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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1997
FILE NO. 33-45671
FILE NO. 811-6557
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 19 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 21 /X/
STI CLASSIC FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (800) 342-5734
DAVID G. LEE
C/O SEI INVESTMENTS
ONE FREEDOM VALLEY ROAD
OAKS, PENNSYLVANIA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
RICHARD W. GRANT JOHN H. GRADY, JR.
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, N.W.
PHILADELPHIA, PA 19103 WASHINGTON, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
Immediately upon filing pursuant to paragraph (b), or
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On [date] pursuant to paragraph (b), or
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60 days after filing pursuant to paragraph (a) or
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X 75 days after filing pursuant to paragraph (a) or
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On [date] pursuant to paragraph (a) of Rule 485.
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Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of units of beneficial interest is being registered
by this Registration Statement. Registrant has filed a Rule 24f-2 Notice on
July 29, 1996 for its fiscal year ended May 31, 1996 .
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STI CLASSIC FUNDS
CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT #19
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N-1A ITEM NO. LOCATION
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PART A - ALL FUNDS
Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Summary
Item 3. Condensed Financial Information *
Item 4. General Description of Registrant Funds and Investment Objectives;
Investment Policies and Strategies; General
Investment Policies and Strategies;
Investment Risks; Investment Limitations;
Appendix
Item 5. Management of the Fund Board of Trustees; Investment Advisor;
Distribution; Administration
Item 5a. *
Item 6. Capital Stock and Other Securities Voting Rights; Shareholder Inquiries;
Dividends and Distributions; Tax
Information
Item 7. Purchase of Securities Being Offered Cover Page; Purchase of Fund Shares;
Redemption of Fund Shares
Item 8. Redemption or Repurchase Purchase of Fund Shares;
Redemption of Fund Shares; Distribution
Item 9. Pending Legal Proceedings *
PART B - ALL FUNDS
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Trust
Item 13. Investment Objectives and Policies Description of Permitted Investments;
Investment Limitations
Item 14. Management of the Registrant Trustees and Officers of the Trust; The
Administrator
Item 15. Control Persons and Principal Trustees and Officers of the Trust
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisor; The Administrator;
Services The Distributor; Legal Counsel (Prospectus);
Independent Auditors (Prospectus); Experts
Item 17. Brokerage Allocation Fund Transactions
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Yield Quotations Computation of Yield; Calculation of Total
Return
Item 23. Financial Statements Financial Information
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PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
* Not applicable
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STI CLASSIC FUNDS
TRUST SHARES
CONTRARIAN EQUITY FUND
TAX FREE INCOME FUND
INVESTMENT ADVISOR TO THE FUNDS:
STI CAPITAL MANAGEMENT, N.A.
(THE "ADVISOR")
The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a
number of separate investment portfolios (each a "Fund" and, collectively, the
"Funds"). This Prospectus sets forth concisely the information about the Trust
Shares of the above-referenced Funds. Investors are advised to read this
Prospectus and retain it for future reference.
A Statement of Additional Information relating to the Funds dated the same date
as this Prospectus has been filed with the Securities and Exchange Commission
and is available without charge through the Distributor, SEI 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.
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT SPONSORED, ENDORSED, OR GUARANTEED BY, AND DO NOT
CONSTITUTE OBLIGATIONS OR DEPOSITS OF, THE ADVISORS OR ANY OF THEIR AFFILIATES
OR CORRESPONDENTS INCLUDING SUNTRUST BANKS, INC., ARE NOT GUARANTEED OR INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
OCTOBER 1, 1997
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2
The Trust Shares are offered primarily to financial institutions and
intermediaries ("Shareholders"), including SunTrust Banks, Inc. and its
affiliates and correspondents, for the investment of funds for which they act in
a fiduciary, agency, investment advisory or custodial capacity. Individuals may
not purchase Trust Shares directly, although individuals may be able to purchase
Trust Shares through accounts maintained with financial institutions.
TABLE OF CONTENTS
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Expense Summary........................................................... 3
The Trust................................................................. 4
Funds and Investment Objectives........................................... 4
Investment Policies and Strategies........................................ 4
General Investment Policies and Strategies................................ 5
Investment Risks.......................................................... 6
Investment Limitations.................................................... 8
Performance Information................................................... 8
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......................................................... 13
Investment Advisor........................................................ 13
Portfolio Managers........................................................ 14
Banking Laws.............................................................. 14
Distribution.............................................................. 14
Administration............................................................ 15
Transfer Agent and Dividend Disbursing Agent.............................. 15
Custodian................................................................. 15
Legal Counsel............................................................. 15
Independent Public Accountants............................................ 15
Other Information......................................................... 15
Voting Rights............................................................. 15
Reporting................................................................. 16
Shareholder Inquiries..................................................... 16
Description of Permitted Investments...................................... 16
Appendix.................................................................. A-1
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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.
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3
EXPENSE SUMMARY
TRUST SHARES
The purpose of the following table is to help you understand the various costs
and expenses that a shareholder will bear, directly or indirectly, in connection
with an investment in the Trust Shares of each Fund.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
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TAX FREE
CONTRARIAN INCOME
EQUITY FUND FUND
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Management Fees (after fee waivers)(1).................................................. 1.00% .55%
Other Fund Expenses(2).................................................................. .20% .17%
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Total Fund Operating Expenses (after fee waivers)(3).................................... 1.20% .72%
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(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, Advisory Fees for the Funds would
be as follows: Contrarian Equity Fund -- 1.15%, and Tax Free Income Fund --
.70%. See "Investment Advisor."
(2) Other Expenses are based on estimated amounts for the current year.
(3) Absent the voluntary waivers described above, Total Fund Operating Expenses
would be as follows: Contrarian Equity Fund -- 1.35% and Tax Free Income
Fund -- .87%.
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ONE THREE
EXAMPLES YEAR YEARS
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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.
CONTRARIAN EQUITY FUND............................ $12 $ 38
TAX FREE INCOME FUND.............................. $ 7 $ 23
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THE EXAMPLES ARE BASED UPON THE TOTAL OPERATING EXPENSES OF THE FUNDS AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
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4
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.
Generally, Shareholders may purchase shares in the Trust's non-money market
Funds through three separate classes (Trust Shares, Investor Shares and Flex
Shares) and in the Trust's money market Funds through two separate classes
(Trust Shares and Investor Shares), which provide for variations in distribution
and service fees, transfer agent fees, voting rights and dividends. Shares of
the Tax Free Income Fund are offered through two separate classes, Trust Shares
and Flex Shares; however, only the Trust Shares are currently available for
purchase. Shares of the Contrarian Equity Fund are offered through Trust Shares
only. Except for differences between classes, each share of each Fund represents
an undivided, proportionate interest in that Fund. This Prospectus relates to
the Trust Shares of the Funds described below.
FUNDS AND INVESTMENT OBJECTIVES
CONTRARIAN EQUITY FUND seeks to provide long-term capital growth by investing
primarily in equity securities which the Adviser believes are undervalued or
out-of-favor.
THE TAX FREE INCOME FUND seeks to provide a high level of income, exempt from
regular federal income tax, from an actively managed portfolio of investment
grade municipal securities.
There can be no assurance that a Fund will achieve its investment objective.
The investment objective of each Fund is nonfundamental and may be changed
without shareholder approval.
INVESTMENT POLICIES AND STRATEGIES
CONTRARIAN EQUITY FUND
The Fund seeks to provide long-term capital growth by investing substantially
all, and under normal market conditions, at least 80% of its assets in equity
securities.
Other equity securities in which the Fund may invest are securities convertible
into or exchangeable for common stock; U.S. dollar denominated equity securities
of foreign issuers (including sponsored American Depositary Receipts ("ADRs"))
that are traded on exchanges or listed on National Association of Securities
Dealers Automated Quotations ("NASDAQ"); and shares of closed-end mutual funds.
The Fund will invest primarily in common stocks of larger, well-known companies
that the Adviser believes possess fundamentally favorable long-term
characteristics, but that are out of favor in the financial community or whose
potential values have been overlooked by other investors. Stocks of smaller
companies may also be purchased if the Adviser believes they are undervalued,
even if they involve more risk. All of the common stocks in which the Fund
invests are traded on registered exchanges such as the New York or American
Stock Exchange or on the over-the-counter market in the United States (I.E.,
NASDAQ).
The Fund's portfolio turnover rate may exceed 100%. This rate of turnover, if
continued, will likely result in higher transaction costs, higher levels of
realized capital gains and additional taxes than if the turnover rate was lower.
See "Tax Information."
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5
TAX FREE INCOME FUND
The Tax Free Income Fund intends to be fully invested in municipal securities
the interest on which is exempt from regular federal income taxes in the opinion
of bond counsel to the issuer. The issuers of these securities can be located in
all fifty states, the District of Columbia, Puerto Rico, and other U.S.
territories and possessions. It is a fundamental policy of the Fund to invest at
least 80% of its total assets in securities the income from which is exempt from
regular federal income tax and treated as a preference item for purposes of the
alternative minimum tax. At least 65% of the Fund's assets will be invested in
municipal bonds and debentures rated investment grade or better. Municipal
securities must be rated BBB or better by S&P or Baa or better by Moody's in the
case of bonds (investment grade); SP-1, SP-2, or MIG-1, MIG-2 in the case of
notes; A-1, A-2, P-1, P-2 in the case of tax-exempt commercial paper; and SP-1,
SP-2, VMIG-1 or VMIG-2 in the case of variable rate demand obligations. The Fund
will only acquire unrated securities if, at the time of purchase, the Fund's
Adviser determines that such unrated obligations are of comparable quality to
rated obligations that may be acquired by the Fund.
In the event that a security owned by the Fund is downgraded below the stated
rating categories, the Advisor will review and take appropriate action with
regard to the security.
The Fund may invest in floating or variable rate securities, municipal forwards,
putable securities, zero coupon securities, debentures, super-sinker bonds,
medium-term notes, municipal lease obligations, and futures and options. The
Fund's Adviser has discretion to invest up to 20% of the Fund's total assets in
taxable debt securities rated at least BBB or better by S&P or Baa or better by
Moody's or, if unrated, of comparable quality at the time of purchase as
determined by the Fund's Adviser and securities subject to the alternative
minimum tax.
Under normal market conditions, it is anticipated that the Fund's averaged
weighted maturity will range from six to twenty-five years. The Fund may shorten
its average weighted maturity to as little as 90 days if deemed appropriate for
temporary defensive purposes. By so limiting the maturity of its investments,
the Fund's net asset value is expected to experience less price movement in
response to changes in interest rates than the net asset values of mutual funds
investing in similar credit quality securities with longer maturities.
The Fund's portfolio turnover rate may exceed 100%. This rate of turnover, if
continued, will likely result in higher transaction costs, higher levels of
realized capital gains and additional taxes than if the turnover rate was lower.
See "Tax Information."
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes, during periods when the Advisor determines
that market conditions warrant, each Fund may hold a portion of its assets in
cash and invest up to 100% of its assets in money market instruments consisting
of: securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities; custodial receipts involving U.S.
Treasury obligations; repurchase agreements; certificates of deposit; bankers'
acceptances; time deposits issued by banks or savings and loan associations; and
commercial paper rated in the highest rating category. A Fund may not be
pursuing its investment objective when it is engaged in temporary defensive
investing.
<PAGE>
6
The municipal bonds that the Tax Free Income Fund may purchase include general
obligation bonds, revenue or special obligation bonds, and private activity and
industrial development bonds. General obligation bonds are backed by the taxing
power of the issuing municipality while revenue or special obligation bonds are
backed by a specific project or facility. The Tax Free Income Fund may also
purchase certificates of participation which represent an interest in an
underlying obligation or commitment such as an obligation issued in connection
with a leasing arrangement. The payment of principal and interest on private
activity and industrial development bonds generally is dependent solely on the
ability of the facility's user to meet its obligation and the pledge, if any, of
real or personal property as security for such payment.
Each Fund may purchase restricted securities, including Rule 144A securities,
that the Advisor determines are liquid pursuant to guidelines established by the
Trust's Board of Trustees.
Each Fund may borrow money for temporary or emergency purposes in an amount not
to exceed one-third of the value of its total assets. A Fund may not purchase
additional securities while its outstanding borrowings exceed 5% of its assets.
Each Fund may purchase securities issued by money market mutual funds. A Fund's
purchase of shares of other investment companies is limited by the Investment
Company Act of 1940 (the "1940 Act") and will ordinarily result in an additional
layer of charges and expenses.
Each Fund may purchase securities on a when-issued and delayed delivery basis.
Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its total assets.
It is a non-fundamental policy of each Fund to invest no more than 15% of its
net assets in illiquid securities. An illiquid security is a security which
cannot be disposed of in the usual course of business within seven days at a
price approximating its carrying value.
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
EQUITY SECURITIES
Investments in equity securities are generally subject to market risks that may
cause their prices to fluctuate over time. The values of convertible equity
securities are also affected by prevailing interest rates, the credit quality of
the issuer and any call provision. Fluctuations in the value of equity
securities in which a Fund invests will cause the net asset value of the Fund to
fluctuate.
FIXED INCOME SECURITIES
The market value of a Fund's fixed income investments will change in response to
interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Securities with longer maturities are subject to
greater fluctuations in value than securities with shorter maturities. Changes
by a nationally recognized statistical rating organization ("NRSRO") to the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal also affect the value of these investments.
Changes in the value of a Fund's
<PAGE>
7
securities will not affect cash income derived from these securities but will
affect the Fund's net asset value.
There is a risk that the current interest rate on floating and variable rate
instruments may not accurately reflect existing market interest rates.
Fixed income securities rated BBB by S&P or Baa by Moody's (the lowest ratings
of investment grade bonds) are deemed by these rating services to have
speculative characteristics.
FOREIGN SECURITIES
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
risks and considerations include differences in accounting, auditing and
financial reporting standards, generally higher commission rates on foreign
portfolio transactions, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control regulations,
political instability which could affect U.S. investment in foreign countries
and potential restrictions of the flow of international capital and currencies.
Foreign companies may also be subject to less government regulation than U.S.
companies. Moreover, the dividends payable on the foreign securities may be
subject to foreign withholding taxes, thus reducing the net amount of income
available for distribution to a Fund's Shareholders. Further, foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may exhibit greater price volatility. Changes in foreign exchange
rates will affect, favorably or unfavorably, the value of those securities which
are denominated or quoted in currencies other than the U.S. dollar.
MUNICIPAL SECURITIES
The ability of state, county, or local governments to meet their obligations
will depend primarily on the availability of tax and other revenues to those
governments and on their fiscal conditions generally. Municipal securities may
be affected from time to time by economic, political, geographic and demographic
conditions. In addition, constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives may limit a
government's power to raise revenues or increase taxes and thus could adversely
affect an issuer's ability to meet financial obligations.
ZERO COUPON OBLIGATIONS
Zero coupon obligations are sold at original issue discount and do not make
periodic payments. Zero coupon obligations may be subject to great fluctuations
in value due to interest rate changes.
A Fund will be required to include the imputed interest in zero coupon
obligations in its current income. Because a Fund distributes all of its net
investment income to investors, a Fund may have to sell portfolio securities to
distribute the income attributable to these obligations and securities at a time
when 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
<PAGE>
8
than 50% of the outstanding shares of the Fund are present or represented by
proxy, or (ii) more than 50% of a Fund's outstanding shares, whichever is less.
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if as a result more than 5% of the total assets of a
Fund would be invested in the securities of such issuer; provided, however, that
a Fund may invest up to 25% of its total assets without regard to this
restriction as permitted by applicable law.
2. Purchase any securities which would cause more than 25% of the total assets
of a Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities, repurchase agreements
involving such securities or tax-exempt securities issued by governments or
political subdivisions of governments. For purposes of this limitation, (i)
utility companies will be divided according to their services, for example, gas,
gas transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii)
supranational entities will be considered to be a separate industry.
It is a non-fundamental policy of the Tax Free Income Fund that it will not
invest more than 25% of its respective net assets in securities of one or more
issuers conducting their principal activities in the same state. In addition,
the Fund will not invest more than 25% of its total assets in securities the
interest on which is derived from revenues of similar type projects.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
PERFORMANCE INFORMATION
From time to time, the Funds may advertise performance (total return and yield).
These figures will be historical and are not intended to indicate future
performance. The yield of a Fund refers to the annualized income generated by an
investment in that Fund over a specified 30-day period. The yield is calculated
by assuming that the income generated by the investment during that period is
generated over one year and is shown as a percentage of the investment.
The Tax Free Income Fund may also advertise a "tax-equivalent yield," which is
calculated by determining the rate of return that would have been achieved on a
fully taxable investment to produce the after tax equivalent of the Fund's
yield, assuming certain tax brackets for a Shareholder.
The total return of a Fund refers to the average compounded rate of return on a
hypothetical investment, including any sales charge imposed, for designated time
periods (including but not limited to, the period from which a Fund commenced
operations through the specified date), assuming that the entire investment is
redeemed at the end of each period and assuming the reinvestment of all dividend
and capital gains distributions.
The performance of the Trust Shares of the Tax Free Income Fund will normally be
higher than
<PAGE>
9
for Flex Shares because Flex Shares are subject to distribution, service and
certain transfer agent fees not charged to Trust Shares.
Each Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
PURCHASE OF FUND SHARES
Trust Shares are sold primarily to financial institutions or intermediaries,
including subsidiaries of SunTrust Banks, Inc. ("SunTrust"), for the investment
of funds for which they act in a fiduciary, agency, investment advisory or
custodial capacity. Individuals generally may not purchase Trust Shares
directly, although individuals may be able to purchase 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 are sold without a sales charge,
although financial institutions may charge their customer accounts for services
provided in connection with the purchase of shares. Financial institutions may
impose an earlier cut-off time for receipt of purchase orders directed through
them to allow for processing and transmittal of these orders to the Trust's
transfer agent, Federated Services Company (the "Transfer Agent"), for
effectiveness the same day. Information concerning these services and any
charges will be provided to customers by the financial institutions. Trust
Shares will be held of record by the financial institutions, although customers
may have or be given the right to vote the shares depending upon the terms of
their relationship with the financial institution. Confirmations of share
purchases and redemptions will be sent to the financial institution as the
shareholder of record.
Shares may be purchased on days on which the New York Stock Exchange is open for
business (a "Business Day").
A purchase order for either of the Funds will be effective as of the Business
Day received by the Transfer Agent if the Transfer Agent receives the order
before 4:00 p.m. Eastern time and payment is received within one day. Purchases
will be made in full and fractional shares of the Trust calculated to three
decimal places. The purchase price of shares of a Fund is the net asset value
next determined after a purchase order is effective plus any applicable sales
charge (the "offering price"). The net asset value per share of a Fund is
determined by dividing the total market value of the Fund's investments and
other assets, less any liabilities, by the total outstanding shares of the Fund.
Net asset value per share is determined daily as of the close of business of the
New York Stock Exchange (currently 4:00 p.m. Eastern time) on any Business Day.
Pursuant to guidelines established by the Trustees, the Trust may use a pricing
service to provide market quotations or valuations for securities owned by each
Fund.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or
Shareholder(s).
The Trust maintains procedures, including identification methods and other
means, for ascertaining the identity of callers and authenticity of
instructions. If reasonable procedures are not employed, the Trust and/or the
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone transactions. Neither the Transfer Agent nor the
<PAGE>
10
Trust will be responsible for any loss, liability, cost or expense for acting
upon telephone or wire instructions reasonably believed to be genuine.
Although the methodology for calculating the net asset value for Trust Shares
are identical to those of Flex Shares, the net asset value per share of the
classes of the Tax Free Income Fund may differ because of the distribution,
service, and certain transfer agent expenses charged to Flex Shares.
REDEMPTION OF FUND SHARES
An order to redeem Trust shares must be transmitted to the Transfer Agent by the
financial institution as the record owner. Financial institutions may establish
procedures for their customers to request redemption of Trust Shares held in
their account with the financial institution. Customers should contact their
financial institution for information concerning these procedures.
Redemption orders must be received by the Transfer Agent before 4:00 p.m.
Eastern time on any Business Day to be effective that day. Redemption proceeds
are normally remitted in federal funds wired to the record owner of the shares
within one Business Day, but in no event more than seven days following the
effective date of the order. No charge for wiring redemption payments is imposed
by the Trust. Redemption orders are effected at the net asset value per share
next determined after an order is effective.
The Trust intends to pay cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, payment may be made wholly or
partly in liquid portfolio securities with a market value equal to the
redemption price. In such circumstances, an investor may incur brokerage costs
in converting such securities to cash.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (exclusive of capital gains) are declared
and paid quarterly by the Contrarian Equity Fund. Dividends from net investment
income (exclusive of capital gains) are declared on each Business Day and paid
monthly by the Tax Free Income Fund. Each Fund's net realized capital gains
(including net short-term capital gains) are distributed at least annually. Net
income for dividend purposes consists of (i) interest accrued and original issue
discount earned on a Fund's assets, (ii) plus the amortization of market
discount (except the Tax Free Income Fund) and minus the amortization of market
premium on such assets, (iii) plus dividend or distribution income on such
assets, (iv) less accrued expenses directly attributable to the Fund and the
general expenses of the Trust prorated to the Fund on the basis of its relative
net assets. Shareholders of record on the record date will be entitled to
receive dividends. Flex Shares invested in the Tax Free Income Fund are eligible
to begin earning dividends that are declared on the Business Day after the
purchase order is effective and continue to be eligible for dividends through
and including the day the redemption order is effective.
The net asset value of Trust Shares of the Funds will be reduced by the amount
of any dividend or distribution. Dividends and distributions are paid in the
form of additional Trust Shares of the same Fund unless the customer has elected
prior to the date of distribution to receive payment in cash. Such election, or
any revocation thereof, must be made in writing prior to the date of
distribution to the Transfer Agent
<PAGE>
11
and will become effective with respect to dividends paid after its receipt.
Dividends and distributions are paid within ten days of the end of the time
period to which the dividend relates. Dividends and distributions payable to a
Shareholder are paid in cash within ten Business Days after a Shareholder's
complete redemption of its Trust Shares in a Fund.
TAX INFORMATION
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of each Fund or
its Shareholders. Shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.
TAX STATUS OF EACH FUND:
Each Fund is treated as a separate entity for federal tax purposes, and is not
combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies by the Internal
Revenue Code of 1986, as amended (the "Code"), so that it will be relieved of
federal income tax on that part of its net investment income and net capital
gains (the excess of long-term capital gains over net short-term capital loss)
which is distributed to Shareholders. Each Fund intends to make sufficient
distributions prior to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment companies.
TAX STATUS OF DISTRIBUTIONS:
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) to Shareholders.
Dividends from net investment income paid by the Contrarian Fund will be taxable
to Shareholders as ordinary income whether received in cash or in additional
shares.
The Tax Free Income Fund will distribute all of its net investment income
(including net short-term capital gains) to Shareholders. If, at the close of
each quarter of its taxable year, at least 50% of the value of the Fund's assets
consist of obligations the interest on which is excludable from gross income,
the Fund may pay exempt-interest dividends to its Shareholders. Those dividends
constitute the portion of the aggregate dividends as designated by the Fund,
equal to the excess of the excludable interest over certain amounts disallowed
as deductions. Exempt-interest dividends are excludable from a Shareholder's
gross income for regular federal income tax purposes, but may have alternative
minimum tax consequences. See the Statement of Additional Information.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Tax Free Income Fund to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment of exempt-interest
dividends.
Dividends from net investment income will qualify for the dividends received
deduction for corporate Shareholders only to the extent such distributions are
derived from dividends paid by domestic corporations. Any net capital gains will
be distributed annually and will be taxed to Shareholders as long-term capital
gains,
<PAGE>
12
regardless of how long the Shareholder has held shares and regardless of whether
distributions are received in cash or in additional shares. For certain
individual Shareholders, net long-term capital gains may be taxed at a lower
rate than ordinary income. The Funds will make annual reports to Shareholders of
the federal income tax status of all distributions. Dividends declared by a Fund
in October, November or December of any year and payable to Shareholders of
record on a date in that month will be deemed to have been paid by the Fund and
received by the Shareholder on December 31 of that year, if paid by the Fund at
any time during the following January.
Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by the Shareholder as income dividends from a Fund, provided certain
state-specific conditions are satisfied. Not all states permit such income
dividends to be tax exempt and some require that a certain minimum percentage of
an investment company's income be derived from state tax-exempt interest. The
Funds will inform Shareholders annually of the percentage of income and
distributions derived from direct U.S. obligations. Shareholders should consult
their tax advisors to determine whether any portion of the income dividends
received from a Fund is considered tax-exempt in their particular state.
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase shares of a "tax-exempt" Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or persons related to "substantial
users") of facilities financed by "private activity bonds" or certain industrial
development bonds should consult their tax advisors before purchasing shares.
For these purposes, the term "substantial user" is defined generally to include
a "non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of such bonds. See the Statement of
Additional Information.
A sale, exchange or redemption of Fund shares is a taxable event to the
Shareholder.
STI CLASSIC FUNDS INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated January 15, 1992. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each Fund. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund and would be subject to liabilities related
thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
BOARD OF TRUSTEES
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described below, certain
companies provide essential management services to the Trust.
<PAGE>
13
INVESTMENT ADVISOR
The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $
billion as of , 199 . 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 $ billion as of , 199 .
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to each Fund.
As of , 199 , STI Capital had discretionary management authority with
respect to assets of approximately $ billion. The principal business address of
STI Capital is P.O. Box 3808, Orlando, Florida 32802.
The Trust and the Investment 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 they advise and continuously
review, supervise and administer their Fund's respective investment programs.
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 all Funds, 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, STI Capital is entitled to receive advisory fees computed daily and
paid monthly at the annual rate of 1.15% and 0.70% of the average daily net
assets of the Contrarian Equity and Tax Free Income Fund, respectively.
From time to time, the Advisor may voluntarily waive 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
any time.
PORTFOLIO MANAGERS
Mr. Daniel J. Lewis has been responsible for the day-to-day management of the
Contrarian Equity Fund since it commenced operations. Mr. Lewis joined STI
Capital in 1993 and currently serves as an equity analyst and portfolio manager.
Mr. Lewis served as an analyst with Winter Park Capital Asset Corporation from
1991 to 1992.
Mr. Ronald Schwartz has been responsible for the day-to-day management of the
Tax Free Income Fund, Florida Tax-Exempt Bond and Investment Grade Tax-Exempt
Bond Fund since each Fund commenced operations. Mr. Schwartz joined STI Capital
in 1988 and currently serves as a Senior Vice President. Mr. Schwartz has also
been responsible for the day-to-day management of the Tennessee Tax-
<PAGE>
14
Exempt Bond Fund since July, 1995. Mr. Schwartz serves as Vice President and
Trust Investment Officer of SunTrust Bank, Chattanooga.
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 STI Classic Funds.
If the Advisor were prohibited from providing services to STI Classic Funds, the
Board of Trustees would consider selecting other qualified firms. Any new
investment advisory agreements would be subject to Shareholder approval.
If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the 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"), and the Trust are parties to a distribution
agreement (the "Distribution Agreement"). No compensation is paid to the
Distributor for distribution services for the Trust Shares of each Fund. Trust
Shares of the Fund are offered primarily to institutional investors, including
affiliates and correspondents for the investment of funds in which they act in a
fiduciary, agency or custodial capacity. An investor may call 1-800-874-4770 to
receive more information regarding Flex Shares of the Tax Free Income Fund. It
is possible that a financial institution may offer different classes of shares
to its customers and thus receive different compensation with respect to
different classes of shares.
Each Fund may execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
ADMINISTRATION
SEI Fund Resources (the "Administrator") serves as the Administrator of the
Trust. The
<PAGE>
15
Administrator provides the Trust with certain administrative services, other
than investment advisory services, including regulatory reporting, all necessary
office space, equipment, personnel and facilities.
The Administrator is entitled to a fee from the Trust, which is calculated daily
and paid monthly, at an annual rate as follows:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS FEE
- ------------------------------------------ -----------
<S> <C>
$1 - $1 billion 0.10 %
over $1 billion to $5 billion 0.07 %
over $5 billion to $8 billion 0.05 %
over $8 billion to $10 billion 0.045%
over $10 billion 0.04 %
</TABLE>
From time to time, the Administrator may voluntarily waive all or a portion of
the administration fee payable by the Trust.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779 is the Transfer Agent for the shares of the Trust and dividend
disbursing agent for the Trust.
CUSTODIAN
SunTrust Bank, Atlanta, c/o STI Trust & Investment Operations, Inc., 303
Peachtree Street N.E., 14th Floor, Atlanta, Georgia 30308, serves as custodian
of the assets of each Fund. The custodian holds cash, securities and other
assets of the Trust as required by the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
OTHER INFORMATION
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. Each Fund or
class of a Fund will vote separately on matters relating solely to that Fund or
class. As a Massachusetts business trust, the Trust is not required to hold
annual meetings of Shareholders but approval will be sought for certain changes
in the operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information and audited financial
statements annually. The Trust furnishes proxy statements and other reports to
Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders may contact their financial institution's representative in order
to obtain information on account statements, procedures and other related
information.
<PAGE>
16
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Funds.
Further discussion is contained in the Statement of Additional Information.
AMERICAN DEPOSITARY RECEIPTS ("ADRs") -- ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer and
deposited with the depositary. ADRs may be available through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the underlying security. Holders of unsponsored depositary
receipts generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through, to the holders of the receipts, voting rights with
respect to the deposited securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT-- Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES -- Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
CORPORATE DEBT OBLIGATIONS -- Debt instruments issued by corporations with
maturities exceeding 270 days. Such instruments may include putable corporate
bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Interests in separately traded interest and principal
component parts of U. S. Treasury obligations that are issued by banks or
brokerage firms and are created by depositing U. S. Treasury obligations into a
special account at custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"),
and "Certificates of Accrual on Treasury Securities"
<PAGE>
17
("CATS"). TRs, TIGRs and CATS are sold as zero coupon securities. See "Zero
Coupon Obligations."
DEBENTURES -- Debentures are general debt obligations issued by corporations
under an agreement called an indenture. These obligations rest on the general
credit of the corporation and upon the indenture agreement.
DERIVATIVES -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, swap agreements, and some mortgage-back securities (CMOs,
REMICs and SMBs). See elsewhere in this "Description of Permitted Investments"
for discussions of these various instruments, and see "Investment Policies and
Strategies" for more information about any investment policies and limitations
applicable to their use.
FORWARD CONTRACTS -- Forward 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. Unlike futures contracts,
forward contracts are not regulated or traded on an exchange.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS -- Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. A Fund may use futures
contracts and related options for bona fide hedging purposes, to offset changes
in the value of securities held or expected to be acquired, to minimize
fluctuations in foreign currencies, or to gain exposure to a particular market
or instrument. A Fund will minimize the risk that it will be unable to close out
a futures contract by only entering into futures contracts which are traded on
national futures exchanges.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates, (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may restrict trading in
futures contracts and futures options.
ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be
disposed of within seven business days at approximately the price at which they
are being carried on the Fund's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, where there is no
secondary market for such security, and repurchase agreements with durations (or
maturities) over seven days in length.
INVESTMENT COMPANY SECURITIES -- A Fund's purchase of investment company
securities will result in the layering of expenses. A Fund is prohibited from
acquiring the securities of other investment companies if, as a result of such
acquisition, the Fund owns in the aggregate (1) more than 3% of the total
outstanding voting stock of the acquired company, (2) securities issued by the
acquired company having an aggregate value of 5% of value of the total assets of
the Fund, or (3) securities issued by the acquired company and
<PAGE>
18
all other investment companies having an aggregate value in excess of 10% of the
value of the total assets of the Fund.
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.
MUNICIPAL FORWARDS -- Municipal forwards are forward commitments for the
purchase of tax-exempt bonds with a specified coupon to be delivered by an
issuer at a future date, typically exceeding 45 days but normally less than one
year after the commitment date. Municipal forwards are normally used as a
refunding mechanism for bonds that may only be redeemed on a designated future
date. A Fund will enter into municipal forwards when the price and yield of the
underlying bonds are believed to be favorable when compared to current prices
and yields. As with forward commitments, municipal forwards are subject to
market fluctuations due to changes in market interest rates between the
commitment date and the settlement date. Municipal forwards may be considered to
be illiquid investments.
To avoid any leveraging concerns, a Fund will maintain liquid, high grade
securities in a segregated account at least equal to the purchase price of the
municipal forward.
MUNICIPAL LEASE OBLIGATIONS -- Municipal lease obligations are securities issued
by state and local governments and authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. Depending upon the market for such securities, municipal lease
obligations may be illiquid.
MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses, and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
(tolls from a bridge, for example). Certificates of participation represent an
interest in an underlying obligation or commitment, such as an obligation issued
in connection with a leasing arrangement. The payment of principal and interest
on private activity and industrial development bonds generally is dependent
solely on the ability of a facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as security for such payment.
Municipal securities include both municipal notes and municipal bonds. Municipal
notes include general obligation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes and participation interests in
municipal notes. Municipal bonds include general obligation bonds, revenue or
special obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds.
OPTIONS -- A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying security at any
time during the option period. A
<PAGE>
19
call option gives the purchaser of the option the right to buy, and the writer
of the option the obligation to sell, the underlying security at any time during
the option period. The premium paid to the writer is the consideration for
undertaking the obligations under the option contract. The initial purchase
(sale) of an option contract is an "opening transaction." In order to close out
an option position, a Fund may enter into a "closing transaction," which is
simply the sale (purchase) of an option contract on the same security with the
same exercise price and expiration date as the option contract originally
opened.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to protect against an
increase in the cost of securities that the Fund may seek to purchase in the
future. A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for the Fund, loss of the premium paid may be offset by
an increase in the value of the Fund's securities or by a decrease in the cost
of acquisition of securities by the Fund.
A Fund may write covered put and call options as a means of increasing the yield
on its portfolio and as a means of providing limited protection against
decreases in its market value. When a Fund sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund will be required to sell the underlying securities
to the option holder at the strike price, and will not participate in any
increase in the price of such securities above the strike price. When a put
option of which a Fund is the writer is exercised, the Fund will be required to
purchase the underlying securities at the strike price, which may be in excess
of the market value of such securities.
A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the Securities and Exchange Commission that OTC options are
illiquid.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
<PAGE>
20
All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing cash or liquid high
grade debt securities with its custodian in an amount at least equal to the
market value of the option and will maintain the account while the option is
open or will otherwise cover the transaction.
RISK FACTORS. Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. A Fund bears a risk of loss in the event the other
party defaults on its obligations and the Fund is delayed or prevented from
exercising its right to dispose of the collateral or if the Fund realizes a loss
on the sale of the collateral. A Fund will enter into repurchase agreements only
with financial institutions deemed to present minimal risk of bankruptcy during
the term of the agreement based on established guidelines. Repurchase agreements
are considered loans under the Investment Company Act of 1940.
RESTRICTED SECURITIES -- Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of 1933
or an exemption from registration. Rule 144A securities are securities that have
not been registered under the Securities Act of 1933, but which may be traded
between certain institutional investors, including investment companies. The
Trust's Board of Trustees is responsible for developing guidelines and
procedures for determining the liquidity of restricted securities and monitoring
the Advisors' implementation of the guidelines and procedures.
SECURITIES LENDING -- In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
STANDBY COMMITMENTS AND PUTS -- Standby commitments and puts are securities
subject to standby commitments or puts permit the holder thereof to sell the
securities at a fixed price prior to maturity. Securities subject to a standby
commitment or put may be sold at any time at the current market price. However,
unless the standby commitment or put was an integral part of the security as
originally issued, it may not be marketable or assignable; therefore, the
standby commitment or put would only have value to the Fund owning the security
to which it relates. In certain cases, a premium may be paid for a standby
commitment or put, which premium will have the effect of reducing the yield
otherwise payable on the underlying
<PAGE>
21
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
SUPER-SINKER BONDS -- Super-sinker bonds, a type of mortgage-backed security 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.
Super-sinker bonds have coupons paying long-term rates but with short-term
maturity because of prepayments (e.g., certain housing bonds).
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.
U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Export Import Bank of the United
States, Farmers Home Administration, Maritime Administration, Tennessee Valley
Authority, 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, Federal Home
Loan Mortgage Corporation ("FHLMC"), the Federal Land Banks, Federal Land Banks,
Federal Intermediate Credit Banks and the U.S. Postal Service as well as
government trust certificates. Some of these securities are supported by the
full faith and credit of the U.S. Treasury (e.g., Government National Mortgage
Association ("GNMA") securities), others are supported by the right of the
issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank securities),
while still others are supported only by the credit of the instrumentality
(e.g., 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.
U.S. TREASURY OBLIGATIONS -- U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS").
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
<PAGE>
22
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Fund will segregate liquid high grade debt securities or cash in an amount
at least equal to these commitments. The interest rate realized on these
securities is fixed as of the purchase date and no interest accrues to the Fund
before settlement. These securities are subject to market fluctuation due to
changes in market interest rates and it is possible that the market value at the
time of settlement could be higher or lower than the purchase price if the
general level of interest rates has changed. Although a Fund generally purchases
securities on a when-issued or forward commitment basis with the intention of
actually acquiring securities for its portfolio, a Fund may dispose of a
when-issued security or forward commitment prior to settlement if it deems
appropriate.
ZERO COUPON OBLIGATIONS -- Zero coupon obligations are debt securities that do
not bear any interest, but instead are issued at a deep discount from par. The
value of a zero coupon obligation increases over time to reflect the interest
accreted. Such obligations will not result in the payment of interest until
maturity, and will have greater price volatility than similar securities that
are issued at par and pay interest periodically.
<PAGE>
A-1
APPENDIX
I. BOND RATINGS
CORPORATE BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P's") and
Moody's Investors Service, Inc. ("Moody's") corporate bond ratings.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories.
Bonds which are rated BBB are considered to be medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Debt rated BB, B, CCC, CC or C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Together with
bonds rated Aaa, they comprise what are generally known as high-grade bonds.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times
<PAGE>
A-2
over the future. Uncertainty of position characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal and interest. Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated C are the lowest rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
II. COMMERCIAL PAPER AND SHORT-TERM RATINGS
The following descriptions of commercial paper ratings have been published by
S&P, Moody's, Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff")
and IBCA Limited ("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+ and 1. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1 reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a safety regarding timely
payment but not as high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to have superior ability and strong ability for repayment, respectively.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
<TABLE>
<S> <C> <C>
STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISOR
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 2000 One Logan Square
Philadelphia, PA 19103
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
100093/10-95
DISTRIBUTOR
SEI Investments Distribution Co.
-- - - - - - - - - - - - - - -
PROSPECTUS
TRUST SHARES
CONTRARIAN
EQUITY FUND
TAX FREE INCOME FUND
INVESTMENT ADVISOR
STI CAPITAL MANAGEMENT, N.A.
OCTOBER 1, 1997
[LOGO]
<PAGE>
STI CLASSIC FUNDS
CONTRARIAN EQUITY FUND
TAX FREE INCOME FUND
INVESTMENT ADVISOR:
STI CAPITAL MANAGEMENT, N.A.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and the above-referenced Funds and should be read in conjunction with the
Funds' prospectus dated October 1, 1997. A prospectus may be obtained through
the Distributor, SEI Investments Distribution Company, 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-
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-
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 of units of beneficial interest
("shares") and different classes of shares. The Trust offers:
INSTITUTIONAL SHARES of the Classic Institutional Cash Management Money
Market Fund and Classic Institutional U.S. Treasury Securities Money Market
Fund;
TRUST SHARES, INVESTOR SHARES AND FLEX SHARES of the Balanced Fund, Capital
Growth Fund, Emerging Markets Equity Fund, Florida Tax-Exempt Bond Fund,
Georgia Tax-Exempt Bond Fund, International Equity Fund, International
Equity Index Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt
Bond Fund, Limited-Term Federal Mortgage Securities Fund, Mid-Cap Equity
Fund, Short-Term U.S. Treasury Securities Fund, Short-Term Bond Fund, Small
Cap Equity Fund, Sunbelt Equity Fund, Tennessee Tax-Exempt Bond Fund, U.S.
Government Securities Fund, and Value Income Stock Fund;
TRUST SHARES AND INVESTOR SHARES of the Prime Quality Money Market Fund,
U.S. Government Securities Money Market Fund and Tax-Exempt Money Market
Fund;
TRUST AND FLEX SHARES of the Tax Free Income Fund;
TRUST SHARES of the Contrarian Equity Fund.
This Statement of Additional Information relates to the Contrarian Equity Fund
(the "Contrarian Fund") and the Tax Free Income Fund (the "Income Fund") (each a
"Fund" and collectively, the "Funds"). The Trust offers Trust Shares and Flex
Shares of the Income Fund, however, at present, investors may only purchase
Trust Shares. Each share represents an equal proportionate interest in the
Fund. See "Description of Shares."
DESCRIPTION OF PERMITTED INVESTMENTS
VARIABLE RATE MASTER DEMAND NOTES
The Income 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 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 Advisor, be
equivalent to the ratings applicable to permitted investments for the Fund. The
Advisor will monitor on an ongoing basis the earning power,
B-2
<PAGE>
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.
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. 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 a Fund.
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 the Funds for purposes of
its investment limitations. The repurchase agreements entered into by the Funds
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 the Funds, 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, the Funds may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Funds are treated as unsecured creditors 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 15% of its total assets in
illiquid securities, subject to the 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
B-3
<PAGE>
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 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.
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
a 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 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 the Advisor as a broker in these transactions.
SMALL CAPITALIZATION COMPANIES
Investments in small capitalization companies involve greater risk than is
customarily associated with larger, more established companies due to the
greater business risks of small size, limited markets and financial resources,
narrow product lines and the frequent lack of depth of management. The
securities of small companies are often traded over-the-counter and may not be
traded in volumes typical on a national securities exchange. Consequently, the
securities of smaller companies may have limited market stability and may be
subject to more abrupt or erratic market movements than securities of larger,
more established growth companies or the market averages in general.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The Income 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.
B-4
<PAGE>
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 ensure that an 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, the Income Fund
would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if the Income 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 Income Fund may
be required to make delivery of the instruments underlying the futures contracts
it holds. The inability to close options and futures positions also could have
an adverse impact on the ability to effectively hedge the underlying securities.
The Income Fund will minimize the risk that it 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 the
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 Fund will be engaged in futures transactions only for hedging
purposes, the Advisor does not believe that the Income Fund will generally be
subject to the risks of loss frequently associated with futures transactions.
The Fund presumably would have sustained comparable losses if, instead of the
futures contract, it 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 Income Fund 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 Fund 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 Fund of margin deposits in the event of the bankruptcy of a broker with whom
the Fund 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
B-5
<PAGE>
trading days with little or no trading, thereby preventing prompt liquidation of
future positions and subjecting some futures traders to substantial losses.
OPTIONS
The Income Fund may write put and call options on a covered the basis only, and
will not engage in option writing strategies for speculative purposes. A put
option gives the purchaser of such option the right to sell, and the writer, in
this case the Income Fund, the obligation to buy the underlying security at the
exercise price during the option period. A call option gives the purchaser of
such option the right to buy, and the writer, in this case the Income Fund, the
obligation to sell the underlying security at the exercise price during the
option period. The advantage to the Fund of writing covered calls is that the
Income Fund receives a premium which is additional income. However, if the
security rises in value, the Income Fund may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. The Income 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, the 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,
the 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.
B-6
<PAGE>
The Income Fund will write call options only on a covered basis, which means
that the 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, the 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 Fund 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.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Investments Company ("SEI"), the parent company of the
Administrator and the Distributor. However, the purchase of shares of a Fund by
such banks or by their customers will not be a consideration in determining
which bank obligations a Fund 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 the Fund's investment objective.
INVESTMENT LIMITATIONS
The following are fundamental policies of the Funds and cannot be changed
without the consent of the holders of a majority of the Fund's outstanding
shares.
No Fund may:
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 the 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) the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies; (b) the Fund may
enter into repurchase agreements, and (c)
B-7
<PAGE>
the 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 (except for financial futures
contracts) and interests in a pool of securities that are secured by
interests in real estate (except that the Tax Free Income Fund may purchase
mortgage-related securities, including certificates of participation and
super-sinker bonds). However, subject to their permitted investment
spectrum, the Funds 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 unless permitted by the
Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations thereunder. Under these rules and regulations, the Fund is
generally 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 the 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
Each Fund may not purchase or retain securities of an issuer if, to the
knowledge of the Trust, an officer, trustee, partner or director of the Trust
or the Advisor of the Trust owns beneficially more than 1/2 of 1% of the shares
or securities of such issuer and all such officers, trustees, partners and
directors owning more than 1/2 of 1% of such shares or securities together own
more than 5% of such shares or securities.
Each Fund may not invest in warrants in an amount exceeding 5% of its net assets
as valued at the lower of cost or market value. Included in that amount, but
not to exceed 2% of a Fund's net assets, may be warrants not listed on the New
York Stock Exchange or American Stock Exchange.
B-8
<PAGE>
Each Fund may not invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of a Fund's assets. An illiquid security is a security which
cannot be disposed of promptly (within seven days), and in the usual course of
business without a loss, and includes repurchase agreements maturing in excess
of seven days, time deposits with a withdrawal penalty, non-negotiable
instruments and instruments for which no market exists.
Each Fund may not invest in interests in oil, gas or other mineral exploration
or development programs and oil, gas or mineral leases.
The Fund may not invest in securities of issuers which together with
predecessors have a record of less than three years continuous operation or
equity securities of issuers which are not readily marketable if such
investments will exceed 5% of the Fund's total assets.
With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
INVESTMENT ADVISOR
The Trust and STI Capital Management, N.A. (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 the Funds (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 a Fund, by a majority of the outstanding shares of a Fund, 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.
B-9
<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
90 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, a
wholly-owned subsidiary of SEI Investments Company ("SEI"), is the owner of all
beneficial interest in the Administrator. SEI and its subsidiaries and
affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors, and 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 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.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Trust have entered into a distribution agreement (the
"Distribution Agreement") dated May 29, 1992. The Distributor will receive no
compensation for distribution of Trust Shares. In addition, the Investor Shares
of the Funds have a distribution plan ("Investor Plan"), and the Flex Shares of
the Funds have a distribution plan ("Flex Plan").
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees (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.
FLEX SHARES DISTRIBUTION PLAN
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
B-10
<PAGE>
can use these fees to compensate broker-dealers and service providers, including
SunTrust and its affiliates, which provide administrative and/or distribution
services to Flex Shares Shareholders or their customers who beneficially own
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 the Income 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 Flex Plan 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 Flex Plan must be approved
annually by a majority of the Trustees of the Trust and by a majority of the
Qualified Trustees. The Flex Plan requires that quarterly written reports of
amounts spent under the Flex Plan, and the purposes of such expenditures, be
furnished to and reviewed by the Trustees. 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 Flex Class of shares of the Trust.
All material amendments of the Plan 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 Fund's, aggregate average daily net assets attributable to its Flex
Shares.
B-11
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their dates of birth and their
principal occupations for the last five years are set forth below. Unless
otherwise noted, the principal business address for each officer listed below is
Oaks, Pennsylvania 19456.
DANIEL S. GOODRUM (7/11/26) - Trustee - 48 Cayuga Road, Fort Lauderdale, Florida
33308. Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman Audit
Committee and Director, Holy Cross Hospital; Executive Committee Member and
Director, Honda Classic Foundation; Director, Broward Community College
Foundation.
WILTON LOONEY (4/18/19) - Trustee - 2999 Circle 75 Parkway, Atlanta, Georgia
30339. President of Genuine Parts Company, 1961-1964; Chairman of the Board,
1964-1990; Honorary Chairman of the Board, 1990 to present; Director, Rollins,
Inc.; Director, RPC Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee - 1405 Trust Co. of Georgia Building,
Atlanta, Georgia 30303. Director and Chairman of Investment Committee and
member of Executive Committee, Cotton States Life and Health Insurance Company;
Director and Chairman of Investment Committee and member of Executive Committee,
Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia
Advisory Council.
F. WENDELL GOOCH (12/3/32) - Trustee - P.O. Box 190, Paoli, Indiana 47454.
President, Orange County Publishing Co., Inc., since October 1981; Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican since
January 1981; President, H & W Distribution, Inc. since July 1984; Current
Trustee on the Board of Trustees for the SEI Family of Funds and The Capitol
Mutual Funds; Executive Vice President, Trust Department, Harris Trust and
Savings Bank and Chairman of the Board of Directors of The Harris Trust Company
of Arizona before January 1981.
T. GORDY GERMANY (11/28/25) -Trustee - 17 Windy Point, Alexander City, Alabama
35010. Retired President, Chairman, and CEO of Crawford & Company; held these
positions, 1973-1987; member of the Board of Directors, 1970-1990, joined
company in 1948; spent entire career at Crawford, currently serves on Boards of
Norrell Corporation and Mercy Health Services, the latter being the holding
company of St. Joseph's Hospitals.
DR. BERNARD F. SLIGER (9/30/24) - Trustee - Florida State University, The Gus A.
Stavros Center, 250 South Woodward Avenue, Tallahassee, Florida 32306-4035.
Currently on sabbatical leave from Florida State University (1991-92); now
serves as visiting professor at the University of New Orleans; President of
Florida State University, 1976-91; previous 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
B-12
<PAGE>
Affairs and Vice Chancellor; Member of Board of Directors of Federal Reserve
Bank of Atlanta, 1983-1988.
JESSE HALL (9/26/29) - Trustee* - 988 Winall Down Road, NE, Atlanta, Georgia
30318. Executive Vice President, SunTrust Banks, Inc., 1985-1994; Director of
Crawford & Company since 1979; Member, Atlanta Estate Planning Council,
1988-1993.
DAVID G. LEE (4/16/52) - President, Chief Executive Officer - Senior Vice
President of the Administrator and Distributor since 1993; Vice President of the
Administrator and Distributor, 1991-1993.
CAROL ROONEY (5/8/64) - Controller, Treasurer, Assistant Secretary - Director
of Fund Resources of the Administrator 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.
SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1983.
KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President & General Counsel of SEI, the Administrator and the Distributor since
1994; Vice President of SEI, the Administrator and the Distributor, 1992-1994.
KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice
President, Assistant Secretary of SEI, the Administrator and Distributor since
1994; Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
JOSEPH M. LYDON (9/27/59) - Vice President - Director of Business Administration
of Fund Resources, SEI since 1995; Vice President of Fund Group and Vice
President of the Adviser, Dremen Value Management and President of Dremen
Financial Services, Inc. prior to 1995.
TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of SEI, the Administrator and the Distributor since
1995; Associate, Dewey Ballantine (law firm), 1994-1995; Associate, Winston &
Strawn (law firm), 1991-1994.
BARBARA A. NUGENT (6/18/56) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor;
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, the Administrator and Distributor; Associate
General Counsel, Barclays Bank PLC, 1995-1996; ERISA counsel for First Fidelity
Bancorporation, 1994-1995 Associate, Morgan, Lewis & Bockius, LLP, 1989-1994.
B-13
<PAGE>
JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 1800 M Street, N.W.
Washington, DC 20036. Partner, Morgan, Lewis & Bockius LLP (law firm) since
1995; Associate, Morgan, Lewis & Bockius LLP, 1993-1995; Associate, Ropes & Gray
(law firm), 1988-1993.
- ---------------------------
* Jesse S. Hall may be deemed to be an "interested person" of the Trust as
defined in the Investment Company Act of 1940.
The Trustees and officers of the Trust own, in the aggregate, less than 1% of
the outstanding shares of the Trust.
For the fiscal year end May 31, 1996, the Trust paid the following amounts to
Trustees and Officers of the Trust:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Total Compensation
Aggregate Pension or from Registrant and
Compensation Retirement Fund Complex Paid to
From Registrant Benefits Accrued Estimated Annual Directors for
Name of Person, for Fiscal Year as Part of Fund Benefits Upon Fiscal Year
Position Ended 1996 Expenses Retirement Ended 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel S. Goodrum, $13,500 N/A N/A $13,500 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
Wilton Looney, $16,000 N/A N/A $16,000 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
Champney A. McNair, $13,500 N/A N/A $13,500 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
F. Wendell Gooch, $13,500 N/A N/A $13,500 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
T. Gordy Germany, $13,500 N/A N/A $13,500 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
Dr. Bernard F. Sliger, $13,500 N/A N/A $13,500 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
Jesse S. Hall, $13,500 N/A N/A $13,500 for service
Trustee on two boards
- -----------------------------------------------------------------------------------------------------
</TABLE>
B-14
<PAGE>
COMPUTATION OF YIELD
The current yield of the Funds will be calculated daily based upon the thirty
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 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.
The 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.
The Tax Free Income 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%.
CALCULATION OF TOTAL RETURN
From time to time, the Funds may advertise total return. In particular, n
total return will be calculated according to the following formula: P (1 + T) =
ERV, where P = a hypothetical initial payment of
B-15
<PAGE>
$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 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 affiliates, STI Capital Management, N.A. acting as
the portfolio manager for the Value Income Stock Fund and the International
Equity Fund, has been in the top 1% of the SEI Funds Evaluation database for
equity managers over the past ten years. SEI's database includes research data
on over 1,000 investment managers responsible for over $450 billion in assets.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Fund 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 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 Fund 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 the Fund 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 securities of the Funds are valued by the Administrator pursuant to
valuations provided by an independent pricing service. The pricing service
relies primarily on prices of actual market transactions as well as trader
quotations. However, the service may also use a matrix system to determine
valuations of fixed income securities, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of
the pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
B-16
<PAGE>
TAXES
FEDERAL INCOME TAX
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended ("Code"), a Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
a Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income, (ii) a Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of stocks or securities held for less than three months; (iii)
at the close of each quarter of a Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of a Fund's assets and that does not represent more than
10% of the outstanding voting securities of such issuer; and (iv) at the close
of each quarter of a Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RIC's) of any one issuer, or of two or more issuers
engaged in same or similar businesses if a Fund owns at least 20% of the voting
power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gains (the excess of net long-term capital gains over net short-term capital
loss), a Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income for the one-year period
ending on October 31 of that calendar year, plus certain other amounts.
As noted in the Prospectus, the Tax Free Income Fund intends to pay
exempt-interest dividends. Exempt-interest dividends are excludable from a
Shareholder's gross income for regular federal income tax purposes, but may
nevertheless be subject to the alternative minimum tax (the "Alternative Minimum
Tax") imposed by Section 55 of the Code or the environmental tax (the
"Environmental Tax") imposed by Section 59A of the Code. The Alternative
Minimum Tax is imposed at the rate of 26% (with a maximum rate of 28%) in the
case of non-corporate taxpayers and at the rate of 20% in the case of corporate
taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The
Environmental Tax is imposed at the rate of 0.12% and applies only to corporate
taxpayers. The Alternative Minimum Tax and the Environmental Tax may be
imposed in two circumstances. First, exempt-interest dividends derived from
certain "private activity bonds" issued after August 7, 1986, will generally be
an item of tax preference (and therefore potentially subject to the Alternative
Minimum Tax and the Environmental Tax) for both corporate and non-corporate
taxpayers. Second, in the case of exempt-interest dividends received by
corporate Shareholders, all exempt-interest dividends, regardless of when the
bonds from which they are derived were issued or whether they are derived from
private activity bonds, will be included in the corporation's "adjusted current
earnings," as defined in Section 56(g) of the Code, in
B-17
<PAGE>
calculating the corporation's alternative minimum taxable income for purposes of
determining the Alternative Minimum Tax and the Environmental Tax.
Any gain or loss recognized on a sale or redemption of Shares of the Income
Fund by a Shareholder who is not a dealer in securities will generally be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise will be generally treated as a short-term
capital gain or loss. Any loss recognized by a Shareholder upon the sale or
redemption of shares of a tax-free Fund held for six months or less, however,
will be disallowed to the extent of any exempt-interest dividends received by
the Shareholder with respect to such shares. If shares on which a net capital
gain distribution has been received are subsequently sold or redeemed and such
shares have been held for six months or less, any loss recognized will be
treated as a long-term capital loss to the extent of the long-term capital gain
distribution.
Interest on indebtedness incurred by Shareholders to purchase or carry shares of
a tax-free Fund will not be deductible for federal income tax purposes to the
extent that the Fund distributes exempt interest dividends during the taxable
year. The deduction otherwise allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Certain foreign corporations engaged in a trade or business in the United States
will be subject to a "branch profits tax" on their "dividend equivalent amount"
for the taxable year, which will include exempt-interest dividends. Certain
Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include exempt-interest dividends. Up to 85%
(up to 50% for years prior to 1994) of the Social Security benefits or railroad
retirement benefits received by an individual during any taxable year will be
included in the gross income of such individual if the individual's "modified
adjusted gross income" (which includes exempt-interest dividends) plus one-half
of the Social Security benefits or railroad retirement benefits received by such
individual during that taxable year exceeds the base amount described in Section
86 of the Code.
A tax-free Fund may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
or private activity bonds. A "substantial user" is defined generally to include
certain persons who regularly use a facility in their trade or business. Such
entities or persons should consult their tax advisors before purchasing shares
of a tax-free Fund.
Issuers of bonds purchased by a tax-free fund (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date thereof if such
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
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
B-18
<PAGE>
for more than twelve months and otherwise will be generally treated as a
short-term capital gain or loss. If shares on which a net capital gain
distribution has been received are subsequently sold or redeemed and such shares
have been held for six months or less, any loss recognized will be treated as a
long-term capital loss to the extent of the long-term capital gain distribution.
STATE TAXES
The Funds are not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to Shareholders and the ownership of shares may be subject to state and local
taxes.
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 the 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 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
B-19
<PAGE>
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 the Advisor, brokerage business to
brokers or dealers who provide brokerage and research services. These research
services include rendering advice, either directly or through publications or
writings, about 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 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 the 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.
The 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 the Fund may obtain, it is the
opinion of the 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 the Advisor, both of which are
registered broker-dealers, for a commission in conformity
B-20
<PAGE>
with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these
provisions, the Distributor or an affiliate of the 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 remuneration 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.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares and classes of shares of each Fund, each of which represents an equal
proportionate interest in the Fund with each other share. Shares are entitled
upon liquidation to a PRO RATA share in the net assets of the Fund. 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 connection with actual or threatened
litigation in which they may be involved because of their offices
B-21
<PAGE>
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.
B-22
<PAGE>
STI CLASSIC FUNDS
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 19
Item 24. Financial Statements and Exhibits:
Financial Statements
(a) Part A - Not applicable
Part B - Not applicable
(b) Additional Exhibits
(1) Declaration of Trust--as originally filed with Registrant's
Registration Statement on Form N-1A filed February 12, 1992 and
incorporated by reference to Post-Effective Amendment No. 15
filed July 31, 1996.
(2) By-Laws--as originally filed with Registrant's Pre-Effective
Amendment No. 1 filed April 23, 1992 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31, 1996.
(3) Not applicable.
(4) Not applicable.
(5)(c) Revised Investment Advisory Agreement with Trusco Capital
Management--as originally filed with Registrant's Post-Effective
Amendment No. 5 filed August 2, 1993 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31, 1996.
(5)(d) Investment Advisory Agreement with American National Bank and
Trust Company--as originally filed with Registrant's Post-
Effective Amendment No. 6 filed October 22, 1993 and incorporated
by reference to Post-Effective Amendment No. 15 filed July 31,
1996.
(5)(e) Investment Advisory Agreement with Trust Company Bank--as
originally filed with Registrant's Post-Effective Amendment No. 6
filed October 22, 1993 and incorporated by reference to Post-
Effective Amendment No. 15 filed July 31, 1996.
(6) Distribution Agreement incorporated by reference to Post-
Effective Amendment No. 16 filed September 10, 1996.
(7) Not applicable.
(8)(a) Custodian Agreement with Trust Company Bank dated February 1,
1994--as originally filed with Registrant's Post-Effective
Amendment No. 13 filed September 28, 1995 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31, 1996.
(8)(b) Custodian Agreement with the Bank of California incorporated by
reference to Post-Effective Amendment No. 15 filed July 31, 1996.
(8)(c) Transfer Agent Agreement with Federated Services Company dated
May 14, 1994--as originally filed with Post-Effective Amendment
No. 9 filed September 22, 1994 and incorporated by reference to
Post-Effective Amendment No. 15 filed July 31, 1996.
(9)(a) Administration Agreement with SEI Financial Management
Corporation dated May 29, 1995 as originally filed with Post-
Effective Amendment No. 12 filed August 17, 1995 and incorporated
by reference to Post-Effective Amendment No. 15 filed July 31,
1996.
(10) Opinion and Consent of Counsel (Incorporated by reference to Pre-
Effective Amendment No. 2 filed May 22, 1992).
C-1
<PAGE>
(11) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS.*
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Distribution Plan - Investor Class incorporated by reference to
Post-Effective Amendment No. 16 filed September 10, 1996.
(15)(a) Distribution and Service Agreement relating to Flex Shares dated
May 29, 1995--as originally filed with Post-Effective Amendment
No. 12 filed August 17, 1995 and incorporated by reference to
Post-Effective Amendment No. 15 filed July 31, 1996.
(16) Performance Quotation Computation (Incorporated by reference to
Post-Effective Amendment No. 9 filed September 22, 1994).
(17) Not applicable.
(18) Rule 18f-3 Plan incorporated by reference to Post-Effective
Amendment No. 16 filed September 10, 1996.
(24) Powers of Attorney--as originally filed with Post-Effective
Amendment No. 13 filed September 28, 1995 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31, 1996.
(24)(a) Power of Attorney for Carol Rooney incorporated by reference to
Post-Effective Amendment No. 18 filed on June 30, 1996.
*FILED HEREWITH.
Item 25. Persons Controlled by or under Common Control with Registrant:
See the Prospectuses and Statement of Additional Information regarding the
Trust's control relationships. The Administrator is a subsidiary of SEI
Investments which also controls the distributor of the Registrant, SEI
Investments Distribution Co., and other corporations engaged in providing
various financial and record keeping services, primarily to bank trust
departments, pension plan sponsors, and investment managers.
Item 26. Number of Holders of Securities:
As of June 20, 1997:
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
Units of beneficial interest, without par value
Balanced Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408
Capital Growth Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .11,461
C-2
<PAGE>
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,024
Classic Institutional Cash Management Money Market Fund. . . . . . . . . . . . 8
Classic Institutional U.S. Treasury Securities Money Market Fund . . . . . . . 7
Emerging Markets Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . 0
Florida Tax-Exempt Bond Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Georgia Tax-Exempt Bond Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
International Equity Index Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
International Equity Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 987
Investment Grade Bond Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,126
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540
Investment Grade Tax-Exempt Bond Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,265
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Limited-Term Federal Mortgage Securities Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Mid-Cap Equity Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,435
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002
Prime Quality Money Market Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,105
Short-Term Bond Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
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<PAGE>
Short-Term U.S. Treasury Securities Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Small Cap Equity Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Sunbelt Equity Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,567
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633
Tax-Exempt Money Market Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
Tennessee Tax-Exempt Bond Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
U.S. Government Securities Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
U.S. Government Securities Money Market Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940
Value Income Stock Fund
Trust Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investor Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,030
Flex Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,952
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such
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<PAGE>
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Advisors:
Other business, profession, vocation, or employment of a substantial nature
in which each director or principal officer of each Advisor is or has been, at
any time during the last two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner or trustee are as follows:
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
---- ------------- -------------
STI CAPITAL MANAGEMENT, N.A.
E. Jenner Wood III -- --
Director
Hunting F. Deutsch -- --
Director
Anthony R. Gray -- --
Chairman & Chief Investment
Officer
James R. Wood -- --
President
Daniel Jaworski -- --
Senior Vice President
Elliott A. Perny -- --
Executive Vice President
& Chief Portfolio Manager
Stuart F. Van Arsdale -- --
Senior Vice President
Jonathan D. Rich -- --
Director
Robert Buhrmann -- --
Senior Vice President
C-5
<PAGE>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
---- ------------- -------------
Larry M. Cole -- --
Senior Vice President
L. Earl Denney -- --
Executive Vice President
Thomas A. Edgar -- --
Senior Vice President
Daniel G. Shannon -- --
Senior Vice President
Ronald Schwartz -- --
Senior Vice President
Ryan R. Burrow Catalina Lighting Director/25% owner
Senior Vice President
Mills A. Riddick -- --
Senior Vice President
Christopher A. Jones -- --
Senior Vice President
David E. West -- --
Vice President
The list required by this Item 28 of officers and directors of Trusco Capital
Management, Inc., together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV, filed by Trusco Capital Management, Inc.
pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-23163).
SUNTRUST BANK CHATTANOOGA, N.A.
Paul K. Brock, Jr. Brock Candy Company Vice President -
Director Special Projects
J. Harold Chandler Provident Life & President & CEO
Director Accident
Insurance Co.
C-6
<PAGE>
<TABLE>
<CAPTION>
<S><C>
William H. Chapin See Rock City, Inc. President
Director
John W. Clay, Jr. Third National Corporation Chairman & Director CEO
Andrew G. Cope The Johnston Company Managing Partner
Director
Robert P. Corker, Jr. -- --
Director
John B. Crimmins, Jr. -- --
Director
J.H. Davenport, III Howard Holdings, Inc. President
Director
Edwin B. Duckett, Jr. -- --
Director
R. Alton Duke, Jr. -- --
Director
Daniel K. Frierson Dixie Yarns, Inc. Chairman & CEO
Director
Zan Guerry Chattem, Inc. Chairman & CEO
Director
James L.E. Hill The Tennessee Aquarium President
Director
Summerfield K. Johnston, Jr. Coca Cola Enterprises, Inc. Vice Chairman & CEO
Director
Robert C. Jones Southern Products Chairman
Director Company, Inc.
James D. Kennedy, Jr. Cherokee Warehouses, Inc. Chairman
Director
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
<S><C>
T. A. Lupton, Jr. Stone Fort Land Company President
Director
Hugh O. Maclellen, Jr. Provident Life & Accident Chairman - Executive
Director Insurance Co. Committee
Jack C. McKee McKee Baking Company Executive Vice
Director President
Charles G. Mills Olan Mills Incorporated Chairman - Executive
Director Committee
J. Woodley Murphy E.I. DuPont de Nemours Plant Manager
Director & Co.
L. Harlen Painter Bell & Associates Attorney-at-Law
Director
Scott L. Probasco, Jr. American National Bank & Chairman - Executive
Director Trust Co. Committee
Robert J. Sudderth, Jr. American National Bank & Chairman & CEO
Director Trust Co.
Winston W. Walker -- --
Director
SUNTRUST BANK, ATLANTA
Gaylord O. Coan Gold Kist, Inc. President & CEO
Director Hindsight Corp. Director
A.D. Correll Georgia-Pacific Corporation President & CEO
Director
R.W. Courts, II Atlantic Realty Company President
Director
Ronald S. Crowding -- --
A.W. Dahlberg The Southern Company President
Director
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S><C>
William W. Gaston Gaston & Gaston General Partner
Director Gaston Development Co., Inc. President
Charles B. Ginden -- --
Director
Roberto C. Goizueta The Coca-Cola Company Chairman of the Board
Director
Edward P. Gould Trust Company of Georgia Chairman of the Board
Director
T. Marshall Hahn, Jr. Georgia-Pacific Honorary Chairman
Director Corporation
Jesse Hill, Jr. Atlanta Life Insurance President
Director Company
L. Phillip Humann SunTrust Banks, Inc. President & Treasurer
Director Services Resources
Corporation
William B. Johnson The Ritz Carlton Hotel Chairman of the Board
Director Company
Hicks J. Lanier Oxford Industries, Inc. Chairman of the Board Director & President
Pinehill Development Co.30% owner
Joseph L. Lanier, Jr. Dan River, Inc. Chairman of the Board
Director Braelan Group Chairman
Robert R. Long Trust Company Bank President
Director
Arthur L. Montgomery -- --
Director
H.G. Patillo Patillo Construction Chairman of the Board
Director Company
Larry L. Prince Genuine Parts Company Chairman of the Board
Director
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S><C>
R. Randall Rollins Rollins, Inc. Chairman of the Board
Director Lor, Inc. Director
Maran, Inc. Director
Gutterworld, Inc. Director
Dabora, Inc. Director & Secretary
Simpson, Nance & Graham Director
Auto Parts Wholesale, Inc. Director
Global Expanded Metal, Inc. Director
Rollins Holding Co. Director
Rol, Ltd. Partner
Rollins Investment Fund Partner
Energy Partners Partner
Petro Partnership Partner
The Piedmont Investment
Group Director
WRG, Ltd. Partner
Rollins, Inc. Chairman
RPC Energy Services, Inc. Chairman
The Mul Company Partner
Bugvac, Inc. Director
Omnitron Int'l, Inc. Director
MRG, Ltd. Partner
Robert W. Scherer -- --
Director
Charles R. Shufeldt -- --
Executive Vice President
Donald Wayne Thurmond -- --
Senior Vice President
James B. Williams SunTrust Banks, Inc. Chairman of the Board
Director
Gerald T. Adams -- --
Senior Vice President
James R. Albach -- --
Group Vice President
Virginia D. Anderson -- --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S><C>
Assistant Vice President
Christina Bird -- --
First Vice President
Edward Burgess -- --
Vice President
Gay Cash -- --
Vice President
Krista Lee Cosgrove -- --
Trust Officer
Mark Elam -- --
Vice President
Joseph B. Foley, Jr. -- --
First Vice President
Thomas R. Frisbie -- --
Group Vice President
Molly Guenther -- --
Assistant Vice President
Benjamin S. Harris -- --
Vice President
Jethro H. Irby, III -- --
First Vice President
V. Jere Koser -- --
Group Vice President
Richard A. Makepeace -- --
Assistant Vice President
Sally S. McKinley -- --
Assistant Vice President
James B. Murphy, III -- --
Vice President
</TABLE>
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<PAGE>
James E. Russell -- --
Vice President
Mark Stancil -- --
Assistant Vice President
David E. Thompson -- --
Vice President
Charles C. Watson -- --
Group Vice President
Item 29. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of the
Registrant also acts as a principal underwriter, distributor or investment
adviser.
Registrant's distributor, SEI Investments Distribution Co. ("SEI
Investments"), acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds-Registered Trademark- June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds-Registered Trademark- August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
C-12
<PAGE>
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds Feburary 15, 1997
Armada Funds March 8, 1997
Expedition Funds June 9, 1997
SEI Investments provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the business address of
each director or officer is Oaks, Pennsylvania 19456.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President, President-
Investment Advisory Group --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President-Investment
Services Division --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
David G. Lee Senior Vice President President & Chief Executive
Officer
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Executive Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & Vice President & Assistant
Secretary Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
---- ---------------- ---------------
<S> <C> <C>
Robert Aller Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President & Assistant
Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant
Secretary
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President & Treasurer --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President & Assistant
Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President & Assistant
Secretary
Donald Pepin Vice President & Managing Director --
Kim Rainey Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8);
(12); and 31a-1(d), the required books and records are maintained at the offices
of Registrant's Custodians:
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<PAGE>
Trust Company Bank
Park Place
P.O. Box 105504
Atlanta, Georgia 30348
Bank of New York (International Equity Index Fund)
One Wall Street
New York, New York
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's Administrator:
SEI Fund Resources
One Freedom Valley Road
Oaks, Pennsylvania 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Advisors:
STI Capital Management, N.A.
P.O. Box 3808
Orlando, Florida 32802
Trusco Capital Management
50 Hurt Plaza, Suite 1400
Atlanta, Georgia 30303
SunTrust Bank, Chattanooga
736 Market Street
Chattanooga, Tennessee 37402
SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Item 31. Management Services: None.
Item 32. Undertakings:
Registrant hereby undertakes that whenever Shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Trustees of their desire to communicate with Shareholders of the Trust,
the Trustees will inform such Shareholders as to the
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<PAGE>
approximate number of Shareholders of record and the approximate costs of
mailing or afford said Shareholders access to a list of Shareholders.
Registrant undertakes to call a meeting of Shareholders for the purpose of
voting upon the question of removal of a Trustee(s) when requested in writing to
do so by the holders of at least 10% of Registrant's outstanding shares and in
connection with such meetings to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to Shareholder communications.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to Shareholders,
upon request and without a charge.
Registrant hereby undertakes to file a post-effective amendment,
including financial statements which need not be audited, within 4-6 months
from the later of the commencement of operations of the Contrarian Equity
Fund and Tax-Free Income Fund of the Registrant or the effective date of
Post-Effective Amendment No. 19 to the Registrant's 1933 Act Registration
Statement.
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<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for STI Classic Funds is
on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustees
as trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Securities
Act") and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 19 to Registration Statement No.
33-45671 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oaks, Commonwealth of Pennsylvania on the 14 day of
July, 1997.
By: /s/ DAVID G. LEE
------------------------------------
David G. Lee, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacity on the dates indicated.
* Trustee July 14, 1997
- ------------------------------
F. Wendell Gooch
* Trustee July 14, 1997
- ------------------------------
Daniel S. Goodrum
* Trustee July 14, 1997
- ------------------------------
Jesse S. Hall
* Trustee July 14, 1997
- ------------------------------
Wilton Looney
* Trustee July 14, 1997
- ------------------------------
Champney A. McNair
* Trustee July 14, 1997
- ------------------------------
T. Gordy Germany
* Trustee July 14, 1997
- ------------------------------
Bernard F. Sliger
/s/ CAROL ROONEY Controller, July 14, 1997
- ------------------------------ Treasurer &
Carol Rooney Chief Financial
Officer
/s/ DAVID G. LEE President & Chief July 14, 1997
- ------------------------------ Executive Officer
David G. Lee
* By: /s/ DAVID G. LEE
-------------------------
David G. Lee, As Power of
Attorney
<PAGE>
EXHIBIT INDEX
NUMBER EXHIBIT
EX-99.B1 Declaration of Trust as originally filed with Registrant's
Registration Statement on Form N-1A filed February 12, 1992
and incorporated by reference to Post-Effective Amendment
No. 15
EX-99.B2 By-Laws as originally filed with Registrant's Pre-Effective
Amendment No. 1 filed April 23, 1992 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31,
1996.
EX-99.B3 Not applicable.
EX-99.B4 Not applicable.
EX-99.B5C Revised Investment Advisory Agreement with Trusco Capital
Management as filed with Registrant's Post-Effective
Amendment No. 5 filed August 2, 1993 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31,
1996.
EX-99.B5D Investment Advisory Agreement with American National Bank
and Trust Company as filed with Registrant's Post-Effective
Amendment No. 6 filed October 22, 1993 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31,
1996.
EX-99.B5E Investment Advisory Agreement with Trust Company Bank as
originally filed with Registrant's Post-Effective Amendment
No. 6 filed October 22, 1993 and incorporated by reference
to Post-Effective Amendment No. 15 filed July 31, 1996.
EX-99.B6 Distribution Agreement incorporated by reference to Post-
Effective Amendment No. 16 filed September 10, 1996.
EX-99.B7 Not applicable.
EX-99.B8A Custodian Agreement with Trust Company Bank dated February
1, 1994 as originally filed with Registrant's Post-Effective
Amendment No. 13 filed September 28, 1995 and incorporated
by reference to Post-Effective Amendment No. 15 filed July
31, 1996.
EX-99.B8B Custodian Agreement with Bank of California incorporated by
reference to Post-Effective Amendment No. 15 filed July 31,
1996.
EX-99.B8C Transfer Agent Agreement with Federated Services Company
dated May 14, 1994 as originally filed with Post-Effective
Amendment No. 9 filed September 22, 1994 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31,
1996.
EX-99.B9A Administration Agreement with SEI Financial Management
Corporation dated May 29, 1995 as originally filed with
Post-Effective Amendment No. 12 filed August 17, 1995 and
incorporated by reference to Post-Effective Amendment No. 15
filed July 31, 1996.
EX-99.10 Opinion and Consent of Counsel (incorporated by reference to
Pre-Effective Amendment No. 2 filed May 22, 1992)
EX-99.B11 Consent of Independent Public Accountants*
EX-99.B12 Not applicable.
EX-99.B13 Not applicable.
EX-99.B14 Not applicable.
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<PAGE>
EX-99.B15 Distribution Plan--Investor Class incorporated by reference
to Post-Effective Amendment No. 16 filed September 10, 1996.
EX-99.B15A Distribution and Service Agreement relating to Flex Shares
dated May 29, 1995 as originally filed with Post-Effective
Amendment No. 12 filed August 17, 1995 and incorporated by
reference to Post-Effective Amendment No. 15 filed July 31,
1996.
EX-99.B16 Performance Quotation Computation (incorporated by reference
to Post-Effective Amendment No. 9 filed September 22, 1994).
EX-99.B18 Rule 18f-3 Plan incorporated by reference to Post-Effective
Amendment No. 16 filed September 10, 1996.
EX-99.B24 Powers of attorney as originally filed with Post-Effective
Amendment No. 13 filed September 28, 1995 and incorporated
by reference to Post-Effective Amendment No. 15 filed July
31, 1996.
EX-99.B24a Power of attorney for Carol Rooney incorporated by reference
to Post-Effective Amendment No. 18 as filed June 30, 1997.
EX-99.27 Financial Data Schedules
*FILED HEREWITH.
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<PAGE>
EXHIBIT EX-99.B11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our firm
name included in the Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A of the STI Classic Funds (File No. 33-45671), and to
all references to our firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
July 11, 1997
