STI CLASSIC FUNDS, 485APOS, 1998-07-15

STI CLASSIC FUNDS
485APOS, 1998-07-15

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1998
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. 23 /X/
AND

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 25 /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

MARK NAGLE
C/O SEI INVESTMENTS COMPANY
ONE FREEDOM VALLEY ROAD
OAKS, PENNSYLVANIA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)

Copies to:

RICHARD W. GRANT, ESQ. JOHN H. GRADY, JR., ESQ.
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, N.W.
PHILADELPHIA, PA 19103 WASHINGTON, D.C. 20036

Title of Securities Being Registered. . . . . . . . Units of Beneficial Interest

It is proposed that this filing will become effective (check appropriate box)
Immediately upon filing pursuant to paragraph (b), or
----
On [date] pursuant to paragraph (b), or
----
60 days after filing pursuant to paragraph (a) or
----
x 75 days after filing pursuant to paragraph (a) or
----
On [date] pursuant to paragraph (a) of Rule 485.
----

<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

STI Classic Funds

EQUITY FUNDS
FLEX SHARES

PROSPECTUS
OCTOBER 1, 1998

----------------------------------------

SMALL CAP GROWTH FUND
TAX SENSITIVE GROWTH STOCK FUND

----------------------------------------

INVESTMENT ADVISORS

SUNTRUST BANK, CHATTANOOGA, N.A. TRUSCO CAPITAL MANAGEMENT, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

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STI CLASSIC FUNDS

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important
information about the Flex Shares of the Equity Funds that you should know
before investing. Please read this prospectus and keep it for future reference.

We arranged the prospectus into different sections so that you can easily review
this important information. On the next page, we discuss general information
you should know about investing in the Funds. If you would like more detailed
information about each Fund, please see:

SMALL CAP GROWTH FUND . . . . . . . . . . . . . . . . . . .. . . . . . . .
TAX SENSITIVE GROWTH STOCK FUND . . . . . . . . . . . . . . . . . . . . . .

If you would like more information about the following topics, please see:

EACH FUND'S PRINCIPAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . .
THE ADVISORS AND THEIR PORTFOLIO MANAGERS . . . . . . . . . . . . . . . . .
PURCHASING, SELLING AND EXCHANGING FUND SHARES. . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . .
HOW FUND SHARES ARE DISTRIBUTED . . . . . . . . . . . . . . . . . . . . . .
HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS. . . Back Cover

For information about key terms and concepts, look for our "SIMPLY SPEAKING"
explanations.

[INSERT ICON MAP]

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INTRODUCTION
- --------------------------------------------------------------------------------

Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in
mutual funds.

The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect securities markets generally, as well as those that affect
particular companies or governments. These price movements, sometimes called
volatility, will vary depending on the types of securities a Fund owns and the
markets where these securities trade. The Funds invest primarily in common
stocks and other equity securities. Historically, equity securities have
outperformed other types of investments on a long-term basis, but have been more
subject to price fluctuations in the short run.

Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.

Each Fund has its own investment goal and strategies for reaching that goal.
But, we cannot guarantee that a Fund will achieve its goal. A Fund's goal may
be changed without shareholder approval. Before investing, make sure that the
Fund's goal matches your own.

The Investment Advisors invest each Fund's assets in a way that the Advisor
believes will help the Fund achieve its goal. An Advisor's judgments about the
stock markets, economy and companies, or selecting investments may not reflect
actual market movements, economic conditions or company performance.

[ICON] SALES LOADS
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This table describes the shareholder fees and expenses that you may pay if you
purchase or sell Fund shares. You would pay these fees directly from your
investment in a Fund. These fees are in addition to the fees and expenses that
you pay indirectly by holding Fund shares (see "Fund Fees and Expenses" for each
Fund).

FLEX SHARES
SHAREHOLDER FEES
Maximum Sales Charge (Load) Imposed on Purchases None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value)* 2.00%

*This sales charge is imposed if you sell Flex Shares within one year of your
purchase. See "Selling Fund Shares."

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SMALL CAP GROWTH FUND
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[icon] FUND SUMMARY

INVESTMENT GOAL LONG-TERM CAPITAL APPRECIATION
INVESTMENT FOCUS U.S. SMALL-CAP COMMON STOCKS OF GROWTH
COMPANIES
SHARE PRICE VOLATILITY HIGH
PRINCIPAL INVESTMENT STRATEGY ATTEMPTS TO IDENTIFY SMALL-CAP COMPANIES WITH
ABOVE-AVERAGE GROWTH POTENTIAL
INVESTOR PROFILE INVESTORS WHO WANT THE VALUE OF THEIR
INVESTMENT TO GROW, BUT WHO DO NOT NEED
CURRENT INCOME

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[icon] INVESTMENT STRATEGY OF THE SMALL CAP GROWTH FUND

The Small Cap Growth Fund invests primarily in U.S. companies that
demonstrate above-average growth potential. We attempt to identify companies
with an established operating history and a solid balance sheet. In
selecting investments for the Fund, we choose companies with market
capitalizations of up to about $3 billion. Due to its investment strategy, the
Fund may buy and sell securities frequently. This may result in higher
transaction costs and additional capital gains taxes.

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SIMPLY SPEAKING . . .
[ICON] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of smaller U.S. companies. As a
result, the Fund is subject to the risk that stock prices will fall over short
or extended periods of time. Stock markets tend to move in cycles, with periods
of rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in small- or
mid-cap companies involve greater risk than investments in larger, more
established companies because of the greater business risks of small size,
limited markets and financial resources, smaller product lines and lack of depth
of management. These securities are often traded over-the-counter and may not
be traded in high volumes. Consequently, securities prices could be less stable
than those of larger, more established companies.

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SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

This table describes the Fund's fees and expenses that you may pay indirectly if
you hold shares of the Fund. The Fund fees and expenses below are in addition to
the sales charges you may pay directly when you purchase or sell Fund shares.
Sales charges are discussed on pages 3 and __ of this prospectus.

This table shows the highest fees and expenses that could be currently charged
to the Fund. Actual fees and expenses are lower because the Advisor is
voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND
TOTAL OPERATING EXPENSES ARE 1.00% AND 2.25%, RESPECTIVELY. The Advisor could
discontinue these voluntary waivers at any time. For more information about
these fees, see "Investment Advisors" and "Distribution of Fund Shares."

ANNUAL FUND OPERATING EXPENSES

FLEX SHARES

Investment Advisory Fees x.xx%
Distribution and Service (12b-1) Fees x.xx%
Other Expenses* x.xx%
------
Total Annual Fund Operating Expenses x.xx%

* Other Expenses are based on estimated amounts for the current fiscal year.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:

1 YEAR 3 YEARS

If you sell your shares at the end of the period: $ $

If you do not sell your shares: $ $

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SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, shareholder, distribution, administration and custody
services. Some of the service providers employed by the Fund include Trusco
Capital Management, Inc.; SEI Investments Mutual Funds Services; SEI Investments
Distribution Co.; and SunTrust Bank, Atlanta. These expenses are deducted from
the Fund's income. The Fund's expenses in the table below are shown as a
percentage of the Fund's net assets.

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TAX SENSITIVE GROWTH STOCK FUND
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[icon] FUND SUMMARY

INVESTMENT GOAL LONG-TERM CAPITAL APPRECIATION
INVESTMENT FOCUS U.S. COMMON STOCKS OF GROWTH COMPANIES
SHARE PRICE VOLATILITY MEDIUM
PRINCIPAL INVESTMENT STRATEGY ATTEMPTS TO IDENTIFY COMPANIES THAT HAVE
ABOVE-AVERAGE GROWTH POTENTIAL IN ORDER TO
MINIMIZE TAXABLE DIVIDEND INCOME. ATTEMPTS
TO REDUCE CAPITAL GAINS BY USING A "BUY AND
HOLD" STRATEGY.
INVESTOR PROFILE TAXABLE INVESTORS WHO WANT TO INCREASE THE
VALUE OF THEIR INVESTMENT AND MINIMIZE
TAXABLE DISTRIBUTIONS

- --------------------------------------------------------------------------------
[icon] INVESTMENT STRATEGY OF THE TAX SENSITIVE GROWTH STOCK FUND

The Tax Sensitive Growth Stock Fund invests primarily in common stocks of U.S.
companies that show financial strength. We diversify the Fund's assets across
all market sectors. We try to enhance tax savings in two ways. First, we use a
"buy and hold" strategy to minimize capital gains. We try to keep portfolio
turnover below 50%; this style generally leads to lower capital gains
distributions and, therefore, lower taxes. Second, we attempt to identify
"growth" companies. Growth company stocks typically pay little to no dividends,
but have the potential to increase in value. This generally leads to lower
income distributions and, therefore, lower taxes.

- --------------------------------------------------------------------------------

SIMPLY SPEAKING . . .
[ICON] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
The Fund invests primarily in common stocks. As a result, the Fund is subject
to the risk that stock prices will fall over short or extended periods of time.
Stock markets tend to move in cycles, with periods of rising prices and periods
of falling prices. This price volatility is the principal risk of investing in
the Fund. The Fund may use hedging techniques such as purchasing put options,
entering short sales "against the box", selling stock index futures contracts
and entering into equity swaps. By using these techniques rather than selling
appreciated securities, we attempt to reduce the Fund's exposure to price
declines without causing substantial capital gains. Although the Fund may use
hedging strategies instead of selling appreciated securities, the Fund's
exposure to losses during stock market declines may be higher than that of other
funds that do not follow a general policy of avoiding sales of highly
appreciated securities.

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<PAGE>

TAX SENSITIVE GROWTH STOCK FUND
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[icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

FLEX SHARES

Investment Advisory Fees x.xx%
Distribution and Service (12b-1) Fees x.xx%
Other Expenses* x.xx%
------
Total Annual Fund Operating Expenses x.xx%

* Other Expenses are based on estimated amounts for the current fiscal year.

EXAMPLE

1 YEAR 3 YEARS

If you sell your shares at the end of the period: $ $

If you do not sell your shares: $ $

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SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, shareholder, distribution, administration and custody
services. Some of the service providers employed by the Fund include SunTrust
Bank, Chattanooga, N.A.; SEI Investments Mutual Funds Services; SEI Investments
Distribution Co.; and SunTrust Bank, Atlanta. These expenses are deducted from
the Fund's income. The Fund's expenses in the table below are shown as a
percentage of the Fund's net assets.

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<PAGE>

[icon] FUND INVESTMENTS
- --------------------------------------------------------------------------------

The table below shows each Fund's principal investments. In other words, the
table describes the type or types of investments that we believe will MOST
LIKELY help each Fund achieve its investment goal.

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Small Cap Growth Fund Tax Sensitive Growth Stock Fund
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Equity Securities x x
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U.S. Government
Obligations x
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Each Fund also may invest in other securities, use other strategies and
engage in other investment practices, which are described in detail in our
Statement of Additional Information. Of course, we cannot assure that any
Fund will achieve its investment goal.

Also, the investments described above and the investments and strategies
described throughout this prospectus are those that we use under normal
conditions. During unusual economic or market conditions or for temporary
defensive or liquidity purposes, each Fund may invest up to 100% of its assets
in cash, money market instruments, repurchase agreements and short-term
obligations. When a Fund is investing for temporary defensive purposes, it will
not be pursuing its investment goal.

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<PAGE>

[icon] INVESTMENT ADVISORS
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The Investment Advisors make investment decisions for the Funds and continuously
review, supervise and administer their Funds' respective investment program.
The Board of Trustees supervises the Advisors and establishes policies that the
Advisors must follow in their management activities.

Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta,
Georgia 30303, serves as the Advisor to the SMALL CAP GROWTH FUND. As of May
31, 1998, Trusco had approximately ____ billion in assets under management.

SunTrust Bank, Chattanooga, N.A. (SunTrust Chattanooga), 736 Market Street,
Chattanooga, Tennessee 37402, serves as the Advisor to the TAX SENSITIVE GROWTH
STOCK FUND. As of May 31, 1998, SunTrust Chattanooga had approximately _____ in
assets under management.

The Advisors may use their affiliates as brokers for Fund transactions.

PORTFOLIO MANAGERS

Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since
1994. He is the manager of the Small Cap Growth Fund. He has more than 10
years of investment experience and has been a portfolio manager with SunTrust or
an affiliate since 1990.

Mr. Jonathan Mote, CFA, CFP has served as a Portfolio Manager of SunTrust
Chattanooga since _______. He is the manager of the Tax Sensitive Growth Stock
Fund. He has more than 13 years of investment experience. Prior to joining
SunTrust Chattanooga, Mr. Mote served as a financial consultant at Merrill
Lynch.

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[icon] PURCHASING FUND SHARES
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HOW TO PURCHASE FUND SHARES

You may purchase Flex Shares directly from us by:

- - mail
- - telephone
- - wire
- - direct deposit, or
- - Automated Clearing House (ACH).

To purchase shares directly from us, please call 1-800-874-4770. Write your
check, payable in U.S. dollars, to "STI CLASSIC FUNDS"
and include the name of the appropriate Fund(s) on the check. We cannot accept
third-party checks, credit cards, credit card checks or cash. You may also
purchase shares through Investment Consultants of certain correspondent banks
of SunTrust Banks, Inc. (SunTrust), or other financial institutions that have
executed dealer agreements with us. We may reject any purchase order if we
believe it is not in the best interests of the STI Classic Funds or its
shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order. We calculate each
Fund's NAV once each Business Day at the regularly-scheduled close of normal
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So,
if you want to receive the current Business Day's NAV, generally we must receive
your purchase order before 4:00 p.m. Eastern time.

HOW WE CALCULATE NAV

In calculating NAV, we generally value a Fund's portfolio at market price. If
market prices are unavailable or we think that they are unreliable, fair value
prices may be determined in good faith using methods approved by the Board of
Trustees. Some Funds hold portfolio securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the Funds
do not calculate NAV. As a result, the NAV of these Funds' shares may change on
days when you cannot purchase or sell Fund shares.

MINIMUM PURCHASES

To purchase Flex Shares for the first time, you must invest at least $10,000 in
any Fund ($2,000 for retirement plans). To purchase additional shares of any
Fund, you must invest at least $1,000 or, if you pay by a statement coupon,
$100. We may accept investments of smaller amounts, for either class of shares,
at our discretion.

FUNDLINK

FUNDLINK is a telephone activated service that allows you to transfer money
quickly and easily between the STI Classic Funds and your SunTrust bank
account(s). To use FUNDLINK, you must first contact your SunTrust Bank
Investment Consultant and complete the FUNDLINK application and authorization
agreements. Once you have signed up to use FUNDLINK, simply call us at
1-800-428-6970 to complete all of your purchase and redemption transactions.

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SIMPLY SPEAKING. . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day).
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
FOR CUSTOMERS OF FINANCIAL INSTITUTIONS
If you purchase, sell or exchange Fund shares through a financial institution
(rather than directly from us), you may have to transmit your purchase, sale and
exchange requests to your financial institution at an earlier time for your
transaction to become effective that day. This allows the financial institution
time to process your request and transmit it to us. For more information about
how to purchase, sell or exchange Fund shares through your financial
institution, you should contact your financial institution directly.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund.
- --------------------------------------------------------------------------------

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SYSTEMATIC INVESTMENT PLAN

If you have a checking or savings account with a SunTrust affiliate bank, you
may purchase shares of either class automatically through regular deductions
from your account. With a $500 minimum initial investment, you may begin
regularly scheduled investments from $50 up to $100,000 once or twice a month.
You should plan on investing at least $10,000 per Fund during the first two
years. The Distributor may close your account if you do not meet this minimum
investment requirement at the end of two years.

SALES CHARGES

CONTINGENT DEFERRED SALES CHARGES - FLEX SHARES

You do not pay a front-end sales charge when you purchase Flex Shares. But if
you sell your shares within the first year after your purchase, you will pay a
contingent deferred sales charge equal to 2.00% of either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
we receive your sale request, whichever is less. The maximum deferred sales
charge as a percentage of the net amount invested is [ ]%. The sales charge
does not apply to Flex Shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in
your investment above the initial offering price. This sales charge does not
apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund.

The contingent deferred sales charge will be waived if you sell your Flex Shares
for the following reasons: (1) to make certain withdrawals from a retirement
plan (not including IRAs); (2) because of death or disability; or (3) for
certain payments under the Systematic Withdrawal Plan (which is discussed
below).

SELLING FUND SHARES
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HOW TO SELL YOUR FUND SHARES

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. To sell your shares
by telephone, the amount of your sale must be at least $1,000. If you would
like to sell $25,000 or more of your shares, please notify us in writing and
include a signature guarantee (a notarized signature is not sufficient). The
sale price of each share will be the next NAV determined after we receive your
request less, in the case of Flex Shares, any applicable deferred sales charge.

SYSTEMATIC WITHDRAWAL PLAN

If you have at least $10,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with a
SunTrust affiliated bank, electronically transferred to your account.

RECEIVING YOUR MONEY

Normally, we will send your sale proceeds within five Business Days after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES
BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR
CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS).

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
OFFERING PRICE OF FUND SHARES
The offering price of Flex Shares is simply the next calculated NAV.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, we are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with us over the telephone, you will
generally bear the risk of any loss.
- --------------------------------------------------------------------------------

<PAGE>

REDEMPTIONS IN KIND

We generally pay sale proceeds in cash. However, under unusual conditions that
make the payment of cash unwise (and for the protection of the Fund's remaining
shareholders) we might pay all or part of your sale proceeds in liquid
securities with a market value equal to the redemption price (redemption in
kind). Although it is highly unlikely that your shares would ever be redeemed
in kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from the sale as with
any redemption.

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below the required $10,000 minimum you may be
required to sell your shares. You will always be given at least 60 days'
written notice to give you time to add to your account and avoid selling your
shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information.

EXCHANGING FUND SHARES
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HOW TO EXCHANGE YOUR SHARES

You may exchange your shares on any Business Day by contacting us directly by
mail or telephone. You may also exchange shares through your financial
institution by mail or telephone. Exchange requests must be for an amount of at
least $1,000. You may exchange your shares up to four times during a calendar
year. If you exchange your shares more than four times during a year, you may
be charged a $10.00 fee for each additional exchange. You will be notified
before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH
ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be
changed or canceled at any time upon 60 days' notice.

FLEX SHARES

You may exchange Flex Shares of any Fund for Flex Shares of any other Fund, or
for Investor Shares of the Money Market Funds. No contingent deferred sales
charge is imposed on redemptions of Money Market Funds shares you acquire in an
exchange, provided you hold your shares for at least one year from your initial
purchase. If you exchange Flex Shares for Investor Shares of a Money Market
Fund, you may only exchange those Money Market Fund Investor Shares for Flex
Shares.

OTHER INFORMATION
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Small Cap Growth Fund distributes its income quarterly, and the Tax
Sensitive Growth Stock Fund distributes income annually. The Funds make
distributions of capital gains, if any, at least annually.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment,
you must notify us in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after we
receive your written notice. To cancel your election, simply send us written
notice.

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
EXCHANGES
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after we receive your exchange request.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to receive
the distribution.
- --------------------------------------------------------------------------------

<PAGE>

TAXES

PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.

Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Capital gains
distributions may be taxable at different rates depending on the length of time
a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE
OF FUND SHARES.

The Funds use a tax management technique known as "highest in, first out."
Using this technique, the portfolio holdings that have experienced the smallest
gain or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.

MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.

DISTRIBUTION OF FUND SHARES
- --------------------------------------------------------------------------------

Each Fund has adopted a distribution plan that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Fund's assets continuously, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. The
maximum distribution fee, as a percentage of average daily net assets, is .75%
of the average daily net assets of each Fund.

- --------------------------------------------------------------------------------
SIMPLY SPEAKING. . .
FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you reinvest
them.
- --------------------------------------------------------------------------------

<PAGE>

STI Classic Funds

INVESTMENT ADVISORS

TRUSCO CAPITAL MANAGEMENT, INC.

SUNTRUST BANK, CHATTANOOGA, N.A.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------

More detailed information about the STI Classic Funds is included in our SAI
dated October 1, 1998. The SAI has been filed with the SEC and is incorporated
by reference into this prospectus. This means that the SAI, for legal purposes,
is a part of this prospectus.

ANNUAL AND SEMIANNUAL REPORTS
- --------------------------------------------------------------------------------

These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies and recent market conditions and trends.

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
BY TELEPHONE: Call 1-800-874-4770

BY MAIL: Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.

BY TELEPHONE: Call 1-800-874-4770

BY E-MAIL:

BY INTERNET: http://www.suntrust.com

FROM THE SEC: You can also obtain these documents, and other information
about the STI Classic Funds, from the SEC's website ("http://www.sec.gov").
You may review and copy documents at the SEC Public Reference Room in
Washington, DC (for information call 1-800-SEC-0330). You may request
documents by mail from the SEC, upon payment of a duplicating fee, by writing
to: Securities and Exchange Commission, Public Reference Section, Washington,
DC 20549-6009. The Fund's Investment Company Act registration number is
811-06557
- --------------------------------------------------------------------------------

<PAGE>

THIS INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

STI CLASSIC FUNDS
EQUITY FUNDS
TRUST SHARES

PROSPECTUS
OCTOBER 1, 1998

----------------------------------

SMALL CAP GROWTH FUND
TAX SENSITIVE GROWTH STOCK FUND

----------------------------------

INVESTMENT ADVISORS

SUNTRUST BANK, CHATTANOOGA, N.A. TRUSCO CAPITAL MANAGEMENT, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

STI CLASSIC FUNDS

HOW TO READ THIS PROSPECTUS
- --------------------------------------------------------------------------------

The STI Classic Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios (Funds). The Funds have individual
investment goals and strategies. This prospectus gives you important
information about the Trust Shares of the Equity Funds that you should know
before investing. Please read this prospectus and keep it for future reference.

We arranged the prospectus into a number of different sections so that you can
easily review this important information. On the next page, we discuss general
information you should know about investing in the Funds. If you would like
more detailed information about each Fund, please see:

SMALL CAP GROWTH FUND . . . . . . . . . . . . . . . . . . . . . . . . . . .
TAX SENSITIVE GROWTH STOCK FUND . . . . . . . . . . . . . . . . . . . . . .

If you would like more information about the following topics, please see:

EACH FUND'S PRINCIPAL INVESTMENTS . . . . . . . . . . . . . . . . . . . . .
THE ADVISORS AND THEIR PORTFOLIO MANAGERS . . . . . . . . . . . . . . . . .
PURCHASING AND SELLING FUND SHARES. . . . . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . .
HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS. . . .Back Cover

For information about key terms and concepts, look for our "SIMPLY SPEAKING"
explanations.

[INSERT ICON MAP]

<PAGE>

INTRODUCTION
- --------------------------------------------------------------------------------

Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.

<PAGE>

SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
[icon] FUND SUMMARY

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
[ICON] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
The Fund invests primarily in common stocks of smaller U.S. companies. As a
result, the Fund is subject to the risk that stock prices will fall over short
or extended periods of time. Stock markets tend to move in cycles, with periods
of rising prices and periods of falling prices. This price volatility is the
principal risk of investing in the Fund. In addition, investments in small- or
mid-cap companies involve greater risk than investments in larger, more
established companies because of the greater business risks of small size,
limited markets and financial resources, smaller product lines and lack of depth
of management. These securities are often traded over-the-counter and may not
be traded in high volumes. Consequently, securities prices could be less stable
than those of larger, more established companies.
- --------------------------------------------------------------------------------

<PAGE>

SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

This table describes the Fund's fees and expenses that you may pay indirectly if
you hold shares of the Fund. It shows the highest fees and expenses that could
be charged to the Fund. Actual fees and expenses are lower because the Advisor
is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES
AND TOTAL OPERATING EXPENSES ARE 1.00% AND 2.25%, RESPECTIVELY. The Advisor may
discontinue these voluntary waivers at any time. For more information about
these fees, see "Investment Advisors" on page __.

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, administration and custody services. Some of the service
providers employed by the Fund include Trusco Capital Management, Inc.; SEI
Investments Mutual Funds Services; and SunTrust Bank, Atlanta. These expenses
are deducted from the Fund's income. The expenses in the table below are shown
as a percentage of the Fund's net assets.
- --------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

Investment Advisory Fees x.xx%
Other Expenses x.xx%
-----
Total Annual Fund Operating Expenses x.xx%

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that your investment has a 5% return each year and that Fund expenses
remain the same. Although your actual costs may be different, your approximate
costs of investing in the Fund would be:

1 YEAR 3 YEARS

$ $

- --------------------------------------------------------------------------------

<PAGE>

TAX SENSITIVE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
[icon] FUND SUMMARY

INVESTMENT GOAL LONG-TERM CAPITAL APPRECIATION
INVESTMENT FOCUS U.S. COMMON STOCKS OF GROWTH COMPANIES
SHARE PRICE VOLATILITY MEDIUM
PRINCIPAL INVESTMENT STRATEGY ATTEMPTS TO IDENTIFY COMPANIES THAT HAVE
ABOVE-AVERAGE GROWTH POTENTIAL IN ORDER TO
MINIMIZE TAXABLE
DIVIDEND INCOME. ATTEMPTS TO REDUCE CAPITAL
GAINS BY USING A "BUY AND HOLD" STRATEGY.
INVESTOR PROFILE TAXABLE INVESTORS WHO WANT TO INCREASE THE
VALUE OF THEIR INVESTMENT AND MINIMIZE
TAXABLE DISTRIBUTIONS

- --------------------------------------------------------------------------------
[icon] INVESTMENT STRATEGY OF THE TAX SENSITIVE GROWTH STOCK FUND

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
[ICON] WHAT ARE THE RISKS OF INVESTING IN THIS FUND?
The Fund invests primarily in common stocks. As a result, the Fund is subject
to the risk that stock prices will fall over short or extended periods of time.
Stock markets tend to move in cycles, with periods of rising prices and periods
of falling prices. The Fund may use hedging techniques such as purchasing put
options, entering short sales "against the box", selling stock index futures
contracts and entering into equity swaps. By using these techniques rather than
selling appreciated securities, we attempt to reduce the Fund's exposure to
price declines without causing substantial capital gains. Although the Fund may
use hedging strategies instead of selling appreciated securities, the Fund's
exposure to losses during stock market declines may be higher than that of other
funds that do not follow a general policy of avoiding sales of highly
appreciated securities.
- --------------------------------------------------------------------------------

<PAGE>

TAX SENSITIVE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
FUND EXPENSES
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, administration and custody services. Some of the service
providers employed by the Fund include SunTrust Bank, Chattanooga, N.A.; SEI
Investments Mutual Funds Services; and SunTrust Bank, Atlanta. These expenses
are deducted from the Fund's income. The expenses in the table below are shown
as a percentage of the Fund's net assets.
- --------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

Investment Advisory Fees x.xx%
Other Expenses x.xx%
-----
Total Annual Fund Operating Expenses x.xx%

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that your investment has a 5% return each year and that Fund expenses
remain the same. Although your actual costs may be different, your approximate
costs of investing in the Fund would be:

1 YEAR 3 YEARS

$ $

- --------------------------------------------------------------------------------

<PAGE>

[icon] FUND INVESTMENTS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Small Cap Growth Fund Tax Sensitive Growth Stock Fund
- --------------------------------------------------------------------------------
Equity Securities x x
- --------------------------------------------------------------------------------
U.S. Government Obligations x
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
<PAGE>

The Advisors may use their affiliates as brokers for Fund transactions.

PORTFOLIO MANAGERS

<PAGE>

[icon] PURCHASING FUND SHARES
- --------------------------------------------------------------------------------

HOW TO PURCHASE FUND SHARES

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
WHEN CAN YOU PURCHASE SHARES?
You may purchase on any day that the New York Stock Exchange is open for
business (a Business Day).
- --------------------------------------------------------------------------------

Generally you may not purchase Trust Shares directly. Instead, Trust Shares are
sold to financial institutions or intermediaries, including subsidiaries of
SunTrust Banks, Inc. (SunTrust) on behalf of accounts for which they act as
fiduciary, agent, investment advisor, or custodian. As a result, you, as a
customer of a financial institution, may own Trust Shares through accounts
maintained with financial institutions and potentially through the Preferred
Portfolio Account (an asset allocation account available through SunTrust
Securities, Inc.). Trust Shares will be held of record by (in the name of) your
financial institution. Depending upon the terms of your account, however, you
may have, or be given, the right to vote your Trust Shares. We may reject any
purchase order if we determine that accepting the order would not be in the best
interests of the STI Classic Funds or its shareholders.

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
FOR CUSTOMERS OF FINANCIAL INSTITUTIONS
You may have to transmit your purchase and sale requests to your financial
institution at an earlier time for your transaction to become effective that
day. This allows the financial institution time to process your request and
transmit it to us. For more information about how to purchase or sell Fund
shares through your financial institution, you should contact your financial
institution directly.
- --------------------------------------------------------------------------------

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order plus. We calculate
each Fund's NAV once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time). So, to receive the current Business Day's NAV, generally we must receive
your purchase order from your financial institution before 4:00 p.m. Eastern
time.

HOW WE CALCULATE NAV

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund.
- --------------------------------------------------------------------------------

SELLING FUND SHARES
- --------------------------------------------------------------------------------

HOW TO SELL YOUR FUND SHARES

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. Although we have certain safeguards and procedures to
ensure the identity of callers and the authenticity of instructions, we are not
responsible for any losses or costs incurred by following telephone instructions
we reasonably believe to be genuine. If you or your financial institution
transact with us over the telephone, you will generally bear the risk of any
loss.
- --------------------------------------------------------------------------------

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting your financial institution. Your financial institution will give you
information about how to sell your shares. The sale price of each share will be
the next NAV determined after we receive your request from your financial
institution.

REDEMPTIONS IN KIND

We generally pay sale proceeds in cash. However, under unusual conditions that
make the payment of cash unwise (and for the protection of the remaining
shareholders of the Fund) we might pay all or part of your redemption proceeds
in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would
ever be redeemed in kind, you would probably have to pay brokerage costs to sell
the securities distributed to you, as well as taxes on any capital gains from
the sale as with any redemption.

<PAGE>

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

OTHER INFORMATION
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

- --------------------------------------------------------------------------------
SIMPLY SPEAKING . . .
THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to receive
the distribution.
- --------------------------------------------------------------------------------

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.

TAXES

MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION.

<PAGE>

STI CLASSIC FUNDS

INVESTMENT ADVISORS

TRUSCO CAPITAL MANAGEMENT, INC.

SUNTRUST BANK, CHATTANOOGA, N.A.

DISTRIBUTOR

SEI INVESTMENTS DISTRIBUTION CO.

LEGAL COUNSEL

MORGAN, LEWIS & BOCKIUS LLP

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- --------------------------------------------------------------------------------

ANNUAL AND SEMIANNUAL REPORTS
- --------------------------------------------------------------------------------

These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies and recent market conditions and trends.

TO OBTAIN MORE INFORMATION:
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
BY TELEPHONE: Call 1-800-874-4770

BY MAIL: Write to us c/o
SEI Investments Distribution Co.
Oaks, Pennsylvania 19456.
BY E-MAIL:

BY INTERNET: http://www.suntrust.com

FROM THE SEC: You can also obtain these documents, and other information about
the STI Classic Funds, from the SEC's website ("http://www.sec.gov"). You may
review and copy documents at the SEC Public Reference Room in Washington, DC
(for information call 1-800-SEC-0330). You may request documents by mail from
the SEC, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, DC 20549-6009. The
Fund's Investment Company Act registration number is 811-06557.
- --------------------------------------------------------------------------------
<PAGE>

THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.

STI CLASSIC FUNDS

Investment Advisors:

Trusco Capital Management, Inc.
SunTrust Bank, Chattanooga

This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
STI Classic Funds (the "Trust") and should be read in conjunction with the
Trust's prospectuses dated October 1, 1998. Prospectuses may be obtained
through the Distributor, SEI Investments Distribution Co., One Freedom Valley
Road, Oaks, Pennsylvania 19456.

TABLE OF CONTENTS
PAGE

THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2
DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . .B-2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . B-18
INVESTMENT ADVISORS. . . . . . . . . . . . . . . . . . . . . . . . . B-19
THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . B-20
THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . B-22
THE CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . B-22
LEGAL COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . B-23
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . B-26
COMPUTATION OF YIELD . . . . . . . . . . . . . . . . . . . . . . . . B-26
CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . B-26
PURCHASING SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . B-27
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . B-28
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-28
FUND TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . B-30
TRADING PRACTICES AND BROKERAGE. . . . . . . . . . . . . . . . . . . B-30
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . B-32
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . B-32
LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . B-32
YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33

October 1, 1998

<PAGE>

THE TRUST

STI Classic Funds (the "Trust") is a diversified, open-end management investment
company established under Massachusetts law as a Massachusetts business trust
under a Declaration of Trust dated January 15, 1992. The Declaration of Trust
permits the Trust to offer separate series ("Funds") of units of beneficial
interest ("shares") and different classes of shares of each Fund. Shareholders
at present may purchase shares of the Trust's money market funds through two
separate classes (Trust Shares and Investor Shares) and shares of the Trust's
other funds through three separate classes (Trust Shares, Investor Shares and
Flex Shares), which provide for variations in sales charges, distribution costs,
transfer agent fees, voting rights and dividends. Except for these differences,
each Trust Share, Investor Share and Flex Share, if any, of each Fund represents
an equal proportionate interest in that portfolio. See "Description of Shares."
This Statement of Additional Information relates to the Trust Shares and Flex
Shares of the Trust's Small Cap Growth and Tax Sensitive Growth Stock Funds (the
"Funds").

The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services, and registering the
shares under federal and state securities laws, pricing, insurance expenses,
litigation, and other extraordinary expenses, brokerage costs, interest charges,
taxes, and organization expenses.

DESCRIPTION OF PERMITTED INVESTMENTS

AMERICAN DEPOSITARY RECEIPTS (ADRs), EUROPEAN DEPOSITARY RECEIPTS (EDRs) AND
GLOBAL DEPOSITORY RECEIPTS (GDRs)

ADRs, EDRs and GDRs are securities, typically issued by a U.S. financial
institution or a non-U.S. financial institution in the case of an EDR or GDR (a
"depositary"). The institution has ownership interests in a security, or a pool
of securities, issued by a foreign issuer and deposited with the depositary.
ADRs, EDRs and GDRs may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary. An unsponsored facility may
be established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.

ASSET-BACKED SECURITIES

Asset-backed securities are securities backed by non-mortgage assets such as
company receivables, truck and auto loans, leases and credit card receivables.
Other asset-backed securities may be created in the future. These securities
may be traded over-the-counter and typically have a short-intermediate maturity
structure depending on the paydown characteristics of the underlying financial
assets which are passed through to the security holder. These securities are
generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pool of assets. Asset-backed
securities may also be debt obligations, which are known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning these assets and
issuing debt obligations.

B-2
<PAGE>

Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and, for a certain
period, by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is
a risk that another party could acquire an interest in the obligations superior
to that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities.

Asset-backed securities entail prepayment risk, which may vary depending on the
type of asset, but is generally less than the prepayment risk associated with
mortgage-backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.

The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.

BANK OBLIGATIONS

Bank obligations are short-term obligations issued by U.S. and foreign banks,
including bankers' acceptances, certificates of deposit, custodial receipts, and
time deposits. Eurodollar and Yankee Bank Obligations are U.S. dollar-
denominated certificates of deposit or time deposits issued outside the U.S. by
foreign branches of U.S. banks or by foreign banks.

COMMON AND PREFERRED STOCKS

Common and preferred stocks represent units of ownership in a corporation.
Owners of common stock typically are entitled to vote on important matters.
Owners of preferred stock ordinarily do not have voting rights, but are entitled
to dividends at a specified rate. Preferred stock has a prior claim to common
stockholders with respect to dividends.

CONVERTIBLE SECURITIES

Convertible securities are securities issued by corporations that are
exchangeable for a set number of another security at a prestated price. The
market value of a convertible security tends to move with the market value of
the underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call option
provisions.

CUSTODIAL RECEIPTS

The custodian arranges for the issuance of the certificates or receipts
evidencing ownership and maintains the register. Receipts include "Treasury
Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). TRs, TIGRs and CATS
are sold as zero coupon securities.

DEBT SECURITIES

B-3
<PAGE>

Debt securities represent money borrowed that obligates the issuer (E.G., a
corporation, municipality, government, government agency) to repay the borrowed
amount at maturity (when the obligation is due and payable) and usually to pay
the holder interest at specific times (E.G., bonds, notes, debentures).

DOLLAR ROLLS

Dollar rolls are transactions in which securities are sold for delivery in the
current month and the seller contracts to repurchase substantially similar
securities on a specified future date. Any difference between the sale price
and the purchase price (plus interest earned on the cash proceeds of the sale)
is applied against the past interest income on the securities sold to arrive at
an implied borrowing rate.

Dollar rolls may be renewed prior to cash settlement and initially may involve
only a firm commitment agreement by the Fund to buy a security.

If the broker-dealer to whom the Fund sells the security becomes insolvent, the
Fund's right to repurchase the security may be restricted. Other risks involved
in entering into dollar rolls include the risk that the value of the security
may change adversely over the term of the dollar roll and that the security the
Fund is required to repurchase may be worth less than the security that the Fund
originally held. To avoid any leveraging concerns, the Fund will place U.S.
Government or other liquid, high grade assets in a segregated account in an
amount sufficient to cover its repurchase obligation.

THE EURO

On January 1, 1999, the European Monetary Union (EMU) plans to implement a new
currency unit, the Euro, which is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. The
countries initially expected to convert or tie their currencies to the Euro
include Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland,
Finland, Italy, Portugal and Spain. Implementation of this plan will mean that
financial transactions and market information, including share quotations and
company accounts, in participating countries will be denominated in Euros.
Approximately 46% of the stock exchange capitalization of the total European
market may be reflected in Euros, and participating governments will issue their
bonds in Euros. Monetary policy for participating countries will be uniformly
managed by a new central bank, the European Central Bank (ECB).

Although it is not possible to predict the impact of the Euro implementation
plan on the Funds, the transition to the Euro may change the economic
environment and behavior of investors, particularly in European markets. For
example, investors may begin to view those countries participating in the EMU as
a single entity, and the Advisors may need to adapt investment strategies
accordingly. The process of implementing the Euro also may adversely affect
financial markets world-wide and may result in changes in the relative strength
and value of the U.S. dollar or other major currencies, as well as possible
adverse tax consequences. The transition to the Euro is likely to have a
significant impact on fiscal and monetary policy in the participating countries
and may produce unpredictable effects on trade and commerce generally. These
resulting uncertainties could create increased volatility in financial markets
world-wide.

B-4
<PAGE>

FOREIGN SECURITIES

Foreign securities include equity securities of foreign entities, obligations of
foreign branches of U.S. banks and of foreign banks, including, without
limitation, European Certificates of Deposit, European Time Deposits, European
Bankers' Acceptances, Canadian Time Deposits, Europaper and Yankee Certificates
of Deposit, and investments in Canadian Commercial Paper and foreign securities.
These instruments have investment risks that differ in some respects from those
related to investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements than
those applicable to domestic branches of U.S. banks.

In making investment decisions for the Fund, the Adviser evaluates the risks
associated with investing Fund assets in a particular country, including risks
stemming from a country's financial infrastructure and settlement practices; the
likelihood of expropriation, nationalization or confiscation of invested assets;
prevailing or developing custodial practices in the country; the country's laws
and regulations regarding the safekeeping, maintenance and recovery of invested
assets, the likelihood of government-imposed exchange control restrictions which
could impair the liquidity of Fund assets maintained with custodians in that
country, as well as risks from political acts of foreign governments ("country
risks"). Of course, the Adviser cannot assure that the Fund will not suffer
losses resulting from investing in foreign countries.

Holding Fund assets in foreign countries through specific foreign custodians
presents additional risks, including but not limited to the risks that a
particular foreign custodian or depository will not exercise proper care with
respect to Fund assets or will not have the financial strength or adequate
practices and procedures to properly safeguard Fund assets.

By investing in foreign securities, the Funds attempt to take advantage of
differences between both economic trends and the performance of securities
markets in the various countries, regions and geographic areas as prescribed by
each Fund's investment objective and policies. During certain periods the
investment return on securities in some or all countries may exceed the return
on similar investments in the United States, while at other times the investment
return may be less than that on similar U.S. securities. Of course, negative
movement by a Fund's investments in one foreign market represented in its
portfolio may offset potential gains from the Fund's investments in another
country's markets.

Emerging countries are all countries that are considered to be developing or
emerging countries by the World Bank or the International Finance Corporation,
as well as countries classified by the United Nations or otherwise regarded by
the international financial community as developing. Currently, the countries
excluded from this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan and
Switzerland.

FORWARD FOREIGN CURRENCY CONTRACTS

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Forward foreign currency contracts involve obligations to purchase or sell a
specific currency amount at a future date, agreed upon by the parties, at a
price set at the time of the contract. A Fund may also enter into a contract to
sell, for a fixed amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in the foreign currency. A Fund may realize a gain or
loss from currency transactions.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified
future time and at a specified price. An option on a futures contract gives
the purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option.

A Fund may use futures contracts, and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired. They may also be used to minimize fluctuations in foreign currencies
or to gain exposure to a particular market or instrument. A Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.

Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific index at the
close of the last trading day of the contract and the price at which the
agreement is made.

Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract which has
previously been "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, a Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Funds may be required to make
delivery of the instruments underlying the futures contracts they hold. The
inability to close options and futures positions also could have an adverse
impact on the ability to effectively hedge the underlying securities.

The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in
a futures contract may result in immediate and substantial loss (or gain) to a
Fund. For example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit if
the contract were closed out. Thus, a purchase or sale of a futures contract
may

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<PAGE>

result in losses in excess of the amount invested in the contract. However,
because the Funds will be engaged in futures transactions only for hedging
purposes, the Advisors do not believe that the Funds will generally be subject
to the risks of loss frequently associated with futures transactions. The Funds
presumably would have sustained comparable losses if, instead of the futures
contract, they had invested in the underlying financial instrument and sold it
after the decline. The risk of loss from the purchase of options is less as
compared with the purchase or sale of futures contracts because the maximum
amount at risk is the premium paid for the option.

Utilization of futures transactions by the Funds does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the fund securities being hedged. It is also
possible that the Funds could both lose money on futures contracts and
experience a decline in value of its fund securities. There is also the risk of
loss by the Funds of margin deposits in the event of the bankruptcy of a broker
with whom the Funds have an open position in a futures contract or related
option.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.

GICs

A GIC is a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the general
assets of the issuer, and the contract is paid at maturity from the general
assets of the issuer. Generally, GICs are not assignable or transferable
without the permission of the issuing insurance company. For this reason, an
active secondary market in GICs does not currently exist and GICs are considered
to be illiquid investments.

HIGH YIELD SECURITIES

High yield securities, commonly referred to as junk bonds, are debt obligations
rated below investment grade, I.E., below BBB by Standard & Poor's Corporation
("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's"), or their unrated
equivalents. The risks associated with investing in high yield securities
include:

(1) High yield, lower rated bonds involve greater risk of default or price
declines than investments in investment grade securities (e.g., securities
rated BBB or higher by S&P or Baa or higher by Moody's) due to changes in
the issuer's creditworthiness.
(2) The market for high risk, high yield securities may be thinner and less
active, causing market price volatility and limited liquidity in the
secondary market. This may limit the ability of a Fund to sell these
securities at their fair market values either to meet redemption requests,
or in response to changes in the economy or the financial markets.
(3) Market prices for high risk, high yield securities may also be affected
by investors' perception of the issuer's credit quality and the outlook for
economic growth. Thus, prices for high risk, high yield securities may
move independently of interest rates and the overall bond market.

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<PAGE>

(4) The market for high risk, high yield securities may be adversely
affected by legislative and regulatory developments.

HEDGING TECHNIQUES

Hedging is an investment strategy designed to offset investment risks. Hedging
activities include, among other things, the use of options and futures. There
are risks associated with hedging activities, including: (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 a Fund and the prices of futures and option on
futures; (3) there may not be a liquid secondary market for a futures contract
or option; and (4) trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in futures contracts
and options.

ILLIQUID SECURITIES

Illiquid securities are securities that cannot be disposed of within seven days
at approximately the price at which they are being carried on a Fund's books.

INVESTMENT COMPANY SHARES

The Funds may purchase shares of other mutual funds to the extent consistent
with applicable law. Investment companies typically incur fees that are
separate from those fees incurred directly by the Funds. A Fund's purchase of
such investment company securities results in the layering of expenses, such
that you would indirectly bear a proportionate share of investment company
operating expenses, such as advisory fees.

INVESTMENT GRADE OBLIGATIONS

Investment grade obligations are debt obligations rated BBB or better by S&P or
Baa or better by Moody's, or their unrated equivalents. These securities are
deemed to have speculative characteristics.

LOAN PARTICIPATIONS

Loan participations are interest in loans to U.S. corporations which are
administered by the lending bank or agent for a syndicate of lending banks. In
a loan participation, the borrower corporation is the issuer of the
participation interest except to the extent the Fund derives its rights from the
intermediary bank. Because the intermediary bank does not guarantee a loan
participation, a loan participation is subject to the credit risks associated
with the underlying corporate borrower.

In the event of bankruptcy or insolvency of the corporate borrower, a loan
participation may be subject to certain defenses that can be asserted by the
borrower as a result of improper conduct by the intermediary bank. In addition,
in the event the underlying corporate borrower fails to pay principal and
interest when due, the Fund may be subject to delays, expenses, and risks that
are greater than those that would have been involved if the Fund had purchased a
direct obligation of the borrower. Under the terms of a Loan Participation, the
Fund may be regarded as a creditor of the intermediary bank (rather than of the
underlying corporate borrower), so that the Fund may also be subject to the risk
that the intermediary bank may become insolvent.

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<PAGE>

The secondary market for loan participations is limited and any such
participation purchased by the Fund may be regarded as illiquid.

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are instruments that entitle the holder to a share of
all interest and principal payments from mortgages underlying the security. The
mortgages backing these securities include conventional thirty-year fixed rate
mortgages, graduated payment mortgages, adjustable rate mortgages, and floating
mortgages.

GOVERNMENT PASS-THROUGH SECURITIES

These are securities that are issued or guaranteed by a U.S. Government
agency representing an interest in a pool of mortgage loans. The primary
issuers or guarantors of these mortgage-backed securities are the
Government National Mortgage Association ("GNMA"), Fannie Mae, and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S.
Government as GNMA certificates are, but Fannie Mae and FHLMC securities
are supported by the instrumentalities' right to borrow from the U.S.
Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions
of interest to certificate holders. GNMA and Fannie Mae also guarantee
timely distributions of scheduled principal. In the past, FHLMC has only
guaranteed the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS)
which also guarantee timely payment of monthly principal reductions.
Government and private guarantees do not extend to the securities' value,
which is likely to vary inversely with fluctuations in interest rates.

Obligations of GNMA are backed by the full faith and credit of the United
States Government. Obligations of Fannie Mae and FHLMC are not backed by
the full faith and credit of the United States Government but are
considered to be of high quality since they are considered to be
instrumentalities of the United States. The market value and interest
yield of these mortgage-backed securities can vary due to market interest
rate fluctuations and early prepayments of underlying mortgages. These
securities represent ownership in a pool of federally insured mortgage
loans with a maximum maturity of 30 years. However, due to scheduled and
unscheduled principal payments on the underlying loans, these securities
have a shorter average maturity and, therefore, less principal volatility
than a comparable 30-year bond. Since prepayment rates vary widely, it is
not possible to accurately predict the average maturity of a particular
mortgage-backed security. The scheduled monthly interest and principal
payments relating to mortgages in the pool will be "passed through" to
investors. Government mortgage-backed securities differ from conventional
bonds in that principal is paid back to the certificate holders over the
life of the loan rather than at maturity. As a result, there will be
monthly scheduled payments of principal and interest. In addition, there
may be unscheduled principal payments representing prepayments on the
underlying mortgages. Although these securities may offer yields higher
than those available from other types of U.S. Government securities,
mortgage-backed securities may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of
the prepayment feature. For instance, when interest rates decline, the
value of these securities likely will not rise as much as comparable debt
securities due to the prepayment feature. In addition, these prepayments
can cause the price of a mortgage-backed security originally purchased at a
premium to decline in price to its par value, which may result in a loss.

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<PAGE>

PRIVATE PASS-THROUGH SECURITIES

Private pass-through securities are mortgage-backed securities issued by a
non-governmental agency, such as a trust. While they are generally
structured with one or more types of credit enhancement, private pass-
through securities generally lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality. The two
principal types of private mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs").

CMOs

CMOs are securities collateralized by mortgages, mortgage pass-throughs,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool
is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). CMOs are rated in one of the two highest categories by S&P or
Moody's. Many CMOs are issued with a number of classes or series which
have different expected maturities. Investors purchasing such CMOs are
credited with their portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal based on a predetermined priority schedule. Accordingly, the
CMOs in the longer maturity series are less likely than other mortgage
pass-throughs to be prepaid prior to their stated maturity. Although some
of the mortgages underlying CMOs may be supported by various types of
insurance, and some CMOs may be backed by GNMA certificates or other
mortgage pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed.

REMICs

REMICs are private entities formed for the purpose of holding a fixed pool
of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities and are rated in
one of the two highest categories by S&P or Moody's.

Investors may purchase beneficial interests in REMICs, which are known as
"regular" interests, or "residual" interests. Guaranteed REMIC pass-
through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC
represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed
mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC
guarantees the timely payment of interest. GNMA REMIC Certificates are
backed by the full faith and credit of the U.S. Government.

STRIPPED MORTGAGE-BACKED SECURITIES

Stripped mortgage-backed securities are securities that are created when a
U.S. Government agency or a financial institution separates the interest
and principal components of a mortgage-backed security and sells them as
individual securities. The holder of the "principal-only" security (PO)
receives the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security (IO) receives
interest payments from the same underlying security.

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The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment
rates tend to increase, which tends to reduce prices of IOs and increase
prices of POs. Rising interest rates can have the opposite effect.

DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES

Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life.
The Advisors believe that the estimated average life is the most
appropriate measure of the maturity of a mortgage-backed security.
Accordingly, in order to determine whether such security is a permissible
investment for a Fund, it will be deemed to have a remaining maturity equal
to its average life as estimated by that Fund's Advisor. An average life
estimate is a function of an assumption regarding anticipated prepayment
patterns. The assumption is based upon current interest rates, current
conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market
participants could produce somewhat different average life estimates with
regard to the same security. There can be no assurance that the average
life as estimated by an Advisor will be the actual average life.

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 (see "When-Issued Securities and
Municipal Forwards" for more information).

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, conditional
sales contract, or a participation interest in any of the above.

MUNICIPAL SECURITIES

MUNICIPAL BONDS include general obligation bonds, revenue or special
obligation bonds, private activity and industrial development bonds and
participation interests in municipal bonds. General obligation bonds are
backed by the taxing power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility (for example, tolls from a
bridge). Certificates of participation represent an interest in an
underlying obligation or commitment, such as an obligation issued in
connection with a leasing arrangement. The payment of principal and
interest on private activity and industrial development bonds generally is
totally dependent on the ability of a facility's user to meet its financial
obligations and the pledge, if any, of real and personal property as
security for the payment.

MUNICIPAL NOTES consist of general obligation notes, tax anticipation notes
(notes sold to finance working capital needs of the issuer in anticipation
of receiving taxes on a future date), revenue anticipation notes (notes
sold to provide needed cash prior to receipt of expected non-tax revenues
from a

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specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. A Fund's investments in any of
the notes described above will be limited to those obligations (i) where
both principal and interest are backed by the full faith and credit of the
United States, (ii) which are rated MIG-2 or V-MIG-2 at the time of
investment by Moody's, (iii) which are rated SP-2 at the time of investment
by S&P, or (iv) which, if not rated by S&P or Moody's, are in the Advisor's
judgement, of at least comparable quality to MIG-2, VMIG-2 or SP-2.

OTHER TYPES OF TAX-EXEMPT INSTRUMENTS which are permissible investments
include floating rate notes. Investments in such floating rate instruments
will normally involve industrial development or revenue bonds which provide
that the rate of interest is set as a specific percentage of a designated
base rate (such as the prime rate) at a major commercial bank, and that the
Fund can demand payment of the obligation at all times or at stipulated
dates on short notice (not to exceed 30 days) at par plus accrued interest.
Such obligations are frequently secured by letters of credit or other
credit support arrangements provided by banks. The quality of the
underlying credit or of the bank, as the case may be, must, in the
Advisor's opinion be equivalent to the long-term bond or commercial paper
ratings stated above. The Advisor will monitor the earning power, cash
flow and liquidity ratios of the issuers of such instruments and the
ability of an issuer of a demand instrument to pay principal and interest
on demand. The Funds may also purchase participation interests in
municipal securities (such as industrial development bonds and municipal
lease/purchase agreements). A participation interest gives a Fund an
undivided interest in the underlying municipal security. If it is unrated,
the participation interest will be backed by an irrevocable letter of
credit or guarantee of a credit-worthy financial institution or the payment
obligations otherwise will be collateralized by U.S. Government securities.
Participation interests may have fixed, variable or floating rates of
interest and may include a demand feature. A participation interest
without a demand feature or with a demand feature exceeding seven days may
be deemed to be an illiquid security subject to the Funds' investment
limitations restricting their purchases of illiquid securities. A Fund may
purchase other types of tax-exempt instruments as long as they are of a
quality equivalent to the bond or commercial paper ratings stated above.

Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the
Funds nor an Advisor will review the proceedings relating to the issuance
of municipal securities or the basis for such opinions.

OTHER INVESTMENTS

The Funds are not prohibited from investing in bank obligations issued by
clients of SEI Investments Company ("SEI Investments"), the parent company of
the Administrator and the Distributor. The purchase of Fund shares by these
banks or their customers will not be a consideration in deciding which bank
obligations the Funds will purchase. The Funds will not purchase obligations
issued by the Advisors.

OPTIONS

A Fund may write call options on a covered basis only, and will not engage in
option writing strategies for speculative purposes. A call option gives the
purchaser of such option the right to buy, and the writer, in this case the
Fund, the obligation to sell the underlying security at the exercise price
during the option period. The advantage to the Funds of writing covered calls
is that the Funds receive a premium which is additional income. However, if the
security rises in value, the Funds may not fully participate in the market
appreciation.

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<PAGE>

During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.

A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.

Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security.

If a call option expires unexercised, a Fund will realize a short-term capital
gain in the amount of the premium on the option, less the commission paid. Such
a gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, a
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security, and the proceeds
of the sale of the security plus the amount of the premium on the option, less
the commission paid.

The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.

The Funds will write call options only on a covered basis, which means that a
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Fund would be required to continue to hold a security which it might otherwise
wish to sell, or deliver a security it would want to hold. Options written by
the Funds will normally have expiration dates between one and nine months from
the date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written.

PAY-IN-KIND SECURITIES

Pay-In-Kind securities are debt obligations or preferred stock, that pay
interest or dividends in the form of additional debt obligations or preferred
stock.

REPURCHASE AGREEMENTS

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

B-13
<PAGE>

number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or maturity of the underlying
security. A repurchase agreement involves the obligation of the seller to pay
the agreed upon price, which obligation is, in effect, secured by the value of
the underlying security.

Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisors monitor
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the appropriate Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
the sale including accrued interest are less than the resale price provided in
the agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and required to return
the underlying security to the seller's estate.

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") or an exemption
from registration. Permitted investments for the Funds include restricted
securities, and each such Fund may invest up to 15% of its net assets in
illiquid securities, subject to each Fund's investment limitations on the
purchase of illiquid securities. Restricted securities, including securities
eligible for re-sale under 1933 Act Rule 144A, that are determined to be liquid
are not subject to this limitation. This determination is to be made by a
Fund's Advisor pursuant to guidelines adopted by the Board of Trustees. Under
these guidelines, the particular Advisor will consider the frequency of trades
and quotes for the security, the number of dealers in, and potential purchasers
for, the securities, dealer undertakings to make a market in the security, and
the nature of the security and of the marketplace trades. In purchasing such
Restricted Securities, each Advisor intends to purchase securities that are
exempt from registration under Rule 144A under the 1933 Act.

SECURITIES LENDING

Each Fund may lend securities pursuant to agreements which require that the
loans be continuously secured by collateral at all times equal to 100% of the
market value of the loaned securities which consists of: cash, securities of the
U.S. Government or its agencies, or any combination of cash and such securities.
Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for a Fund exceed one-third of the value of the
Fund's total assets taken at fair market value. A Fund will continue to receive
interest on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a
Fund will normally pay lending fees to such broker-dealers and related expenses
from the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
appropriate Advisor to be of good standing and when, in the judgment of that
Advisor, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Any loan may be terminated by either party
upon reasonable notice to the other party. The Funds may use the Distributor or
a broker-dealer affiliate of an Advisor as a broker in these transactions.

B-14
<PAGE>

SHORT-TERM OBLIGATIONS

Short-term obligations are debt obligations maturing (becoming payable) in 397
days or less, including commercial paper and short-term corporate obligations.
Short-term corporate obligations are short-term obligations issued by
corporations.

STANDBY COMMITMENTS AND PUTS

The Funds may purchase securities at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
when they can simultaneously acquire the right to sell the securities back to
the seller, the issuer or a third party (the "writer") at an agreed-upon price
at any time during a stated period or on a certain date. Such a right is
generally denoted as a "standby commitment" or a "put." The purpose of engaging
in transactions involving puts is to maintain flexibility and liquidity to
permit the Funds to meet redemptions and remain as fully invested as possible in
municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability
to pay for the securities at the time the put is exercised. A Fund would limit
its put transactions to institutions which the Advisor believes present minimal
credit risks, and the Advisor would use its best efforts to initially determine
and continue to monitor the financial strength of the sellers of the options by
evaluating their financial statements and such other information as is available
in the marketplace. It may, however be difficult to monitor the financial
strength of the writers because adequate current financial information may not
be available. In the event that any writer is unable to honor a put for
financial reasons, a Fund would be a general creditor (I.E., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular
provisions of the contract between the Fund and the writer may excuse the writer
from repurchasing the securities; for example, a change in the published rating
of the underlying securities or any similar event that has an adverse effect on
the issuer's credit or a provision in the contract that the put will not be
exercised except in certain special cases, for example, to maintain portfolio
liquidity. The Fund could, however, at any time sell the underlying portfolio
security in the open market or wait until the portfolio security matures, at
which time it should realize the full par value of the security.

The securities purchased subject to a put may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could, of course, sell the portfolio
security. The maturity of the underlying security will generally be different
from that of the put. There will be no limit to the percentage of portfolio
securities that the Fund may purchase subject to a standby commitment or put,
but the amount paid directly or indirectly for all standby commitments or puts
which are not integral parts of the security as originally issued held in the
Fund will not exceed 1/2 of 1% of the value of the total assets of such Fund
calculated immediately after any such put is acquired.

SUPRANATIONAL AGENCY OBLIGATIONS

Supranational agency obligations are obligations of supranational entities
established through the joint participation of several governments, including
the Asian Development Bank, Inter-American Development Bank, International Bank
for Reconstruction and Development (also known as the "World Bank"), African
Development Bank, European Economic Community, European Investment Bank, and the
Nordic Investment Bank.

B-15
<PAGE>

SWAPS, CAPS, FLOORS, COLLARS

Swaps, caps, floors and collars are hedging tools designed to permit the
purchaser to preserve a return or spread on a particular investment or portion
of its portfolio. They are also used to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. In a
typical interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times a "notional principal amount." This is done in
return for payments equal to a fixed rate times the same amount, for a specific
period of time. If a swap agreement provides for payment in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates.

In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances. This is usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specific interest rate exceeds an
agreed-upon level. Meanwhile, the seller of an interest rate floor is obligated
to make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap
and selling a floor.

Swap agreements are subject to risks related to the counterparty's ability to
perform, and may decline in value if the counterparty's creditworthiness
deteriorates. The Fund may also suffer losses if it is unable to terminate
outstanding swap agreements or reduce its exposure through offsetting
transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside liquid high-grade securities in a
segregated account. The Fund will enter into swaps only with counterparties
believed to be creditworthy.

U.S. GOVERNMENT AGENCY OBLIGATIONS

U.S. Government agency obligations are obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Agencies of the United
States Government which issue obligations consist of, among others, the Export
Import Bank of the United States, Farmers Home Administration, Federal Farm
Credit Bank, Federal Housing Administration, Government National Mortgage
Association ("GNMA"), Maritime Administration, Small Business Administration and
The Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued by, among others, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate
Credit Banks, Federal Land Banks, Fannie Mae and the United States Postal
Service as well as government trust certificates. Some of these securities are
supported by the full faith and credit of the United States Treasury, others are
supported by the right of the issuer to borrow from the Treasury and still
others are supported only by the credit of the instrumentality. Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing the value of the obligation prior to maturity.

U.S. TREASURY OBLIGATIONS

U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S.
Treasury. They also consist of separately traded interest and principal
component parts of these obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities (STRIPS).

VARIABLE AND FLOATING RATE SECURITIES

B-16
<PAGE>

Variable and floating rate instruments involve certain obligations that may
carry variable or floating rates of interest, and may involve a conditional or
unconditional demand feature. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market rates or indices.
The interest rates on these securities may be reset daily, weekly, quarterly, or
some other reset period, and may have a set floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.

VARIABLE RATE MASTER DEMAND NOTES

Variable rate master demand notes permit the investment of fluctuating amounts
at varying market rates of interest pursuant to direct arrangements between a
Fund, as lender, and a borrower. Such notes provide that the interest rate on
the amount outstanding varies on a daily, weekly or monthly basis depending upon
a stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There
is no secondary market for the notes and it is not generally contemplated that
such instruments will be traded. The quality of the note or the underlying
credit must, in the opinion of the appropriate Advisor, be equivalent to the
ratings applicable to permitted investments for the particular Fund. The
appropriate Advisor will monitor on an ongoing basis the earning power, cash
flow and liquidity ratios of the issuers of such instruments and will similarly
monitor the ability of an issuer of a demand instrument to pay principal and
interest on demand. Variable rate master demand notes may or may not be backed
by bank letters of credit.

WARRANTS

Warrants give holders the right, but not the obligation, to buy shares of a
company at a given price, usually higher than the market price, during a
specified period.

WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS

When-issued securities are securities that are delivered and paid for normally
within 45 days after the date of commitment to purchase. Municipal forwards
call for delivery of the underlying municipal security normally after 45 days
but before one year after the commitment date.

Although a Fund will only make commitments to purchase when-issued securities
and municipal forwards with the intention of actually acquiring the securities,
a Fund may sell them before the settlement date. When-issued securities are
subject to market fluctuation, and accrue no interest to the purchaser during
this pre-settlement period. The payment obligation and the interest rate that
will be received on the securities are each fixed at the time the purchaser
enters into the commitment. Purchasing municipal forwards and when-issued
securities entails leveraging and can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction itself. In that case, there could be an unrealized
loss at the time of delivery.

Segregated accounts will be established with the appropriate custodian, and a
Fund will maintain high quality, liquid assets in an amount at least equal in
value to its commitments to purchase when-issued securities and municipal
forwards. If the value of these assets declines, the Fund will place additional
liquid assets in the account on a daily basis so that the value of the assets in
the account is equal to the amount of such commitments.

B-17
<PAGE>

ZERO COUPON OBLIGATIONS

Zero coupon obligations are debt obligations that do not bear any interest, but
instead are issued at a deep discount from face value or par. The value of a
zero coupon obligation increases over time to reflect the interest accumulated.
Such obligations will not result in the payment of interest until maturity, and
will have greater price volatility than similar securities that are issued at
face value or par and pay interest periodically.

Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective.

INVESTMENT LIMITATIONS

The following are fundamental policies of each Fund and cannot be changed with
respect to a Fund without the consent of the holders of a majority of that
Fund's outstanding shares.

A Fund may not:

1. Acquire more than 10% of the voting securities of any one issuer.

2. Invest in companies for the purpose of exercising control.

3. Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding one-third of the value of total assets.
Any borrowing will be done from a bank and, to the extent that such
borrowing exceeds 5% of the value of the Fund's assets, asset coverage
of at least 300% is required. In the event that such asset coverage
shall at any time fall below 300%, the Fund shall, within three days
thereafter or such longer period as the Securities and Exchange
Commission may prescribe by rules and regulations, reduce the amount
of its borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. This borrowing provision is
included solely to facilitate the orderly sale of portfolio securities
to accommodate heavy redemption requests if they should occur and is
not for investment purposes. All borrowings in excess of 5% of the
value of a Fund's total assets will be repaid before making additional
investments and any interest paid on such borrowings will reduce
income.

4. Make loans, except that (a) a Fund may purchase or hold debt
instruments in accordance with its investment objective and policies;
(b) a Fund may enter into repurchase agreements, and (c) the Bond
Funds, Balanced Fund, U.S. Government Securities Fund, Limited-Term
Federal Mortgage Securities Fund, International Equity Index Fund,
International Equity Fund, Value Income Stock Fund, Small Cap Equity
Fund and Emerging Markets Equity Fund may engage in securities lending
as described in the Prospectuses and in this Statement of Additional
Information.

5. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed
10% of the Fund's total assets, taken at current value at the time of
the incurrence of such loan, except as permitted with respect to
securities lending.

6. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts (except for financial
futures contracts) and interests in a pool of securities that are
secured by interests in real estate (except that each Bond Fund may
purchase mortgage-backed and other mortgage-related securities,
including collateralized mortgage obligations and REMICs). However,
subject to their

B-18
<PAGE>

permitted investment spectrum, any Fund may invest in companies which
invest in real estate, commodities or commodities contracts.

7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term
credits as necessary for the clearance of security transactions.

8. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a security.

9. Purchase securities of other investment companies except for money
market funds and CMOs and REMICs deemed to be investment companies and
then only as permitted by the Investment Company Act of 1940 (the
"1940 Act") and the rules and regulations thereunder, except that the
Mid-Cap Equity, Sunbelt Equity, Balanced, Georgia Tax-Exempt Bond,
Florida Tax-Exempt Bond, U.S. Government Securities, Limited-Term
Federal Mortgage Securities, International Equity Index, International
Equity, Small Cap Equity and Emerging Market Equity Funds' purchases
of investment company shares are not limited to money market funds.
Under these rules and regulations, a Fund is prohibited from acquiring
the securities of other investment companies if, as a result of such
acquisition, the Fund owns more than 3% of the total voting stock of
the company; securities issued by any one investment company represent
more than 5% of the total assets of a Fund; or securities (other than
treasury stock) issued by all investment companies represent more than
10% of the total assets of the Fund.

10. Issue senior securities (as defined in the 1940 Act) except in
connection with permitted borrowings as described above or as
permitted by rule, regulation or order of the SEC.

NON-FUNDAMENTAL POLICIES

No Fund may purchase or hold illiquid securities (I.E., securities that cannot
be disposed of for their approximate carrying value in seven days or less (which
term includes repurchase agreements and time deposits maturing in more than
seven days) if, in the aggregate, more than 15% of its net assets would be
invested in illiquid securities.

With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.

INVESTMENT ADVISORS

The Trust and Trusco Capital Management, Inc. and SunTrust Bank, Chattanooga,
N.A. (the "Advisors") have entered into advisory agreements with the Trust
(the "Advisory Agreements"). The Advisors are indirect wholly-owned
subsidiaries of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a
southeastern regional bank holding company with assets of $___ billion as of
_________, 1998. The Advisory Agreements provide that each Advisor shall not
be protected against any liability to the Trust or its Shareholders by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.

B-19
<PAGE>

Each Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to an Advisor but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by certain states, the Advisor and/or the
Administrator will bear the amount of such excess. The Advisor will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.

The continuance of each Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to each
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. Each Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds, by a majority of the outstanding shares of the Funds, on
not less than 30 days' nor more than 60 days' written notice to the Advisor, or
by the Advisor on 90 days' written notice to the Trust.

BANKING LAWS

Current interpretations of federal banking laws and regulations:

- - prohibit SunTrust and the Advisors from sponsoring, organizing,
controlling, or distributing the Funds' shares; but
- - do not prohibit SunTrust or the Advisors generally from acting as an
investment advisor, transfer agent, or custodian to the Funds or from
purchasing Fund shares as agent for and upon the order of a customer.

The Advisors believe that they may perform advisory and related services for the
Trust without violating applicable banking laws or regulations. However, the
legal requirements and interpretations about the permissible activities of banks
and their affiliates may change in the future. These changes could prevent the
Advisors from continuing to perform services for the Trust. If this happens,
the Board of Trustees would consider selecting other qualified firms.
Shareholders would approve any new investment advisory agreements would be
subject to Shareholder approval.

If current restrictions on bank activities with mutual funds were relaxed, the
Advisors, or their affiliates, would consider performing additional services for
the Trust. We cannot predict whether these changes will be enacted. We also
cannot predict the terms that the Advisors, or their affiliates, might offer to
provide additional services.

THE ADMINISTRATOR

The Trust and SEI Investment Mutual Funds Services (the "Administrator") are
parties to the Administrative Agreement. The Administration Agreement provides
that the Administrator shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which the Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Administration Agreement shall remain in effect for
a period of five years after the date of the Agreement and shall continue in
effect for successive periods of two years subject to review at least annually
by the Trustees of the Trust unless terminated by either party on not less than
ninety days' written notice to the other party.

B-20
<PAGE>

The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as
administrator or sub-administrator to the following other mutual funds: The
Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK
Funds, Armada 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 Nevis Funds,
Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc.,
The Pillar Funds, 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, TIP Funds
and TIP Institutional Funds.

For its administrative services, the Administrator is entitled to a fee, which
is calculated daily and paid monthly, at an annual rate of: .12% of the first
$1 billion of average aggregate net assets, .09% on the next $4 billion of
average aggregate net assets, .07% of the next $3 billion of average aggregate
net assets, .065% of the next $2 billion of average aggregate net assets, and
.06% thereafter.

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 Flex Shares of
the Funds have a distribution and service plan (the "Flex Plan").

The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the disinterested Trustees, 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 can use these fees to
compensate broker-dealers and service providers, including SunTrust and its
affiliates, which provide administrative and/or distribution services to
Investor Shares or Flex Shares Shareholders or their customers who beneficially
own Investor Shares or Flex Shares. In addition, Flex Shares are subject to a
service fee of up to .25% of the average daily net assets of the Flex Shares of
each Fund. This service fee will be used for services provided and expenses
incurred in maintaining shareholder accounts, responding to shareholder
inquiries and providing information on their investments.

Services for which broker-dealers and service providers may be compensated
include establishing and maintaining customer accounts and records; aggregating
and processing purchase and redemption requests from customers; placing net
purchase and redemption orders with the Distributor; automatically investing
customer

B-21
<PAGE>

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 each case in accordance with the
provisions of Rule 12b-1 under the 1940 Act, which Rule regulates circumstances
under which an investment company may directly or indirectly bear expenses
relating to the distribution of its shares. Continuance of the Flex Plan must
be approved annually by a majority of the Trustees of the Trust and by a
majority of the disinterested Trustees. The Flex Plan requires that quarterly
written reports of amounts spent under the Flex Plan, respectively, 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
affected class of shares of the Trust. All material amendments of the Plans
will require approval by a majority of the Trustees of the Trust and of the
disinterested 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 Funds' aggregate average daily net assets attributable to its Flex
Shares.

THE TRANSFER AGENT

Federated Services Company, Federated Investors Tower, Pittsburgh, PA
15222-3779 serves as the Trust's

THE CUSTODIAN

SunTrust Bank, Atlanta, 303 Peachtree Street N.E., 14th Floor, Atlanta, GA
30308 serves as the custodian for the Funds.

INDEPENDENT PUBLIC ACCOUNTANTS

______________________, serves as independent public accountants for the Trust.

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. serves as
legal counsel to the Trust.

B-22
<PAGE>

TRUSTEES AND OFFICERS OF THE TRUST

The Trustees supervise the management and affairs of the Trust. The Trustees
have approved contracts with certain companies that provide the Trust with
essential management services. The Trustees and Executive Officers of the
Trust, their respective dates of birth, and their principal occupations for the
last five years are set forth below. Each may have held other positions with
the named companies during that period. The business address of each Trustee
and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456.
Certain officers of the Trust also serve as officers of some or all of the
following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The
Arbor Fund, ARK Funds, Armada 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
Nevis Funds, Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series
Fund, Inc., The Pillar Funds, 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, TIP Funds and TIP Institutional Funds, each of which is an
open-end management investment company managed by SEI Investments Mutual Funds
Services or its affiliates and, except for Profit Funds Investment Trust, and
Santa Barbara Group of Mutual Funds, Inc., are distributed by SEI Investments
Distribution Co.

DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida,
N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital;
Executive Committee Member and Director, Honda Classic Foundation; Director,
Broward Community College Foundation.

WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company, 1961-
1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board, 1990 to
present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc.

CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment
Committee and member of Executive Committee, Cotton States Life and Health
Insurance Company; Director and Chairman of Investment Committee and member of
Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust
Company of Georgia Advisory Council.

F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County
Publishing Co., Inc., 1981-1997, publisher of the Paoli News and the Paoli
Republican and Editor of the Paoli Republican, 1981-1997, President, H & W
Distribution, Inc., 1984-1997. Current Trustee on the Board of Trustees for the
SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President,
Trust Department, Harris Trust and Savings Bank and Chairman of the Board of
Directors of The Harris Trust Company of Arizona before January 1981.

T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of
Crawford & Company; held these positions, 1973-1987. Member of the Board of
Directors, 1970-1990, joined company in 1948; spent entire career at Crawford,
currently serves on Boards of Norrell Corporation and Mercy Health Services, the
latter being the holding company of St. Joseph's Hospitals.

DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for
Economic Education, Florida State University, 1991-present. 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

B-23
<PAGE>

Southern University. Spent 19 years as faculty member and administrator at
Louisiana State University and served as Head of Economics Department, member
and Chairman of the Graduate Council, Dean of Academic Affairs and Vice
Chancellor. Member of Board of Directors of Federal Reserve Bank of Atlanta,
1983-1988.

JESSE HALL (9/26/29) - Trustee* - Executive Vice President, SunTrust Banks,
Inc., 1985-1994; Director of Crawford & Company since 1979; Member, Atlanta
Estate Planning Council, 1988-1993.

JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD
Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg
Trust.

WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust
Equitable Securities Corporation, January, 1998-present. Chairman and CEO,
Equitable Asset Management, Inc., December 1993-present. Chairman & CEO,
Equitable Trust Company, June 1991-present. Chairman, Equitable Securities
Corporation, July 1972 - January 1998.

MARK NAGLE (10/20/59) - President and Chief Executive Officer - Vice President
and Controller, Funds Accounting since 1996. Vice President of the Administrator
and Distributor since 1996. Vice President of Fund Accounting - BISYS Fund
Services 1995-1996. Senior Vice President - Fidelity Investments 1981-1995.

TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of the Administrator and the Distributor since 1995.
Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn
(law firm), 1991-1994.

LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock
Exchange, 1989-1998.

KATHY HEILIG (12/21/58) - Vice President and Assistant Secretary - Treasurer of
SEI Investments Company since 1997. Assistant Controller of SEI Investments
Company since 1995. Vice President of SEI Investments Company since 1991.
Director of Taxes of SEI Investments Company, 1987-1991. Tax Manager - Arthur
Anderson LLP prior to 1987.

JOSEPH M. O'DONNELL (11/13/54) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997. Staff
Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993.

SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor since
1983.

LYNDA J. STRIEGEL (10/30/48) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and the Distributor since
1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998.
Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel,
Riggs Bank, N.A., 1991-1995.

KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice
President & General Counsel of SEI Investments, the Administrator and the
Distributor since 1994. Vice President of SEI, the Administrator and the
Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm) prior
to 1992.

B-24
<PAGE>

KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice
President, Assistant Secretary of SEI Investments, the Administrator and
Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.

CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of SEI
Investments Mutual Funds Services 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, since 1989.

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, counsel to the Trust, Administrator and Distributor. Associate, Morgan,
Lewis & Bockius LLP, 1993-1995. Associate, Ropes & Gray (law firm), 1988-1993.

- --------------------------
* Messrs. Looney, Goodrum, McNair, Hall and Cammack 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, 1998, the Trust paid the following amounts to
Trustees and Officers of the Trust:

- ----------------------------------------------------------------------------------------------------------------------------------
Aggregate Pension or Retirement Estimated Annual Total Compensation from Fund
Compensation From Benefits Accrued as Part Benefits Upon and Fund Complex Paid to
Name of Person, Position Fund of Fund Expenses Retirement Trustees
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Daniel S. Goodrum, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

Wilton Looney, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

Champney A. McNair, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------
F. Wendell Gooch, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

T. Gordy Germany, $__,____ N/A N/A $__,____ for service on two
Trustee boards
- ----------------------------------------------------------------------------------------------------------------------------------

Dr. Bernard F. Sliger, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

Jesse S. Hall, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

B-25
<PAGE>

Jonathan T. Walton, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

William H. Cammack, Trustee $__,____ N/A N/A $__,____ for service on two
boards
- ----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

PERFORMANCE INFORMATION

From time to time a Fund may advertise its performance. Performance figures are
based on historical earnings and are not intended to indicate future
performance.

CLASSES OF SHARES AND PERFORMANCE

The performance of the Trust's Flex Shares will normally be lower than for Trust
Shares because Flex Shares are subject to distribution, service, and certain
transfer agent fees not charged to Trust Shares.

PERFORMANCE COMPARISONS

Each Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds, or
to unmanaged indices. These comparisons may assume reinvestment of dividends
but generally do not reflect deductions for administrative and management costs.

COMPUTATION OF YIELD

THIRTY-DAY YIELD

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
average 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.

CALCULATION OF TOTAL RETURN

From time to time, the Funds may advertise total return. In particular, total
n
return will be calculated according to the following formula: P (1 + T) = ERV,
where P = a hypothetical initial payment of $1,000; T = average annual total
return; n = number of years; and ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the designated time period as of the end
of such period.

B-26
<PAGE>

From time to time, the Trust may include the names of clients of the Advisors in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. SunTrust
Bank's investment advisory affiliates, STI Capital Management, N.A. and Trusco
Capital Management, have been in the top 1% of the SEI Funds Evaluation database
for equity managers over the past ten years. SEI Investment's database includes
research data on over 1,000 investment managers responsible for over $450
billion in assets.

PURCHASING SHARES

Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is
closed on the days the following holidays are observed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

CONTINGENT DEFERRED SALES CHARGE -- FLEX SHARES

You do not pay an initial sales charge when you purchase Flex Shares. If,
however, you redeem (sell) your shares within the first year after your
purchase, you will pay a contingent deferred sales charge (CDSC) equal to 2.00%
of either (1) the NAV of the shares at the time of purchase, or (2) the NAV of
the shares at the time of redemption, whichever is less. The CDSC does not
apply to shares you purchase through reinvestment of dividends or distributions.
So, you never pay a CDSC on any increase in your investment above the initial
purchase price. In addition, the CDSC does not apply to exchange of Flex Shares
of one Fund for Flex Shares of another Fund.

REDEEMING SHARES

It is currently the Trust's policy to pay for all redemptions in cash. The
Trust retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of readily marketable
securities held by the Funds in lieu of cash. Shareholders may incur brokerage
charges on the sale of any such securities so received in payment of
redemptions. A Shareholder will at all times be entitled to aggregate cash
redemptions from all Funds of the Trust during any 90-day period of up to the
lesser of $250,000 or 1% of the Trust's net assets.

The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the NYSE is restricted, or during the existence of an emergency (as determined
by the Securities and Exchange Commission by rule or regulation) as a result of
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission has by order
permitted. The Trust also reserves the right to suspend sales of shares of a
Fund for any period during which the NYSE, an Advisor, the Administrator and/or,
the Custodian are not open for business.

A number of Fund shareholders are institutions with significant share holdings
that may be redeemed at any time. If a substantial number or amount of
redemptions should occur within a relatively short period of time, a Fund may
have to sell portfolio securities it would otherwise hold and incur the
additional transaction costs. The sale of portfolio securities may result in
the recognition of capital gains, which will be distributed annually and

B-27
<PAGE>

generally will be taxable to shareholders as ordinary income or capital gains.
Shareholders are notified annually regarding the federal tax status of
distributions they receive (see "Taxes").

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.

TAXES

The following is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders that are not described in
the Funds' prospectus. No attempt is made to present a detailed explanation of
the Federal tax treatment of the funds or their Shareholders, and the discussion
here and in the Funds' prospectus is not intended as a substitute for careful
tax planning.

This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder, in effect on the date of this Statement of Additional Information.
New legislation, as well as administrative changes or court decisions, may
change the conclusions expressed herein, and may have a retroactive effect with
respect to the transactions contemplated herein.

FEDERAL INCOME TAX

In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
investment 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) at the close
of each quarter of a Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RIC's and other securities, with such other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of a Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of a Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RIC's) of any one issuer, or of two or more issuers engaged
in same or similar businesses if the Fund owns at least 20% of the voting power
of such issuers.

In addition, each Fund will 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

B-28
<PAGE>

certain other amounts. Each Fund intends to make sufficient distributions prior
to the end of each calendar year to avoid liability for the federal excise tax
applicable to regulated investment companies.

If, at the close of each quarter of its taxable year, at least 50% of the value
of a Fund's total assets consists of obligations the interest on which is
excludable from gross income, a Fund may pay "exempt-interest dividends," as
defined in Section 852(b)(5) of the Code, to its shareholders.

Issuers of bonds purchased by a Tax-Exempt Fund (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
Federal income taxation retroactively to the date of issuance of the bonds to
which such dividends are attributable thereof if such representations are
determined to have been inaccurate or if the issuer of such bonds (or the
beneficiary of such bonds) fails to comply with such covenants.

Any gain or loss recognized on a sale or redemption of shares of a Fund by a
Shareholder who is not a dealer in securities will generally be treated as long-
term capital gain or loss if the shares have been held for more than eighteen
months, mid-term if the shares have been held for over one year but not for over
eighteen months, and short-term if for a year or less. If shares held for six
months or less are sold or redeemed for a loss, two special rules apply: First,
if shares on which a net capital gain distribution has been received are
subsequently sold or redeemed, and such shares have been held for six months or
less, any loss recognized will be treated as long-term capital loss to the
extent of the long-term capital gain distributions. Second, any loss recognized
by a Shareholder upon the sale or redemption of shares of a Tax-Exempt Fund held
for six months or less will be disallowed to the extent of any exempt-interest
dividends received by the Shareholder with respect to such shares.

The Funds will make annual reports to Shareholders of the Federal income tax
status of all distributions.

B-29
<PAGE>

FUND TRANSACTIONS

The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, an Advisor is responsible for placing the orders to
execute transactions for a Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
an Advisor generally seeks reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.

The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, an Advisor
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.

TRADING PRACTICES AND BROKERAGE

The Trust selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers provide transactions at best price and execution for the Trust. Best
price and execution includes many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors

B-30
<PAGE>

affecting the overall benefit obtained by the account on the transaction. The
Trust's determination of what are reasonably competitive rates is based upon the
professional knowledge of its trading department as to rates paid and charged
for similar transactions throughout the securities industry. In some instances,
the Trust pays a minimal share transaction cost when the transaction presents no
difficulty. Some trades are made on a net basis where the Trust either buys
securities directly from the dealer or sells them to the dealer. In these
instances, there is no direct commission charged but there is a spread (the
difference between the buy and sell price) which is the equivalent of a
commission.

The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by an Advisor, brokerage business to brokers
or dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends, assisting in
determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by an Advisor in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used exclusively with respect to the fund
or account generating the brokerage.

As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-
dealers who provide such brokerage and research services, the Trust believes
that the commissions paid to such broker-dealers are not, in general, higher
than commissions that would be paid to broker-dealers not providing such
services and that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In addition, portfolio
transactions which generate commissions or their equivalent are directed to
broker-dealers who provide daily portfolio pricing services to the Trust.
Subject to best price and execution, commissions used for pricing may or may not
be generated by the funds receiving the pricing service.

An Advisor may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in
a manner deemed equitable to each account or fund. It is believed that the
ability of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or Fund may obtain, it is the opinion
of each Advisor and the Trust's Board of Trustees that the advantages of
combined orders outweigh the possible disadvantages of separate transactions.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Funds, at
the request of the Distributor, give consideration to sales of shares of the
Trust as a factor in the selection of brokers and dealers to execute Trust
portfolio transactions.

It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of an Advisor, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of an Advisor is permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on

B-31
<PAGE>

an exchange if a written contract is in effect between the Distributor and the
Trust expressly permitting the Distributor or an affiliate of an Advisor to
receive and retain such compensation. These rules further require that
commissions paid to the Distributor by the Trust for exchange transactions not
exceed "usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other renumeration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Trust may direct commission business to one
or more designated broker-dealers in connection with such broker/dealer's
provision of services to the Trust or payment of certain Trust expenses (e.g.,
custody, pricing and professional fees). The Trustees, including those who are
not "interested persons" of the Trust, have adopted procedures for evaluating
the reasonableness of commissions paid to the Distributor, and will review these
procedures periodically.

DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
shares and classes of shares of the Funds each of which represents an equal
proportionate interest in that Fund with each other share. Shares are entitled
upon liquidation to a pro rata share in the net assets of the Funds.
Shareholders have no preemptive rights. The Declaration of Trust provides that
the Trustees of the Trust may create additional series of shares or classes of
series. All consideration received by the Trust for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.

SHAREHOLDER LIABILITY

The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held personally liable for the
obligations of the Trust.

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisors, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.

YEAR 2000

B-32
<PAGE>

The Trust depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Trust could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000 and distinguish between the year 2000 and the year 1900. The Trust has
asked its service providers whether they expect to have their computer systems
adjusted for the year 2000 transition, and received assurances from each from
each that its system is expected to accommodate the year 2000 without material
adverse consequences to the Trust. The Trust and its shareholders may
experience losses if these assurances prove to be incorrect or as a result of
year 2000 computer difficulties experienced by issuers of portfolio securities
or third parties, such as custodians, banks, broker-dealers or others with which
the Trust does business.

EXPERTS

The financial statements as of May 31, 1998 have been audited by ___________,
Independent Public Accountants, as indicated in their report dated July ___,
1998 with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.

B-33
<PAGE>

STI CLASSIC FUNDS
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 23

Item 23. Exhibits:

(a) Declaration of Trust - originally filed with Registrant's Registration
Statement on Form N-1A filed February 12, 1992 and incorporated by
reference to Exhibit 1 of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
(b)(1) By-Laws - originally filed with Registrant's Pre-Effective Amendment
No. 1 filed April 23, 1992 and incorporated by reference to Exhibit 2
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(b)(2) Amended By-Laws filed herewith.
(c) Not applicable.
(d)(1) Revised Investment Advisory Agreement with Trusco Capital Management,
Inc. - as originally filed with Registrant's Post-Effective Amendment
No. 5 filed August 2, 1993 and incorporated by reference to Exhibit
5(c) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(d)(2) 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 as Exhibit 5(d) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(d)(3) Investment Advisory Agreement with Sun Bank Capital Management,
National Association (now STI Capital Management, N.A. - as originally
filed with Registrant's Post-Effective Amendment No. 6 filed October
22, 1993 and incorporated by reference to Exhibit 5(e) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(e) Distribution Agreement - incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 16 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
(f) Not applicable.
(g)(1) Custodian Agreement with Trust Company Bank dated February 1, 1994 -
originally filed with Registrant's Post-Effective Amendment No. 13
filed September 28, 1995 and incorporated by reference to Exhibit 8(b)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(g)(2) Custodian Agreement with the Bank of California - incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
(g)(3) Fourth Amendment to Custodian Agreement by and between STI Trust &
Investment Operations, Inc. and The Bank of New York dated May 6, 1997
- incorporated by reference to Exhibit 8(d) of Post-Effective
Amendment No. 21 to the Registrant's Registration Statement filed with
the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30,
1997.
(h)(1) Transfer Agent Agreement with Federated Services Company dated May 14,
1994 - originally filed with Post-Effective Amendment No. 9 filed
September 22, 1994 and incorporated by reference to Exhibit 8(c) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(h)(2) Administration Agreement with SEI Financial Management Corporation
dated May 29, 1995 - originally filed with Post-Effective Amendment
No. 12 filed August 17, 1995 and incorporated by reference to Exhibit
9(a) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.

C-1
<PAGE>

(h)(3) Consent to Assignment and Assumption of the Administration Agreement
between STI Classic Funds and SEI Financial Mangement Corporation -
incorporated by reference to Exhibit 9(b) of Post-Effective Amendment
No. 21 to the Registrant's Registration Statement filed with the SEC
via EDGAR Assession No. 0000912057-97-032207 on September 30, 1997.
(i) Opinion and Consent of Counsel - orginally filed with Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on May 22,
1992 and filed herewith.
(j) Not applicable
(k) Not applicable.
(l) Not applicable.
(m)(1) Distribution Plan - Investor Class - incorporated by reference to
Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
(m)(2) Distribution and Service Agreement relating to Flex Shares dated May
29, 1995 - originally filed with Post-Effective Amendment No. 12
filed August 17, 1995 and incorporated by reference to Exhibit 15(a)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(n) Not applicable
(o) Rule 18f-3 Plan - filed herewith.
(p) Powers of Attorney - incorporated by reference to Post-Effective
Amendment No. 21 to the Registrant's Registration Statement filed with
the SEC via EDGAR Assession No. 0000912057-97-032207 on September 30,
1997.

Item 24. 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 25. Indemnification:

Article VIII of the Agreement of Declaration of Trust filed as Exhibit (a) to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.

Item 26. Business and Other Connections of Investment Advisors:

C-2
<PAGE>

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
---- ------------- -------------
<S> <C> <C>
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

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

C-3
<PAGE>

Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>

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
</TABLE>

TRUSCO CAPITAL MANAGEMENT, INC.

The list required by this Item 26 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, 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

William W. Gaston Gaston & Gaston General Partner
Director Gaston Development Co., Inc. President

Charles B. Ginden -- --
Director

Roberto C. Goizueta The Coca-Cola Company Chairman of the
Director Board

Edward P. Gould Trust Company of Georgia Chairman of the
Director Board

C-4
<PAGE>

Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>

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 &
Director Services Resources Treasurer
Corporation

William B. Johnson The Ritz Carlton Hotel Chairman of the
Director Company Board

Hicks J. Lanier Oxford Industries, Inc. Chairman of the Board
Pinehill Development Co. & President
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

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

C-5
<PAGE>

Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
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 -- --
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

C-6
<PAGE>

Name of Connection with
Name Other Company Other Company
---- ------------- -------------
<S> <C> <C>
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

James E. Russell -- --
Vice President

Mark Stancil -- --
Assistant Vice President

David E. Thompson -- --
Vice President

Charles C. Watson -- --
Group Vice President

SUNTRUST BANK CHATTANOOGA, N.A.
Paul K. Brock, Jr. Brock Candy Company Vice President-Special
Director Projects

J. Harold Chandler Provident Life & Accident President & CEO
Director Insurance Co

William H. Chapin See Rock City, Inc. President
Director

John W. Clay, Jr. Third National Corporation Chairman & Director
CEO

Andrew G. Cope The Johnston Company Managing Partner
Director

Robert P. Corker, Jr. -- --
Director

John B. Crimmins, Jr. -- --
Director

J.H. Davenport, III Howard Holdings, Inc. President
Director

Edwin B. Duckett, Jr. -- --
Director

R. Alton Duke, Jr. -- --
Director

Daniel K. Ericsson 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.
</TABLE>

Item 27. 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. (the
"Distributor"), 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

C-7
<PAGE>

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
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 February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
TIP Institutional Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Funds June 24, 1998

The Distributor 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, PA 19456.

Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board --
of Directors
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
</TABLE>

C-8

<PAGE>

<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Larry Hutchison Senior Vice President --
Jack May Senior 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
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant Secretary
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant Secretary
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President Vice President & Assistant Secretary
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President President & Chief Executive Officer
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President & Assistant Secretary
Sandra K. Orlow Vice President & Secretary Vice President & Assistant Secretary
Cynthia M. Parrish Vice President & Assistant Secretary --
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Vice President & Assistant Secretary
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>

Item 28. Location of Accounts and Records:

Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:

(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8);
(12); and 31a-1(d), the required books and records are maintained at the offices
of Registrant's Custodians:

C-9
<PAGE>

Trust Company Bank
Park Place
P.O. Box 105504
Atlanta, Georgia 30348

Bank of New York
One Wall Street
New York, New York
(International Equity Index Fund, International Equity Fund, Emerging
Markets Equity Fund)

(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 Investments Mutual Funds Services
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, Atlanta
25 Park Place
Atlanta, Georgia 30303

Item 31. Management Services: None.

Item 32. Undertakings: None.

NOTICE

A copy of the Agreement and Declaration of Trust for STI Classic Funds is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this Registration Statement has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustees as
trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.

C-10
<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. 23 to Registration Statement No.
33-45671 to be signed on its behalf by the undersigned, duly authorized, in the
City of Oaks, Commonwealth of Pennsylvania on the 14th day of July, 1998.

By: /s/ Mark Nagle
------------------------------------
Mark Nagle, President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacity on the
dates indicated.

* Trustee July 14, 1998
- -----------------------------
F. Wendell Gooch

* Trustee July 14, 1998
- -----------------------------
Daniel S. Goodrum

* Trustee July 14, 1998
- -----------------------------
Jesse S. Hall

* Trustee July 14, 1998
- -----------------------------
Wilton Looney

* Trustee July 14, 1998
- -----------------------------
Champney A. McNair

* Trustee July 14, 1998
- -----------------------------
T. Gordy Germany

* Trustee July 14, 1998
- -----------------------------
Bernard F. Sliger

Trustee July ___, 1998
- -----------------------------
Jonathan T. Walton

Trustee July ___, 1998
- -----------------------------
William H. Cammack

* Controller, July 14, 1998
- ----------------------------- Treasurer &
Carol Rooney Chief Financial
Officer

/s/ Mark Nagle President & Chief July 14, 1998
- ----------------------------- Executive Officer
Mark Nagle

* By: /s/ Kevin P. Robins
---------------------------------------
Kevin P. Robins, As Power of Attorney

<PAGE>

EXHIBIT INDEX

Number Exhibit
- ------ -------

EX-99.A Declaration of Trust - originally filed with Registrant's Registration
Statement on Form N-1A filed February 12, 1992 and incorporated by
reference to Exhibit 1 of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
EX-99.B1 By-Laws - originally filed with Registrant's Pre-Effective Amendment
No. 1 filed April 23, 1992 and incorporated by reference to Exhibit 2
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.B2 Amended By-Laws filed herewith.
EX-99.C Not applicable.
EX-99.D1 Revised Investment Advisory Agreement with Trusco Capital Management,
Inc. - as originally filed with Registrant's Post-Effective Amendment
No. 5 filed August 2, 1993 and incorporated by reference to Exhibit
5(c) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.D2 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 as Exhibit 5(d) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.D3 Investment Advisory Agreement with Sun Bank Capital Management,
National Association (now STI Capital Management, N.A. - as originally
filed with Registrant's Post-Effective Amendment No. 6 filed October
22, 1993 and incorporated by reference to Exhibit 5(e) of
Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.E Distribution Agreement - incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 16 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
EX-99.F Not applicable.
EX-99.G1 Custodian Agreement with Trust Company Bank dated February 1, 1994 -
originally filed with Registrant's Post-Effective Amendment No. 13
filed September 28, 1995 and incorporated by reference to Exhibit 8(b)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.G2 Custodian Agreement with the Bank of California - incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
EX-99.G3 Fourth Amendment to Custodian Agreement by and between STI Trust &
Investment Operations, Inc. and The Bank of New York dated May 6, 1997
- incorporated by reference to Exhibit 8(d) of Post-Effective
Amendment No. 21 to the Registrant's Registration Statement filed with
the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30,
1997.
EX-99.H1 Transfer Agent Agreement with Federated Services Company dated May 14,
1994 - originally filed with Post-Effective Amendment No. 9 filed
September 22, 1994 and incorporated by reference to Exhibit 8(c) of
Post-Effective Amendment No. 15 to the

C-12
<PAGE>

Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
EX-99.H2 Administration Agreement with SEI Financial Management Corporation
dated May 29, 1995 - originally filed with Post-Effective Amendment
No. 12 filed August 17, 1995 and incorporated by reference to Exhibit
9(a) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.H3 Consent to Assignment and Assumption of the Administration Agreement
between STI Classic Funds and SEI Financial Mangement Corporation -
incorporated by reference to Exhibit 9(b) of Post-Effective Amendment
No. 21 to the Registrant's Registration Statement filed with the SEC
via EDGAR Assession No. 0000912057-97-032207 on September 30, 1997.
EX-99.I Opinion and Consent of Counsel - orginally filed with Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on May 22,
1992 and filed herewith.
EX-99.J Not applicable.
EX-99.K Not applicable.
EX-99.L Not applicable.
EX-99.M1 Distribution Plan - Investor Class - incorporated by reference to
Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's
Registration Statement filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
EX-99.M2 Distribution and Service Agreement relating to Flex Shares dated May
29, 1995 - originally filed with Post-Effective Amendment No. 12
filed August 17, 1995 and incorporated by reference to Exhibit 15(a)
of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement filed with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
EX-99.N Not applicable
EX-99.O Rule 18f-3 Plan - filed herewith.
EX-99.P Powers of Attorney - incorporated by reference to Post-Effective
Amendment No. 21 to the Registrant's Registration Statement filed with
the SEC via EDGAR Assession No. 0000912057-97-032207 on September 30,
1997.

C-13

<PAGE>

BY-LAWS

STI CLASSIC FUNDS

SECTION 1. AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE

1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to the
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of STI Classic Funds, a Massachusetts business
trust established by the Declaration of Trust (the "Trust").

1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall be
located in Boston, Massachusetts.

SECTION 2. SHAREHOLDERS

2.1 ANNUAL MEETING. The Trust will not hold annual meetings of the
shareholders.

2.2 SPECIAL MEETINGS. A special meeting of the shareholders may be called at
any time by the Trustees, by the president or, if the Trustees and the
president shall fail to call any meeting of shareholders for a period of
30 days after written application of one or more shareholders who hold at
least 10% of all shares issued and outstanding and entitled to vote at the
meeting, then such shareholders may call such meeting. Each call of a
meeting shall state the place, date, hour and purposes of the meeting.

2.3 PLACE OF MEETINGS. All meetings of the shareholders shall be held at such
place within the United States as shall be designated by the Trustees or
the president of the Trust.

2.4 NOTICE OF MEETINGS. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each shareholder entitled
to vote thereat by leaving such notice with him or at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to
such shareholder at his address as it appears in the records of the Trust.
Such notice shall be given by the secretary or an assistant secretary or by
an officer designated by the Trustees. No notice of any meeting of
shareholders need be given to a shareholder if a written waiver of notice,
executed before or after the meeting by such shareholder or his attorney
thereunto duly authorized, is filed with the records of the meeting.

2.5 BALLOTS. No ballot shall be required for any election unless requested by
a shareholder present or represented at the meeting and entitled to vote in
the election.

2.6 PROXIES. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted.
Unless otherwise specifically limited by their terms, such proxies shall
entitle the holders

<PAGE>

thereof to vote at any adjournment of such meeting but shall not be valid
after the final adjournment of such meeting.

SECTION 3. TRUSTEES

3.1 COMMITTEES AND ADVISORY BOARD. The Trustees may appoint from their number
an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for conduct of its
business. The Trustees may appoint an advisory board to consist of not
less than two nor more than five members. The members of the advisory
board shall be compensated in such manner as the Trustees may determine and
shall confer with and advise the Trustees regarding the investments and
other affairs of the Trust. Each member of the advisory board shall hold
office until the first meeting of the Trustees following the next annual
meeting of the shareholders and until his successor is elected and
qualified, or until he sooner dies, resigns, is removed, or becomes
disqualified, or until the advisory board is sooner abolished by the
Trustees.

3.2 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A
regular meeting of the Trustees may be held without call or notice
immediately after and at the same place as the annual meeting of the
shareholders.

3.3 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any time
and at any place designated in the call of the meeting, when called by the
Chairman of the Board, the president or the treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the
secretary or an assistant secretary or by the officer or one of the
Trustees calling the meeting.

3.4 NOTICE. It shall be sufficient notice to a Trustee to send notice by mail
at least forty-eight hours or by telegram at least twenty-four hours before
the meeting addressed to the Trustee at his or her usual or last known
business or residence address or to give notice to him or her in person or
by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him
or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.

3.5 QUORUM. At any meeting of the Trustees one-third of the Trustees then in
office shall constitute a quorum; provided, however, a quorum shall not be
less than two. Any meeting may be adjourned from time to time by a
majority of the votes cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further notice.

SECTION 4. OFFICERS AND AGENTS

4.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
president, a treasurer, a secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint. The
Trust may also have such agents, if any, as the Trustees from time to time
may in

2
<PAGE>

their discretion appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same person.

4.2 POWERS. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.

4.3 ELECTION. The president, the treasurer and the secretary shall be elected
annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time.

4.4 TENURE. The president, the treasurer and the secretary shall hold office
for a one year term and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each agent shall retain his or her authority at
the pleasure of the Trustees.

4.5 PRESIDENT AND VICE PRESIDENTS. The president shall be the chief executive
officer of the Trust. The president shall, subject to the control of the
Trustees, have general charge and supervision of the business of the Trust.
Any vice president shall have such duties and powers as shall be designated
from time to time by the Trustees.

4.6 CHAIRMAN OF THE BOARD. If a Chairman of the Board of Trustees is elected,
he shall have the duties and powers specified in these By-Laws and, except
as the Trustees shall otherwise determine, preside at all meetings of the
shareholders and of the Trustees at which he or she is present and have
such other duties and powers as may be determined by the Trustees.

4.7 TREASURER AND CONTROLLER. The treasurer shall be the chief financial
officer of the Trust and subject to any arrangement made by the Trustees
with a bank or trust company or other organization as custodian or transfer
or shareholder services agent, shall be in charge of its valuable papers
and shall have such other duties and powers as may be designated from time
to time by the Trustees or by the president. If at any time there shall be
no controller, the treasurer shall also be the chief accounting officer of
the Trust and shall have the duties and powers prescribed the Trust and
shall have the duties and powers prescribed herein for the controller. Any
assistant treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.

The controller, if any be elected, shall be the chief accounting officer of
the Trust and shall be in charge of its books of account and accounting
records. The controller shall be responsible for preparation of financial
statements of the Trust and shall have such other duties and powers as may
be designated from time to time by the Trustees or the president.

4.8 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept
therefor, which books shall be kept at the principal office of the Trust.
In the absence of the secretary from any meeting of shareholders or Trustee
an assistant secretary, or if there be none or he or she is absent, a
temporary clerk chosen at the meeting shall record the proceedings thereof
in the aforesaid books.

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SECTION 5. RESIGNATION AND REMOVALS

Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of the Board, the
president, the treasurer or the secretary or to a meeting of the Trustees. The
Trustees may remove any officer elected by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee, officer,
or advisory board member resigning, and no officer or advisory board member
removed shall have any right to any compensation for any period following his or
her resignation or removal, or any right to damages on account of such removal.

SECTION 6. VACANCIES

A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the treasurer
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.

SECTION 7. SHARES OF BENEFICIAL INTEREST

In lieu of issuing certificates for shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
beheld to have expressly assented and agreed to the terms hereof.

SECTION 8. RECORD DATE

The Trustees may fix in advance a time, which shall not be more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date.

SECTION 9. SEAL

The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts", together with the name of
the Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.

SECTION 10. EXECUTION OF PAPERS

Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by

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<PAGE>

whomsoever else shall be designated for that purpose by the vote of the Trustees
and need not bear the seal of the Trust.

SECTION 11. FISCAL YEAR

The fiscal year of the Trust shall end on such date in each year as the Trustees
shall from time to time determine.

SECTION 12. REPORTS TO SHAREHOLDERS; DISTRIBUTIONS FROM REALIZED GAINS

The Trust shall send to each shareholder of record at least annually a statement
of the condition of the Trust and of the results of its operation, containing
all information required by applicable laws or regulations.

SECTION 13. AMENDMENTS

These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such majority.

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[LETTERHEAD OF MORGAN, LEWIS & BOCKIUS]

May 21, 1992

STI Classic Funds
2 Oliver Street
Boston, Massachusetts 02109

Gentlemen:

We are furnishing this opinion with respect to the proposed offer and
sale from time to time of units of beneficial interest, without par value (the
"Shares"), of STI Classic Funds (the "Trust"), a Massachusetts business trust,
being registered under the Securities Act of 1933 and the Investment Company Act
of 1940 by a Registration Statement on Form N-1A (File No. 33-45671) as amended
from time to time (the "Registration Statement").

We have acted as counsel to the Trust since its inception, and we are
familiar with the actions taken by its Trustees to authorize the issuance of the
Shares. We have reviewed the Agreement and Declaration of Trust, the By-Laws,
and the minute books of the Trust, and such other certificates, documents and
opinions of counsel as we deem necessary for the purpose of this opinion.

We have reviewed the Trust's Notification of Registration on Form N-8A
under the Investment Company Act of 1940. We have assisted in the preparation
of the Trust's Registration Statement, including all pre-effective amendments
thereto filed or to be filed with the Securities and Exchange Commission.

We have assumed the appropriate action will be taken to register or
qualify the sale of the Shares under any applicable state and federal laws
regulating sales and offerings of securities.

Based upon the foregoing, we are of the opinion that:
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STI Classic Funds
May 21, 1992
Page 2

1. The Trust is a business trust validly existing under the laws of
the Commonwealth of Massachusetts. The Trust is authorized to issue an
unlimited number of Shares in separate series ("Funds") of shares of beneficial
interest and different classes of shares of each Fund, representing interests in
the Trust Shares and Investor Shares classes of Prime Quality Money Market Fund,
U.S. Government Securities Money Market Fund, Tax-Exempt Money Market Fund,
Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, and the
Capital Growth Fund of the Trust and in such other series or classes as the
Trustees may hereafter duly authorize.

2. Upon the issuance of any Shares of any of the series or classes of
the Trust for payment therefor as described in the Prospectus and Statement of
Additional Information for such series or class filed as part of the
Registration Statement, the Shares so issued will be validly issued, fully paid
and non-assessable.

This opinion is intended only for your use in connection with the
offering of Shares and may not be relied upon by any other person.

We hereby consent to the inclusion of this opinion as Exhibit 10 to
the Trust's Registration Statement on Form N-1A to be filed with the Securities
and Exchange Commission and to the reference to our firm under the caption
"Legal Counsel" in each Prospectus filed as part of such Registration Statement.

Very truly yours,

/s/ Morgan, Lewis & Bockius
---------------------------

<PAGE>

STI CLASSIC FUNDS

RULE 18f-3
MULTIPLE CLASS PLAN

MAY 24, 1995

INTRODUCTION

Each portfolio of the STI Classic Funds (each a "Fund" and,
collectively, the "Funds"), has elected to rely on Rule 18f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act") in offering multiple
classes of units of beneficial interest ("shares") in each Fund. The Plan sets
forth the differences among classes, including shareholder services,
distribution arrangements, expense allocations, and conversion or exchange
options.

A. ATTRIBUTES OF SHARE CLASSES

The rights of each existing class of the Funds (I.E., Trust, Investor,
and Flex Class Shares) shall be as set forth in the resolutions and related
materials of the Funds' Board adopted pursuant to the order dated September 9,
1993, obtained by [SEI Liquid Asset Trust, ET AL. (Inv. Co. Act Release No. IC-
19698)], and attached hereto as Exhibits A - C.

With respect to any class of shares of a Fund created after the date
hereof, each share of a Fund will represent an equal PRO RATA interest in the
Fund and will have identical terms and conditions, except that: (i) each new
class will have a different class name (or other designation) that identifies
the class as separate from any other class; (ii) each class will separately bear
any distribution expenses ("distribution fees") in connection with a plan
adopted pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan"), and
will separately bear any non-Rule 12b-1 Plan service payments ("service fees")
that are made under any servicing agreement entered into with respect to that
class; (iii) each class may bear, consistent with rulings and other published
statements of position by the Internal Revenue Service, the expenses of the
Fund's operations which are directly attributable to such class ("Class
Expenses"); and (iv) shareholders of the class will have exclusive voting rights
regarding the Rule 12b-1 Plan and the servicing agreements

<PAGE>

relating to such class, and will have separate voting rights on any matter
submitted to shareholders in which the interests of that class differ from the
interests of any other class.

B. EXPENSE ALLOCATIONS

Expenses of each existing class and of each class created after the
date hereof shall be allocated as follows: (i) distribution and shareholder
servicing payments associated with any Rule 12b-1 Plan or servicing agreement
relating to each class of shares are (or will be) borne exclusively by that
class; (ii) any incremental transfer agency fees relating to a particular class
are (or will be) borne exclusively by that class; and (iii) Class Expenses
relating to a particular class are (or will be) borne exclusively by that class.

Until and unless changed by the Board, the methodology and procedures
for calculating the net asset value of the various classes of shares and the
proper allocation of income and expenses among the various classes of shares
shall be as set forth in the "Report" rendered by Arthur Andersen LLP.

C. AMENDMENT OF PLAN; PERIODIC REVIEW

This Plan must be amended to properly describe (through additional
exhibits hereto or otherwise) each new class of shares approved by the Board
after the date hereof.

The Board of the Funds, including a majority of the independent
Trustees, must periodically review this Plan for its continued appropriateness,
and must approve any material amendment of the Plan as it relates to any class
of any Fund covered by the Plan.

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