $212,524) 212,524
----------
BANK NOTES (7.6%)
Boatmans National Bank (C)
5.690%, 06/17/97 25,000 25,000
FCC National Bank (C)
5.640%, 05/08/98 15,000 14,993
FCC National Bank
5.880%, 11/05/97 25,000 25,003
Fifth Third Bank
5.430%, 06/12/97 10,000 10,000
Morgan Guaranty Trust
5.950%, 06/06/97 19,300 19,301
PNC Bank (C)
5.628%, 06/06/97 10,000 10,000
----------
Total Bank Notes
(Cost $104,297) 104,297
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.6%)
FNMA (C)
5.350%, 09/29/97 25,000 24,996
FNMA, MTN (C)
5.360%, 11/14/97 40,000 39,991
FNMA, MTN Ser B (C)
5.250%, 09/03/97 20,000 19,997
SLMA
Callable 08/18/97 @100
5.370%, 02/08/99 5,000 4,987
----------
Total U.S. Government Agency Obligations
(Cost $89,971) 89,971
----------
ASSET-BACKED SECURITIES (5.7%)
Americredit Auto Receivables Trust, Ser 1997-A, Cl A1
5.515%, 04/06/98 20,452 20,453
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Americredit Auto Receivables Trust, Ser 1996-D, Cl A1
5.425%, 12/12/97 $11,936 $ 11,939
Americredit Auto Receivables Trust, Ser 1997-B, Cl A
5.790%, 06/12/98 30,000 30,000
Chase Manhattan Auto Owner Trust, Ser 1997-A, Cl A1
5.545%, 04/10/98 6,789 6,789
Ford Credit Auto Owner Trust, Ser 1996-B, Cl A1
5.514%, 10/15/97 1,351 1,352
Navistar Financial Owner Trust, Ser 1996-B, Cl A1
5.490%, 11/20/97 910 911
Olympic Automobile Recievable Trust, Ser 1996-D
5.430%, 12/15/97 121 122
WFS Financial Owner Trust, Ser 1996-D, Cl A1
5.500%, 01/16/98 6,287 6,287
----------
Total Asset-Backed Securities
(Cost $77,853) 77,853
----------
CERTIFICATES OF DEPOSIT (13.1%)
Bank of America, Toronto
5.730%, 07/31/97 38,000 38,000
Bankers Trust New York (C)
5.630%, 10/16/97 25,000 24,995
Bankers Trust, Toronto
5.690%, 08/21/97 21,000 21,000
CIBC
5.970%, 03/19/98 5,000 4,999
Societe Generale
5.690%, 08/22/97 40,000 40,000
Swiss Bank
5.530%, 06/30/97 30,000 30,000
Swiss Bank (C)
6.149%, 06/19/97 10,000 10,000
Swiss Bank
5.490%, 07/09/97 10,000 10,000
----------
Total Certificates Of Deposit
(Cost $178,994) 178,994
----------
</TABLE>
100
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (1.5%)
U.S. Treasury Notes
7.250%, 02/15/98 $20,000 $ 20,200
----------
Total U.S. Treasury Obligations
(Cost $20,200) 20,200
----------
REPURCHASE AGREEMENTS (6.6%)
Deutsche Bank
5.55%, dated 05/30/97, matures 06/02/97, repurchase
price $10,007,654 (collateralized by FHMLC
obligation, par value $10,337,964, 6.092%,
10/01/32: market value $10,203,089) 10,003 10,003
Salomon Brothers
5.55%, dated 05/30/97, matures 06/02/97, repurchase
price $10,007,654 (collateralized by various FHLMC
obligations, total par value $17,813,437,
5.500%-9.000, 08/01/00-06/01/26; and various FNMA
obligations, total par value $18,383,048,
6.000%-9.000%, 12/01/01-05/01/27: total market
value $10,246,600) 10,003 10,003
Swiss Bank
5.55%, dated 05/30/97, matures 06/02/97, repurchase
price $13,337,430 (collateralized by FNMA
obligation, par value $17,012,000, 6.071%,
04/01/34: market value $13,664,762) 13,331 13,331
<CAPTION>
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Union Bank of Switzerland
5.55%, dated 05/30/97, matures 06/02/97, repurchase
price $59,196,682 (collateralized by various FHLMC
obligations, total par value $61,959,824,
0.000%-8.500%, 12/01/07-12/01/26; and FNMA
obligation, par value $3,000,000, 6.400% 02/25/03:
total market value $60,374,115) $59,169 $ 59,169
----------
Total Repurchase Agreements
(Cost $92,506) 92,506
----------
Total Investments (102.5%)
(Cost $1,404,666) 1,404,666
----------
OTHER ASSETS AND LIABILITIES, NET (-2.5%) (34,567)
----------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on
1,086,903,240 outstanding shares of beneficial
interest 1,086,903
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 283,601,522
outstanding shares of beneficial interest 283,602
Accumulated net realized loss on investments (406)
----------
Total Net Assets (100.0%) $1,370,099
----------
----------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 1.00
----------
----------
Net Asset Value, Offering Price and Redemption Price
Per Share -- Investor Shares $ 1.00
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
101
<PAGE>
- --------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (25.9%)
U.S. Treasury Notes
5.750%, 10/31/97 $30,000 $ 30,025
7.375%, 11/15/97 55,000 55,405
5.000%, 01/31/98 10,000 9,950
7.250%, 02/15/98 10,000 10,100
--------
Total U.S. Government Agency Obligations (Cost
$105,480) 105,480
--------
REPURCHASE AGREEMENTS (73.2%)
Barclays
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $20,009,183 (collateralized by FHLMC
obligation, par value $8,960,000, 5.890%, 03/26/98;
FNMA obligation, par value $4,315,000, 6.200%,
06/06/00; SLMA obligation, par value $7,000,000,
5.880%, 02/06/01: total market value $20,401,553) 20,000 20,000
Deutsche Bank
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $20,040,319 (collateralized by various U.S.
Treasury obligations, total par value $19,827,000,
5.750%-8.125%, 12/31/98- 05/15/21: total market
value $20,432,188) 20,031 20,031
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $98,954,749 (collateralized by various GNMA
obligations, total par value $328,491,658,
7.000%-11.000%, 02/15/02-11/15/23: total market
value $100,889,610) $98,909 $ 98,909
Morgan Stanley
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $99,259,385 (collateralized by various GNMA
obligations, total par value $709,897,000,
0.698%-8.000%, 01/01/00-06/15/26: total market
value $104,959,999) 99,214 99,214
Salomon Brothers
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $20,093,747 (collateralized by various U.S.
Government Notes, total par value $20,034,000,
6.875%-8.875%, 10/15/97-03/31/00: total market
value $20,489,252) 20,085 20,085
Swiss Bank
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $20,012,200 (collateralized by various U.S.
Treasury obligations, total par value $19,625,000,
5.875%-7.250%, 06/30/00-08/15/22: total market
value $20,426,087) 20,003 20,003
</TABLE>
102
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--CONTINUED
Union Bank of Switzerland
5.51%, dated 05/30/97, matures 06/02/97, repurchase
price $20,015,030 (collateralized by various FHLMC
obligations, total par value $20,185,000,
5.980%-7.554%, 02/26/04-07/31/06: total market
value $20,410,150) $20,006 $ 20,006
--------
Total Repurchase Agreements (Cost $298,248) 298,248
--------
Total Investments (99.1%) (Cost $403,728) 403,728
--------
OTHER ASSETS AND LIABILITIES, NET (0.9%) 3,800
--------
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 344,391,123
outstanding shares of beneficial interest 344,391
<CAPTION>
- -------------------------------------------------------------------------------
VALUE
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 63,197,343
outstanding shares of beneficial interest $ 63,197
Accumulated net realized loss on investments (60)
--------
Total Net Assets (100.0%) $407,528
--------
--------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 1.00
--------
--------
Net Asset Value, Offering Price and Redemption Price
Per Share -- Investor Shares $ 1.00
--------
--------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
103
<PAGE>
- --------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (98.5%)
ALABAMA (1.1%)
McIntosh, Industrial Development Board, Ciba-Geigy
Project, Ser A, RB, VRDN (C)(D)(E)
3.850%, 06/04/97 $ 3,500 $ 3,500
Special Care Facilities, Montgomery Hospital Revenue,
RB, VRDN (FGIC) (C)(D)
3.900%, 06/04/97 1,400 1,400
--------
Total Alabama 4,900
--------
ALASKA (0.2%)
Anchorage, GO, Ser A, (MBIA)
5.000%, 02/01/98 1,045 1,054
--------
ARIZONA (1.7%)
Maricopa County, Pollution Control Authority, Ser A,
RB, VRDN (C)(D)(E)
3.850%, 06/04/97 4,000 4,000
Pima County, Industrial Development Authority, Tuscon
Electric Project, Ser A, RB, VRDN (C)(D)(E)
3.900%, 06/04/97 2,600 2,600
Scottsdale, GO
7.500%, 07/01/97 840 842
--------
Total Arizona 7,442
--------
ARKANSAS (0.2%)
State, Industrial Development Financial Authority,
Ser A, RB, VRDN, AMT (C)(D)(E)
4.000%, 06/04/97 1,000 1,000
--------
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA (1.7%)
Contra Costa County, Multi-Family Mortgage, Delta
Square Project, Ser A, RB, VRDN (C)(D)(E)
3.850%, 06/05/97 $ 4,200 $ 4,200
Higher Education Loan Authority, Ser A, VRDN,
callable 06/01/98 @ 100 (C)(D)(E)
3.950%, 06/01/01 1,900 1,900
State, Higher Education Loan Authority, Student Loan,
Ser 95E-5, RB, VRDN, AMT (C)(D)(E)
3.950%, 06/04/97 1,200 1,200
--------
Total California 7,300
--------
COLORADO (1.9%)
North Glen, Castle Garden Retirement Center, VRDN
(C)(D)(E)
3.850%, 06/05/97 1,200 1,200
State, TRAN, Ser A, RB
4.500%, 06/27/97 7,000 7,003
--------
Total Colorado 8,203
--------
DELAWARE (0.4%)
State Educational Development Authority, VRDN
(C)(D)(E)
4.225%, 06/05/97 1,875 1,875
--------
FLORIDA (10.3%)
Citrus Park, RB, VRDN (C)(D)(E)
3.900%, 06/04/97 1,500 1,500
Dade County, Water & Sewer System, Ser 94, RB, VRDN
(FGIC) (C)(E)
3.850%, 06/04/97 8,000 8,000
</TABLE>
104
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA--CONTINUED
Jacksonville, TECP
3.400%, 06/09/97 $ 1,000 $ 1,000
3.500%, 06/26/97 10,000 10,000
Jacksonville, Pollution Control Revenue, TECP
3.500%, 06/12/97 5,000 5,000
Local Government, TECP
3.450%, 06/16/97 4,000 4,000
3.550%, 06/19/97 5,500 5,500
Pinellas County, TECP
3.750%, 07/01/97 3,600 3,600
State Board of Education, Capital Outlay, GO
6.500%, 06/01/97 4,575 4,575
Sunshine State Government, Finance Commission
Revenue, TECP
3.500%, 06/12/97 1,400 1,400
--------
Total Florida 44,575
--------
GEORGIA (5.0%)
Barrow County School District, Ser 97, GO
4.000%, 02/01/98 1,000 1,000
Burke County, Development Authority Pollution
Control, RB (AMBAC)
3.600%, 12/01/97 1,500 1,500
Burke County, Oglethorpe Power, Ser A, VRDN
(FGIC)(C)(D)
3.850%, 06/04/97 4,400 4,400
Fulton County, Development Authority, American Red
Cross Project, RB, VRDN (C)(D)(E)
3.950%, 06/05/97 1,500 1,500
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
GEORGIA--CONTINUED
Gordon County, Development Authority, Sara Lee
Project, RB, VRDN (C)(D)
3.950%, 06/05/97 $ 1,400 $ 1,400
Lafayette, Industrial Development Authority,
Blue-Bird Project, Ser 1991, VRDN (C)(D)(E)
3.950%, 06/05/97 1,000 1,000
Marietta Housing Finance Authority, Franklin Walk
Apartments Project, VRDN (C)
3.975%, 06/05/97 1,600 1,600
Monroe County, Industrial Development Authority,
Forsyth Inns Project, RB, VRDN (C)(D)(E)
3.950%, 06/04/97 2,525 2,525
Municipal Electric Authority, VRDN (FGIC) (C)(D)
4.100%, 06/05/97 3,000 3,000
Private College Facilities Authority, Emory
University, RB, VRDN Optional Put 12/01/97 @ 100,
(C)(D)(E)
3.700%, 12/01/04 3,465 3,465
--------
Total Georgia 21,390
--------
IDAHO (1.6%)
Nez Pierce County, Pollution Control Board, Potlatch
Corp. Project, RB, VRDN (C)(D)(E)
3.900%, 06/05/97 3,000 3,000
Idaho State, TAN, GO
4.500%, 06/30/97 4,000 4,002
--------
Total Idaho 7,002
--------
</TABLE>
105
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
ILLINOIS (4.7%)
Bloomington, Airport Authority, VRDN (C)(D)(E)
3.950%, 06/04/97 $ 1,500 $ 1,500
Chicago, Tender Notes, GO (E)
3.650%, 02/05/98 2,000 2,000
DuPage County, First Preservation District, GO,
Pre-Refunded 11/01/97 @ 102 (F)
8.100%, 11/01/06 1,200 1,245
Educational Facilities, Chicago Children's Museum,
RB, VRDN (C)(D)(E)
3.900%, 06/04/97 1,600 1,600
Health Facilities Authority, Advocate Healthcare
Network, Ser B, RB, VRDN (C)(D)
3.950%, 06/04/97 3,000 3,000
Illinois Health Facility Authority, RB, VRDN (C)(D)
4.000%, 06/05/97 3,000 3,000
Savanna, Industrial Development Authority, Metform
Project, Ser B, RB, VRDN (C)(D)(E)
4.050%, 06/04/97 1,400 1,400
Savanna, Industrial Development Authority, Ser A, RB,
VRDN (C)(D)(E)
4.050%, 06/04/97 500 500
State, Health Facilities Authority, Streeterville
Project, RB, VRDN (C)(D)(E)
3.900%, 06/04/97 2,000 2,000
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
State, Health Facilities Authority, University of
Chicago Hospital Project, Ser C, VRDN (MBIA) (C)(D)
3.850%, 06/04/97 $ 4,000 $ 4,000
--------
Total Illinois 20,245
--------
INDIANA (5.6%)
Allen County, Industrial Economic Development, Mattel
Power Wheels Project, RB, VRDN, AMT (C)(D)(E)
4.200%, 06/04/97 1,500 1,500
Fort Wayne, Industrial Economic Development
Authority, ND Tech Project, RB, VRDN, AMT (C)(D)(E)
4.050%, 06/04/97 1,000 1,000
Hammond Industrial Local Public, Adv. Fdg Project,
Ser A-2, GO
4.200%, 01/08/98 6,000 6,017
Health Facility Authority, Clarian Health Partners,
Ser B, RB, VRDN, (C)(D)(E)
3.900%, 06/04/97 2,000 2,000
Indianapolis, Industrial Economic Development
Authority, Allied Signal Project, RB, VRDN
(C)(D)(E)
4.050%, 06/04/97 3,500 3,500
Indianapolis, Industrial Multi-Family Housing
Authority, Crossing Partners Project, RB, VRDN, AMT
(C)(D)(E)
4.150%, 06/04/97 8,700 8,700
</TABLE>
106
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
INDIANA--CONTINUED
Rockport County, Pollution Control Authority, Aep
Generating Project, Ser B, RB, VRDN (AMBAC) (C)(D)
4.150%, 06/02/97 $ 1,600 $ 1,600
--------
Total Indiana 24,317
--------
IOWA (0.6%)
West Des Moines, Commercial Development Authority,
Greyhound Lines Project, VRDN (C)(D)(E)
3.800%, 06/04/97 2,500 2,500
--------
KENTUCKY (0.9%)
Jefferson County, Industrial Building
Fisher-Klosterman Project, RB, VRDN (C)(D)(E)
4.050%, 06/05/97 2,500 2,500
State, Economic Development Financial Authority
Hospital Facilities-Baptist Healthcare, RB, VRDN
(C)(D)(E)
3.850%, 06/05/97 1,400 1,400
--------
Total Kentucky 3,900
--------
LOUISIANA (2.4%)
Lake Charles, Harbor & Terminal District Authority,
Reynolds Metals Project, VRDN (C)(D)(E)
3.900%, 06/04/97 3,000 3,000
Plaqeumines, Port Facilities, International Marine
Terminal Project, Ser B, RB, Optional Put 03/15/98
@ 100 (D)(E)
3.750%, 03/15/06 1,000 1,000
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Louisiana Port Authority, Occidental Petroleum
Project, RB, VRDN (C)(D)(E)
3.800%, 06/04/97 $ 4,500 $ 4,500
State, Offshore Terminal Authority Deepwater Port,
Loop Inc - First Stage Project, Ser A, RB, VRDN,
(C)(E)
3.850%, 06/04/97 2,000 2,000
--------
Total Louisiana 10,500
--------
MAINE (1.0%)
State, TAN, GO
4.500%, 06/27/97 4,500 4,502
--------
MARYLAND (2.7%)
Baltimore County, Allied Signal Project, RB, VRDN
(C)(D)(E)
4.000%, 06/04/97 1,000 1,000
Baltimore, Industrial Development Authority, Days Inn
of America Project, RB Callable
12/01/97 @ 100 (F)
12.625%, 12/01/04 2,000 2,087
Montgomery County, Housing Opportunities Multi-Family
Commission, Ser A, RB
3.700%, 11/13/97 3,650 3,650
State, Health & Higher Education Authority, Pooled
Loan Program, Ser B, VRDN (C)(D)(E)
3.850%, 06/04/97 5,000 5,000
--------
Total Maryland 11,737
--------
</TABLE>
107
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
MICHIGAN (3.4%)
Michigan City, Industrial Economic Development,
Performance Packaging, RB, VRDN (C)(D)(E)
4.150%, 06/04/97 $ 1,000 $ 1,000
Midland County, Economic Development, Dow Chemical
Project, Ser B, RB, VRDN, (C)(D)
4.000%, 06/02/97 5,575 5,575
Oakland County, Economic Development, VRDN (C)(D)(E)
4.100%, 06/04/97 1,000 1,000
State, Housing Development Authority, WoodLand
Meadows, RB, VRDN, AMT (C)(D)(E)(F)
4.050%, 06/04/97 1,000 1,000
State, Housing Development Authority, Harbortown,
VRDN (C)(D)(E)
3.975%, 06/05/97 3,000 3,000
State, Strategic Industrial Development Authority,
Norcor Manufacturing Project, RB, VRDN (C)(D)(E)
4.000%, 06/03/97 3,000 3,000
--------
Total Michigan 14,575
--------
MISSISSIPPI (0.8%)
Jackson County, Chevron USA Project, Ser 93, RB, VRDN
(C)(D)
4.050%, 06/02/97 3,500 3,500
--------
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
MISSOURI (0.7%)
Environmental Improvement and Energy Resource,
Utilicorp United Project, RB, VRDN (C)(D)(E)
4.050%, 06/04/97 $ 700 $ 700
State, Industrial Development Authority, Bachman
Machine Project, Ser A, RB, VRDN, AMT (C)(D)(E)
4.200%, 06/04/97 90 90
State, Industrial Development Authority, Plastic
Enterprises Project, Ser A, RB, VRDN, AMT
(C)(D)(E)(F)
4.200%, 06/04/97 385 385
State, Industrial Development Authority, Precision
Stainless Project, Ser I, RB, VRDN, AMT (C)(D)(E)
4.200%, 06/04/97 70 70
State, Custody Receipt, Third Street Building
Project, Ser A, GO, VRDN (C)(D)(E)
4.200%, 06/04/97 2,000 2,000
--------
Total Missouri 3,245
--------
NEVADA (6.3%)
Clark County, Airport Improvement Authority, Ser A,
VRDN, (MBIA) (C)(D)
3.850%, 06/04/97 10,000 10,000
Clark County, Airport Improvement, Sub Lien, Ser A-1,
RB, VRDN (C)(D)(E)
3.850%, 06/04/97 4,300 4,300
</TABLE>
108
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
NEVADA--CONTINUED
Clark County, Nevada Power Project, Ser A, VRDN, AMT
(C)(D)(E)
4.150%, 06/04/97 $ 5,000 $ 5,000
Clark County, School District, VRDN (C)(D)(E)
3.960%, 06/05/97 8,000 8,000
--------
Total Nevada 27,300
--------
NEW HAMPSHIRE (5.5%)
State, Business Finance Authority, TECP
3.650%, 07/29/97 7,000 7,000
State, Business Finance Authority, Pollution Control,
Ser D, VRDN, AMT (C)
4.000%, 06/04/97 6,000 6,000
State, Business Finance Authority, TECP (E)
3.400%, 06/11/97 5,000 5,000
State, Housing Finance Authority, Multi-Family,
Fairways Project, Ser 1, RB, VRDN, AMT (C)(D)(E)
4.000%, 06/04/97 5,000 5,000
State, Pollution Control Authority, CT Power and
Light, Ser A, RB, VRDN (C)(D)(E)
3.900%, 06/04/97 800 800
--------
Total New Hampshire 23,800
--------
NEW MEXICO (2.2%)
Hurley, New Mexico, Pollution Control Authority, RB,
VRDN (C)(D)(E)
4.150%, 06/02/97 2,200 2,200
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
NEW MEXICO--CONTINUED
State, Educational Assistance Foundation, Student
Loan Program, VRDN (AMBAC) (C)(D)
4.100%, 06/05/97 $ 3,490 $ 3,490
State, Mortgage Financial Authority, Ser B-CR-123,
Optional Put 07/01/97 @ 100
3.400%, 07/01/17 3,995 3,995
--------
Total New Mexico 9,685
--------
NEW YORK (1.8%)
Urban Development Corporation, Senior Lien, VRDN
(C)(D)
3.960%, 06/05/97 7,600 7,600
--------
NORTH CAROLINA (2.1%)
Educational Facilities, Guilford College, VRDN
(C)(D)(E)
4.000%, 06/04/97 2,300 2,300
Mecklenburg County, Industrial Facilities & Pollution
Control, Sterigenics International Project, RB,
VRDN, AMT (C)(D)(E)
4.250%, 06/04/97 2,000 2,000
State Municipal Power Authority, Finance Authority,
TECP (E)
3.400%, 06/10/97 5,000 5,000
--------
Total North Carolina 9,300
--------
NORTH DAKOTA (0.4%)
Mercer County, Solid Waste Disposal Authority, United
Power Project, RB, VRDN, AMT (C)(D)(E)
3.550%, 06/02/97 1,900 1,900
--------
OHIO (5.1%)
Columbus, Sewer Revenue (C)(D)
3.800%, 06/05/97 9,600 9,600
</TABLE>
109
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
OHIO--CONTINUED
State, Air Quality Development Authority, JMG Limited
Partnership, Ser A, RB, VRDN, AMT (C)(D)(E)
3.900%, 06/04/97 $ 3,000 $ 3,000
State, Higher Education Authority, Lake Erie Project,
RB, VRDN (C)(D)(E)
3.950%, 06/05/97 5,100 5,100
State, Pollution Control Authority, Duquesne Project,
RB, VRDN, AMT (C)(D)(E)
3.950%, 06/04/97 3,000 3,000
Trumbull County, St. Joseph Riverside Hospital
Project, RB, Pre-Refunded
11/01/97 @ 102 (F)
7.750%, 11/01/13 1,500 1,555
--------
Total Ohio 22,255
--------
PENNSYLVANIA (3.8%)
Beaver County, Industrial Development Authority,
Duquesne Light Company Project, Ser B, VRDN
(C)(D)(E)
3.800%, 06/04/97 1,000 1,000
Philadelphia School District, TRAN
4.500%, 06/30/97 5,000 5,002
Philadelphia, TRAN
4.500%, 06/30/97 4,000 4,002
State, Ser A, VRDN Pre-Refunded 11/01/99 @ 101.5,
(C)(F)
3.960%, 06/05/97 6,500 6,500
--------
Total Pennsylvania 16,504
--------
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
RHODE ISLAND (0.9%)
State, TAN
4.500%, 06/30/97 $ 4,000 $ 4,002
--------
SOUTH CAROLINA (1.2%)
York County, Pollution Control Revenue, Ser N-4,
VRDN, Optional Put on
9/15/97 @ 100 (C)(D)(E)
3.550%, 09/15/14 5,000 5,000
--------
TENNESSEE (2.5%)
Covington, Industrial Development Board, Charms
Project, RB, VRDN, AMT (C)(D)(E)
4.050%, 06/04/97 3,000 3,000
Hamilton County, Industrial Development Board,
Tennessee Aquarium Project, VRDN (C)(D)(E)
3.950%, 06/05/97 3,000 3,000
Memphis-Shelby County, Industrial Development Board,
Ponderosa Fibres American Project, RB, VRDN, AMT
(C)(D)(E)
4.100%, 06/05/97 1,600 1,600
Nashville & Davidson County, Industrial Development
Authority, Multi-Family Mortgage, Chimneytop II
Project, RB, VRDN (C)(D)(E)
3.950%, 06/02/97 1,325 1,325
Nashville & Davidson County, Vanderbilt University,
Ser 85A, VRDN, Optional Put 1/15/98, (C)(D)(E)
3.650%, 01/15/15 2,000 2,002
--------
Total Tennessee 10,927
--------
</TABLE>
110
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
TEXAS (9.2%)
Brazos River, TECP (E)
3.450%, 06/09/97 $ 2,700 $ 2,700
Brownsville, Utility System, TECP
3.450%, 06/12/97 4,000 4,000
Georgetown, Higher Education Financing Authority,
Southwestern University Project, Ser 84, RB, VRDN
(C)(D)(E)
3.950%, 06/04/97 2,000 2,000
Harris County, Health Facilities Authority, Memorial
Hospital Project, Ser B, RB, VRDN (C)(D)(E)
3.850%, 06/04/97 1,500 1,500
Harris County, Housing Finance Corporation, Ser 1985,
VRDN (C)(D)(E)
4.225%, 06/05/97 900 900
Harris County, Industrial Development Authority,
Lubrizol Project, RB, VRDN (C)(D)
3.850%, 06/04/97 1,600 1,600
Harris County, Toll Roads, Ser H, RB, VRDN (C)(D)(E)
3.850%, 06/04/97 5,500 5,500
Lone Star, Airport Improvement, Ser A2, RB, VRDN
(C)(D)
4.000%, 06/02/97 1,700 1,700
South Higher Education Authority, RB, VRDN, AMT
(C)(D)(E)
3.950%, 06/04/97 5,000 5,000
State, Public Finance Authority, TECP
3.650%, 08/11/97 5,000 5,000
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
State, TAN
4.750%, 08/29/97 $ 10,000 $ 10,019
--------
Total Texas 39,919
--------
UTAH (1.5%)
Carbon County, Pollution Control Authority,
Pacificorp Project, RB, VRDN (AMBAC) (C)(D)
4.150%, 06/02/97 1,600 1,600
Intermountain Power Agency, Ser E, RB, Optional Put
09/15/97 @ 100 (E)
3.500%, 07/01/14 1,000 1,000
Intermountain Power Agency, Optional Put 06/16/97 @
100, RB, VRDN (C)(D)(E)
3.930%, 06/17/97 4,000 4,000
--------
Total Utah 6,600
--------
VERMONT (0.2%)
State, Ser B, GO,
4.600%, 08/01/97 1,000 1,001
--------
TAX-EXEMPT MONEY MARKET FUND
VIRGINIA (3.6%)
Bedford County, Industrial Development Authority,
VRDN (C)(D)(E)
4.000%, 06/05/97 2,500 2,500
Chesterfield County, Industrial Development
Authority, Allied Signal Project, RB, VRDN
(C)(D)(E)
4.050%, 06/04/97 3,000 3,000
Commonwealth, Ser 1994, VRDN (C)(D)
4.060%, 06/05/97 4,000 4,000
</TABLE>
111
<PAGE>
STATEMENT OF NET ASSETS------
-----------------------------------------------
---------------------STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
VIRGINIA--CONTINUED
Front Royal & Warren County, Industrial Development
Authority, Pen Tab Industries Project, RB, VRDN,
AMT (C)(D)(E)
4.000%, 06/05/97 $ 3,000 $ 3,000
Peninsula Port Authority, Dominion Term Project, Ser
1987C, VRDN (C)(D)(E)
3.950%, 06/02/97 3,300 3,300
--------
Total Virginia 15,800
--------
WASHINGTON (2.6%)
Pierce County, Washington Economic Development,
Weyerhaeuser Real Estate Project, RB, VRDN (C)(D)
3.850%, 06/04/97 3,000 3,000
Port of Seattle, VRDN (C)(D)(E)
3.900%, 06/04/97 1,600 1,600
State Public Power Supply System, Nuclear Project #1,
1993-1A3, RB, VRDN (C)(D)(E)
3.850%, 06/04/97 3,500 3,500
State Student Loan Finance Association, Ser B, RB,
VRDN, AMT (C)(D)(E)
3.950%, 06/05/97 3,000 3,000
--------
Total Washington 11,100
--------
WEST VIRGINIA (0.9%)
Marshall County, Pollution Control Authority, Allied
Signal Project, RB, VRDN (C)(D)(E)
4.050%, 06/04/97 2,000 2,000
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Marshall County, PPG Industries Project, RB, VRDN
(C)(D)(E)
4.100%, 06/05/97 $ 2,000 $ 2,000
--------
Total West Virginia 4,000
--------
WISCONSIN (0.7%)
Milwaukee, Ser BY, GO
7.250%, 06/15/97 1,000 1,001
Milwaukee, School Order Notes, Ser B
4.250%, 08/21/97 1,000 1,002
Racine, Wisconsin Promissory Notes, Ser 96 B, GO
3.700%, 12/15/97 1,165 1,165
--------
Total Wisconsin 3,168
--------
WYOMING (1.1%)
Sweetwater, Ser A, RB, VRDN (C)(D)(E)
3.900%, 06/04/97 4,600 4,600
--------
Total Municipal Bonds
(Cost $428,223) 428,223
--------
CASH EQUIVALENT (1.3%)
AIM Management Institutional Tax-Free Portfolio 5,853 5,853
--------
Total Cash Equivalent
(Cost $5,853) 5,853
--------
Total Investments (99.8%) (Cost $434,076) 434,076
--------
OTHER ASSETS AND LIABILITIES (0.2%)
Total Other Assets and Liabilities, Net 943
--------
</TABLE>
112
<PAGE>
- --------------------------------------------------
------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares of the Trust Shares (unlimited
authorization -- no par value) based on 333,003,932
outstanding shares of beneficial interest $333,004
Fund shares of the Investor Shares (unlimited
authorization -- no par value) based on 102,018,739
outstanding shares of beneficial interest 102,019
<CAPTION>
- -------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated net realized loss on investments $ (4)
--------
Total Net Assets (100.0%) $435,019
--------
--------
Net Asset Value, Offering and Redemption Price Per
Share -- Trust Shares $ 1.00
--------
--------
Net Asset Value, Offering Price and Redemption Price
Per Share -- Investor Shares $ 1.00
--------
--------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 110.
113
<PAGE>
STATEMENT OF NET ASSETS
- -------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
KEY TO ABBREVIATIONS USED IN
THE STATEMENT OF NET ASSETS
<TABLE>
<S> <C>
ADR American Depository Receipt
AMBAC Security insured by the American Municipal Bond
Assurance Company
AMT Alternative Minimum Tax
ARM Adjustable Rate Mortgage
Cl Class
COP Certificate of Participation
CV Convertible Security
ETM Escrowed to Maturity
F Foreign Registry Shares
FGIC Security insured by the Financial Guaranty Insurance
Corporation
FHA Federal Housing Authority
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FSA Security insured by Financial Security Assurance
GDR Global Depository Receipt
GDS Global Depository Shares
GNMA Government National Mortgage Association
GO General Obligation
LYON Liquid Yield Option Note
MBIA Security insured by the Municipal Bond Investors
Assurance
MTN Medium Term Note
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, 1997.
(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) Collateralized by U.S. Government Securities
(G) In local currency
</TABLE>
114
<PAGE>
(This page has been left blank intentionally.)
115
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
MID-CAP SMALL CAP CAPITAL
VALUE INCOME EQUITY EQUITY GROWTH
STOCK FUND FUND FUND FUND
------------ --------- ---------- ---------
06/01/96- 06/01/96- 01/31/97*- 06/01/96-
05/31/97 05/31/97 05/31/97 05/31/97
(000) (000) (000) (000)
<S> <C> <C> <C> <C>
------------ --------- ---------- ---------
Income:
Interest Income... $ 5,035 $ 1,386 $ 92 $ 6,139
Dividend Income... 44,675 2,627 765 18,021
Less: Foreign
Taxes
Withheld........ -- -- -- --
------------ --------- ---------- ---------
Total
Investment
Income....... 49,710 4,013 857 24,160
------------ --------- ---------- ---------
Expenses:
Investment
Advisory Fees... 12,026 3,328 322 14,003
Less: Investment
Advisory Fees
Waived.......... -- (318) (48) (1,226)
Less: Contribution
from Advisor.... -- -- -- --
Administrator
Fees............ 1,009 194 18 818
Transfer Agent
Fees -- Trust
Shares.......... 16 15 6 16
Transfer Agent
Fees -- Investor
Shares.......... 103 31 -- 166
Transfer Agent
Fees -- Flex
Shares.......... 53 24 -- 37
Transfer Agent Out
of Pocket
Fees............ 114 22 1 98
Printing
Expenses........ 102 20 2 85
Custody Fees...... 73 14 1 62
Professional
Fees............ 77 15 2 63
Trustee Fees...... 22 4 -- 19
Registration
Fees............ 138 27 22 58
Distribution Fees
-- Investor
Shares.......... 470 82 -- 1,345
Less: Distribution
Fees Waived --
Investor
Shares.......... (32) (26) -- (236)
Distribution Fees
-- Flex
Shares.......... 444 74 -- 213
Less: Distribution
Fees Waived --
Flex Shares..... (11) (20) -- (12)
Insurance and
Other Fees...... 46 14 -- 40
Amortization of
Deferred
Organization
Costs........... 11 -- 10 8
------------ --------- ---------- ---------
Total
Expenses..... 14,661 3,500 336 15,557
------------ --------- ---------- ---------
Net
Investment
Income
(Loss)...... 35,049 513 521 8,603
------------ --------- ---------- ---------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain
(Loss) on
Securities
Sold............ 243,189 33,978 1,757 221,554
Net Realized 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..... 33,953 4,912 7,644 43,851
------------ --------- ---------- ---------
Total Net
Realized and
Unrealized
Gain on
Investments... 277,142 38,890 9,401 265,405
------------ --------- ---------- ---------
Net Increase in Net
Assets from
Operations........ $312,191 $ 39,403 $9,922 $ 274,008
------------ --------- ---------- ---------
------------ --------- ---------- ---------
</TABLE>
* Commencement of Operations
Amounts designated as "--" are either $0 or round to $0.
116
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INVESTMENT GRADE FLORIDA TENNESSEE
BALANCED MARKETS EQUITY INDEX INTERNATIONAL SUNBELT TAX-EXEMPT BOND TAX-EXEMPT TAX-EXEMPT
FUND EQUITY FUND FUND EQUITY FUND EQUITY FUND FUND BOND FUND BOND FUND
-------- ----------- ------------- ------------- ----------- ---------------- ---------- ----------
06/01/96- 01/31/97*- 06/01/96- 06/01/96- 06/01/96- 06/01/96- 06/01/96- 06/01/96-
05/31/97 05/31/97 05/31/97 05/31/97 05/31/97 05/31/97 05/31/97 05/31/97
(000) (000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Income:
Interest Income... $ 3,654 $ 49 $ 13 $ 922 $ 18 $ 8,107 $2,318 $282
Dividend Income... 1,113 272 1,382 6,838 2,081 -- -- --
Less: Foreign
Taxes
Withheld........ -- (14) (108) (645) -- -- -- --
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Total
Investment
Income....... 4,767 307 1,287 7,115 2,099 8,107 2,318 282
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Expenses:
Investment
Advisory Fees... 1,177 137 658 4,494 4,842 1,272 293 35
Less: Investment
Advisory Fees
Waived.......... (151) (53) (80) (157) (442) (189) (73) (35)
Less: Contribution
from Advisor.... -- -- -- -- -- -- -- (10)
Administrator
Fees............ 83 7 48 240 283 115 31 4
Transfer Agent
Fees -- Trust
Shares.......... 16 5 18 12 16 16 16 16
Transfer Agent
Fees -- Investor
Shares.......... 17 -- 21 14 44 34 13 12
Transfer Agent
Fees -- Flex
Shares.......... 17 -- 15 17 20 15 14 13
Transfer Agent Out
of Pocket
Fees............ 9 1 9 22 33 15 3 --
Printing
Expenses........ 8 6 7 21 30 13 3 --
Custody Fees...... 6 34 70 484 21 9 2 1
Professional
Fees............ 6 1 6 15 22 9 2 --
Trustee Fees...... 2 -- 2 5 7 3 1 --
Registration
Fees............ 21 11 5 111 31 12 6 1
Distribution Fees
-- Investor
Shares.......... 15 -- 22 21 119 148 6 3
Less: Distribution
Fees Waived --
Investor
Shares.......... (13) -- (14) (10) (39) (47) (6) --
Distribution Fees
-- Flex
Shares.......... 43 -- 10 33 45 51 27 23
Less: Distribution
Fees Waived --
Flex Shares..... (14) -- (10) (15) (18) (15) (21) (8)
Insurance and
Other Fees...... 4 4 15 18 13 7 2 --
Amortization of
Deferred
Organization
Costs........... -- 10 3 2 -- 8 -- --
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Total
Expenses..... 1,246 163 805 5,327 5,027 1,476 319 55
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Net
Investment
Income
(Loss)...... 3,521 144 482 1,788 (2,928) 6,631 1,999 227
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain
(Loss) on
Securities
Sold............ 11,411 80 4,148 31,885 24,062 2,924 (209) (11)
Net Realized Loss
on Foreign
Currency
Transactions.... -- (18) (50) (949) -- -- -- --
Net Change in
Unrealized
Appreciation
(Depreciation)
on Foreign
Currency and
Translation of
Other Assets and
Liabilities in
Foreign
Currency........ -- -- (21) 16 -- -- -- --
Net Change in
Unrealized
Appreciation
(Depreciation)
on
Investments..... 5,223 2,108 (466) 51,213 (18,818) 2,169 1,157 153
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Total Net
Realized and
Unrealized
Gain on
Investments... 16,634 2,170 3,611 82,165 5,244 5,093 948 142
-------- ----------- ------ ------------- ----------- ------- ---------- -----
Net Increase in Net
Assets from
Operations........ $ 20,155 $2,314 $4,093 $83,953 $ 2,316 $11,724 $2,947 $369
-------- ----------- ------ ------------- ----------- ------- ---------- -----
-------- ----------- ------ ------------- ----------- ------- ---------- -----
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
117
<PAGE>
STATEMENT OF OPERATIONS (concluded)
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
GEORGIA INVESTMENT
TAX-EXEMPT GRADE BOND SHORT-TERM
BOND FUND FUND BOND FUND
---------- ---------- ----------
06/01/96- 06/01/96- 06/01/96-
05/31/97 05/31/97 05/31/97
(000) (000) (000)
<S> <C> <C> <C>
---------- ---------- ----------
Interest Income............... $1,875 $43,028 $5,793
---------- ---------- ----------
Expenses:
Investment Advisory Fees.... 246 4,793 624
Less: Investment Advisory
Fees Waived............... (64) (645) (138)
Administrator Fees.......... 25 435 65
Less: Administrator Fees
Waived.................... -- -- --
Transfer Agent Fees -- Trust
Shares.................... 16 16 16
Transfer Agent Fees --
Investor Shares........... 13 46 13
Transfer Agent Fees -- Flex
Shares.................... 14 19 13
Transfer Agent Out of Pocket
Fees...................... 3 54 8
Printing Expenses........... 2 49 7
Custody Fees................ 2 34 5
Professional Fees........... 2 34 5
Trustee Fees................ 1 11 2
Registration Fees........... 5 64 13
Distribution Fees --
Investor Shares........... 6 153 5
Less: Distribution Fees
Waived -- Investor
Shares.................... (6) (59) (5)
Distribution Fees -- Flex
Shares.................... 46 54 10
Less: Distribution Fees
Waived -- Flex Shares..... (26) (24) (10)
Insurance and Other Fees.... 1 22 3
Amortization of Deferred
Organization Costs........ -- 8 5
---------- ---------- ----------
Total Expenses.......... 286 5,064 641
---------- ---------- ----------
Net Investment
Income................ 1,589 37,964 5,152
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain (Loss) on
Securities Sold........... 7 (5,113) (321)
Net Change in Unrealized
Appreciation on
Investments............... 882 10,558 1,027
---------- ---------- ----------
Total Net Realized and
Unrealized Gain (Loss)
on Investments........ 889 5,445 706
---------- ---------- ----------
Net Increase in Net Assets
from Operations............. $2,478 $43,409 $5,858
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Amounts designated as "--" are either $0 or round to $0.
118
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM PRIME TAX-EXEMPT
U.S. TREASURY LIMITED-TERM QUALITY U.S. GOVERNMENT MONEY
SECURITIES FEDERAL MORTGAGE U.S. GOVERNMENT MONEY MARKET SECURITIES MONEY MARKET
FUND SECURITIES FUND SECURITIES FUND FUND MARKET FUND FUND
------------- ---------------- --------------- ------------ ---------------- ----------
06/01/96- 06/01/96- 06/01/96- 06/01/96- 06/01/96- 06/01/96-
05/31/97 05/31/97 05/31/97 05/31/97 05/31/97 05/31/97
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
------ ------ ------ ------------ ------- ----------
Interest Income............... $1,410 $6,871 $1,411 $82,489 $20,206 $15,230
------ ------ ------ ------------ ------- ----------
Expenses:
Investment Advisory Fees.... 156 691 150 9,767 2,455 2,361
Less: Investment Advisory
Fees Waived............... (73) (151) (59) (2,181) (519) (674)
Administrator Fees.......... 16 71 14 1,009 254 289
Less: Administrator Fees
Waived.................... -- -- -- (348) (41) --
Transfer Agent Fees -- Trust
Shares.................... 16 16 16 16 16 16
Transfer Agent Fees --
Investor Shares........... 14 13 13 35 23 18
Transfer Agent Fees -- Flex
Shares.................... 14 14 15 -- -- --
Transfer Agent Out of Pocket
Fees...................... 2 6 1 107 34 36
Printing Expenses........... 2 6 1 95 26 29
Custody Fees................ 1 4 1 69 21 22
Professional Fees........... 1 5 1 80 21 23
Trustee Fees................ -- 1 -- 21 7 7
Registration Fees........... 17 30 19 162 27 38
Distribution Fees --
Investor Shares........... 7 6 10 551 106 149
Less: Distribution Fees
Waived -- Investor
Shares.................... (7) (6) (9) (208) (40) (59)
Distribution Fees -- Flex
Shares.................... 21 16 30 -- -- --
Less: Distribution Fees
Waived -- Flex Shares..... (20) (16) (15) -- -- --
Insurance and Other Fees.... 1 3 1 25 8 9
Amortization of Deferred
Organization Costs........ 4 2 2 8 8 8
------ ------ ------ ------------ ------- ----------
Total Expenses.......... 172 711 191 9,208 2,406 2,272
------ ------ ------ ------------ ------- ----------
Net Investment
Income................ 1,238 6,160 1,220 73,281 17,800 12,958
------ ------ ------ ------------ ------- ----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain (Loss) on
Securities Sold........... (25) 1 (17) (121) (51) 10
Net Change in Unrealized
Appreciation on
Investments............... 88 303 214 -- -- --
------ ------ ------ ------------ ------- ----------
Total Net Realized and
Unrealized Gain (Loss)
on Investments........ 62 304 197 (121) (51) 10
------ ------ ------ ------------ ------- ----------
Net Increase in Net Assets
from Operations............. $1,301 $6,464 $1,417 $73,160 $17,749 $12,968
------ ------ ------ ------------ ------- ----------
------ ------ ------ ------------ ------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
119
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
SMALL CAP
VALUE INCOME STOCK FUND MID-CAP EQUITY FUND EQUITY FUND
-------------------------- -------------------------- ------------
06/01/96- 06/01/95- 06/01/96- 06/01/95- 01/31/97*-
05/31/97 05/31/96 05/31/97 05/31/96 05/31/97
(000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C>
------------ ------------ ------------ ------------ ------------
Operations:
Net Investment Income
(Loss)..................... $ 35,049 $ 33,101 $ 513 $ 1,365 $ 521
Net Realized Gain on
Investments................ 243,189 196,134 33,978 29,513 1,757
Net Realized 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............. 33,953 60,796 4,912 12,518 7,644
------------ ------------ ------------ ------------ ------------
Increase in Net Assets
from Operations......... 312,191 290,031 39,403 43,396 9,922
------------ ------------ ------------ ------------ ------------
Distributions to Shareholders:
Net Investment Income:
Trust Shares............... (30,805) (29,124) (962) (1,285) (205)
Investor Shares............ (2,820) (2,618) (17) (30) --
Flex Shares................ (606) (206) -- (1) --
Capital Gains:
Trust Shares............... (166,191) (92,363) (24,244) (13,072) --
Investor Shares............ (18,030) (9,853) (1,770) (922) --
Flex Shares................ (5,570) (1,106) (676) (167) --
------------ ------------ ------------ ------------ ------------
Total Distributions..... (224,022) (135,270) (27,669) (15,477) (205)
------------ ------------ ------------ ------------ ------------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares
Issued................... 380,339 371,542 113,386 133,402 126,046
Reinvestment of Cash
Distributions............ 179,808 111,671 22,790 13,361 137
Cost of Shares
Repurchased.............. (392,524) (369,739) (113,291) (44,487) (4,851)
------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net
Assets From Trust Share
Transactions............... 167,623 113,474 22,885 102,276 121,332
------------ ------------ ------------ ------------ ------------
Investor Shares:
Proceeds from Shares
Issued................... 31,242 31,177 5,664 10,027 --
Reinvestment of Cash
Distributions............ 20,626 12,291 1,783 948 --
Cost of Shares
Repurchased.............. (24,774) (19,420) (5,934) (2,010) --
------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net
Assets From Investor Share
Transactions............... 27,094 24,048 1,513 8,965 --
------------ ------------ ------------ ------------ ------------
Flex Shares:
Proceeds from Shares
Issued................... 43,363 24,893 5,680 5,125 --
Reinvestment of Cash
Distributions............ 6,080 1,301 666 163 --
Cost of Shares
Repurchased.............. (6,096) (1,416) (1,648) (450) --
------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net
Assets From Flex Share
Transactions............... 43,347 24,778 4,698 4,838 --
------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net
Assets From Share
Transactions............. 238,064 162,300 29,096 116,079 121,332
------------ ------------ ------------ ------------ ------------
Total Increase
(Decrease) in Net
Assets.................. 326,233 317,061 40,830 143,998 131,049
------------ ------------ ------------ ------------ ------------
Net Assets:
Beginning of Period.......... 1,401,294 1,084,233 276,905 132,907 --
------------ ------------ ------------ ------------ ------------
End of Period................ $1,727,527 $1,401,294 $317,735 $276,905 $131,049
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued.............. 29,343 29,898 9,011 10,952 12,290
Shares Issued in Lieu of
Cash Distributions....... 14,654 9,282 1,853 1,144 13
Shares Redeemed............ (30,076) (30,154) (9,008) (3,620) (466)
------------ ------------ ------------ ------------ ------------
Net Trust Share
Transactions............ 13,921 9,026 1,856 8,476 11,837
------------ ------------ ------------ ------------ ------------
Investor Shares:
Shares Issued.............. 2,411 2,522 455 824 --
Shares Issued in Lieu of
Cash Distributions....... 1,683 1,023 145 82 --
Shares Redeemed............ (1,906) (1,569) (472) (165) --
------------ ------------ ------------ ------------ ------------
Net Investor Share
Transactions............ 2,188 1,976 128 741 --
------------ ------------ ------------ ------------ ------------
Flex Shares:
Shares Issued.............. 3,360 2,014 459 419 --
Shares Issued in Lieu of
Cash Distributions....... 500 108 55 14 --
Shares Redeemed............ (470) (113) (134) (37) --
------------ ------------ ------------ ------------ ------------
Net Flex Share
Transactions............ 3,390 2,009 380 396 --
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
*Commencement of operations.
Amounts designated as "--" are either $0 or round to $0.
120
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
EMERGING EQUITY
CAPITAL GROWTH FUND BALANCED FUND MARKETS EQUITY FUND INDEX FUND
----------------------- ------------------------ ------------------- --------------------------
06/01/96- 06/01/95- 06/01/96- 06/01/95- 01/31/97*- 06/01/96- 06/01/95-
05/31/97 05/31/96 05/31/97 05/31/96 05/31/97 05/31/97 05/31/96
(000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
---------- ------------ ------------- --------- ---------- ------------ ------------
Operations:
Net Investment Income
(Loss)..................... $ 8,603 $ 9,278 $ 3,521 $ 3,088 $ 144 $ 482 $ 800
Net Realized Gain on
Investments................ 221,554 224,050 11,411 11,091 80 4,148 1,134
Net Realized Loss on Foreign
Currency Transactions...... -- -- -- -- (18) (50) --
Net Change in Unrealized
Appreciation (Depreciation)
on Foreign Currency and
Translation of Other Assets
and Liabilities in Foreign
Currency................... -- -- -- -- -- (21) (7)
Net Change in Unrealized
Appreciation (Depreciation)
on Investments............. 43,851 63,301 5,223 1,891 2,108 (466) 6,362
---------- ------------ ------------- --------- ---------- ------------ ------------
Increase in Net Assets
from Operations......... 274,008 296,629 20,155 16,070 2,314 4,093 8,289
---------- ------------ ------------- --------- ---------- ------------ ------------
Distributions to Shareholders:
Net Investment Income:
Trust Shares............... (7,993) (9,644) (3,051) (2,933) -- (614) (1,048)
Investor Shares............ (338) (570) (139) (115) -- (35) (59)
Flex Shares................ -- (5) (77) (31) -- -- (7)
Capital Gains:
Trust Shares............... (180,731) (41,659) (9,775) (904) -- (1,696) (743)
Investor Shares............ (35,976) (7,343) (505) (44) -- (154) (43)
Flex Shares................ (3,858) (227) (388) (18) -- (27) (6)
---------- ------------ ------------- --------- ---------- ------------ ------------
Total Distributions..... (228,896) (59,448) (13,935) (4,045) -- (2,526) (1,906)
---------- ------------ ------------- --------- ---------- ------------ ------------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares
Issued................... 295,281 187,108 75,303 54,735 42,043 21,944 62,965
Reinvestment of Cash
Distributions............ 178,092 48,431 12,606 3,784 -- 1,958 1,417
Cost of Shares
Repurchased.............. (406,707) (439,271) (54,011) (47,301) (4,862) (62,693) (68,891)
---------- ------------ ------------- --------- ---------- ------------ ------------
Increase (Decrease) in Net
Assets From Trust Share
Transactions............... 66,666 (203,732) 33,898 11,218 37,181 (38,791) (4,509)
---------- ------------ ------------- --------- ---------- ------------ ------------
Investor Shares:
Proceeds from Shares
Issued................... 22,778 21,971 1,430 1,315 -- 2,579 3,017
Reinvestment of Cash
Distributions............ 36,046 7,818 633 155 -- 189 101
Cost of Shares
Repurchased.............. (38,034) (34,867) (1,149) (844) -- (2,981) (1,782)
---------- ------------ ------------- --------- ---------- ------------ ------------
Increase (Decrease) in Net
Assets From Investor Share
Transactions............... 20,790 (5,078) 914 626 -- (213) 1,336
---------- ------------ ------------- --------- ---------- ------------ ------------
Flex Shares:
Proceeds from Shares
Issued................... 23,389 10,505 3,065 3,359 -- 334 992
Reinvestment of Cash
Distributions............ 3,813 230 462 49 -- 27 13
Cost of Shares
Repurchased.............. (2,774) (641) (787) (428) -- (410) (127)
---------- ------------ ------------- --------- ---------- ------------ ------------
Increase (Decrease) in Net
Assets From Flex Share
Transactions............... 24,428 10,094 2,740 2,980 -- (49) 878
---------- ------------ ------------- --------- ---------- ------------ ------------
Increase (Decrease) in Net
Assets From Share
Transactions............. 111,884 (198,716) 37,552 14,824 37,181 (39,053) (2,295)
---------- ------------ ------------- --------- ---------- ------------ ------------
Total Increase
(Decrease) in Net
Assets.................. 156,996 38,465 43,772 26,849 39,495 (37,486) 4,088
---------- ------------ ------------- --------- ---------- ------------ ------------
Net Assets:
Beginning of Period.......... 1,183,545 1,145,080 119,665 92,816 -- 97,494 93,406
---------- ------------ ------------- --------- ---------- ------------ ------------
End of Period................ $1,340,541 $1,183,545 $163,437 $119,665 $ 39,495 $ 60,008 $97,494
---------- ------------ ------------- --------- ---------- ------------ ------------
---------- ------------ ------------- --------- ---------- ------------ ------------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued.............. 20,391 13,624 6,572 4,974 4,128 2,030 5,971
Shares Issued in Lieu of
Cash Distributions....... 13,369 3,617 1,122 346 -- 184 134
Shares Redeemed............ (27,687) (32,204) (4,686) (4,335) (468) (5,800) (6,536)
---------- ------------ ------------- --------- ---------- ------------ ------------
Net Trust Share
Transactions............ 6,073 (14,963) 3,008 985 3,660 (3,586) (431)
---------- ------------ ------------- --------- ---------- ------------ ------------
Investor Shares:
Shares Issued.............. 1,573 1,605 122 119 -- 241 286
Shares Issued in Lieu of
Cash Distributions....... 2,717 585 56 14 -- 18 10
Shares Redeemed............ (2,607) (2,576) (99) (76) -- (277) (170)
---------- ------------ ------------- --------- ---------- ------------ ------------
Net Investor Share
Transactions............ 1,683 (386) 79 57 -- (18) 126
---------- ------------ ------------- --------- ---------- ------------ ------------
Flex Shares:
Shares Issued.............. 1,620 768 265 305 -- 31 95
Shares Issued in Lieu of
Cash Distributions....... 289 17 41 5 -- 3 1
Shares Redeemed............ (191) (46) (68) (38) -- (38) (12)
---------- ------------ ------------- --------- ---------- ------------ ------------
Net Flex Share
Transactions............ 1,718 739 238 272 -- (4) 84
---------- ------------ ------------- --------- ---------- ------------ ------------
---------- ------------ ------------- --------- ---------- ------------ ------------
<CAPTION>
INTERNATIONAL
EQUITY FUND SUNBELT EQUITY FUND
---------------------- ----------------------
06/01/96- 12/01/95*- 06/01/96- 06/01/95-
05/31/97 05/31/96 05/31/97 05/31/96
(000) (000) (000) (000)
<S> <C> <C> <C> <C>
--------- ------------ --------- ------------
Operations:
Net Investment Income
(Loss)..................... $ 1,788 $ 986 $ (2,928) $ (1,275)
Net Realized Gain on
Investments................ 31,885 4,059 24,062 39,898
Net Realized Loss on Foreign
Currency Transactions...... (949) (265) -- --
Net Change in Unrealized
Appreciation (Depreciation)
on Foreign Currency and
Translation of Other Assets
and Liabilities in Foreign
Currency................... 16 (10) -- --
Net Change in Unrealized
Appreciation (Depreciation)
on Investments............. 51,213 13,617 (18,818) 84,777
--------- ------------ --------- ------------
Increase in Net Assets
from Operations......... 83,953 18,387 2,316 123,400
--------- ------------ --------- ------------
Distributions to Shareholders:
Net Investment Income:
Trust Shares............... (638) -- -- --
Investor Shares............ -- -- -- --
Flex Shares................ -- -- -- --
Capital Gains:
Trust Shares............... (9,573) -- (29,932) (5,188)
Investor Shares............ (182) -- (2,119) (426)
Flex Shares................ (75) -- (360) (20)
--------- ------------ --------- ------------
Total Distributions..... (10,468) -- (32,411) (5,634)
--------- ------------ --------- ------------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares
Issued................... 382,588 212,805 208,763 132,237
Reinvestment of Cash
Distributions............ 9,386 -- 27,551 4,956
Cost of Shares
Repurchased.............. (187,406) (17,640) (239,412) (92,700)
--------- ------------ --------- ------------
Increase (Decrease) in Net
Assets From Trust Share
Transactions............... 204,568 195,165 (3,098) 44,493
--------- ------------ --------- ------------
Investor Shares:
Proceeds from Shares
Issued................... 7,794 3,467 6,043 5,187
Reinvestment of Cash
Distributions............ 181 -- 2,111 426
Cost of Shares
Repurchased.............. (2,060) (220) (7,103) (7,209)
--------- ------------ --------- ------------
Increase (Decrease) in Net
Assets From Investor Share
Transactions............... 5,915 3,247 1,051 (1,596)
--------- ------------ --------- ------------
Flex Shares:
Proceeds from Shares
Issued................... 7,049 911 3,978 2,489
Reinvestment of Cash
Distributions............ 74 -- 354 20
Cost of Shares
Repurchased.............. (424) (3) (1,172) (123)
--------- ------------ --------- ------------
Increase (Decrease) in Net
Assets From Flex Share
Transactions............... 6,699 908 3,160 2,386
--------- ------------ --------- ------------
Increase (Decrease) in Net
Assets From Share
Transactions............. 217,182 199,320 1,113 45,283
--------- ------------ --------- ------------
Total Increase
(Decrease) in Net
Assets.................. 290,667 217,707 (28,982) 163,049
--------- ------------ --------- ------------
Net Assets:
Beginning of Period.......... 217,707 -- 444,137 281,088
--------- ------------ --------- ------------
End of Period................ $ 508,374 $217,707 $ 415,155 $444,137
--------- ------------ --------- ------------
--------- ------------ --------- ------------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued.............. 31,059 20,338 16,289 10,848
Shares Issued in Lieu of
Cash Distributions....... 785 -- 2,176 437
Shares Redeemed............ (14,649) (1,635) (18,979) (7,882)
--------- ------------ --------- ------------
Net Trust Share
Transactions............ 17,195 18,703 (514) 3,403
--------- ------------ --------- ------------
Investor Shares:
Shares Issued.............. 634 324 473 428
Shares Issued in Lieu of
Cash Distributions....... 15 -- 169 38
Shares Redeemed............ (166) (21) (569) (614)
--------- ------------ --------- ------------
Net Investor Share
Transactions............ 483 303 73 (148)
--------- ------------ --------- ------------
Flex Shares:
Shares Issued.............. 566 84 310 202
Shares Issued in Lieu of
Cash Distributions....... 6 -- 29 2
Shares Redeemed............ (34) -- (95) (10)
--------- ------------ --------- ------------
Net Flex Share
Transactions............ 538 84 244 194
--------- ------------ --------- ------------
--------- ------------ --------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
121
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
INVESTMENT GRADE TAX- FLORIDA TAX-EXEMPT TENNESSEE TAX-EXEMPT
EXEMPT BOND FUND BOND FUND BOND FUND
------------------------ --------------------- ---------------------
06/01/96- 06/01/95- 06/01/96- 06/01/95- 06/01/96- 06/01/95-
05/31/97 05/31/96 05/31/97 05/31/96 05/31/97 05/31/96
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
--------- ------------ --------- --------- --------- ---------
Operations:
Net Investment Income................ $ 6,631 $ 5,851 $ 1,999 $ 1,235 $ 227 $ 185
Net Realized Gain (Loss) on
Investments........................ 2,924 5,634 (209) 220 (11) 13
Net Change in Unrealized Appreciation
(Depreciation) on Investments...... 2,169 (3,672) 1,157 (723) 153 (96)
--------- ------------ --------- --------- --------- ---------
Increase in Net Assets from
Operations...................... 11,724 7,813 2,947 732 369 102
--------- ------------ --------- --------- --------- ---------
Distributions to Shareholders:
Net Investment Income:
Trust Shares....................... (5,248) (4,292) (1,748) (996) (74) (80)
Investor Shares.................... (1,226) (1,492) (154) (171) (65) (54)
Flex Shares........................ (159) (120) (101) (65) (88) (51)
Capital Gains:
Trust Shares....................... (2,384) (3,335) (126) (111) -- --
Investor Shares.................... (623) (1,295) (11) (21) -- --
Flex Shares........................ (92) (137) (9) (10) -- --
--------- ------------ --------- --------- --------- ---------
Total Distributions............. (9,732) (10,671) (2,149) (1,374) (227) (185)
--------- ------------ --------- --------- --------- ---------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued........ 45,948 87,347 27,976 30,124 1,241 414
Reinvestment of Cash
Distributions.................... 3,196 4,062 314 228 33 36
Cost of Shares Repurchased......... (36,027) (42,946) (9,265) (9,139) (1,174) (264)
--------- ------------ --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Trust Share Transactions...... 13,117 48,463 19,025 21,213 100 186
--------- ------------ --------- --------- --------- ---------
Investor Shares:
Proceeds from Shares Issued........ 2,163 4,535 923 1,865 450 668
Reinvestment of Cash
Distributions.................... 1,619 2,347 128 127 51 35
Cost of Shares Repurchased......... (9,763) (10,550) (1,919) (1,235) (459) (333)
--------- ------------ --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Investor Share Transactions... (5,981) (3,668) (868) 757 42 370
--------- ------------ --------- --------- --------- ---------
Flex Shares:
Proceeds from Shares Issued........ 1,973 6,823 1,182 2,844 836 2,235
Reinvestment of Cash
Distributions.................... 222 222 80 50 53 36
Cost of Shares Repurchased......... (3,111) (1,413) (1,011) (153) (456) (215)
--------- ------------ --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Flex Share Transactions....... (916) 5,632 251 2,741 433 2,056
--------- ------------ --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Share Transactions.......... 6,220 50,427 18,408 24,711 575 2,612
--------- ------------ --------- --------- --------- ---------
Total Increase (Decrease) in Net
Assets.......................... 8,212 47,569 19,206 24,069 717 2,529
--------- ------------ --------- --------- --------- ---------
Net Assets:
Beginning of Period.................. 167,470 119,901 37,507 13,438 5,363 2,834
--------- ------------ --------- --------- --------- ---------
End of Period........................ $175,682 $167,470 $56,713 $37,507 $6,080 $5,363
--------- ------------ --------- --------- --------- ---------
--------- ------------ --------- --------- --------- ---------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued...................... 4,112 7,736 2,728 2,945 130 43
Shares Issued in Lieu of Cash
Distributions.................... 286 362 31 22 3 4
Shares Redeemed.................... (3,216) (3,816) (907) (902) (122) (28)
--------- ------------ --------- --------- --------- ---------
Net Trust Share Transactions.... 1,182 4,282 1,852 2,065 11 19
--------- ------------ --------- --------- --------- ---------
Investor Shares:
Shares Issued...................... 193 401 89 182 47 70
Shares Issued in Lieu of Cash
Distributions.................... 144 208 13 12 5 4
Shares Redeemed.................... (869) (934) (188) (120) (48) (35)
--------- ------------ --------- --------- --------- ---------
Net Investor Share
Transactions.................... (532) (325) (86) 74 4 39
--------- ------------ --------- --------- --------- ---------
Flex Shares:
Shares Issued...................... 176 603 115 277 88 233
Shares Issued in Lieu of Cash
Distributions.................... 20 20 8 5 6 4
Shares Redeemed.................... (277) (125) (99) (15) (48) (23)
--------- ------------ --------- --------- --------- ---------
Net Flex Share Transactions..... (81) 498 24 267 46 214
--------- ------------ --------- --------- --------- ---------
--------- ------------ --------- --------- --------- ---------
</TABLE>
Amounts designated as "--" are either $0 or round to $0.
122
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GEORGIA SHORT-TERM U.S.
TAX-EXEMPT INVESTMENT GRADE TREASURY SECURITIES
BOND FUND BOND FUND SHORT-TERM BOND FUND FUND
-------------------- -------------------- -------------------- --------------------
06/01/96- 06/01/95- 06/01/96- 06/01/95- 06/01/96- 06/01/95- 06/01/96- 06/01/95-
05/31/97 05/31/96 05/31/97 05/31/96 05/31/97 05/31/96 05/31/97 05/31/96
(000) (000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------- --------- --------- --------- --------- --------- --------- ---------
Operations:
Net Investment Income................ $ 1,589 $ 971 $ 37,964 $ 35,694 $ 5,152 $ 4,224 $ 1,238 $ 915
Net Realized Gain (Loss) on
Investments........................ 7 330 (5,113) 19,716 (321) 1,358 (25) 95
Net Change in Unrealized Appreciation
(Depreciation) on Investments...... 882 (789) 10,558 (32,383) 1,027 (2,395) 88 (294)
--------- --------- --------- --------- --------- --------- --------- ---------
Increase in Net Assets from
Operations...................... 2,478 512 43,409 23,027 5,858 3,187 1,301 716
--------- --------- --------- --------- --------- --------- --------- ---------
Distributions to Shareholders:
Net Investment Income:
Trust Shares....................... (1,285) (747) (35,713) (33,703) (4,983) (4,065) (934) (551)
Investor Shares.................... (139) (139) (1,950) (1,908) (120) (133) (205) (308)
Flex Shares........................ (165) (88) (270) (114) (51) (26) (99) (56)
Capital Gains:
Trust Shares....................... (153) (26) -- -- (311) (124) -- --
Investor Shares.................... (17) (6) -- -- (7) (4) -- --
Flex Shares........................ (26) (4) -- -- (4) (1) -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Total Distributions............. (1,785) (1,010) (37,933) (35,725) (5,476) (4,353) (1,238) (915)
--------- --------- --------- --------- --------- --------- --------- ---------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued........ 29,571 17,893 218,768 203,235 43,385 60,843 17,856 5,744
Reinvestment of Cash
Distributions.................... 761 215 27,532 26,403 3,426 2,588 465 334
Cost of Shares Repurchased......... (14,098) (7,944) (217,253) (161,583) (48,636) (32,113) (6,510) (5,409)
--------- --------- --------- --------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Trust Share Transactions...... 16,234 10,164 29,047 68,055 (1,825) 31,318 11,811 669
--------- --------- --------- --------- --------- --------- --------- ---------
Investor Shares:
Proceeds from Shares Issued........ 573 661 5,838 8,832 602 642 745 966
Reinvestment of Cash
Distributions.................... 137 109 1,770 1,510 111 90 204 278
Cost of Shares Repurchased......... (677) (596) (10,944) (7,248) (1,240) (606) (1,238) (4,147)
--------- --------- --------- --------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Investor Share Transactions... 33 174 (3,336) 3,094 (527) 126 (289) (2,903)
--------- --------- --------- --------- --------- --------- --------- ---------
Flex Shares:
Proceeds from Shares Issued........ 1,697 4,355 3,077 5,179 523 1,014 825 2,603
Reinvestment of Cash
Distributions.................... 172 75 237 88 50 22 85 39
Cost of Shares Repurchased......... (1,499) (150) (2,217) (508) (469) (53) (2,259) (188)
--------- --------- --------- --------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Flex Share Transactions....... 370 4,280 1,097 4,759 104 983 (1,349) 2,454
--------- --------- --------- --------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Share Transactions.......... 16,637 14,618 26,808 75,908 (2,248) 32,427 10,173 220
--------- --------- --------- --------- --------- --------- --------- ---------
Total Increase (Decrease) in Net
Assets.......................... 17,330 14,120 32,284 63,210 (1,866) 31,261 10,236 21
--------- --------- --------- --------- --------- --------- --------- ---------
Net Assets:
Beginning of Period.................. 30,575 16,455 640,290 577,080 94,822 63,561 16,764 16,743
--------- --------- --------- --------- --------- --------- --------- ---------
End of Period........................ $47,905 $30,575 $672,574 $640,290 $92,956 $94,822 $27,000 $16,764
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued...................... 3,062 1,832 21,475 19,682 4,380 6,066 1,806 579
Shares Issued in Lieu of Cash
Distributions.................... 78 22 2,709 2,550 345 258 47 34
Shares Redeemed.................... (1,457) (823) (21,378) (15,629) (4,902) (3,190) (659) (547)
--------- --------- --------- --------- --------- --------- --------- ---------
Net Trust Share Transactions.... 1,683 1,031 2,806 6,603 (177) 3,134 1,194 66
--------- --------- --------- --------- --------- --------- --------- ---------
Investor Shares:
Shares Issued...................... 59 68 575 856 61 64 75 97
Shares Issued in Lieu of Cash
Distributions.................... 14 11 174 146 11 9 21 28
Shares Redeemed.................... (70) (61) (1,076) (701) (125) (60) (125) (418)
--------- --------- --------- --------- --------- --------- --------- ---------
Net Investor Share
Transactions.................... 3 18 (327) 301 (53) 13 (29) (293)
--------- --------- --------- --------- --------- --------- --------- ---------
Flex Shares:
Shares Issued...................... 175 448 303 499 52 101 84 262
Shares Issued in Lieu of Cash
Distributions.................... 18 8 23 8 5 2 9 4
Shares Redeemed.................... (154) (15) (218) (49) (47) (5) (228) (19)
--------- --------- --------- --------- --------- --------- --------- ---------
Net Flex Share Transactions..... 39 441 108 458 10 98 (135) 247
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
MORTGAGE SECURITIES U.S. GOVERNMENT
FUND SECURITIES FUND
-------------------- --------------------
06/01/96- 06/01/95- 06/01/96- 06/01/95-
05/31/97 05/31/96 05/31/97 05/31/96
(000) (000) (000) (000)
<S> <C> <C> <C> <C>
--------- --------- --------- ---------
Operations:
Net Investment Income................ $ 6,160 $ 3,181 $ 1,220 $ 602
Net Realized Gain (Loss) on
Investments........................ 1 389 (17) (24)
Net Change in Unrealized Appreciation
(Depreciation) on Investments...... 303 (1,359) 214 (557)
--------- --------- --------- ---------
Increase in Net Assets from
Operations...................... 6,464 2,211 1,417 21
--------- --------- --------- ---------
Distributions to Shareholders:
Net Investment Income:
Trust Shares....................... (5,933) (3,012) (916) (453)
Investor Shares.................... (146) (68) (147) (68)
Flex Shares........................ (81) (37) (157) (81)
Capital Gains:
Trust Shares....................... (159) -- -- (18)
Investor Shares.................... (4) -- -- (3)
Flex Shares........................ (3) -- -- (5)
--------- --------- --------- ---------
Total Distributions............. (6,326) (3,117) (1,220) (628)
--------- --------- --------- ---------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued........ 75,207 46,841 19,904 9,824
Reinvestment of Cash
Distributions.................... 4,139 1,846 297 144
Cost of Shares Repurchased......... (28,939) (16,287) (11,131) (2,556)
--------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Trust Share Transactions...... 50,407 32,400 9,070 7,412
--------- --------- --------- ---------
Investor Shares:
Proceeds from Shares Issued........ 1,381 2,404 1,272 2,290
Reinvestment of Cash
Distributions.................... 141 51 140 50
Cost of Shares Repurchased......... (1,615) (533) (1,599) (456)
--------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Investor Share Transactions... (93) 1,922 (187) 1,884
--------- --------- --------- ---------
Flex Shares:
Proceeds from Shares Issued........ 500 1,538 764 3,019
Reinvestment of Cash
Distributions.................... 72 27 130 59
Cost of Shares Repurchased......... (517) (196) (958) (148)
--------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Flex Share Transactions....... 55 1,369 (64) 2,930
--------- --------- --------- ---------
Increase (Decrease) in Net Assets
From Share Transactions.......... 50,369 35,691 8,819 12,226
--------- --------- --------- ---------
Total Increase (Decrease) in Net
Assets.......................... 50,507 34,785 9,016 11,619
--------- --------- --------- ---------
Net Assets:
Beginning of Period.................. 77,231 42,446 15,499 3,880
--------- --------- --------- ---------
End of Period........................ $127,738 $77,231 $24,515 $15,499
--------- --------- --------- ---------
--------- --------- --------- ---------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued...................... 7,497 4,639 1,986 952
Shares Issued in Lieu of Cash
Distributions.................... 413 182 30 14
Shares Redeemed.................... (2,886) (1,610) (1,110) (249)
--------- --------- --------- ---------
Net Trust Share Transactions.... 5,024 3,211 906 717
--------- --------- --------- ---------
Investor Shares:
Shares Issued...................... 138 238 127 225
Shares Issued in Lieu of Cash
Distributions.................... 14 5 14 5
Shares Redeemed.................... (161) (53) (159) (45)
--------- --------- --------- ---------
Net Investor Share
Transactions.................... (9) 190 (18) 185
--------- --------- --------- ---------
Flex Shares:
Shares Issued...................... 50 152 77 294
Shares Issued in Lieu of Cash
Distributions.................... 7 2 13 6
Shares Redeemed.................... (51) (19) (95) (15)
--------- --------- --------- ---------
Net Flex Share Transactions..... 6 135 (5) 285
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
123
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (concluded)
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
U.S. GOVERNMENT
PRIME QUALITY MONEY SECURITIES MONEY MARKET TAX-EXEMPT MONEY
MARKET FUND FUND MARKET FUND
------------------------ ----------------------- ---------------------
06/01/96- 06/01/95- 06/01/96- 06/01/95- 06/01/96- 06/01/95-
05/31/97 05/31/96 05/31/97 05/31/96 05/31/97 05/31/96
(000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
---------- ------------ --------- ----------- --------- ---------
Operations:
Net Investment Income................. $ 73,281 $ 54,132 $ 17,800 $ 20,311 $ 12,958 $ 12,217
Net Realized Gain (Loss) on
Investments......................... (121) (82) (51) 90 10 9
---------- ------------ --------- ----------- --------- ---------
Increase in Net Assets from
Operations....................... 73,160 54,050 17,749 20,401 12,968 12,226
---------- ------------ --------- ----------- --------- ---------
Distributions to Shareholders:
Net Investment Income:
Trust Shares........................ (60,224) (44,689) (14,924) (17,516) (10,054) (9,342)
Investor Shares..................... (13,057) (9,442) (2,876) (2,795) (2,904) (2,872)
Capital Gains:
Trust Shares........................ -- -- -- -- -- --
Investor Shares..................... -- -- -- -- -- --
---------- ------------ --------- ----------- --------- ---------
Total Distributions............... (73,281) (54,131) (17,800) (20,311) (12,958) (12,214)
---------- ------------ --------- ----------- --------- ---------
Capital Transactions (1):
Trust Shares:
Proceeds from Shares Issued......... 2,786,281 2,131,623 705,839 1,156,411 980,872 719,678
Reinvestment of Cash
Distributions...................... 2,069 1,223 274 60 -- 3
Cost of Shares Redeemed............. (2,752,496) (1,881,171) (687,215) (1,265,169) (921,487) (661,491)
---------- ------------ --------- ----------- --------- ---------
Increase (Decrease) in Net Assets From
Trust Share Transactions............ 35,854 251,675 18,898 (108,698) 59,385 58,190
---------- ------------ --------- ----------- --------- ---------
Investor Shares:
Proceeds from Shares Issued......... 928,946 1,012,310 182,325 231,451 305,724 322,435
Reinvestment of Cash
Distributions...................... 10,375 8,255 2,379 2,414 2,569 2,480
Cost of Shares Redeemed............. (871,451) (962,468) (180,124) (221,906) (301,505) (317,341)
---------- ------------ --------- ----------- --------- ---------
Increase in Net Assets From Investor
Share Transactions.................. 67,870 58,097 4,580 11,959 6,788 7,574
---------- ------------ --------- ----------- --------- ---------
Increase in Net Assets From Share
Transactions....................... 103,724 309,772 23,478 (96,739) 66,173 65,764
---------- ------------ --------- ----------- --------- ---------
Total Increase (Decrease) in Net
Assets........................... 103,603 309,691 23,427 (96,649) 66,183 65,776
---------- ------------ --------- ----------- --------- ---------
Net Assets:
Beginning of Period................... 1,266,496 956,805 384,101 480,750 368,836 303,060
---------- ------------ --------- ----------- --------- ---------
End of Period......................... $1,370,099 $1,266,496 $407,528 $ 384,101 $435,019 $368,836
---------- ------------ --------- ----------- --------- ---------
---------- ------------ --------- ----------- --------- ---------
(1) Shares Issued and Redeemed:
Trust Shares:
Shares Issued....................... 2,786,281 2,131,623 705,839 1,156,411 980,872 719,678
Shares Issued in Lieu of Cash
Distributions...................... 2,069 1,223 274 60 -- 3
Shares Redeemed..................... (2,752,496) (1,881,171) (687,215) (1,265,169) (921,487) (661,491)
---------- ------------ --------- ----------- --------- ---------
Net Trust Share Transactions...... 35,854 251,675 18,898 (108,698) 59,385 58,190
---------- ------------ --------- ----------- --------- ---------
Investor Shares:
Shares Issued....................... 928,946 1,012,310 182,325 231,451 305,724 322,435
Shares Issued in Lieu of Cash
Distributions...................... 10,375 8,255 2,379 2,414 2,569 2,480
Shares Redeemed..................... (871,451) (962,468) (180,124) (221,906) (301,505) (317,341)
---------- ------------ --------- ----------- --------- ---------
Net Investor Share Transactions... 67,870 58,097 4,580 11,959 6,788 7,574
---------- ------------ --------- ----------- --------- ---------
---------- ------------ --------- ----------- --------- ---------
</TABLE>
Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
124
<PAGE>
(This page has been left blank intentionally.)
125
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED AND DISTRIBUTIONS
INVESTMENT UNREALIZED GAINS FROM
NET ASSET VALUE INCOME (LOSSES) DISTRIBUTIONS FROM REALIZED CAPITAL
BEGINNING OF PERIOD (LOSS) ON INVESTMENTS NET INVESTMENT INCOME GAINS
------------------- ---------- ---------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
1997 $13.15 $ 0.30 $ 2.32 $(0.30) $(1.76)
1996 11.59 0.35 2.71 (0.34) (1.16)
1995 10.54 0.32 1.56 (0.32) (0.51)
1994 10.23 0.29 0.70 (0.32) (0.36)
1993(1) 10.00 0.11 0.16 (0.04) --
Investor Shares
1997 $13.13 $ 0.25 $ 2.32 $(0.26) $(1.76)
1996 11.58 0.30 2.71 (0.30) (1.16)
1995 10.52 0.28 1.56 (0.27) (0.51)
1994 10.23 0.26 0.67 (0.27) (0.37)
1993(2) 9.73 0.09 0.44 (0.03) --
Flex Shares
1997 $13.08 $ 0.18 $ 2.29 $(0.18) $(1.76)
1996(3) 11.59 0.26 2.65 (0.26) (1.16)
MID-CAP EQUITY FUND (B)
Trust Shares
1997 $12.76 $ 0.03 $ 1.69 $(0.05) $(1.22)
1996 11.00 0.08 2.63 (0.08) (0.87)
1995 9.85 0.08 1.15 (0.08) --
1994(4) 10.00 0.02 (0.16) (0.01) --
Investor Shares
1997 $12.74 $(0.03) $ 1.69 $(0.01) $(1.22)
1996 10.99 0.03 2.62 (0.03) (0.87)
1995 9.84 0.03 1.15 (0.03) --
1994(5) 10.00 0.01 (0.17) -- --
Flex Shares
1997 $12.69 $(0.07) $ 1.64 $ -- $(1.22)
1996(6) 11.13 -- 2.45 (0.02) (0.87)
SMALL CAP EQUITY FUND
Trust Shares
1997(7) $10.00 $ 0.05 $ 1.04 $(0.02) $ --
CAPITAL GROWTH FUND
Trust Shares
1997 $14.90 $ 0.12 $ 3.13 $(0.12) $(2.94)
1996 12.18 0.12 3.32 (0.13) (0.59)
1995 11.99 0.16 0.57 (0.14) (0.40)
1994 11.95 0.16 0.31 (0.17) (0.26)
1993(8) 10.36 0.12 1.57 (0.10) --
Investor Shares
1997 $14.89 $ 0.03 $ 3.10 $(0.02) $(2.94)
1996 12.17 0.03 3.32 (0.04) (0.59)
1995 11.98 0.09 0.57 (0.07) (0.40)
1994 11.93 0.09 0.31 (0.09) (0.26)
1993(9) 10.00 0.06 1.93 (0.06) --
Flex Shares
1997 $14.84 $(0.01) $ 3.07 $ -- $(2.94)
1996(3) 12.20 0.02 3.26 (0.05) (0.59)
</TABLE>
* Annualized.
** Average commission rate paid per share for security purchases and
sales during the period. Presentation of the rate is only required for
fiscal years beginning after September 1, 1995.
+ Returns are for the period indicated and have not been annualized.
(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.
(7) Commenced operations on January 31, 1997
(8) Commenced operations on July 1, 1992.
(9) Commenced operations on June 9, 1992.
(A) Total return figures do not reflect applicable sales loads.
(B) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund
changed its name to the Mid-Cap Equity Fund.
126
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
NET INVESTMENT
RATIO OF INCOME (LOSS)
RATIO OF EXPENSES TO TO
NET AVERAGE NET AVERAGE NET
INVESTMENT ASSETS ASSETS
RATIO OF INCOME (EXCLUDING (EXCLUDING
NET ASSET TOTAL NET ASSETS EXPENSES TO (LOSS) TO WAIVERS WAIVERS PORTFOLIO
VALUE END RETURN END OF AVERAGE NET AVERAGE NET AND AND TURNOVER
OF PERIOD (A) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
--------- --------- ------------ ----------- ----------- --------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
Trust Shares
$13.71 22.18% $1,488,062 0.91% 2.40% 0.91% 2.40% 105.03%
13.15 27.91% 1,244,399 0.92% 2.86% 0.92% 2.86% 133.99%
11.59 19.06% 991,977 0.95% 3.16% 0.95% 3.16% 125.71%
10.54 9.95% 573,082 0.88% 3.21% 0.97% 3.12% 149.28%
10.23 9.05%* 137,761 0.80%* 4.32%* 0.96%* 4.16%* 34.71%
Investor Shares
$13.68 21.69% $ 165,999 1.30% 2.01% 1.31% 2.00% 105.03%
13.13 27.39% 130,597 1.30% 2.47% 1.37% 2.40% 133.99%
11.58 18.71% 92,256 1.30% 2.80% 1.41% 2.69% 125.71%
10.52 9.27% 60,589 1.25% 2.80% 1.44% 2.61% 149.28%
10.23 19.42%* 24,779 1.15%* 4.51%* 1.63%* 4.04%* 34.71%
Flex Shares
$13.61 20.91% $ 73,466 2.00% 1.33% 2.03% 1.30% 105.03%
13.08 26.52%* 26,298 2.00%* 1.72%* 2.15%* 1.57%* 133.99%
MID-CAP EQUITY FUND (B)
Trust Shares
$13.21 14.23% $ 287,370 1.15% 0.23% 1.26% 0.12% 151.68%
12.76 25.54% 253,905 1.15% 0.70% 1.29% 0.56% 115.62%
11.00 12.56% 125,562 1.15% 0.88% 1.32% 0.71% 65.63%
9.85 (1.39%)+ 57,036 1.15%* 1.20%* 1.68%* 0.67%* 7.99%
Investor Shares
$13.17 13.76% $ 20,245 1.60% (0.21%) 1.85% (0.46%) 151.68%
12.74 24.93% 17,971 1.60% 0.25% 1.96% (0.11%) 115.62%
10.99 11.96% 7,345 1.60% 0.43% 2.27% (0.24%) 65.63%
9.84 (1.60%)+ 3,004 1.60%* 0.74%* 4.60%* (2.26%)* 7.99%
Flex Shares
$13.04 13.06% $ 10,120 2.20% (0.85%) 2.58% (1.23%) 151.68%
12.69 23.00%* 5,029 2.20%* (0.37%)* 3.04%* (1.21%)* 115.62%
SMALL CAP EQUITY FUND
Trust Shares
$11.07 10.97%+ $ 131,049 1.20%* 1.86%* 1.37%* 1.69%* 27.46%
CAPITAL GROWTH FUND
Trust Shares
$15.09 24.66% $1,085,128 1.15% 0.83% 1.25% 0.73% 141.32%
14.90 28.97% 981,498 1.15% 0.90% 1.27% 0.78% 156.46%
12.18 6.63% 984,205 1.15% 1.38% 1.28% 1.25% 127.79%
11.99 3.87% 891,870 1.15% 1.25% 1.29% 1.11% 123.87%
11.95 17.90%* 507,692 1.15%* 1.43%* 1.28%* 1.30%* 95.02%
Investor Shares
$15.06 23.74% $ 218,660 1.80% 0.19% 2.02% (0.03%) 141.32%
14.89 28.18% 191,078 1.80% 0.24% 2.08% (0.04%) 156.46%
12.17 5.93% 160,875 1.80% 0.73% 2.10% 0.43% 127.79%
11.98 3.26% 170,795 1.80% 0.64% 2.11% 0.33% 123.87%
11.93 20.49%* 131,858 1.80%* 0.81%* 2.06%* 0.55%* 95.02%
Flex Shares
$14.96 23.24% $ 36,753 2.27% (0.29%) 2.43% (0.45%) 141.32%
14.84 27.48%* 10,969 2.27%* (0.29%)* 2.68%* (0.70%)* 156.46%
<CAPTION>
AVERAGE
COMMISSION
RATE**
----------
<S> <C>
VALUE INCOME STOCK FUND
Trust Shares
$0.0609
n/a
n/a
n/a
n/a
Investor Shares
$0.0609
n/a
n/a
n/a
n/a
Flex Shares
$0.0609
n/a
MID-CAP EQUITY FUND (B)
Trust Shares
$0.0587
n/a
n/a
n/a
Investor Shares
$0.0587
n/a
n/a
n/a
Flex Shares
$0.0587
n/a
SMALL CAP EQUITY FUND
Trust Shares
$0.0523
CAPITAL GROWTH FUND
Trust Shares
$0.0620
n/a
n/a
n/a
n/a
Investor Shares
$0.0620
n/a
n/a
n/a
n/a
Flex Shares
$0.0620
n/a
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
127
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED AND DISTRIBUTIONS
INVESTMENT UNREALIZED GAINS FROM
NET ASSET VALUE INCOME (LOSSES) DISTRIBUTIONS FROM REALIZED
BEGINNING OF PERIOD (LOSS) ON INVESTMENTS NET INVESTMENT INCOME CAPITAL GAINS
------------------- ---------- ---------------- ---------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCED FUND
Trust Shares
1997 $11.55 $ 0.33 $ 1.47 $(0.32) $(1.09)
1996 10.26 0.33 1.41 (0.34) (0.11)
1995 9.76 0.33 0.49 (0.32) --
1994(1) 10.00 0.11 (0.29) (0.06) --
Investor Shares
1997 $11.60 $ 0.29 $ 1.48 $(0.29) $(1.09)
1996 10.30 0.30 1.41 (0.30) (0.11)
1995 9.79 0.28 0.51 (0.28) --
1994(2) 10.00 0.03 (0.24) -- --
Flex Shares
1997 $11.53 $ 0.22 $ 1.45 $(0.21) $(1.09)
1996(3) 10.36 0.24 1.29 (0.25) (0.11)
EMERGING MARKETS EQUITY FUND
Trust Shares
1997(4) $10.00 $ 0.04 $ 0.75 $ -- $ --
INTERNATIONAL EQUITY INDEX FUND
Trust Shares
1997 $10.96 $ 0.10 $ 0.69 $(0.11) $(0.30)
1996 10.24 0.10 0.84 (0.13) (0.09)
1995(5) 10.00 0.08 0.19 (0.02) (0.01)
Investor Shares
1997 $10.88 $ 0.03 $ 0.72 $(0.07) $(0.30)
1996 10.20 0.05 0.85 (0.13) (0.09)
1995(5) 10.00 0.05 0.17 (0.01) (0.01)
Flex Shares
1997 $10.87 $(0.05) $ 0.72 $ -- $(0.30)
1996(6) 10.24 -- 0.82 (0.10) (0.09)
INTERNATIONAL EQUITY FUND
Trust Shares
1997 $11.40 $ 0.03 $ 2.57 $(0.02) $(0.35)
1996(7) 10.00 0.05 1.35 -- --
Investor Shares
1997 $11.38 $(0.01) $ 2.56 $ -- $(0.35)
1996(8) 10.44 0.04 0.90 -- --
Flex Shares
1997 $11.37 $(0.04) $ 2.49 $ -- $(0.35)
1996(8) 10.44 0.02 0.91 -- --
SUNBELT EQUITY FUND
Trust Shares
1997 $14.11 $(0.09) $ 0.25 $ -- $(0.99)
1996 10.03 (0.04) 4.32 -- (0.20)
1995 9.70 (0.01) 0.38 -- (0.04)
1994(1) 10.00 -- (0.30) -- --
Investor Shares
1997 $13.95 $(0.14) $ 0.24 $ -- $(0.99)
1996 9.96 (0.11) 4.30 -- (0.20)
1995 9.69 (0.05) 0.36 -- (0.04)
1994(2) 10.00 (0.02) (0.29) -- --
Flex Shares
1997 $13.97 $(0.14) $ 0.16 $ -- $(0.99)
1996(9) 10.20 (0.07) 4.04 -- (0.20)
</TABLE>
* Annualized.
** Average commission rate paid per share for security purchases and
sales during the period. Presentation of the rate is only required for
fiscal years beginning after September 1, 1995.
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on January 3, 1994.
(2) Commenced operations on January 4, 1994.
(3) Commenced operations on June 14, 1995.
(4) Commenced operations on January 31, 1997.
(5) Commenced operations on June 6, 1994.
(6) Commenced operations on June 8, 1995.
(7) Commenced operations on December 1, 1995.
(8) Commenced operations on January 2, 1996.
(9) Commenced operations on June 5, 1995.
(A) Total return figures do not reflect applicable sales loads.
128
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
NET INVESTMENT
RATIO OF INCOME (LOSS)
RATIO OF EXPENSES TO TO
NET AVERAGE NET AVERAGE NET
INVESTMENT ASSETS ASSETS
RATIO OF INCOME (EXCLUDING (EXCLUDING
NET ASSET NET ASSETS EXPENSES TO (LOSS) TO WAIVERS WAIVERS
VALUE END TOTAL END OF AVERAGE NET AVERAGE NET AND AND
OF PERIOD RETURN (A) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS)
--------- ---------- ------------ ----------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
Trust Shares
$11.94 16.66% $151,358 0.95% 2.89% 1.08% 2.76%
11.55 17.26% 111,638 0.95% 3.00% 1.09% 2.86%
10.26 8.72% 89,051 0.95% 3.44% 1.11% 3.28%
9.76 (1.78%)+ 90,579 0.95%* 2.76%* 1.25%* 2.46%*
Investor Shares
$11.99 16.27% $ 6,012 1.25% 2.58% 1.64% 2.19%
11.60 16.88% 4,896 1.25% 2.70% 1.89% 2.06%
10.30 8.29% 3,765 1.25% 3.17% 1.80% 2.62%
9.79 (2.10%)+ 2,311 1.25%* 2.46%* 4.91%* (1.20%)*
Flex Shares
$11.90 15.40% $ 6,067 2.01% 1.84% 2.45% 1.40%
11.53 15.58%* 3,131 2.00%* 1.85%* 2.97%* 0.88%*
EMERGING MARKETS EQUITY FUND
Trust Shares
$10.79 7.90%+ $ 39,495 1.55%* 1.37%* 2.04%* 0.88%*
INTERNATIONAL EQUITY INDEX FUND
Trust Shares
$11.34 7.48% $ 53,516 1.05% 0.71% 1.15% 0.61%
10.96 9.29% 90,980 1.05% 0.84% 1.19% 0.70%
10.24 2.69%+ 89,446 1.05%* 1.13%* 1.31%* 0.87%*
Investor Shares
$11.26 7.12% $ 5,592 1.45% 0.28% 1.88% (0.15%)
10.88 8.90% 5,597 1.45% 0.48% 2.06% (0.13%)
10.20 2.18%+ 3,960 1.45%* 0.67%* 2.44%* (0.32%)*
Flex Shares
$11.24 6.41% $ 900 2.10% (0.39%) 3.69% (1.98%)
10.87 8.32%+ 917 2.10%* (0.24%)* 4.14%* (2.28%)*
INTERNATIONAL EQUITY FUND
Trust Shares
$13.63 23.29% $489,325 1.46% 0.51% 1.51% 0.46%
11.40 14.00%+ 213,306 1.46%* 1.36%* 1.65%* 1.17%*
Investor Shares
$13.58 22.85% $ 10,674 1.81% 0.18% 2.05% (0.06%)
11.38 9.00%+ 3,448 1.81%* 1.73%* 3.14%* 0.40%*
Flex Shares
$13.47 21.98% $ 8,375 2.51% (0.27%) 3.03% (0.79%)
11.37 8.91%+ 953 2.51%* 1.08%* 5.86%* (2.27%)*
SUNBELT EQUITY FUND
Trust Shares
$13.28 1.48% $381,371 1.15% (0.65%) 1.26% (0.76%)
14.11 43.19% 412,430 1.15% (0.34%) 1.28% (0.47%)
10.03 3.81% 258,908 1.15% (0.12%) 1.30% (0.27%)
9.70 (2.99%)+ 128,280 1.15%* (0.19%)* 1.58%* (0.62%)*
Investor Shares
$13.06 1.05% $ 28,095 1.60% (1.10%) 1.84% (1.34%)
13.95 42.58% 29,002 1.60% (0.79%) 1.93% (1.12%)
9.96 3.20% 22,180 1.60% (0.57%) 1.98% (0.95%)
9.69 (3.10%)+ 16,077 1.60%* (0.63%)* 2.04%* (1.07%)*
Flex Shares
$13.00 0.46% $ 5,689 2.20% (1.72%) 2.69% (2.21%)
13.97 39.86%* 2,705 2.20%* (1.43%)* 3.62%* (2.85%)*
<CAPTION>
PORTFOLIO AVERAGE
TURNOVER COMMISSION
RATE RATE**
--------- ----------
<S> <C> <C>
BALANCED FUND
Trust Shares
196.73% $0.0608
154.63% n/a
156.61% n/a
105.65% n/a
Investor Shares
196.73% $0.0608
154.63% n/a
156.61% n/a
105.65% n/a
Flex Shares
196.73% $0.0608
154.63% n/a
EMERGING MARKETS EQUITY FUND
Trust Shares
23.88% $0.0019
INTERNATIONAL EQUITY INDEX FUND
Trust Shares
1.82% $0.0244
30.46% n/a
10.37% n/a
Investor Shares
1.82% $0.0244
30.46% n/a
10.37% n/a
Flex Shares
1.82% $0.0244
30.46% n/a
INTERNATIONAL EQUITY FUND
Trust Shares
139.37% $0.0313
113.34% n/a
Investor Shares
139.37% $0.0313
113.34% n/a
Flex Shares
139.37% $0.0313
113.34% n/a
SUNBELT EQUITY FUND
Trust Shares
72.17% $0.0674
106.27% n/a
80.03% n/a
21.42% n/a
Investor Shares
72.17% $0.0674
106.27% n/a
80.03% n/a
21.42% n/a
Flex Shares
72.17% $0.0674
106.27% n/a
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
129
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM
BEGINNING OF INVESTMENT (LOSSES) DISTRIBUTIONS FROM REALIZED
PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME CAPITAL GAINS
------------ ---------- ---------------- ---------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE TAX-EXEMPT BOND FUND
Trust Shares
1997 $11.10 $ 0.44 $ 0.33 $(0.44) $(0.21)
1996 11.28 0.45 0.19 (0.45) (0.37)
1995 10.68 0.46 0.60 (0.46) --
1994(1) 11.37 0.22 (0.34) (0.22) (0.35)
Investor Shares
1997 $11.12 $ 0.40 $ 0.33 $(0.40) $(0.21)
1996 11.30 0.41 0.19 (0.41) (0.37)
1995 10.69 0.42 0.61 (0.42) --
1994 10.79 0.33 0.25 (0.33) (0.35)
1993(2) 10.00 0.35 0.82 (0.35) (0.03)
Flex Shares
1997 $11.11 $ 0.35 $ 0.33 $(0.35) $(0.21)
1996(3) 11.30 0.37 0.18 (0.37) (0.37)
FLORIDA TAX-EXEMPT BOND FUND
Trust Shares
1997 $10.06 $ 0.46 $ 0.25 $(0.46) $(0.03)
1996 10.18 0.46 (0.07) (0.46) (0.05)
1995 9.75 0.44 0.43 (0.44) --
1994(4) 10.00 0.13 (0.25) (0.13) --
Investor Shares
1997 $10.07 $ 0.44 $ 0.25 $(0.44) $(0.03)
1996 10.18 0.44 (0.06) (0.44) (0.05)
1995 9.75 0.42 0.43 (0.42) --
1994(5) 10.00 0.13 (0.25) (0.13) --
Flex Shares
1997 $10.08 $ 0.39 $ 0.25 $(0.39) $(0.03)
1996(3) 10.19 0.39 (0.06) (0.39) (0.05)
TENNESSEE TAX-EXEMPT BOND FUND
Trust Shares
1997 $ 9.40 $ 0.43 $ 0.23 $(0.43) $ --
1996 9.50 0.43 (0.11) (0.42) --
1995 9.22 0.44 0.28 (0.44) --
1994(6) 10.00 0.12 (0.77) (0.13) --
Investor Shares
1997 $ 9.42 $ 0.41 $ 0.23 $(0.41) $ --
1996 9.53 0.41 (0.10) (0.42) --
1995 9.23 0.44 0.29 (0.43) --
1994(7) 10.00 0.13 (0.77) (0.13) --
Flex Shares
1997 $ 9.41 $ 0.37 $ 0.23 $(0.37) $ --
1996(8) 9.59 0.37 (0.18) (0.37) --
GEORGIA TAX-EXEMPT BOND FUND
Trust Shares
1997 $ 9.56 $ 0.42 $ 0.22 $(0.42) $(0.05)
1996 9.63 0.43 (0.05) (0.43) (0.02)
1995 9.42 0.42 0.21 (0.42) --
1994(5) 10.00 0.14 (0.58) (0.14) --
Investor Shares
1997 $ 9.58 $ 0.40 $ 0.21 $(0.40) $(0.05)
1996 9.65 0.41 (0.05) (0.41) (0.02)
1995 9.44 0.40 0.21 (0.40) --
1994(7) 10.00 0.13 (0.56) (0.13) --
Flex Shares
1997 $ 9.56 $ 0.35 $ 0.22 $(0.35) $(0.05)
1996(9) 9.72 0.36 (0.14) (0.36) (0.02)
</TABLE>
* Annualized.
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on October 21, 1993.
(2) Commenced operations on June 9, 1992.
(3) Commenced operations on June 1, 1995.
(4) Commenced operations on January 25, 1994.
(5) Commenced operations on January 18, 1994.
(6) Commenced operations on January 27, 1994.
(7) Commenced operations on January 19, 1994.
(8) Commenced operations on June 5, 1995.
(9) Commenced operations on June 6, 1995.
(A) Total return figures do not reflect applicable sales loads.
130
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
EXPENSES TO
RATIO OF AVERAGE NET
NET ASSETS
RATIO OF INVESTMENT (EXCLUDING
NET ASSET NET ASSETS EXPENSES TO INCOME TO WAIVERS
VALUE END TOTAL END OF AVERAGE NET AVERAGE NET AND
OF PERIOD RETURN (A) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS)
--------- ---------- ------------ ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE TAX-EXEMPT BOND FUND
Trust Shares
$11.22 7.13% $139,144 0.75% 3.96% 0.86%
11.10 5.82% 124,507 0.75% 4.01% 0.89%
11.28 10.21% 78,208 0.75% 4.34% 0.91%
10.68 (1.10%)+ 44,595 0.75%* 3.46%* 0.95%*
Investor Shares
$11.24 6.69% $ 31,857 1.15% 3.56% 1.38%
11.12 5.40% 37,427 1.15% 3.61% 1.42%
11.30 9.91% 41,693 1.15% 3.88% 1.43%
10.69 5.37% 46,182 1.14% 2.96% 1.51%
10.79 11.88%* 15,844 1.12%* 3.61%* 1.83%*
Flex Shares
$11.23 6.19% $ 4,681 1.63% 3.08% 2.15%
11.11 4.91%* 5,536 1.63%* 3.12%* 2.25%*
FLORIDA TAX-EXEMPT BOND FUND
Trust Shares
$10.28 7.22% $ 50,487 0.65% 4.48% 0.80%
10.06 3.87% 30,790 0.65% 4.49% 0.88%
10.18 9.26% 10,118 0.65% 4.63% 1.13%
9.75 (1.19%)+ 3,192 0.65%* 3.86%* 1.12%*
Investor Shares
$10.29 7.00% $ 3,226 0.85% 4.28% 1.31%
10.07 3.76% 4,025 0.85% 4.28% 1.36%
10.18 9.04% 3,320 0.85% 4.36% 1.50%
9.75 (1.22%)+ 2,280 0.85%* 3.67%* 3.20%*
Flex Shares
$10.30 6.48% $ 3,000 1.35% 3.78% 2.28%
10.08 3.27%* 2,692 1.35%* 3.79%* 2.54%*
TENNESSEE TAX-EXEMPT BOND FUND
Trust Shares
$ 9.63 7.16% $ 1,973 0.65% 4.51% 1.72%
9.40 3.43% 1,823 0.65% 4.49% 1.68%
9.50 8.17% 1,664 0.65% 4.90% 2.65%
9.22 (6.52%)+ 594 0.65%* 4.24%* 1.43%*
Investor Shares
$ 9.65 6.93% $ 1,602 0.85% 4.31% 1.76%
9.42 3.28% 1,523 0.85% 4.29% 2.08%
9.53 8.24% 1,170 0.85% 4.70% 2.10%
9.23 (6.39%)+ 1,127 0.85%* 3.74%* 6.60%*
Flex Shares
$ 9.64 6.42% $ 2,505 1.35% 3.81% 2.34%
9.41 1.98%* 2,017 1.34%* 3.80%* 2.74%*
GEORGIA TAX-EXEMPT BOND FUND
Trust Shares
$ 9.73 6.79% $ 39,732 0.65% 4.31% 0.81%
9.56 3.89% 22,950 0.65% 4.36% 0.89%
9.63 6.94% 13,187 0.65% 4.56% 0.98%
9.42 (4.43%)+ 4,338 0.65%* 4.12%* 1.06%*
Investor Shares
$ 9.74 6.47% $ 3,511 0.85% 4.10% 1.33%
9.58 3.69% 3,418 0.85% 4.17% 1.41%
9.65 6.70% 3,268 0.85% 4.31% 1.43%
9.44 (4.29%)+ 3,300 0.85%* 3.93%* 2.36%*
Flex Shares
$ 9.73 6.06% $ 4,662 1.35% 3.60% 2.07%
9.56 2.25%* 4,207 1.35%* 3.66%* 2.35%*
<CAPTION>
RATIO OF
NET INVESTMENT
INCOME (LOSS)
TO
AVERAGE NET
ASSETS
(EXCLUDING
WAIVERS PORTFOLIO
AND TURNOVER
REIMBURSEMENTS) RATE
--------------- --------
<S> <C> <C>
INVESTMENT GRADE TAX-EXEMPT BOND
Trust Shares
3.85% 489.02%
3.87% 513.90%
4.18% 591.91%
3.26%* 432.46%
Investor Shares
3.33% 489.02%
3.34% 513.90%
3.60% 591.91%
2.59% 432.46%
2.90%* 344.87%
Flex Shares
2.56% 489.02%
2.50%* 513.90%
FLORIDA TAX-EXEMPT BOND FUND
Trust Shares
4.33% 134.62%
4.26% 62.68%
4.15% 105.01%
3.39%* 53.24%
Investor Shares
3.82% 134.62%
3.77% 62.68%
3.71% 105.01%
1.32%* 53.24%
Flex Shares
2.85% 134.62%
2.60%* 62.68%
TENNESSEE TAX-EXEMPT BOND FUND
Trust Shares
3.44% 16.09%
3.46% 41.00%
2.90% 27.73%
3.46%* 13.05%
Investor Shares
3.40% 16.09%
3.06% 41.00%
3.45% 27.73%
(2.01%)* 13.05%
Flex Shares
2.82% 16.09%
2.40%* 41.00%
GEORGIA TAX-EXEMPT BOND FUND
Trust Shares
4.15% 14.81%
4.12% 60.02%
4.23% 24.50%
3.71%* 25.90%
Investor Shares
3.62% 14.81%
3.61% 60.02%
3.73% 24.50%
2.42%* 25.90%
Flex Shares
2.88% 14.81%
2.66%* 60.02%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
131
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED
AND
UNREALIZED DISTRIBUTIONS
NET ASSET GAINS FROM DISTRIBUTIONS
VALUE NET (LOSSES) NET FROM
BEGINNING INVESTMENT ON INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
--------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND FUND
Trust Shares
1997 $10.07 $ 0.60 $ 0.09 $(0.60) $ --
1996 10.26 0.60 (0.19) (0.60) --
1995 9.89 0.61 0.37 (0.61) --
1994 10.45 0.50 (0.36) (0.50) (0.20)
1993(1) 10.09 0.45 0.36 (0.45) --
Investor Shares
1997 $10.06 $ 0.56 $ 0.10 $(0.56) $ --
1996 10.26 0.56 (0.20) (0.56) --
1995 9.89 0.57 0.38 (0.58) --
1994 10.44 0.46 (0.35) (0.46) (0.20)
1993(2) 10.00 0.44 0.44 (0.44) --
Flex Shares
1997 $10.07 $ 0.51 $ 0.10 $(0.51) $ --
1996(3) 10.33 0.52 (0.26) (0.52) --
SHORT-TERM BOND FUND
Trust Shares
1997 $ 9.86 $ 0.53 $ 0.07 $(0.53) $(0.03)
1996 9.98 0.54 (0.10) (0.54) (0.02)
1995 9.79 0.53 0.19 (0.53) --
1994 10.01 0.42 (0.21) (0.42) (0.01)
1993(4) 10.00 0.08 0.01 (0.08) --
Investor Shares
1997 $ 9.88 $ 0.51 $ 0.06 $(0.51) $(0.03)
1996 10.01 0.52 (0.10) (0.53) (0.02)
1995 9.81 0.51 0.19 (0.50) --
1994 10.03 0.40 (0.21) (0.40) (0.01)
1993(5) 10.06 0.06 (0.03) (0.06) --
Flex Shares
1997 $ 9.88 $ 0.48 $ 0.06 $(0.48) $(0.03)
1996(6) 10.02 0.47 (0.12) (0.47) (0.02)
SHORT-TERM U.S. TREASURY SECURITIES FUND
Trust Shares
1997 $ 9.84 $ 0.51 $ 0.04 $(0.51) $ --
1996 9.93 0.55 (0.09) (0.55) --
1995 9.82 0.47 0.11 (0.47) --
1994 9.98 0.33 (0.11) (0.33) (0.05)
1993(4) 10.00 0.07 (0.02) (0.07) --
Investor Shares
1997 $ 9.84 $ 0.50 $ 0.04 $(0.50) $ --
1996 9.94 0.54 (0.10) (0.54) --
1995 9.83 0.46 0.11 (0.46) --
1994 9.99 0.32 (0.12) (0.31) (0.05)
1993(7) 10.01 0.06 (0.02) (0.06) --
Flex Shares
1997 $ 9.82 $ 0.47 $ 0.03 $(0.47) $ --
1996(8) 9.96 0.48 (0.14) (0.48) --
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Trust Shares
1997 $ 9.99 $ 0.58 $ 0.04 $(0.58) $(0.01)
1996 10.11 0.62 (0.14) (0.60) --
1995(9) 10.00 0.58 0.13 (0.60) --
Investor Shares
1997 $ 9.97 $ 0.56 $ 0.04 $(0.56) $(0.01)
1996 10.11 0.60 (0.14) (0.60) --
1995(10) 9.98 0.58 0.13 (0.58) --
Flex Shares
1997 $ 9.99 $ 0.52 $ 0.04 $(0.52) $(0.01)
1996(3) 10.14 0.55 (0.15) (0.55) --
</TABLE>
* Annualized.
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on July 16, 1992.
(2) Commenced operations on June 11, 1992.
(3) Commenced operations on June 7, 1995.
(4) Commenced operations on March 15, 1993.
(5) Commenced operations on March 22, 1993.
(6) Commenced operations on June 20, 1995.
(7) Commenced operations on March 18, 1993.
(8) Commenced operations on June 22, 1995.
(9) Commenced operations on June 7, 1994.
(10) Commenced operations on July 17, 1994.
132
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
EXPENSES TO
RATIO OF AVERAGE NET
NET ASSETS
RATIO OF INVESTMENT (EXCLUDING
NET ASSET NET ASSETS EXPENSES TO INCOME TO WAIVERS
VALUE END TOTAL END OF AVERAGE NET AVERAGE NET AND
OF PERIOD RETURN (A) PERIOD (000) ASSETS ASSETS REIMBURSEMENTS)
--------- ---------- ------------ ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND FUND
Trust Shares
$10.16 6.99% $633,646 0.75% 5.89% 0.85%
10.07 4.02% 599,514 0.75% 5.81% 0.87%
10.26 10.39% 543,308 0.75% 6.22% 0.88%
9.89 1.17% 460,538 0.75% 4.77% 0.88%
10.45 9.34%* 336,132 0.74%* 5.14%* 0.87%*
Investor Shares
$10.16 6.66% $ 33,165 1.15% 5.48% 1.41%
10.06 3.50% 36,155 1.15% 5.40% 1.44%
10.26 10.04% 33,772 1.15% 5.79% 1.49%
9.89 0.86% 35,775 1.14% 4.39% 1.41%
10.44 9.21%* 24,375 1.14%* 4.75%* 1.46%*
Flex Shares
$10.17 6.16% $ 5,763 1.64% 5.00% 2.20%
10.07 2.50%* 4,621 1.64%* 4.84%* 2.49%*
SHORT-TERM BOND FUND
Trust Shares
$ 9.90 6.30% $ 89,701 0.65% 5.37% 0.78%
9.86 4.45% 91,156 0.65% 5.39% 0.81%
9.98 7.60% 60,952 0.65% 5.49% 0.85%
9.79 2.02% 34,772 0.65% 4.15% 0.85%
10.01 4.45%* 25,334 0.64%* 3.88%* 1.11%*
Investor Shares
$ 9.91 5.97% $ 2,182 0.85% 5.16% 1.58%
9.88 4.23% 2,700 0.85% 5.20% 1.72%
10.01 7.44% 2,609 0.85% 5.24% 1.56%
9.81 1.81% 2,381 0.85% 3.94% 2.52%
10.03 1.65%* 716 0.85%* 3.85%* 7.22%*
Flex Shares
$ 9.91 5.62% $ 1,073 1.20% 4.82% 3.02%
9.88 3.73%* 966 1.20%* 4.77%* 4.06%*
SHORT-TERM U.S. TREASURY SECURITIES FUND
Trust Shares
$ 9.88 5.76% $ 21,988 0.65% 5.23% 0.92%
9.84 4.73% 10,149 0.65% 5.56% 1.00%
9.93 6.11% 9,599 0.65% 4.91% 1.08%
9.82 2.17% 12,723 0.65% 3.23% 0.81%
9.98 2.22%* 30,336 0.63%* 3.34%* 1.04%*
Investor Shares
$ 9.88 5.59% $ 3,921 0.80% 5.05% 1.35%
9.84 4.52% 4,192 0.80% 5.43% 1.32%
9.94 6.03% 7,144 0.80% 4.74% 1.33%
9.83 2.01% 4,841 0.78% 3.11% 1.41%
9.99 1.84%* 2,423 0.80%* 3.16%* 3.42%*
Flex Shares
$ 9.85 5.19% $ 1,091 1.05% 4.75% 2.51%
9.82 3.72%* 2,423 1.05%* 5.03%* 2.97%*
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Trust Shares
$10.02 6.43% $123,903 0.65% 5.81% 0.78%
9.99 4.84% 73,370 0.65% 6.04% 0.84%
10.11 7.50%+ 41,823 0.65%* 6.43%* 0.93%*
Investor Shares
$10.00 6.17% $ 2,426 0.90% 5.55% 1.48%
9.97 4.59% 2,512 0.90% 5.75% 2.25%
10.11 7.45%+ 623 0.90%* 6.27%* 7.74%*
Flex Shares
$10.02 5.80% $ 1,409 1.25% 5.20% 2.66%
9.99 4.10%* 1,349 1.25%* 5.38%* 3.59%*
<CAPTION>
RATIO OF
NET INVESTMENT
INCOME (LOSS)
TO
AVERAGE NET
ASSETS
(EXCLUDING
WAIVERS PORTFOLIO
AND TURNOVER
REIMBURSEMENTS) RATE
--------------- ---------
<S> <C> <C>
INVESTMENT GRADE BOND FUND
Trust Shares
5.79% 297.82%
5.69% 184.33%
6.09% 237.66%
4.64% 259.19%
5.01%* 299.32%
Investor Shares
5.22% 297.82%
5.11% 184.33%
5.45% 237.66%
4.12% 259.19%
4.43%* 299.32%
Flex Shares
4.44% 297.82%
3.99%* 184.33%
SHORT-TERM BOND FUND
Trust Shares
5.24% 117.83%
5.23% 162.62%
5.29% 200.49%
3.95% 74.85%
3.41%* 63.89%
Investor Shares
4.43% 117.83%
4.33% 162.62%
4.53% 200.49%
2.27% 74.85%
(2.52%)* 63.89%
Flex Shares
3.00% 117.83%
1.91%* 162.62%
SHORT-TERM U.S. TREASURY SECURITIES FUND
Trust Shares
4.96% 92.89%
5.21% 94.00%
4.48% 87.98%
3.07% 116.57%
2.93%* 36.44%
Investor Shares
4.50% 92.89%
4.91% 94.00%
4.21% 87.98%
2.48% 116.57%
0.54%* 36.44%
Flex Shares
3.29% 92.89%
3.11%* 94.00%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
Trust Shares
5.68% 133.45%
5.85% 83.01%
6.15%* 67.63%
Investor Shares
4.97% 133.45%
4.40% 83.01%
(0.57%)* 67.63%
Flex Shares
3.79% 133.45%
3.04%* 83.01%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
133
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM FROM
BEGINNING OF INVESTMENT (LOSSES) NET INVESTMENT REALIZED
PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS
------------ ---------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES FUND
Trust Shares
1997 $ 9.91 $ 0.62 $ 0.11 $(0.62) $ --
1996 10.27 0.62 (0.33) (0.62) (0.03)
1995(1) 9.98 0.53 0.29 (0.53) --
Investor Shares
1997 $ 9.90 $ 0.58 $ 0.12 $(0.58) $ --
1996 10.26 0.59 (0.33) (0.59) (0.03)
1995(2) 10.00 0.56 0.26 (0.56) --
Flex Shares
1997 $ 9.91 $ 0.53 $ 0.11 $(0.53) $ --
1996(3) 10.31 0.52 (0.37) (0.52) (0.03)
PRIME QUALITY MONEY MARKET FUND
Trust Shares
1997 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.05 -- (0.05) --
1994 1.00 0.03 -- (0.03) --
1993(4) 1.00 0.03 -- (0.03) --
Investor Shares
1997 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.05 -- (0.05) --
1994 1.00 0.03 -- (0.03) --
1993(4) 1.00 0.03 -- (0.03) --
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Trust Shares
1997 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.05 -- (0.05) --
1994 1.00 0.03 -- (0.03) --
1993(4) 1.00 0.03 -- (0.03) --
Investor Shares
1997 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1996 1.00 0.05 -- (0.05) --
1995 1.00 0.04 -- (0.04) --
1994 1.00 0.03 -- (0.03) --
1993(4) 1.00 0.03 -- (0.03) --
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
1997 $ 1.00 $ 0.03 $ -- $(0.03) $ --
1996 1.00 0.03 -- (0.03) --
1995 1.00 0.03 -- (0.03) --
1994 1.00 0.02 -- (0.02) --
1993(4) 1.00 0.02 -- (0.02) --
Investor Shares
1997 $ 1.00 $ 0.03 $ -- $(0.03) $ --
1996 1.00 0.03 -- (0.03) --
1995 1.00 0.03 -- (0.03) --
1994 1.00 0.02 -- (0.02) --
1993(4) 1.00 0.02 -- (0.02) --
</TABLE>
* Annualized.
+ Returns are for the period indicated and have not been annualized.
(A) Total return figures do not reflect applicable sales loads.
(1) Commenced operations on July 31, 1994.
(2) Commenced operations on June 9, 1994.
(3) Commenced operations on June 7, 1995.
(4) Commenced operations on June 8, 1992.
134
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
EXPENSES TO
RATIO OF AVERAGE NET
RATIO OF NET ASSETS
EXPENSES INVESTMENT (EXCLUDING
NET ASSET NET ASSETS TO INCOME TO WAIVERS
VALUE END TOTAL END OF AVERAGE AVERAGE AND
OF PERIOD RETURN (A) PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS)
--------- ---------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES FUND
Trust Shares
$10.02 7.54% $ 19,471 0.75% 6.19% 1.02%
9.91 2.77% 10,277 0.75% 6.05% 1.25%
10.27 8.64%+ 3,291 0.75%* 6.67%* 3.33%*
Investor Shares
$10.02 7.21% $ 2,243 1.15% 5.76% 1.79%
9.90 2.47% 2,396 1.15% 5.68% 2.50%
10.26 8.61%+ 589 1.15%* 6.08%* 6.84%*
Flex Shares
$10.02 6.57% $ 2,801 1.66% 5.26% 2.42%
9.91 1.42%* 2,826 1.66%* 5.18%* 2.86%*
PRIME QUALITY MONEY MARKET FUND
Trust Shares
$ 1.00 5.01% $1,086,555 0.58% 4.90% 0.76%
1.00 5.25% 1,050,800 0.58% 5.11% 0.78%
1.00 4.79% 799,189 0.58% 4.77% 0.79%
1.00 2.88% 583,399 0.58% 2.86% 0.79%
1.00 2.92%* 410,991 0.58%* 2.85%* 0.78%*
Investor Shares
$ 1.00 4.84% $ 283,544 0.75% 4.74% 0.97%
1.00 5.08% 215,696 0.75% 4.94% 1.00%
1.00 4.62% 157,616 0.75% 4.55% 1.01%
1.00 2.71% 129,415 0.75% 2.67% 0.99%
1.00 2.75%* 61,578 0.75%* 2.68%* 1.02%*
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Trust Shares
$ 1.00 4.83% $ 344,350 0.61% 4.73% 0.76%
1.00 5.14% 325,493 0.61% 5.02% 0.78%
1.00 4.67% 434,111 0.61% 4.64% 0.80%
1.00 2.77% 309,228 0.61% 2.69% 0.77%
1.00 2.79%* 453,567 0.61%* 2.71%* 0.78%*
Investor Shares
$ 1.00 4.69% $ 63,178 0.75% 4.59% 0.96%
1.00 4.99% 58,608 0.75% 4.88% 0.99%
1.00 4.51% 46,639 0.75% 4.51% 1.02%
1.00 2.63% 32,395 0.75% 2.54% 0.97%
1.00 2.65%* 16,688 0.75%* 2.57%* 1.11%*
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
$ 1.00 3.09% $ 333,006 0.50% 3.04% 0.66%
1.00 3.28% 273,613 0.50% 3.23% 0.68%
1.00 3.10% 215,413 0.45% 3.12% 0.70%
1.00 2.08% 143,982 0.42% 2.05% 0.71%
1.00 2.12%* 78,416 0.41%* 2.07%* 0.70%*
Investor Shares
$ 1.00 2.97% $ 102,013 0.62% 2.92% 0.83%
1.00 3.16% 95,223 0.62% 3.10% 0.85%
1.00 3.00% 87,647 0.55% 3.00% 0.87%
1.00 1.96% 61,675 0.54% 1.93% 0.88%
1.00 2.00%* 35,209 0.53%* 1.95%* 0.95%*
<CAPTION>
RATIO OF
NET INVESTMENT
INCOME (LOSS)
TO
AVERAGE NET
ASSETS
(EXCLUDING
WAIVERS PORTFOLIO
AND TURNOVER
REIMBURSEMENTS) RATE
--------------- --------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES FUND
Trust Shares
5.92% 21.15%
5.55% 83.38%
4.09%* 30.39%
Investor Shares
5.12% 21.15%
4.33% 83.38%
0.39%* 30.39%
Flex Shares
4.50% 21.15%
3.98%* 83.38%
PRIME QUALITY MONEY MARKET FUND
Trust Shares
4.72% --
4.91% --
4.56% --
2.65% --
2.65%* --
Investor Shares
4.52% --
4.69% --
4.29% --
2.43% --
2.41%* --
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Trust Shares
4.58% --
4.85% --
4.45% --
2.53% --
2.54%* --
Investor Shares
4.38% --
4.64% --
4.24% --
2.32% --
2.21%* --
TAX-EXEMPT MONEY MARKET FUND
Trust Shares
2.88% --
3.05% --
2.87% --
1.76% --
1.78%* --
Investor Shares
2.71% --
2.87% --
2.68% --
1.59% --
1.53%* --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
135
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
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 twenty-three portfolios: the Value Income
Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital
Growth Fund, the Balanced Fund, the Emerging Markets Equity Fund, the
International Equity Index Fund, the International Equity Fund, the Sunbelt
Equity Fund, the Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt
Bond Fund, the Tennessee Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund,
the Investment Grade Bond Fund, the Short-Term Bond Fund, the Short-Term U.S.
Treasury Securities Fund, the Limited-Term Federal Mortgage Securities Fund, and
the U.S. Government Securities Fund, (collectively the "Non-Dollar Funds"), the
Prime Quality Money Market Fund, the U.S. Government Securities Money Market
Fund, the Tax-Exempt Money Market Fund, the Classic Institutional Cash
Management Money Market Fund and the Classic Institutional U.S. Treasury
Securities Money Market Fund, (collectively the "Money Market 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 that are listed on a
securities exchange for which market quotations are available are valued at
the last quoted sales price 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 Emerging Markets Equity Fund, 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 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 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
136
<PAGE>
- --------------------------------------------------------------------------------
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 Emerging Markets
Equity, 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 Emerging Markets Equity, the International Equity and the International
Equity Index Funds do not isolate that portion of gains and losses on
investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Emerging Markets Equity, 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 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 Sunbelt Equity, the Mid-Cap Equity, the Small Cap Equity and the
Balanced Funds. Distributions from net investment income are declared and
paid annually by the Emerging Markets Equity, 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 OF COMPONENTS OF NET ASSETS--The timing and
characterization of certain income and capital gains distributions are
determined annually in accordance with federal tax regulations which may
differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions during such period. These book/tax differences may be
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences arise.
Accordingly, the following permanent differences, primarily attributable to
a net operating loss in the Sunbelt Equity Fund and the
137
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
classification of short-term capital gains and ordinary income for tax
purposes related to the other funds, have been reclassified to/from the
following accounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED
ACCUMULATED NET INVESTMENT
PAID-IN-CAPITAL REALIZED GAIN INCOME
(000) (000) (000)
--------------- ------------- --------------
<S> <C> <C> <C>
Mid-Cap Equity Fund..................... $-- $(207) $ 207
International Equity Index Fund......... -- (204) 204
International Equity Fund............... -- 83 (83)
Sunbelt Equity Fund..................... (2,967) -- 2,967
Short-Term Bond Fund.................... -- (54) 54
</TABLE>
These reclassifications have no effect on net assets or net asset values per
share.
USE OF ESTIMATES--The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and reported amounts of revenues and expenses
during the reporting period. Actual amounts could differ from these
estimates.
3. Organization Costs and Transactions with Affiliates:
The Trust incurred organization costs of approximately $808,836 including
approximately $395,594 relating to state registration fees. 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 with the
exception of state registration fees, which are being amortized over a period of
twelve months. The costs include legal fees of approximately $60,383 for
organizational work performed by a law firm of which two officers of the Trust
are partners. On March 18, 1992, the Trust sold initial shares of beneficial
interest to SEI Fund Resources (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 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
Investments Distribution Co. (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 regarding the Flex Shares and a Distribution Agreement dated November
21, 1995 with respect to the Trust and Investor shares. 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 Distribution and 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 Management ("Trusco"), the SunTrust Bank, Atlanta and SunTrust
Bank, Chattanooga have entered into advisory agreements dated May 29, 1992, June
15, 1993, December 20, 1993 and December 20, 1993 respectively.
138
<PAGE>
- --------------------------------------------------------------------------------
Under terms of the respective agreements, the Funds are charged the following
annual fees based upon average daily net assets:
<TABLE>
<CAPTION>
MAXIMUM
INVESTOR MAXIMUM
MAXIMUM TRUST SHARE INVESTOR FLEX SHARE FLEX
ANNUAL SHARE DISTRI- SHARE DISTRI- SHARE
ADVISORY MAXIMUM BUTION MAXIMUM BUTION AND MAXIMUM
FEE EXPENSE FEE EXPENSE SERVICE 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% 1.66%
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% 2.01%
Small Cap Equity Fund............................. 1.15% 1.20% -- -- -- --
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%
Emerging Markets Equity Fund...................... 1.30% 1.55% -- -- -- --
<CAPTION>
MAXIMUM
INVESTOR MAXIMUM
MAXIMUM TRUST SHARE INVESTOR FLEX SHARE FLEX
ANNUAL SHARE DISTRI- SHARE DISTRI- SHARE
ADVISORY MAXIMUM BUTION MAXIMUM BUTION AND MAXIMUM
FEE EXPENSE FEE EXPENSE SERVICE FEE EXPENSE
-------- ------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
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 Emerging Markets Equity, the International Equity and the
International Equity Index Funds who utilize the Bank of New York as custodian.
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.
139
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
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, 1997, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------- ----------
<S> <C> <C>
Value Income Stock Fund................................. $1,510,065 $1,479,214
Mid-Cap Equity Fund..................................... 418,847 401,422
Small Cap Equity Fund................................... 138,246 20,448
Capital Growth Fund..................................... 1,613,504 1,785,362
Balanced Fund........................................... 162,679 134,261
Emerging Markets Equity Fund............................ 39,912 6,023
International Equity Index Fund......................... 1,316 43,227
International Equity Fund............................... 683,881 480,728
Sunbelt Equity Fund..................................... 297,705 337,710
Investment Grade Tax-Exempt Bond Fund................... 737,733 729,258
Florida Tax-Exempt Bond Fund............................ 69,939 56,743
Tennessee Tax-Exempt Bond Fund.......................... 858 814
Georgia Tax-Exempt Bond Fund............................ 18,954 5,152
Investment Grade Bond Fund.............................. 833,857 550,764
Short-Term Bond Fund.................................... 57,688 42,957
Short-Term U.S. Treasury Securities Fund................ -- --
Limited-Term Federal Mortgage Securities Fund........... -- --
U.S. Government Securities Fund......................... -- --
</TABLE>
The cost of purchases and proceeds from sales of U.S. Government Securities
were:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------- ----------
<S> <C> <C>
Value Income Stock Fund.............................. $ -- $ --
Mid-Cap Equity Fund.................................. -- --
Small Cap Equity Fund................................ -- --
Capital Growth Fund.................................. -- --
Balanced Fund........................................ 79,476 93,071
Emerging Markets Equity Fund......................... -- --
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........................... $1,016,624 $1,283,246
Short-Term Bond Fund................................. 49,756 70,593
Short-Term U.S. Treasury Securities Fund............. 32,074 21,455
Limited-Term Federal Mortgage Securities Fund........ 187,177 136,508
U.S. Government Securities Fund...................... 12,660 4,083
</TABLE>
At May 31, 1997, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Funds
at May 31, 1997, were as follows:
<TABLE>
<CAPTION>
VALUE
INCOME MID-CAP SMALL-CAP
STOCK EQUITY EQUITY
FUND FUND FUND
(000) (000) (000)
--------- ----------- -----------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation............ $ 181,099 $ 36,213 $ 8,808
Aggregate gross unrealized depreciation............ (26,682) (10,378) (1,164)
--------- ----------- -----------
Net unrealized appreciation........................ $ 154,417 $ 25,835 $ 7,644
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
EMERGING
CAPITAL MARKETS
GROWTH BALANCED EQUITY
FUND FUND FUND
(000) (000) (000)
--------- ----------- -----------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation............ $ 201,727 $ 13,349 $ 3,401
Aggregate gross unrealized depreciation............ (20,916) (1,442) (1,293)
--------- ----------- -----------
Net unrealized appreciation........................ $ 180,811 $ 11,907 $ 2,108
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY INTERNATIONAL SUNBELT
INDEX EQUITY EQUITY
FUND FUND FUND
(000) (000) (000)
------------- ------------- ---------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation...... $ 12,670 $ 69,379 $ 94,010
Aggregate gross unrealized depreciation...... (4,169) (4,549) (12,447)
------------- ------------- ---------
Net unrealized appreciation.................. $ 8,501 $ 64,830 $ 81,563
------------- ------------- ---------
------------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT
GRADE FLORIDA TENNESSEE
TAX-EXEMPT TAX-EXEMPT BOND TAX-EXEMPT BOND
BOND FUND FUND FUND
(000) (000) (000)
------------- --------------- ---------------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation..... $ 1,557 $ 843 $ 132
Aggregate gross unrealized depreciation..... (84) (43) (12)
------ ----- -----
Net unrealized appreciation................. $ 1,473 $ 800 $ 120
------ ----- -----
------ ----- -----
</TABLE>
140
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GEORGIA INVESTMENT SHORT-
TAX-EXEMPT GRADE BOND TERM BOND
FUND FUND FUND
(000) (000) (000)
------------- ----------- -------------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation....... $ 425 $ 3,182 $ 172
Aggregate gross unrealized depreciation....... (123) (2,877) (473)
----- ----------- -----
Net unrealized appreciation/(depreciation).... $ 302 $ 305 $ (301)
----- ----------- -----
----- ----------- -----
</TABLE>
<TABLE>
<CAPTION>
SHORT- LIMITED-
TERM TERM
U.S. FEDERAL U.S.
TREASURY MORTGAGE GOVERNMENT
SECURITIES SECURITIES SECURITIES
FUND FUND FUND
(000) (000) (000)
------------- ----------- -------------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation......... $ 23 $ 268 $ 85
Aggregate gross unrealized depreciation......... (53) (413) (299)
--- ----- -----
Net unrealized appreciation/(depreciation)...... $ (30) $ (145) $ (214)
--- ----- -----
--- ----- -----
</TABLE>
Subsequent to October 31, 1996, the Funds recognized net capital losses for tax
purposes that have been deferred to 1997 and can be used to offset future
capital gains at May 31, 1997. The Funds also had capital loss carryforwards at
May 31, 1997 as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS POST
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES 10/31
5/31/97 2002 2003 2004 2005 DEFERRAL
FUND (000) (000) (000) (000) (000) (000)
- ------------------------------ ------------ ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Florida Tax-Exempt Bond
Fund......................... $ 127 $-- $ -- $-- $ 127 $ 83
Tennessee Tax Exempt
Bond Fund.................... 12 -- -- -- 12 --
Investment Grade
Bond Fund.................... 10,613 -- 6,388 -- 4,225 --
Short-Term Bond Fund.......... 137 -- -- -- 137 120
Short-Term U.S. Treasury
Securities Fund.............. 232 -- 203 29 -- 26
Limited-Term Federal Mortgage
Securities Fund.............. -- -- -- -- -- 28
U.S. Government Securities
Fund......................... 31 -- -- -- 31 20
Prime Quality Money Market
Fund......................... 379 3 173 -- 203 --
U.S. Government Securities
Money Market Fund............ 62 -- 11 -- 51 --
Tax-Exempt Money Market
Fund......................... 4 -- -- 4 -- --
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
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 Ratings Group ("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 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
141
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
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.
8. Consent of Sole Shareholder:
On December 30, 1996, the sole shareholder of the Emerging Markets Equity Fund
and Small Cap Equity Fund (the "Funds") approved the following: SEI Fund
Resources as administrator of the Funds, STI Capital Management, N.A. as
investment advisor to the assets of the Funds, SEI Investments Distribution Co.
as distributor of the shares of the Funds, the Distribution and Service Plan for
Flex Shares, the Distribution Plan for Investor Shares, and Arthur Andersen LLP
as independent public accountants of the Funds.
142
<PAGE>
NOTICE TO SHAREHOLDERS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997 UNAUDITED
For shareholders that do not have a May 31, 1997 tax year end, this notice is
for informational purposes only. For shareholders with a May 31, 1997 tax year
end, please consult your tax advisor as to the pertinence of this notice. For
the fiscal year ended May 31, 1997, each portfolio is designating the following
items with regard to distributions paid during the year:
<TABLE>
<CAPTION>
(A)* (C)
LONG TERM (B)*
CAPITAL GAINS ORDINARY INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
- ----------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Value Income Stock 31.66% 68.34% 100%
Mid-Cap Equity 53.39% 46.61% 100%
Small Cap Equity 0% 100% 100%
Capital Growth 36.04% 63.96% 100%
Balanced 28.88% 71.12% 100%
Emerging Markets Equity 0% 0% 0%
International Equity Index 68.28% 31.72% 100%
International Equity 0% 100% 100%
Sunbelt Equity 78.18% 21.82% 100%
Investment Grade Tax-Exempt Bond .90% 99.10% 100%
Florida Tax-Exempt Bond 2.50% 97.50% 100%
Tennessee Tax-Exempt Bond 0% 100% 100%
Georgia Tax-Exempt Bond 6.68% 93.32% 100%
Investment Grade Bond 0% 100% 100%
Short-Term Bond 0% 100% 100%
Short-Term U.S. Treasury Securities 0% 100% 100%
Limited-Term Federal Mortgage
Securities 1.81% 98.19% 100%
U.S. Government Securities 0% 100% 100%
Prime Quality Money Market 0% 100% 100%
U.S. Government Securities Money
Market 0% 100% 100%
Tax-Exempt Money Market 0% 100% 100%
<CAPTION>
(D)** (E)***
QUALIFYING TAX-EXEMPT
FUND DIVIDENDS (1) INTEREST
- ----------------------------------- --------------- ---------------
<S> <C> <C> <C>
Value Income Stock 24.34% 0%
Mid-Cap Equity 17.39% 0%
Small Cap Equity 100% 0%
Capital Growth 9.03% 0%
Balanced 8.08% 0%
Emerging Markets Equity 0% 0%
International Equity Index 0% 0%
International Equity 0% 0%
Sunbelt Equity 0% 0%
Investment Grade Tax-Exempt Bond 0% 65.39%
Florida Tax-Exempt Bond 0% 94.61%
Tennessee Tax-Exempt Bond 0% 92.09%
Georgia Tax-Exempt Bond 0% 93.94%
Investment Grade Bond 0% 0%
Short-Term Bond 0% 0%
Short-Term U.S. Treasury Securities 0% 0%
Limited-Term Federal Mortgage
Securities 0% 0%
U.S. Government Securities 0% 0%
Prime Quality Money Market 0% 0%
U.S. Government Securities Money
Market 0% 0%
Tax-Exempt Money Market 0% 99.44%
</TABLE>
- ----------------------------------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of each fund's total
distributions.
143
<PAGE>
** Item (D) is based on the net income of the fund.
*** Item (E) is based on the ordinary income distributions of the fund.
144
<PAGE>
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
The STI Classic International Equity Index Fund and STI Classic International
Equity Fund have made an election under section 853 of the Internal Revenue Code
(the "Code") to provide a foreign tax deduction or credit to their shareholders
for the fiscal year ended May 31, 1997. The information provided below is
pertinent to taxpayers who meet the following two criteria:
1) file a U.S. Federal Income Tax Return and
2) held shares of the Fund on the dividend record date of December 30, 1996
and satisfy the applicable requirements of the Code.
The amount per share of income from, and foreign taxes paid to, each country is
listed in the following schedule:
STI CLASSIC INTERNATIONAL EQUITY INDEX FUND
<TABLE>
<CAPTION>
TRUST SHARES INVESTOR SHARES FLEX SHARES
GROSS FOREIGN GROSS FOREIGN GROSS FOREIGN
COUNTRY DIVIDEND TAXES PAID DIVIDEND TAXES PAID DIVIDEND TAXES PAID
- ----------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Australia 0.0018 0.0003 0.0012 0.0003 0.0004 0.0003
Austria 0.0059 0.0004 0.0037 0.0004 0.0005 0.0004
Belgium 0.0054 0.0015 0.0039 0.0015 0.0016 0.0015
Denmark 0.0014 0.0004 0.0010 0.0004 0.0004 0.0004
Finland 0.0014 0.0004 0.0010 0.0004 0.0004 0.0004
France 0.0216 0.0076 0.0162 0.0076 0.0080 0.0076
Germany 0.0197 0.0028 0.0131 0.0028 0.0033 0.0028
Hong Kong 0.0018 0.0000 0.0011 0.0000 0.0001 0.0000
Italy 0.0113 0.0028 0.0080 0.0028 0.0030 0.0028
Japan 0.0186 0.0053 0.0134 0.0053 0.0057 0.0053
Netherlands 0.0068 0.0019 0.0049 0.0019 0.0020 0.0019
Norway 0.0016 0.0005 0.0012 0.0005 0.0005 0.0005
Spain 0.0113 0.0031 0.0081 0.0031 0.0033 0.0031
Sweden 0.0028 0.0008 0.0020 0.0008 0.0009 0.0008
Switzerland 0.0027 0.0004 0.0018 0.0004 0.0005 0.0004
United Kingdom 0.0290 0.0082 0.0209 0.0082 0.0088 0.0082
United States 0.0017 0.0000 0.0010 0.0000 0.0000 0.0000
------ ------ ------ ------ ------ ------
0.1448 0.0364 0.1025 0.0364 0.0394 0.0364
</TABLE>
Please consult your tax advisor for proper treatment of this information.
145
<PAGE>
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
The amount per share of income from and foreign taxes paid to each country is
listed in the following schedule:
STI CLASSIC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
TRUST SHARES
GROSS FOREIGN
COUNTRY DIVIDEND TAXES PAID
- ----------------------------------- ------------ ------------
<S> <C> <C>
Argentina 0.0003 0.0000
Australia 0.0012 0.0002
Brazil 0.0001 0.0000
Canada 0.0016 0.0008
Chile 0.0001 0.0001
Denmark 0.0002 0.0001
Finland 0.0027 0.0014
France 0.0026 0.0017
Germany 0.0016 0.0008
Hong Kong 0.0016 0.0000
Indonesia 0.0005 0.0003
Italy 0.0021 0.0012
Japan 0.0022 0.0011
Mexico 0.0004 0.0000
Netherlands 0.0059 0.0031
New Zealand 0.0005 0.0003
Panama 0.0003 0.0000
Peru 0.0004 0.0000
Singapore 0.0011 0.0007
South Africa 0.0003 0.0000
Spain 0.0017 0.0009
Sweden 0.0040 0.0021
Switzerland 0.0015 0.0007
United Kingdom 0.0037 0.0018
United States 0.0030 0.0000
------ ------
0.0396 0.0173
</TABLE>
Please consult your tax advisor for proper treatment of this information.
146
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (70.0%)
A1 Credit
5.640%, 06/02/97 $13,000 $ 12,998
American Express
5.500%, 08/28/97 500 493
Banc One Funding
5.620%, 07/21/97 4,000 3,969
5.680%, 08/14/97 3,811 3,767
Bank of America Toronto, Yankee
5.730%, 07/31/97 5,500 5,500
Bank of Montreal
5.520%, 07/01/97 10,000 9,954
Bank of New York
5.500%, 06/02/97 3,350 3,350
Bankers Trust
5.500%, 11/17/97 200 195
BAT Capital
5.530%, 06/24/97 10,000 9,965
Bell Atlantic Network Funding
5.600%, 06/12/97 1,000 998
Campbell Soup
5.550%, 07/07/97 2,550 2,536
Cargill Global Funding
5.550%, 06/16/97 5,000 4,988
5.820%, 11/25/97 500 486
Caterpillar Financial Services
5.600%, 09/11/97 4,915 4,837
Dean Witter Discover
5.640%, 08/01/97 6,000 5,943
Dominion Semiconductor
5.650%, 06/03/97 5,000 4,998
5.570%, 06/11/97 5,000 4,992
Dresser Industries
5.550%, 06/30/97 10,000 9,955
Ford Motor Credit
5.520%, 06/24/97 835 832
5.600%, 06/27/97 1,000 996
5.640%, 07/21/97 5,000 4,961
Gannett
5.520%, 06/17/97 4,775 4,763
General Electric Capital
5.400%, 06/02/97 500 500
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
5.700%, 06/30/97 $ 1,000 $ 995
5.630%, 09/25/97 1,000 982
Golden Peanut
5.400%, 07/15/97 250 248
GTE Funding
5.510%, 06/05/97 3,500 3,498
5.510%, 06/06/97 5,350 5,346
5.530%, 06/17/97 3,000 2,993
Hertz
5.620%, 07/25/97 8,500 8,428
IBM Credit
5.550%, 06/09/97 7,717 7,708
5.550%, 06/19/97 5,000 4,987
John Hancock Capital
5.600%, 06/26/97 9,375 9,339
Marsh & Mclennan
5.700%, 09/05/97 2,393 2,357
Metlife Funding
5.530%, 07/11/97 2,203 2,189
Monongahela Power
5.700%, 06/02/97 6,320 6,319
National Australia Funding
5.550%, 06/02/97 12,000 11,998
5.430%, 08/13/97 250 247
National City Credit
5.650%, 07/28/97 2,000 1,982
5.665%, 08/21/97 5,000 4,936
New England Power
5.550%, 06/04/97 2,300 2,299
5.520%, 06/06/97 5,550 5,546
5.540%, 06/12/97 2,123 2,119
Pactel Capital Resources
5.510%, 06/23/97 7,000 6,976
Philip Morris
5.700%, 06/02/97 8,000 7,999
5.550%, 06/06/97 1,505 1,504
5.550%, 06/09/97 1,275 1,273
5.550%, 06/18/97 1,240 1,237
Potomac Electric Power
5.600%, 06/06/97 9,360 9,353
Progress Capital
5.520%, 06/09/97 8,798 8,787
</TABLE>
146
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--CONTINUED
5.550%, 06/20/97 $ 1,271 $ 1,267
Royal Bank Canada
5.580%, 07/15/97 3,010 2,989
RTZ America
5.370%, 06/16/97 250 249
5.550%, 06/25/97 250 249
5.570%, 07/08/97 800 795
Sherwin Williams
5.550%, 06/18/97 5,000 4,987
Societe Generale North America
5.500%, 09/10/97 200 197
Sony Capital
5.650%, 06/02/97 4,400 4,399
South Carolina Fuel
5.510%, 06/20/97 4,435 4,422
Southern New England
Telcommunications
5.580%, 06/11/97 1,157 1,155
Transamerica Finance
5.650%, 06/02/97 7,500 7,499
5.520%, 06/12/97 5,000 4,992
5.530%, 06/13/97 700 699
U.S. Borax
5.370%, 06/16/97 250 249
5.600%, 07/01/97 2,000 1,991
5.650%, 07/16/97 1,600 1,589
Union Bank Of Switzerland Finance
5.750%, 06/02/97 1,000 1,000
Virgina Electric & Power
5.650%, 07/16/97 2,000 1,986
Waste Management Technologies
5.580%, 06/24/97 3,000 2,989
5.650%, 06/27/97 2,770 2,759
Xerox Credit
5.520%, 06/12/97 1,985 1,982
5.510%, 06/24/97 5,100 5,082
-----------
Total Commercial Paper
(Cost $277,147) 277,147
-----------
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (0.3%)
Compton Community,
Redevelopment Agency,
Series 1995B, RB (FSA)
6.150%, 08/01/97 $ 1,000 $ 1,000
-----------
Total Municipal Bonds
(Cost $1,000) 1,000
-----------
CORPORATE OBLIGATIONS (5.2%)
Associates Corporation of
North America
6.750%, 06/13/97 3,000 3,001
8.625%, 06/15/97 500 500
Beneficial MTN
6.850%, 11/19/97 1,500 1,506
6.860%, 11/19/97 2,200 2,209
BP America
8.875%, 12/01/97 200 203
Dow Capital
5.750%, 09/15/97 500 500
FCC National Bank (A)
5.640%, 05/08/98 3,000 2,999
Federal National Mortgage
Association MTN
6.520%, 09/08/97 500 501
6.520%, 09/15/97 900 901
First Chicago MTN
11.150%, 10/31/97 1,700 1,735
Household Finance
7.750%, 06/15/97 2,250 2,251
6.250%, 10/15/97 1,000 1,001
Morgan Guaranty Trust
5.950%, 06/06/97 200 200
Teco Energy MTN
9.250%, 06/16/97 3,000 3,004
-----------
Total Corporate Obligations
(Cost $20,511) 20,511
-----------
CERTIFICATES OF DEPOSIT (4.8%)
Bankers Trust Toronto
5.690%, 08/21/97 4,000 4,000
Societe Generale Yankee
5.690%, 08/22/97 5,000 5,000
</TABLE>
147
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF DEPOSIT--CONTINUED
Swiss Bank, Yankee
5.530%, 06/30/97 $10,000 $ 10,000
-----------
Total Certificates Of Deposit
(Cost $19,000) 19,000
-----------
ASSET-BACKED SECURITIES (1.0%)
Americredit Auto Receivables
Trust, 1997-B, Cl A
5.790%, 06/12/98 4,000 4,000
-----------
Total Asset-Backed Securities
(Cost $4,000) 4,000
-----------
REPURCHASE AGREEMENTS (21.3%)
Deutsche Bank
5.56%, dated 05/30/97, matures 06/02/97, repurchase
price $76,220,749 (collateralized by various FHLMC
obligations, total par value $94,382,160,
0.000%-6.630%, 05/15/08-09/01/26; FNMA obligation,
par value $21,264,738, 0.000%, 01/01/26: total
market value $77,708,900) 76,185 76,185
Salomon Brothers 5.56%, dated 05/30/97, matures
06/02/97, repurchase price $8,072,554
(collateralized by various FHLMC obligations, total
par value $9,465,582, 6.014%-8.500%,
07/01/02-11/01/26; various FNMA obligations, total
par value $20,886,794, 5.500%-9.000%,
04/01/98-05/01/26: total market value $8,294,005) 8,069 8,069
-----------
<CAPTION>
--------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
Total Repurchase Agreements
(Cost $84,254) $ 84,254
-----------
Total Investments (102.6%)
(Cost $405,912) 405,912
-----------
OTHER ASSETS AND LIABILITIES, NET (-2.6%) (10,239)
-----------
NET ASSETS:
Fund shares of the Institutional Shares (unlimited
authorization -- no par value) based on 395,673,180
outstanding shares of beneficial interest 395,673
-----------
Total Net Assets (100.0%) $ 395,673
-----------
-----------
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Shares $ 1.00
-----------
-----------
</TABLE>
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA -- SECURITY INSURED BY FINANCIAL SECURITY ASSURANCE
MTN -- MEDIUM TERM NOTE
RB -- REVENUE BOND
(A) -- VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON MAY 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
148
<PAGE>
- --------------------------------------------------------------------------
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
TREASURY NOTE (4.9%)
U.S. Treasury Note
5.750%, 10/31/97 $1,000 $ 1,000
Total Treasury Note
(Cost $1,000) 1,000
-------
REPURCHASE AGREEMENTS (71.1%)
Deutsche Bank
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $1,031,851 (collateralized by U.S. Treasury
Bill, par value $948,000, 0.000%, 07/31/97; U.S.
Treasury Note, par value $111,000, 5.125%,
12/31/98: total maket value $1,052,006) 1,031 1,031
Merrill Lynch
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $1,000,995 (collateralized by U.S. Government
STRIPS, total par value $1,995,661, 0.000%,
05/15/02-11/15/14: total market value $1,021,320) 1,001 1,001
Barclays
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $4,677,964 (collateralized by U.S. Treasury
Bill, par value $4,955,000, 0.000%, 02/05/98:
market value $4,770,173) 4,676 4,676
Morgan Stanley
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $1,000,458 (collateralized by U.S. Treasury
Note, par value $990,000, 7.25%, 05/15/04: market
value $1,021,442) 1,000 1,000
<CAPTION>
- ------------------------------------------------------------------------------
FACE AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Salomon Brothers
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $1,000,458 (collateralized by various U.S.
Treasury Notes, total par value $1,005,000,
6.125%-8.875%, 11/15/97-07/31/00: total market
value $1,022,745) $1,000 $ 1,000
Swiss Bank
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $4,678,206 (collateralized by U.S. Treasury
Bond, par value $4,565,000, 7.250%, 08/15/22; U.S.
Treasury Note, par value $25,000, 5.875%, 06/30/00:
total market value $4,777,310) 4,676 4,676
Union Bank of Switzerland
5.50%, dated 05/30/97, matures 06/02/97, repurchase
price $1,000,458 (collateralized by U.S. Treasury
Note, par value 1,030,000, 5.875%, 11/15/99: market
value $1,021,198) 1,000 1,000
-------
Total Repurchase Agreements
(Cost $14,384) 14,384
-------
Total Investments (76.0% of Net Assets)
(Cost $15,384) $15,384
-------
-------
</TABLE>
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST
AND PRINCIPAL SECURITY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
149
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
CLASSIC INSTITUTIONAL
U.S. TREASURY
SECURITIES
MONEY MARKET
FUND
---------------------
<S> <C>
Assets:
Investments at market value (Cost $15,384).......................... $15,384
Receivables for investment securities sold.......................... 4,951
Other assets........................................................ 120
-------
Total Assets........................................................ 20,455
-------
Liabilities:
Accrued expenses.................................................... 26
Distribution payable................................................ 101
Other liabilities................................................... 90
-------
Total Liabilities................................................... 217
-------
Net Assets:
Fund Shares of the Institutional Shares (unlimited authorization --
no par value)
based on 20,238,609 outstanding shares of beneficial interest..... 20,239
Accumulated net realized loss on investments........................ (1)
-------
Total Net Assets.................................................... $20,238
-------
-------
Net Asset Value, Offering Price and Redemption Price Per Share --
Institutional Shares................................................. $ 1.00
-------
-------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
150
<PAGE>
STATEMENT OF OPERATIONS (000)
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
CLASSIC CLASSIC
INSTITUTIONAL INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY
MONEY MARKET SECURITIES MONEY
FUND MARKET FUND
--------------- ----------------
12/12/96*- 12/12/96*-
05/31/97 05/31/97
--------------- ----------------
<S> <C> <C>
Income:
Interest Income..................................................... $2,784 $491
Expenses:
Investment Advisory Fees............................................ 100 18
Investment Advisory Fees Waived..................................... (100) (18)
Contribution from Advisor........................................... (131) (20)
Administrator Fees.................................................. 33 6
Registration Fees................................................... 108 3
Transfer Agent Fees................................................. 8 8
Printing Fees....................................................... 3 3
Amortization of Deferred Organizational Costs....................... 8 8
------ ---
Total Expenses.................................................... 29 8
------ ---
Net Investment Income................................................. 2,755 483
------ ---
Net Realized Loss on Securities Sold.................................. -- (1)
------ ---
Increase in Net Assets Resulting from Operations...................... $2,755 $482
------ ---
------ ---
</TABLE>
* Commencement of Operations
Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
151
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1997
<TABLE>
<CAPTION>
CLASSIC CLASSIC
INSTITUTIONAL INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY
MONEY MARKET SECURITIES MONEY
FUND MARKET FUND
--------------- ----------------
12/12/96*- 12/12/96*-
05/31/97 05/31/97
--------------- ----------------
<S> <C> <C>
Operations:
Net Investment Income............................................... $ 2,755 $ 483
Net Realized Loss on Securities Sold................................ -- (1)
--------------- ----------------
Increase in Net Assets Resulting from Operations.................. 2,755 482
--------------- ----------------
Distributions to Shareholders:
Net Investment Income............................................... (2,755) (483)
Capital Gains....................................................... -- --
--------------- ----------------
Total Distributions................................................. (2,755) (483)
--------------- ----------------
Capital Share Transactions (1):
Proceeds from Shares Issued......................................... 578,520 143,133
Reinvestments of Cash Distributions................................. -- --
Cost of Shares Redeemed............................................. (182,847) (122,894)
--------------- ----------------
Increase in Net Assets from Share Transactions.................... 395,673 20,239
--------------- ----------------
Total Increase in Net Assets.................................... 395,673 20,238
--------------- ----------------
Net Assets:
Beginning of Period................................................. -- --
--------------- ----------------
End of Period....................................................... $ 395,673 $ 20,238
--------------- ----------------
--------------- ----------------
(1) Shares Issued and Redeemed:
Shares Issued..................................................... 578,520 143,133
Shares Issued in Lieu of Cash Distributions....................... -- --
Shares Redeemed................................................... (182,847) (122,894)
--------------- ----------------
Net Share Transactions.......................................... 395,673 20,239
--------------- ----------------
--------------- ----------------
</TABLE>
* Commencement of Operations.
Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
152
<PAGE>
(This page has been left blank intentionally.)
153
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS FOR THE PERIOD FROM INCEPTION THROUGH MAY 31, 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED AND
NET UNREALIZED GAINS
NET ASSET VALUE INVESTMENT OR (LOSSES) DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME
------------------- ------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional
Shares
1997* $ 1.00 $ 0.02 $ -- $ (0.02)
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional
Shares
1997* $ 1.00 $ 0.02 $ -- $ (0.02)
<CAPTION>
DISTRIBUTIONS FROM
REALIZED CAPITAL GAINS
-----------------------
<S> <C>
CLASSIC INSTITUTION
Institutional
Shares
$ --
CLASSIC INSTITUTION
Institutional
Shares
$ --
</TABLE>
* Commenced operations on December 12, 1996. Total return is for the period
indicated and has not been annualized. All ratios for the period have been
annualized.
154
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
NET ASSETS RATIO OF EXPENSES TO INCOME TO
NET ASSET END OF RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS
VALUE END TOTAL PERIOD EXPENSES TO INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS
OF PERIOD RETURN (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS)
- ----------- ----------- ----------- ------------------- ------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.00 2.51% $ 395,673 0.06% 5.49% 0.52% 5.03%
$ 1.00 2.46% $ 20,238 0.09% 5.27% 0.51% 4.85%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
155
<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 twenty-three portfolios: the Value Income
Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital
Growth Fund, the Balanced Fund, the Emerging Markets Equity Fund, the
International Equity Index Fund, the International Equity Fund the Sunbelt
Equity Fund, the Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt
Bond Fund, the Tennessee Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund,
the Investment Grade Bond Fund, the Short-Term Bond Fund, the Short-Term U.S.
Treasury Securities Fund, the Limited-Term Federal Mortgage Securities Fund, and
the U.S. Government Securities Fund, (collectively the "Non-Dollar Funds"), the
Prime Quality Money Market Fund, the U.S. Government Securities Money Market
Fund, the Tax-Exempt Money Market Fund, the Classic Institutional Cash
Management Money Market Fund and the Classic Institutional U.S. Treasury
Securities Money Market Fund, (collectively the "Money Market 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. The
footnotes herein pertain only to the Classic Institutional Cash Management Money
Market Fund and the Classic Institutional U.S. Treasury Securities Fund
(collectively the "Funds").
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust:
SECURITY VALUATION--Investment securities held by the Funds are stated at
amortized cost, which approximates market value.
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).
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
Funds are accreted and amortized ratably to maturity and are included in
interest income.
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 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 each business day, by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding.
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 Funds are declared on
each business day and paid to shareholders on a monthly basis. Any net realized
capital gains on sales of securities are distributed to shareholders at least
annually.
3. Organization Costs and Transactions with Affiliates:
The Trust incurred organization costs of approximately $808,836 including
approximately $395,594 relating to state
156
<PAGE>
- --------------------------------------------------------------------------------
registration fees. 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 with the exception of state registration fees, which
are being amortized over a period of twelve months. The costs include legal fees
of approximately $60,383 for organizational work performed by a law firm of
which two officers of the Trust are partners. On March 18, 1992, the Trust sold
initial shares of beneficial interest to SEI Fund Resources (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
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
Investments Distribution Co. (the "Distributor"). Such officers are paid no fees
by the Trust for serving as officers of the Trust.
4. Administration and Transfer Agency Servicing 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.
5. Investment Advisory and Custodian Agreements:
The Trust and STI Capital Management, N.A., ("STI Capital Management, N.A."),
Trusco Capital Management ("Trusco"), the SunTrust Bank, Atlanta and SunTrust
Bank, Chattanooga have entered into advisory agreements dated May 29, 1992, July
15, 1993, December 20, 1993 and December 20, 1993 respectively.
Under terms of the respective agreements, the Funds are charged the following
annual fees based upon average daily net assets:
<TABLE>
<CAPTION>
MAXIMUM
ANNUAL INSTITUTIONAL
ADVISORY SHARE MAXIMUM
FEE EXPENSE
------- -------------
<S> <C> <C>
TRUSCO:
Classic Institutional Cash Management Money
Market Fund................................. .20% .20%
Classic Institutional U.S. Treasury Money
Market Fund................................. .20% .20%
</TABLE>
The Investment Advisors and the Administrator 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 the
Funds. Fees of the Custodians are paid on the basis of the net assets of the
Funds. The Custodian plays no role in determining the investment policies of the
Trust or which securities are to be purchased or sold in the Funds.
6. Concentration of Credit Risk:
The Classic Institutional Cash Management Money Market Fund invests in high
quality money market instruments issued by corporations and the U.S. Government
and rated by one or more nationally recognized statistical rating organizations,
or, if not rated determined by the Advisor to be of comparable quality. The
Classic U.S. Treasury Securities Money Market Fund invests in U.S. Treasury
Obligations, 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.
157
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1996
7. Consents of Sole Shareholder:
On November 20, 1996, the sole shareholder of the Classic Institutional Cash
Management Money Market Fund and Classic Institutional U.S. Treasury Securities
Money Market Fund (the "Funds") approved the following appointments: SEI
Financial Service Company to serve as administrator of the Funds, Trusco Capital
Management to serve as investment advisor to the assets of the Funds, SEI
Investments Distribution Co. to serve as distributor of the shares of the Funds
and Arthur Andersen LLP to serve as independent public accountants of the Funds.
158
<PAGE>
NOTICE TO SHAREHOLDERS
- --------------------------------------------------------------------------------
STI CLASSIC FUNDS MAY 31, 1997 UNAUDITED
For shareholders that do not have a May 31, 1997 tax year end, this notice is
for informational purposes only. For shareholders with a May 31, 1997 tax year
end, please consult your tax advisor as to the pertinence of this notice. For
the fiscal year ended May 31, 1997, each portfolio is designating the following
items with regard to distributions paid during the year:
<TABLE>
<CAPTION>
(A)* (B)*
LONG TERM ORDINARY (C)
CAPITAL GAINS INCOME TOTAL (D)** (E)***
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING TAX-EXEMPT
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST
- -------------------------------------------------- ------------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Classic Institutional Cash Management Money Market 0% 100% 100% 0% 0%
Classic Institutional U.S. Treasury Securities
Money Market 0% 100% 100% 0% 0%
</TABLE>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of each fund's total
distributions.
** Item (D) is based on the net income of the fund.
*** Item (E) is based on the ordinary income distributions of the fund.
159
