ANNUAL
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FINANCIAL REPORT
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STI CLASSIC FUNDS
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A Family of Mutual Funds
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CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
May 31, 1998
[LOGO OMITTED]
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
COMMERCIAL PAPER (25.4%)
FINANCE (5.5%)
Banc One
5.570%, 06/09/98 $1,729 $ 1,727
Banc One Funding
5.520%, 06/01/98 1,078 1,078
5.570%, 06/12/98 1,000 998
Caterpiller Finance
5.470%, 07/21/98 1,300 1,290
Credit Suisse First Boston
5.500%, 06/09/98 5,000 4,994
General Electric Capital
5.450%, 06/01/98 500 500
5.520%, 08/17/98 500 494
GMAC
5.550%, 07/10/98 2,250 2,237
John Hancock
5.530%, 07/02/98 3,706 3,688
Xerox Credit
5.650%, 06/01/98 3,512 3,512
----------
20,518
----------
INDUSTRIAL (19.2%)
British Petroleum America
5.650%, 06/01/98 10,844 10,844
Dominion Semiconductor
5.560%, 07/20/98 4,000 3,970
5.570%, 07/23/98 7,000 6,944
Eaton
5.500%, 06/03/98 937 937
5.480%, 07/31/98 6,575 6,515
Fortune Brands
5.520%, 07/28/98 6,500 6,443
General Re
5.510%, 06/26/98 11,000 10,957
J.C. Penney
5.500%, 06/10/98 1,300 1,298
5.500%, 06/25/98 10,000 9,963
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
INDUSTRIAL--CONTINUED
Procter & Gamble
5.580%, 06/19/98 $1,350 $ 1,346
RTZ America
5.500%, 06/18/98 4,200 4,189
Sherwin Williams
5.500%, 06/01/98 2,000 2,000
5.500%, 06/09/98 3,625 3,621
Wal-Mart Stores
5.782%, 06/01/98 1,400 1,400
Walt Disney
5.550%, 12/04/98 515 500
Xerox
5.650%, 06/01/98 932 932
----------
71,859
----------
UTILITIES (0.7%)
South Carolina Fuel
5.520%, 06/25/98 2,580 2,571
----------
Total Commercial Paper
(Cost $94,950) 94,948
----------
CORPORATE OBLIGATIONS (12.4%)
FINANCE (8.4%)
Associates Corporation of
North America, MTN
8.780%, 06/10/98 1,000 1,001
Associates Corporation of
North America
6.375%, 08/15/98 100 100
Bankers Trust, New York (A) (B)
5.679%, 02/19/99 7,000 7,000
Beneficial, MTN
8.270%, 11/30/98 1,000 1,012
British Telecom Finance
9.375%, 02/15/99 1,000 1,024
Caterpillar Financial Service,
MTN (A)
5.755%, 05/09/99 5,000 5,000
1
<PAGE>
STATEMENT OF NET ASSETS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONTINUED
- -----------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
FINANCE--CONTINUED
Ford Motor Credit
8.000%, 01/15/99 $ 1,000 $ 1,013
General Electric Capital (A)
5.596%, 11/27/98 10,000 10,000
GMAC, MTN
7.150%, 04/30/99 1,000 1,011
International Lease
5.750%, 01/15/99 752 752
Nationsbank
8.500%, 03/01/99 1,000 1,020
Norwest
6.230%, 09/01/98 150 150
Transamerica, MTN (A)
5.719%, 02/18/99 1,500 1,501
Xerox Credit
10.000%, 04/01/99 780 806
----------
31,390
----------
INDUSTRIAL (0.7%)
Fortune Brands
7.500%, 05/15/99 1,025 1,041
Fortune Brands, MTN
8.750%, 08/10/98 1,000 1,006
J.C. Penney
5.375%, 11/15/98 500 499
----------
2,546
----------
UTILITIES (3.3%)
Baltimore Gas & Electric, MTN
8.930%, 07/16/98 1,750 1,756
Bell Atlantic, MTN
5.440%, 07/15/98 250 250
Carolina Power & Light, MTN
5.375%, 07/01/98 250 250
Duke Energy, MTN
5.170%, 09/01/98 500 499
GTE Northwest
6.125%, 02/15/99 650 651
- -----------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -----------------------------------------------------------
UTILITIES--CONTINUED
Pacific Gas & Electric,
Callable on 07/09/98 @ 100.00
5.750%, 12/01/98 $ 1,000 $ 1,000
Southern California Edison
5.450%, 06/15/98 1,000 1,000
7.500%, 04/15/99 505 512
Virginia Electric Power
9.375%, 06/01/98 4,980 4,980
Virginia Electric Power, MTN
6.250%, 08/01/98 500 500
9.650%, 01/25/99 990 1,013
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12,411
----------
Total Corporate Obligations
(Cost $46,347) 46,347
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BANK NOTES (11.7%)
American Express Centurion (A)
5.606%, 03/24/99 5,000 5,000
Comerica Bank (A)
5.695%, 10/21/98 4,000 3,999
Deutsche Bank NY (A)
5.715%, 04/14/99 5,000 4,998
FCC National Bank (A)
5.715%, 04/09/99 5,000 4,998
First National Bank, Chicago (A)
5.722%, 04/19/99 10,000 9,996
Northern Trust (A)
5.715%, 04/09/99 10,000 9,997
PNC Bank N.A. (A)
5.660%, 07/01/98 5,000 5,000
----------
Total Bank Notes
(Cost $43,988) 43,988
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U.S. GOVERNMENT AGENCY OBLIGATION (4.0%)
Federal Farm Credit, MTN (A)
5.443%, 03/02/99 10,000 9,996
2
<PAGE>
- -------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION--CONTINUED
SLMA, MTN (A)
5.628%, 04/01/99 $ 5,000 $ 4,998
----------
Total U.S. Government Agency Obligation
(Cost $14,994) 14,994
----------
CERTIFICATES OF DEPOSIT (18.1%)
Commerzbank (A)
5.725%, 04/14/99 10,000 9,997
Bank America, Canada
5.570%, 07/28/98 10,000 10,000
Bayerische Landesbank,
New York (A)
5.666%, 04/21/99 10,000 9,995
Credit Suisse First Boston,
New York (A)
5.725%, 10/27/98 5,000 5,000
Deutsche Bank, New York
5.640%, 03/23/99 4,000 3,997
Rabobank
5.750%, 04/27/99 8,000 7,997
Societe Generale, New York
5.580%, 02/10/99 2,000 2,000
5.800%, 04/28/99 9,000 8,992
Swiss Bank Corporation, New York
5.650%, 03/24/99 5,000 4,996
5.810%, 04/29/99 5,000 4,997
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Total Certificates Of Deposit
(Cost $67,971) 67,971
----------
ASSET-BACKED SECURITIES (5.6%)
Americredit Auto Receivable Trust,
Ser 1997-D, Cl A1
5.800%, 11/05/98 858 858
Americredit Auto Receivable Trust,
Ser 1998-B, Cl A1
5.629%, 06/12/99 4,000 4,000
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FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
ASSET-BACKED SECURITIES--CONTINUED
Arcadia Auto Receivable Trust,
Ser 1998-A, Cl A1
5.628%, 03/15/99 $ 4,506 $ 4,507
Chase Manhattan Auto Owner
Trust, Ser 1999-B, Cl A1
5.578%, 05/10/99 5,782 5,783
Key Auto Finance Trust,
Ser 1997-2, Cl A1
5.835%, 01/05/99 1,264 1,264
WFS Financial Owner Trust,
Ser 1997-D, Cl A1
5.910%, 12/20/98 4,652 4,652
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Total Asset-Backed Securities
(Cost $21,064) 21,064
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REPURCHASE AGREEMENTS (22.8%)
Barclays
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$17,613,558 (collateralized
by FNMA and FHLMC obligations:
total market value
$17,957,479) (C) 17,605 17,605
Deutsche Bank
5.58%, dated 05/29/98, matures
06/01/98 repurchase price
$45,688,671 (collateralized
by FNMA and FHLMC obligations:
total market value
$46,580,828) (C) 45,668 45,668
Salomon Brothers
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$4,113,374 (collateralized
by FNMA and FHLMC
obligations: total market
value $4,195,308) (C) 4,112 4,112
3
<PAGE>
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONCLUDED
- -------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
REPURCHASE AGREEMENTS--CONTINUED
Union Bank of Switzerland
5.58%, dated 05/29/98, matures
06/01/98, repurchase price
$18,026,805 (collateralized
by FNMA obligation: market
value $18,380,052) (C) $18,018 $ 18,018
----------
Total Repurchase Agreements
(Cost $85,403) 85,403
----------
Total Investments (100.0%)
(Cost $374,715) 374,715
----------
OTHER ASSETS AND LIABILITIES, NET (0.0%) 87
----------
NET ASSETS:
Fund shares of the Institutional Shares
(unlimited authorization -- no par value)
based on 374,801,521 outstanding
shares of beneficial interest 374,802
----------
Total Net Assets (100.0%) $ 374,802
==========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Shares $ 1.00
==========
Cl Class
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
Ser Series
(A) Variable rate security. The rate reported on the
Statement of Net Assets is the rate in effect on
May 31, 1998.
(B) Private Placement Security
(C) Tri-Party Repurchase Agreement
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
================================================================================
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
- -------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
TREASURY NOTES (9.2%)
U.S. Treasury Notes
5.625%, 11/30/98 $ 600 $ 600
6.375%, 05/15/99 10,000 10,065
----------
Total Treasury Notes
(Cost $10,665) 10,665
----------
REPURCHASE AGREEMENTS (90.8%)
Barclays
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,254,982 (collateralized by
U.S. Treasury Note: market
value $6,377,082) (A) 6,251 6,251
Deutsche Bank
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,276,517 (collateralized by
U.S. Treasury Bond: market
value $6,399,356) (A) 6,274 6,274
Greenwich
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$34,006,313 (collateralized by
U.S. Treasury Notes: total
market value $34,672,999) (A) 33,991 33,991
Merrill Lynch
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,205,190 (collateralized by
U.S. Government STRIPS: total
market value $6,329,772) (A) 6,202 6,202
Morgan Stanley
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,305,510 (collateralized by
U.S. Treasury Bond: market
value $6,452,812) (A) 6,303 6,303
- -------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- -------------------------------------------------------------
Salomon Brothers
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,205,541 (collateralized by
U.S. Treasury Note: market
value $6,331,636) (A) $ 6,203 $ 6,203
Swiss Bank
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$6,263,560 (collateralized by
U.S. Treasury Note and U.S.
Treasury Bond: total market
value $6,397,913) (A) 6,261 6,261
Union Bank of Switzerland
5.51%, dated 05/29/98, matures
06/01/98, repurchase price
$34,006,826 (collateralized by
U.S. Treasury Bills: total
market value $34,675,013) (A) 33,990 33,990
----------
Total Repurchase Agreements
(Cost $105,475) 105,475
----------
Total Investments (82.8% of Net Assets)
(Cost $116,140) $ 116,140
==========
STRIPS -- Separately Traded Registered Interest and
Principal Security
(A) Tri-Party Repurchase Agreement
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
<TABLE>
<CAPTION>
CLASSIC INSTITUTIONAL
U.S. TREASURY SECURITIES
MONEY MARKET
FUND
------------------------
Assets:
<S> <C>
Investments at market value (Cost $116,140) .............................................. $116,140
Accrued income ........................................................................... 615
Receivables for investment securities sold ............................................... 24,755
--------
Total Assets ............................................................................. 141,510
--------
Liabilities:
Accrued expenses ......................................................................... (23)
Distribution payable ..................................................................... (623)
Other liabilities ........................................................................ (530)
--------
Total Liabilities ........................................................................ (1,176)
--------
Net Assets:
Fund Shares of the Institutional Shares (unlimited authorization -- no par value)
based on 140,331,464 outstanding shares of beneficial interest ......................... 140,331
Accumulated net realized gain on investments ............................................. 3
--------
Total Net Assets ......................................................................... $140,334
========
Net Asset Value, Offering Price and Redemption Price Per Share-- Institutional Shares .... $ 1.00
========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<PAGE>
This page is left intentionally blank.
<PAGE>
STATEMENT OF OPERATIONS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
CLASSIC CLASSIC
INSTITUTIONAL INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY
MONEY MARKET SECURITIES MONEY
FUND MARKET FUND
--------------- ----------------
06/01/97- 06/01/97-
05/31/98 05/31/98
---------- ---------
<S> <C> <C>
Income:
Interest Income .............................................................. $17,193 $5,786
------- ------
Expenses:
Investment Advisory Fees ..................................................... 608 209
Investment Advisory Fees Waived .............................................. (403) (198)
Administrator Fees ........................................................... 219 76
Administrator Fees Waived .................................................... (32) (13)
Transfer Agent Fees .......................................................... 16 16
Transfer Agent Out of Pocket ................................................. 23 11
Printing Fees ................................................................ 24 14
Custody Fees ................................................................. 13 6
Professional Fees ............................................................ -- 8
Trustee Fees ................................................................. -- 2
Registration Fees ............................................................ 14 28
Other Fees ................................................................... -- 20
Amortization of Deferred Organizational Costs ................................ 11 11
------- ------
Total Expenses ............................................................. 493 190
------- ------
Net Investment Income ...................................................... 16,700 5,596
------- ------
Net Realized Gain on Securities Sold ............................................ -- 4
------- ------
Increase in Net Assets Resulting from Operations ................................ $16,700 $5,600
======= ======
<FN>
Amounts designated as "--" are either $0 or round to $0.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
CLASSIC CLASSIC
INSTITUTIONAL INSTITUTIONAL
CASH MANAGEMENT U.S. TREASURY
MONEY MARKET SECURITIES MONEY
FUND MARKET FUND
---------------------- ---------------------
06/01/97- 12/12/96*- 06/01/97- 12/12/96*-
05/31/98 05/31/97 05/31/98 05/31/97
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Operations:
Net Investment Income ............................................ $ 16,700 $ 2,755 $ 5,596 $ 483
Net Realized Gain (Loss) on Investments .......................... -- -- 4 (1)
--------- --------- --------- --------
Increase in Net Assets Resulting from Operations ............... 16,700 2,755 5,600 482
--------- --------- --------- --------
Distributions to Shareholders:
Net Investment Income ............................................ (16,700) (2,755) (5,596) (483)
--------- --------- --------- --------
Total Distributions ........................................... (16,700) (2,755) (5,596) (483)
--------- --------- --------- --------
Share Transactions:
Proceeds from Shares Issued .................................... 1,549,940 578,520 991,131 143,133
Reinvestments of Cash Distributions ............................ 11,287 -- 4,231 --
Cost of Shares Redeemed ........................................ (1,582,098) (182,847) (875,270) (122,894)
--------- --------- --------- --------
Increase (Decrease) in Net Assets from Share Transactions .... (20,871) 395,673 120,092 20,239
--------- --------- --------- --------
Total Increase (Decrease) in Net Assets ..................... (20,871) 395,673 120,096 20,238
--------- --------- --------- --------
Net Assets:
Beginning of Period .............................................. 395,673 -- 20,238 --
--------- --------- --------- --------
End of Period .................................................... $ 374,802 $ 395,673 $ 140,334 $ 20,238
========= ========= ========= ========
Shares Issued and Redeemed:
Shares Issued .................................................. 1,549,940 578,520 991,131 143,133
Shares Issued in Lieu of Cash Distributions .................... 11,287 -- 4,231 --
Shares Redeemed ................................................ (1,582,098) (182,847) (875,270) (122,894)
--------- --------- --------- --------
Net Share Transactions ........................................... (20,871) 395,673 120,092 20,239
========= ========= ========= ========
<FN>
*Commencement of Operations.
Amounts designated as "--" are either $0 or round to $0.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED
NET ASSET VALUE INVESTMENT GAINS (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ---------- -------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1997(A) 1.00 0.02 -- (0.02) --
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 $ 0.05 $ -- $(0.05) $ --
1997(A) 1.00 0.02 -- (0.02) --
RATIO OF
NET ASSET NET ASSETS RATIO OF NET INVESTMENT
VALUE END TOTAL END OF EXPENSES TO INCOME TO
OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS
--------- ------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 5.63% $ 374,802 0.16% 5.49%
1997(A) 1.00 2.51* 395,673 0.06 5.49
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional Shares
1998 $ 1.00 5.50% $ 140,334 0.18% 5.34%
1997(A) 1.00 2.46* 20,238 0.09 5.27
RATIO OF
RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET ASSETS AVERAGE NET ASSETS
(EXCLUDING WAIVERS (EXCLUDING WAIVERS
AND REIMBURSEMENTS) AND REIMBURSEMENTS)
------------------ ------------------
<S> <C> <C> <C>
CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
Institutional Shares
1998 0.30% 5.35%
1997(A) 0.52 5.03
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
Institutional Shares
1998 0.38% 5.14%
1997(A) 0.51 4.85
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10 & 11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
1. Organization:
The STI Classic Funds (the "Trust") was organized as a Massachusetts Business
Trust under a Declaration of Trust dated January 15, 1992. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with twenty-two portfolios: the Value Income Stock
Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth
Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International
Equity Index Fund, the International Equity Fund the Sunbelt Equity Fund, the
Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the
Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term
Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term
Federal Mortgage Securities Fund, and the U.S. Government Securities Fund,
(collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the
U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund,
the Classic Institutional Cash Management Money Market Fund and the Classic
Institutional U.S. Treasury Securities Money Market Fund, (collectively the
"Money Market Funds"). The assets of each portfolio are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. Each
Fund's prospectus provides a description of the Fund's investment objectives,
policies and strategies. The financial statements of the Classic Institutional
Cash Management Money Market Fund and the Classic Institutional U.S. Treasury
Securities Fund (collectively the "Funds") are included herein. The financial
statements of the remaining Funds are presented separately.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust:
SECURITY VALUATION -- Investment securities held by the Funds are stated at
amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a
regulated investment company for Federal income tax purposes and distribute
all of its taxable income and net capital gains. Accordingly, no provisions
for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on an accrual basis. Costs used in
determining net realized gains and losses on the sales of investment
securities are those of the specific securities sold adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding period. Purchase discounts and premiums on securities
held by the Funds are accreted and amortized ratably to maturity and are
included in interest income.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters into
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
12
<PAGE>
================================================================================
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated each business day, by dividing the total value of each Fund's
assets, less liabilities, by the number of shares outstanding.
OTHER -- Expenses that are directly related to a specific Fund are charged
to that Fund. Class specific expenses are borne by that class. Other
operating expenses of the Trust are pro-rated to the Funds on the basis of
relative net assets. Fund expenses are pro-rated to the respective classes
on the basis of relative net assets.
Distributions from net investment income of each of the Funds are declared on
each business day and paid to shareholders on a monthly basis. Any net realized
capital gains on sales of securities are distributed to shareholders at least
annually.
3. Organization Costs and Transactions with Affiliates:
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
The Trust incurred organization costs of approximately $808,836 including
approximately $395,594 relating to state registration fees. These costs have
been deferred in the accounts of the Funds and are being amortized on a straight
line basis over a period of sixty months commencing with operations with the
exception of state registration fees, which are being amortized over a period of
twelve months. The costs include legal fees of approximately $60,383 for
organizational work performed by a law firm of which two officers of the Trust
are partners. On March 18, 1992, the Trust sold initial shares of beneficial
interest to SEI Fund Resources (the "Administrator"). In the event any of the
initial shares of the Trust are redeemed by any holder thereof during the period
that the Trust is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof will be reduced by the unamortized organizational
costs in the same ratio as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting
on the Costs of Start-Up Activities." This SOP provides guidance on the
financial reporting of start-up costs and organization costs and requires costs
of start-up activities and organization costs to be expensed as incurred.
Investment companies that began operations prior to June 30, 1998 can adopt the
SOP prospectively. Therefore, previously capitalized organization costs will
continue to be amortized as discussed above. Any future start-up or organization
costs will be expensed as incurred.
Certain officers of the Trust are also officers of the Administrator and/or SEI
Investments Distribution Co. (the "Distributor"). Such officers are paid no fees
by the Trust for serving as officers of the Trust.
4. Administration and Transfer Agency Servicing Agreements:
The Trust and the Administrator are parties to an Administration Agreement dated
May 29, 1995, as amended November 19, 1997, under which the Administrator
provides administrative services for an annual fee (expressed as a percentage of
the combined average daily net assets of the Trust and
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
STI Classic Variable Annuity Trust) of: .12% up to $1 billion, .09% on the next
$4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06%
for over $10 billion.
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated May 14, 1994 under which Federated Services Company
provides transfer agency services to the Trust.
5. Investment Advisory and Custodian Agreements:
The Trust and Trusco Capital Management have entered into an advisory agreement
dated July 15, 1993.
Under terms of the respective agreements, the Funds are charged the following
annual fees based upon average daily net assets:
MAXIMUM INSTITUTIONAL
ANNUAL SHARE
ADVISORY MAXIMUM
FEE EXPENSE
---------- -------------
Classic Institutional
Cash Management
Money Market Fund .20% .20%
Classic Institutional
U.S. Treasury
Money Market Fund .20% .20%
The Investment Advisor and the Administrator have voluntarily agreed to waive
all or a portion of their fees (and to reimburse Funds' expenses) in order to
limit operating expenses to an amount as outlined in the table above. Fee
waivers and expense reimbursements are voluntary and may be terminated at any
time.
SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the
Funds. Fees of the Custodian are paid on the basis of the net assets of the
Funds. The Custodian plays no role in determining the investment policies of the
Trust or which securities are to be purchased or sold in the Funds.
6. Concentration of Credit Risk:
The Classic Institutional Cash Management Money Market Fund invests in high
quality money market instruments issued by corporations and the U.S. Government
and rated by one or more nationally recognized statistical rating organizations,
or, if not rated determined by the Advisor to be of comparable quality. The
Classic U.S. Treasury Securities Money Market Fund invests in U.S. Treasury
Obligations, which are backed by the full faith and credit of the U.S.
Government and repurchase agreements with approved dealers collateralized by
U.S. Treasury securities.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998
To the Shareholders and Board of Trustees of
STI Classic Funds:
We have audited the accompanying statements of net assets of the Classic
Institutional Cash Management Money Market Fund and the statement of assets and
liabilities, including the schedule of investments, of the Classic Institutional
U.S. Treasury Securities Money Market Fund of STI Classic Funds (the "Trust") as
of May 31, 1998, and the related statements of operations, changes in net
assets, and financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Classic Institutional Cash Management Money Market and Classic Institutional
U.S. Treasury Securities Money Market Funds of STI Classic Funds as of May 31,
1998, the results of their operations, changes in their net assets, and
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
July 24, 1998
15
<PAGE>
NOTICE TO SHAREHOLDERS
================================================================================
STI CLASSIC FUNDS MAY 31, 1998 UNAUDITED
For shareholders that do not have a May 31, 1998 tax year end, this notice is
for informational purposes only. For shareholders with a May 31, 1998 tax year
end, please consult your tax advisor as to the pertinence of this notice. For
the fiscal year ended May 31, 1998, each portfolio is designating the following
items with regard to distributions paid during the year:
<TABLE>
<CAPTION>
LONG TERM MID TERM
(20% RATE) (28% RATE) ORDINARY
CAPITAL GAINS CAPITAL GAINS INCOME TAX-EXEMPT TOTAL QUALIFYING
FUND DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1)
- ------------------------ ------------- ------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Institutional U.S. Treasury Securities
Money Market 0.00% 0.00% 100.00% 0.00% 100.00% 0.00%
Institutional Cash Management
Money Market 0.00% 0.00% 100.00% 0.00% 100.00% 0.00%
<FN>
- ------------------------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected as a percentage of "Ordinary
Income Distribution".
</FN>
</TABLE>
16
<PAGE>
INVESTMENT ADVISORS
Trusco Capital Management, Inc.
STI Classic Funds are not deposits, are not
insured or guaranteed by the FDIC or any other
government agency, and are not endorsed by and do
not constitute obligations of SunTrust Banks, Inc.
or any other of its affiliates. Investment in the
Funds involves risk, including the possible loss
of principal. There is no guarantee that any STI
Classic Fund will achieve its investment
objective. The STI Classic Funds are advised by
affiliates of SunTrust Banks, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
This information must be preceded or
accompanied by a current prospectus for
each Fund described.
