<PAGE>
[ESC LOGO]
To ESC Strategic Funds' Shareholders:
Enclosed with this letter is a proxy ballot, a N-14 combined proxy
statement/prospectus and related information concerning a special meeting of
ESC Strategic Funds' shareholders.
The purpose of this proxy package is to announce that a Shareholder Meet-
ing for the ESC Strategic Funds has been scheduled for March 22, 2000. The pur-
pose of the meeting is to submit the Agreement and Plan of Reorganization
between the ESC Strategic Funds and the STI Classic Funds to the shareholders
for a vote.
The Directors of the ESC Strategic Funds unanimously approved the Agree-
ment and Plan of Reorganization. In coming to this conclusion, the Directors
considered a variety of factors including:
. the compatibility of the funds' objectives and policies
. the expense ratios of the combined fund family
. the potential economies of scale to be gained by the merger
. the advantages of increased investment opportunities for ESC Strategic
Funds' shareholders; and
. the fact that the merger will be free from Federal income taxes.
The details of the proposed Agreement and Plan of Reorganization are set
forth in the combined proxy statement/prospectus that accompanies this letter.
We encourage you to read them thoroughly. In addition, we have included a list
of commonly asked questions and answers on the next page.
If you and the other shareholders of your fund approve the proposed reor-
ganization of your fund and certain other conditions are satisfied, you will be
able to continue your investment program through ownership in an STI Classic
Funds portfolio with similar objectives and policies. As a shareholder of an
STI Classic Funds portfolio, you will enjoy access, through the exchange privi-
lege, to a much larger family of funds, including types of funds that the ESC
Strategic Funds currently do not offer. This will provide you with a convenient
way to diversify your investments.
Most shareholders cast their votes by filling out and signing the
enclosed proxy card. You can also vote by telephone or by internet as described
within this package. In order to conduct the Shareholder Meeting, a majority of
shares must be represented. YOUR VOTE IS VERY IMPORTANT. PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-
PAID ENVELOPE.
We thank you for your continued confidence and support.
Sincerely,
/s/ W. Howard Cammack, Jr.
W. Howard Cammack, Jr.
Director
IMPORTANT PROXY INFORMATION ENCLOSED
-IMMEDIATE ACTION REQUIRED-
<PAGE>
QUESTIONS & ANSWERS
FOR THE
ESC STRATEGIC FUNDS
SHAREHOLDER MEETING
Q. Why is the Board of Directors proposing to reorganize the ESC Strategic
Funds and the STI Classic Funds?
A. After conducting due diligence regarding a reorganization transaction
between the STI Classic Funds and the ESC Strategic Funds, the Board of
Directors voted to approve the transaction. Before approving the
integration of the ESC Strategic Funds into the STI Classic Funds, the
ESC Strategic Funds' Board of Directors evaluated the expanded range of
investment alternatives that would be available to shareholders, the
opportunities for increased economies of scale, and the potential for
improved shareholder service. After careful consideration, they
determined that the Agreement and Plan of Reorganization is in the best
interests of the ESC Strategic Funds shareholders. Through this proxy,
they are submitting the proposal for reorganization to you - the ESC
Strategic Funds shareholders - for a vote.
Q. How will this affect me as an ESC Strategic Funds' shareholder?
A. You will become a shareholder of STI Classic Funds with similar
investment objectives and policies as the ESC Strategic Funds you
currently hold. As an STI Classic Fund shareholder, you will have access
to the wider array of fund portfolios offered by the STI Classic family
of funds.
The reorganization provides for the transfer of all of the assets of
each of the ESC Strategic Funds into its corresponding STI Classic Fund
in exchange for shares of the STI Classic Fund. There are NO SALES
CHARGES on this transaction. Each ESC Strategic Funds shareholder will
receive shares of STI Classic Funds equal in value to their ESC Strate-
gic Funds shares. In certain cases, the NAV of your fund may change.
However, in these cases the number of shares that you own will be
adjusted so that there will be NO CHANGE in the market value of your
account as a result of the merger.
Q. Will the reorganization result in any taxes?
A. Neither the ESC Strategic Funds nor their shareholders will incur any
Federal income tax as a result of the reorganizations.
Q. What Fund(s) will I hold following the reorganizations?
A. ESC Strategic Funds shareholders will receive shares of the following
corresponding STI Classic Funds. Please refer to the enclosed STI
Classic Funds' prospectus for more
<PAGE>
details. Listed below are the ESC Strategic Funds and the corresponding
STI Classic Funds:
<TABLE>
<CAPTION>
ESC Strategic Funds STI Classic Funds
--------------------------------------------------------------------------
<S> <C>
ESC Strategic Small Cap STI Classic Small Cap Growth Stock
Class A Investor Class
Class D Flex Class
ESC Strategic Small Cap II STI Classic Small Cap Growth Stock
Class A Investor Class
Class D Flex Class
ESC Strategic International Equity STI Classic International Equity
Class A Investor Class
Class D Flex Class
ESC Strategic Appreciation STI Classic Growth and Income
Class A Investor Class
Class D Flex Class
ESC Strategic Income STI Classic High Income
Class A Flex Class
Class D Flex Class
--------------------------------------------------------------------------
</TABLE>
Q. How does the ESC Strategic Funds' Board of Directors recommend that I
vote?
A. After careful consideration, the ESC Strategic Funds' Directors
unanimously recommend that you vote "FOR" the proposed reorganizations.
The Board also wishes to remind you to vote and return ALL the proxy
ballot cards you receive. This means that if you receive multiple proxies
and ballot cards because you are invested in more than one of the ESC
Strategic Funds, please fill out and return each and every ballot card
you receive.
Q. Who should I call with questions about this proxy?
A. If you have any questions regarding this proxy, please contact your
Financial Consultant, or the ESC Strategic Funds directly at 1-800-261-
FUND (3863).
PLEASE VOTE THE ENCLOSED PROXY BALLOT CARD.
YOUR VOTE IS IMPORTANT!
<PAGE>
ESC STRATEGIC FUNDS, INC.
3435 Stelzer Road
Columbus, OH 43219
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on March 22, 2000
Notice is hereby given that a Special Meeting of Shareholders of the ESC
Strategic Funds, Inc. (the "Corporation"), with respect to its five series
(each an "ESC Strategic Fund" and collectively, the "ESC Strategic Funds"),
will be held at the offices of BISYS Fund Services, 3435 Stelzer Road, Colum-
bus, Ohio 43219, on March 22, 2000 at 3:00 p.m. (Eastern Time) for the pur-
poses of considering the proposals set forth below. Collectively, the propos-
als, if approved, will result in the transfer of the assets and certain stated
liabilities of each ESC Strategic Fund to a corresponding series of the STI
Classic Funds (the "Trust") in return for shares of such series (each an "STI
Classic Fund") (the "Reorganization").
Proposal 1: Approval of the Agreement and Plan of Reorganization (the
"Reorganization Agreement") as it relates to (i) the trans-
fer of all of the assets and certain stated liabilities of
the ESC Strategic Small Cap Fund to the STI Classic Small
Cap Growth Stock Fund, in exchange for shares of the STI
Classic Fund; (ii) the distribution of the STI Classic
Fund's shares so received to shareholders of the correspond-
ing ESC Strategic Fund; and (iii) the termination under
state law of the ESC Strategic Fund.
Proposal 2: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the ESC Strategic Small Cap II Fund to the
STI Classic Small Cap Growth Stock Fund, in exchange for
shares of the STI Classic Fund; (ii) the distribution of the
STI Classic Fund's shares so received to shareholders of the
corresponding ESC Strategic Fund; and (iii) the termination
under state law of the ESC Strategic Fund.
Proposal 3: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the ESC Strategic International Equity Fund
to the STI Classic International Equity Fund, in exchange
for shares of the STI Classic Fund; (ii) the distribution of
the STI Classic Fund's shares so received to shareholders of
the corresponding ESC Strategic Fund; and (iii) the termina-
tion under state law of the ESC Strategic Fund.
Proposal 4: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the ESC Strategic Appreciation Fund to the
STI Classic Growth and Income Fund in exchange for shares of
the STI Classic Fund; (ii) the distribution of the STI Clas-
sic Fund's shares so received to shareholders of the corre-
sponding ESC Strategic Fund; and (iii) the termination under
state law of the ESC Strategic Fund.
Proposal 5: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the ESC Strategic
<PAGE>
Income Fund to the STI Classic High Income Fund, in exchange
for shares of the STI Classic Fund; (ii) the distribution of
the STI Classic Fund's shares so received to shareholders of
the corresponding ESC Strategic Fund; and (iii) the termination
under state law of the ESC Strategic Fund.
Proposal 6: The transaction of such other business as may properly be
brought before the meeting.
Shareholders of record as of the close of business on January 18, 2000
are entitled to notice of, and to vote at this meeting, or any adjournment of
this meeting. Shareholders of the respective ESC Strategic Funds will vote
separately, and the proposed Reorganization will be effected as to a particu-
lar ESC Strategic Fund only if that Fund's shareholders approve the proposal.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY THE ACCOMPANY-
ING PROXY CARD WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF ESC STRA-
TEGIC FUNDS, INC. YOU MAY EXECUTE THE PROXY CARD IN ONE OF THE THREE METHODS
DESCRIBED IN THE PROXY CARD. RETURNING THE PROXY CARD IS IMPORTANT TO ENSURE A
QUORUM AT THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY SUBMITTING A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXE-
CUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
R. Jeffrey Young
President
January 24, 2000
<PAGE>
PROXY STATEMENT/PROSPECTUS
Dated January 24, 2000
Relating to the acquisition of the assets of series of
ESC STRATEGIC FUNDS, INC.
3435 Stelzer Road
Columbus, OH 43219
1-800-261-FUND (3863)
by and in exchange for shares of certain series of
STI CLASSIC FUNDS
2 Oliver Street
Boston, MA 02109
1-800-874-4770
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of ESC Strategic Funds, Inc.
(the "Corporation") in connection with the Special Meeting of Shareholders
(the "Meeting") of each series of the Corporation (the ESC Strategic Small Cap
Fund, ESC Strategic Small Cap II Fund, ESC Strategic International Equity
Fund, ESC Strategic Appreciation Fund, and ESC Strategic Income Fund) (each an
"ESC Strategic Fund" and collectively, the "ESC Strategic Funds"), to be held
on March 22, 2000 at 3:00 p.m. (Eastern Time) at the offices of BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219. At the meeting, sharehold-
ers of each ESC Strategic Fund, voting separately, will be asked to consider
and approve a proposed Agreement and Plan of Reorganization (the "Reorganiza-
tion Agreement"), by and between the Corporation and STI Classic Funds (the
"Trust") on behalf of three of its existing series (the STI Classic Small Cap
Growth Stock Fund, STI Classic International Equity Fund and STI Classic
Growth and Income Fund) (collectively, the "Existing STI Classic Funds") and
one new series, the STI Classic High Income Fund (the "New STI Classic Fund"
and, with the Existing STI Classic Funds, the "STI Classic Funds"). The Corpo-
ration and the Trust are referred to collectively as the "Companies" and the
participating series of the Companies are referred to collectively as the
"Funds." A copy of the Reorganization Agreement is attached as Exhibit A.
Proposal 1: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the ESC Strategic Small Cap Fund to the STI
Classic Small Cap Growth Stock Fund, in exchange for shares
of that STI Classic Fund; (ii) the distribution of the STI
Classic Fund's shares so received to shareholders of the
corresponding ESC Strategic Fund; and (iii) the termination
under state law of the ESC Strategic Fund.
Proposal 2: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the ESC Strategic Small Cap II Fund to the
STI Classic Small Cap Growth Stock Fund, in
<PAGE>
exchange for shares of that STI Classic Fund; (ii) the distri-
bution of the STI Classic Fund's shares so received to share-
holders of the corresponding ESC Strategic Fund; and (iii) the
termination under state law of the ESC Strategic Fund.
Proposal 3: Approval of the Reorganization Agreement as it relates to (i)
the transfer of all of the assets and certain stated liabili-
ties of the ESC Strategic International Equity Fund to the STI
Classic International Equity Fund, in exchange for shares of
that STI Classic Fund; (ii) the distribution of the STI Clas-
sic Fund's shares so received to shareholders of the corre-
sponding ESC Strategic Fund; and (iii) the termination under
state law of the ESC Strategic Fund.
Proposal 4: Approval of the Reorganization Agreement as it relates to (i)
the transfer of all of the assets and certain stated liabili-
ties of the ESC Strategic Appreciation Fund to the STI Classic
Growth and Income Fund in exchange for shares of that STI
Classic Fund; (ii) the distribution of the STI Classic Fund's
shares so received to shareholders of the corresponding ESC
Strategic Fund; and (iii) the termination under state law of
the ESC Strategic Fund.
Proposal 5: Approval of the Reorganization Agreement as it relates to (i)
the transfer of all of the assets and certain stated liabili-
ties of the ESC Strategic Income Fund to the STI Classic High
Income Fund, in exchange for shares of that STI Classic Fund;
(ii) the distribution of the STI Classic Fund's shares so
received to shareholders of the corresponding ESC Strategic
Fund; and (iii) the termination under state law of the ESC
Strategic Fund.
Proposal 6: The transaction of such other business as may properly be
brought before the meeting.
The Reorganization Agreement provides that each ESC Strategic Fund will
transfer all of its assets and certain stated liabilities to the corresponding
STI Classic Fund listed opposite its name in the following chart:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESC Strategic Fund
(Selling Fund) STI Classic Fund (Acquiring Fund)
- ------------------------------------------------------------
<S> <C>
Small Cap Fund Small Cap Growth Stock Fund
- ------------------------------------------------------------
Small Cap II Fund Small Cap Growth Stock Fund
- ------------------------------------------------------------
International Equity Fund International Equity Fund
- ------------------------------------------------------------
Appreciation Fund Growth and Income Fund
- ------------------------------------------------------------
Income Fund High Income Fund/1/
- ------------------------------------------------------------
</TABLE>
In exchange for the transfers of these assets and liabilities, each STI
Classic Fund will simultaneously issue shares to the corresponding ESC Strate-
gic Funds as listed above, in an
2
<PAGE>
amount equal in value to the net asset value of the ESC Strategic Funds'
shares. These transfers are expected to occur in two steps, on or about March
27, and March 28, 2000 (each an "Effective Time" and collectively, the "Effec-
tive Times").
Immediately after the transfer of the ESC Strategic Funds' assets and
liabilities, the ESC Strategic Funds will make a liquidating distribution to
their shareholders of the STI Classic Funds' shares received, so that a holder
of shares in an ESC Strategic Fund at the applicable Effective Time of the
Reorganization will receive a number of shares of the applicable class of the
corresponding STI Classic Fund with the same aggregate value as the share-
holder had in the ESC Strategic Fund immediately before the Reorganization. At
the applicable Effective Time of the Reorganization, shareholders of each ESC
Strategic Fund will become shareholders of the corresponding STI Classic Fund.
Following the completion of the Reorganization, the ESC Strategic Funds will
be terminated under state law.
Each ESC Strategic Fund offers two classes of shares (Class A and Class
D) and each participating STI Classic Fund offers up to three classes of
shares (Investor Shares, Flex Shares and Trust Shares/2/). Holders of Class A
shares of each ESC Strategic Fund, with the exception of the ESC Strategic
Income Fund, will receive an amount of Investor Shares of the corresponding
STI Classic Fund equal in value to their ESC Strategic Fund shares. Holders of
Class D shares of the ESC Strategic Funds and holders of Class A shares of the
ESC Strategic Income Fund will receive an amount of Flex Shares of the corre-
sponding STI Classic Fund equal in value to their ESC Strategic Fund shares.
Holders of Class A shares and Class D shares, respectively, of the ESC Strate-
gic Small Cap Fund and the ESC Strategic Small Cap II Fund will receive an
amount of Investor Shares and Flex Shares, respectively, of the STI Classic
Small Cap Growth Stock Fund equal in value to their ESC Strategic Fund shares.
Each Company is an open-end, management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"). STI Capital Manage-
ment, N.A. ("STI Capital") and Trusco Capital Management, Inc. ("Trusco") are
the investment advisers to the STI Classic Funds (individually an "Adviser"
and collectively, the "Advisers") and are each indirect wholly-owned subsidi-
aries of SunTrust Banks, Inc., a Georgia corporation and a bank holding com-
pany ("SunTrust"). Trusco is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act"). STI Capital is a bank
and is, therefore, not required to register as an investment adviser by virtue
of Section 202(a)(11)(A) of the Advisers Act. SEI Investments Distribution Co.
("SEI Distributors") is the principal underwriter of the STI Classic Funds and
SEI Investments Mutual Funds Services serves as administrator to the STI Clas-
sic Funds.
SunTrust Equitable Securities ("STES"), a wholly-owned subsidiary of
SunTrust, and a registered investment adviser, is the investment adviser to
the ESC Strategic Funds. Equitable Asset Management, Inc., an affiliate of
STES, is the sub-adviser to both the ESC Strategic Small
- -------------------------------------------------------------------------------
/1/The STI Classic High Income Fund is a newly created series of the Trust.
/2/Trust Shares of the participating STI Classic Funds are not involved in the
Reorganization. The STI Classic High Income Fund will not initially offer
Investor Shares or Trust Shares.
3
<PAGE>
Cap Fund and the ESC Strategic Small Cap II Fund. Westcap Investors, LLC,
Brandes Investment Partners, L.P. and Atlantic Capital Management, LLC are
each a sub-adviser for the ESC Strategic Appreciation Fund. Murray Johnstone
International Limited is the sub-adviser and is primarily responsible for the
daily management of the ESC Strategic International Equity Fund. Cincinnati
Asset Management, Inc. is the sub-adviser and is responsible for the daily
management of the ESC Strategic Income Fund. BISYS Fund Services ("BISYS")
serves as the ESC Funds' distributor and administrator.
This Proxy Statement/Prospectus sets forth concisely the information
that a shareholder of each of the ESC Strategic Funds should know before vot-
ing on the Reorganization, and should be retained for future reference. Cer-
tain additional relevant documents listed below, which have been filed with
the Securities and Exchange Commission ("SEC"), are incorporated in whole or
in part by reference. A Statement of Additional Information dated January 24,
2000, relating to this Proxy Statement/Prospectus and the Reorganization and
including certain financial information about the ESC Strategic Funds and the
STI Classic Funds, has been filed with the SEC and is incorporated in its
entirety into this Proxy Statement/Prospectus. A copy of such Statement of
Additional Information is available upon request and without charge by writing
to SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA 19456
or by calling toll-free 1-800-874-4770.
For a more detailed discussion of the investment objectives, policies,
risks and restrictions of the ESC Strategic Funds, see the prospectus con-
tained in the registration statement for the ESC Strategic Funds, dated July
30, 1999, which has been filed with the SEC and is incorporated by reference
into this Proxy Statement/Prospectus. A Statement of Additional Information
for the ESC Strategic Funds dated July 29, 1999, has been filed with the SEC,
and is incorporated by reference into this Proxy Statement/Prospectus. Copies
of the prospectus and Statement of Additional Information for the ESC Strate-
gic Funds are available upon request and without charge by calling 1-800-261-
FUND (3863).
For a more detailed discussion of the investment objectives, policies,
risks and restrictions of the participating STI Classic Funds, see the regis-
tration statement or prospectus relating to the Existing STI Classic Funds and
the New STI Classic Fund, which has been filed with the SEC and is incorpo-
rated by reference into this Proxy Statement/Prospectus. Copies of the pro-
spectuses for the STI Classic Funds accompany this Proxy Statement/Prospectus.
Statements of Additional Information for the Existing STI Classic Funds dated
October 1, 1999, and for the New STI Classic Fund dated January 24, 2000, have
been filed with the SEC, and are incorporated by reference into this Proxy
Statement/Prospectus. Copies are available upon request and without charge by
calling 1-800-874-4770.
This Proxy Statement/Prospectus constitutes the proxy statement of ESC
Strategic Funds for the Meeting and is expected to be sent to shareholders on
or about January 28, 2000.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Synopsis............................................................ 6
The Reorganization............................................... 6
The Funds........................................................ 7
Fees and Expenses................................................ 7
Investment Objectives, Policies and Restrictions................. 21
The Funds' Purchase, Exchange and Redemption Procedures.......... 25
Risks............................................................... 28
Information Relating to the Reorganization.......................... 31
Description of the Reorganization................................ 31
Federal Income Taxes............................................. 33
Capitalization................................................... 33
Reasons for the Reorganization...................................... 35
Shareholder Rights.................................................. 35
Information About the STI Classic Funds and ESC Strategic Funds..... 38
Voting Matters...................................................... 40
Other Business...................................................... 44
Shareholder Inquiries............................................... 45
Form of Agreement and Plan of Reorganization........................ Exhibit A
Management's Discussion of Fund Performance......................... Exhibit B
</TABLE>
5
<PAGE>
SYNOPSIS
This Synopsis is designed to allow you to compare the current fees,
investment objectives, policies and restrictions, and distribution, purchase,
exchange and redemption procedures of each ESC Strategic Fund with those of
its corresponding STI Classic Fund. It is a summary of certain information
contained elsewhere in this Proxy Statement/Prospectus, or incorporated by
reference into this Proxy Statement/Prospectus. Shareholders should read this
entire Proxy Statement/Prospectus carefully. For more complete information,
please read the prospectus for each Fund.
The Reorganization
Background. Pursuant to the Reorganization Agreement (attached hereto as
Exhibit A), each of the ESC Strategic Funds will transfer all of its assets
and certain stated liabilities to its corresponding STI Classic Fund in
exchange solely for shares of that STI Classic Fund. Each of the ESC Strategic
Funds will distribute the STI Classic Fund shares that it receives to its
shareholders in liquidation. Each of the ESC Strategic Funds will then be ter-
minated under state law. The result of the Reorganization is that shareholders
of each ESC Strategic Fund will become shareholders of the corresponding STI
Classic Fund. No front-end sales charges or contingent deferred sales charges
will be imposed in connection with these transactions.
The Board of Directors of the Corporation, including the Directors who
are not "interested persons" within the meaning of Section 2(a)(19) of the
1940 Act, has concluded that the Reorganization would be in the best interests
of each of the ESC Strategic Funds and their shareholders, and that the inter-
ests of existing shareholders in the ESC Strategic Funds would not be diluted
as a result of the transactions contemplated by the Reorganization. The Board
of Directors of the Corporation recommends that you vote for approval of the
Reorganization.
Tax Consequences. The Reorganization is intended to qualify for federal
income tax purposes as a tax-free reorganization. If the Reorganization so
qualifies, shareholders of the ESC Strategic Funds will not recognize gain or
loss in the transaction. Nevertheless, the sale of securities by the ESC Stra-
tegic Funds prior to the Reorganization, whether in the ordinary course of
business or in anticipation of the Reorganization, could result in a taxable
capital gains distribution prior to the Reorganization.
Special Considerations and Risk Factors. Although the investment objec-
tives and policies of the participating STI Classic Funds and the correspond-
ing ESC Strategic Funds are generally similar, there are certain differences,
especially for the ESC Strategic Funds that are combining with an Existing STI
Classic Fund. Therefore, an investment in an STI Classic Fund may involve
investment risks that are, in some respects, different from those of its cor-
responding ESC Strategic Fund. For a more complete discussion of the risks
associated with the respective Funds, see "RISKS," below.
6
<PAGE>
The Funds
Business of the Funds. The Corporation is an open-end management invest-
ment company, which offers redeemable shares in different series. It was orga-
nized as a Maryland corporation on November 24, 1993. The ESC Strategic Funds
offer two classes of shares, Class A and Class D shares. The two classes dif-
fer with respect to distribution and shareholder servicing costs and front-end
sales charges, as set forth in the ESC Strategic Funds' prospectus.
The Trust is an open-end, management investment company, which offers
redeemable shares in different series of investment portfolios. It was orga-
nized as a Massachusetts business trust on January 15, 1992. The participating
STI Classic Funds offer three classes of shares, Trust Shares, Investor
Shares, and Flex Shares, although Trust Shares are not involved in the Reorga-
nization. The classes differ with respect to minimum investment requirements,
distribution and shareholder servicing costs, front-end sales charges and con-
tingent deferred sales charges, as set forth in the STI Classic Funds' pro-
spectuses.
Fees and Expenses
The following comparative fee tables show the fees and expenses you must
pay if you buy and hold shares of each Existing STI Classic Fund and its cor-
responding ESC Strategic Fund. The Pro forma tables show the fees you would
pay if the Reorganization is approved. Both sets of tables show fees and
expenses without any waivers. The footnotes following the tables show what the
actual fees and expenses will be after waivers, if any.
If the Reorganization is approved, Total Expenses before waivers will
increase for all shareholders of the ESC Strategic Small Cap Fund and Class D
shareholders of the ESC Strategic Small Cap II Fund by the following percent-
ages: ESC Strategic Small Cap Fund, Class A (0.11%) and Class D (0.90%); and
ESC Strategic Small Cap II Fund, Class D (0.42%). However, Total Expenses
after waivers will decrease for shareholders of each ESC Strategic Fund by the
following percentages: ESC Strategic Small Cap Fund, Class A (0.24%) and Class
D (0.04%); ESC Strategic Small Cap II Fund, Class A (0.45%) and Class D
(0.25%); ESC Strategic International Equity Fund, Class A (0.67%) and Class D
(0.47%); ESC Strategic Appreciation Fund, Class A (0.79%) and Class D (0.54%);
and ESC Strategic Income Fund, Class A (0.60%) and Class D (0.90%).
ESC STRATEGIC SMALL CAP FUND - STI CLASSIC SMALL CAP GROWTH STOCK FUND
Comparison of Shareholder Fees
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
ESC Strategic Small Cap 4.50% None
Fund (Class A)
STI Classic Small Cap 3.75% None
Growth Stock Fund
(Investor Shares)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
ESC Strategic Small Cap 1.50% None
Fund (Class D)
STI Classic Small Cap None 2.00%*
Growth Stock Fund (Flex
Shares)
- ----------------------------------------------------------------------------------
</TABLE>
* The CDSC will be waived for Flex Shares issued to shareholders of the ESC
Strategic Funds as a result of the Reorganization. This waiver does not
apply to shares of the STI Classic Funds purchased following the Effective
Times of the Reorganization.
Comparison of Annual Operating Expenses
(as a percentage of average net assets)
<TABLE>
- ----------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Small Cap 1.00% 0.25% 0.54% 1.79%
Fund (Class A)*
STI Classic Small Cap 1.15% 0.50% 0.25% 1.90%
Growth Stock Fund
(Investor Shares)+
ESC Strategic Small Cap 1.00% 0.75% 0.54% 2.29%
Fund (Class D)*
STI Classic Small Cap 1.15% 1.00% 1.04% 3.19%
Growth Stock Fund (Flex
Shares)+
- ----------------------------------------------------------------------------
</TABLE>
* STES has contractually agreed to waive a portion of its fees and/or reim-
burse the ESC Strategic Small Cap Fund to limit Net Annual Operating
Expenses to 2.00% for Class A and 2.50% for Class D, until March 31, 2000.
+ The table shows the highest expenses that could be currently charged to the
STI Classic Small Cap Growth Stock Fund. Actual expenses are lower because
Trusco and SEI Distributors are voluntarily waiving a portion of their fees.
Actual Investment Advisory Fees, Distribution Fees and Total Operating
Expenses for Investor Shares are 0.86%, 0.44% and 1.55%, respectively.
Actual Investment Advisory Fees, Distribution Fees and Total Operating
Expenses for Flex Shares are 0.86%, 0.35% and 2.25%, respectively. Trusco
and SEI Distributors could discontinue these voluntary waivers at any time.
Pro forma Shareholder Fees
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
STI Classic Small Cap 3.75% None
Growth Stock Fund
(Investor Shares)
STI Classic Small Cap None 2.00%
Growth Stock Fund (Flex
Shares)
- ----------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Pro forma Annual Operating Expenses+
(as a percentage of average net assets)
<TABLE>
- --------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Small Cap 1.15% 0.50% 0.25% 1.90%
Growth Stock Fund
(Investor Shares)
STI Classic Small Cap 1.15% 1.00% 1.04% 3.19%
Growth Stock Fund
(Flex Shares)
- --------------------------------------------------------------------------
</TABLE>
+ The table shows the highest expenses that could be currently charged to the
STI Classic Small Cap Growth Stock Fund, following the Reorganization.
Actual expenses will be lower because Trusco and SEI Distributors will con-
tinue to voluntarily waive a portion of their fees. Actual Investment Advi-
sory Fees, Distribution Fees and Total Operating Expenses for Investor
Shares will be 0.86%, 0.44% and 1.55%, respectively. Actual Investment Advi-
sory Fees, Distribution Fees and Total Operating Expenses for Flex Shares
will be 0.86%, 0.95% and 2.25%, respectively. Trusco and SEI Distributors
could discontinue these voluntary waivers at any time.
Examples
These examples are intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in each Fund for the time periods
indicated, that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions you would pay the following expenses if
you redeem all of your shares at the end of the time periods indicated:
<TABLE>
- ------------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Small Cap Fund $624 $988 $1,376 $2,461
(Class A)
STI Classic Small Cap Growth Stock Fund $561 $950 $1,363 $2,514
(Investor Shares)
ESC Strategic Small Cap Fund $379 $855 $1,357 $2,736
(Class D)
STI Classic Small Cap Growth Stock Fund $522 $983 $1,669 $3,494
(Flex Shares)
- ------------------------------------------------------------------------
</TABLE>
Pro forma Example
<TABLE>
- ------------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Small Cap Growth Stock Fund $561 $950 $1,363 $2,514
(Investor Shares)
STI Classic Small Cap Growth Stock Fund $522 $983 $1,669 $3,494
(Flex Shares)
- ------------------------------------------------------------------------
</TABLE>
9
<PAGE>
The Examples above should not be considered a representation of future
expenses of the Fund. Actual expenses may be greater or less than those shown.
ESC STRATEGIC SMALL CAP II FUND - STI CLASSIC SMALL CAP GROWTH STOCK FUND
Comparison of Shareholder Fees
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
ESC Strategic Small Cap 4.50% None
II Fund (Class A)
STI Classic Small Cap 3.75% None
Growth Stock Fund
(Investor Shares)
ESC Strategic Small Cap 1.50% None
II Fund (Class D)
STI Classic Small Cap None 2.00%*
Growth Stock Fund (Flex
Shares)
- ----------------------------------------------------------------------------------
</TABLE>
* The CDSC will be waived for Flex Shares issued to shareholders of the ESC
Strategic Funds as a result of the Reorganization. This waiver does not
apply to shares of the STI Classic Funds purchased following the Effective
Times of the Reorganization.
Comparison of Annual Operating Expenses
(as a percentage of average net assets)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Small Cap II 1.25% 0.25% 0.77% 2.27%
Fund (Class A)*
STI Classic Small Cap 1.15% 0.50% 0.25% 1.90%
Growth Stock Fund
(Investor Shares)+
ESC Strategic Small Cap II 1.25% 0.75% 0.77% 2.77%
Fund (Class D)*
STI Classic Small Cap 1.15% 1.00% 1.04% 3.19%
Growth Stock Fund (Flex
Shares)+
- -------------------------------------------------------------------------------
</TABLE>
* STES has contractually agreed to waive a portion of its fees and/or reim-
burse the ESC Strategic Small Cap II Fund to limit Net Annual Operating
Expenses to 2.00% for Class A and 2.50% for Class D, until March 31, 2000.
+ The table shows the highest expenses that could be currently charged to the
STI Classic Small Cap Growth Stock Fund. Actual expenses are lower because
Trusco and SEI Distributors are voluntarily waiving a portion of their fees.
Actual Investment Advisory Fees, Distribution Fees and Total Operating
Expenses for Investor Shares are 0.86%, 0.44% and 1.55%, respectively.
Actual Investment Advisory Fees, Distribution Fees and Total Operating
Expenses for Flex Shares are 0.86%, 0.35% and 2.25%, respectively. Trusco
and SEI Distributors could discontinue these voluntary waivers at any time.
10
<PAGE>
Pro forma Shareholder Fees
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
STI Classic Small Cap 3.75% None
Growth Stock Fund
(Investor Shares)
STI Classic Small Cap None 2.00%
Growth Stock Fund (Flex
Shares)
- ----------------------------------------------------------------------------------
</TABLE>
Pro forma Annual Operating Expenses
(as a percentage of average net assets)+
<TABLE>
- --------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Small Cap 1.15% 0.50% 0.25% 1.90%
Growth Stock Fund
(Investor Shares)
STI Classic Small Cap 1.15% 1.00% 1.04% 3.19%
Growth Stock Fund
(Flex Shares)
- --------------------------------------------------------------------------
</TABLE>
+ The table shows the highest expenses that could be currently charged to the
STI Classic Small Cap Growth Stock Fund, following the Reorganization.
Actual expenses will be lower because Trusco and SEI Distributors will con-
tinue to voluntarily waive a portion of their fees. Actual Investment Advi-
sory Fees, Distribution Fees and Total Operating Expenses for Investor
Shares will be 0.86%, 0.44% and 1.55%, respectively. Actual Investment Advi-
sory Fees, Distribution Fees and Total Operating Expenses for Flex Shares
will be 0.86%, 0.35% and 2.25%, respectively. Trusco and SEI Distributors
could discontinue these voluntary waivers at any time.
Examples
These examples are intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in each Fund for the time periods
indicated, that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions you would pay the following expenses if
you redeem all of your shares at the end of the time periods indicated:
<TABLE>
- ------------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Small Cap II Fund $644 $1,103 $1,587 $2,918
(Class A)
STI Classic Small Cap Growth Stock Fund $561 $950 $1,363 $2,514
(Investor Shares)
ESC Strategic Small Cap II Fund $399 $971 $1,569 $3,184
(Class D)
STI Classic Small Cap Growth Stock $522 $983 $1,669 $3,494
(Flex Shares)
- ------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Pro forma Example
<TABLE>
- ------------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Small Cap Growth Stock Fund $561 $950 $1,363 $2,514
(Investor Shares)
STI Classic Small Cap Growth Stock Fund $522 $983 $1,669 $3,494
(Flex Shares)
- ------------------------------------------------------------------------
</TABLE>
The Examples above should not be considered a representation of future
expenses of the Fund. Actual expenses may be greater or less than those shown.
ESC STRATEGIC INTERNATIONAL EQUITY FUND - STI CLASSIC INTERNATIONAL EQUITY
FUND
Comparison of Shareholder Fees
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ESC Strategic 4.50% None
International Equity
Fund (Class A)
STI Classic 3.75% None
International Equity
Fund (Investor Shares)
ESC Strategic 1.50% None
International Equity
Fund (Class D)
STI Classic None 2.00%*
International Equity
(Flex Shares)
- ---------------------------------------------------------------------------------
</TABLE>
* The CDSC will be waived for Flex Shares issued to shareholders of the ESC
Strategic Funds as a result of the Reorganization. This waiver does not
apply to shares of the STI Classic Funds purchased following the Effective
Times of the Reorganization.
12
<PAGE>
Comparison of Annual Operating Expenses
(as a percentage of average net assets)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic 1.00% 0.25% 1.30% 2.55%
International Equity Fund
(Class A)*
STI Classic International 1.25% 0.33% 0.35% 1.93%
Equity Fund (Investor
Shares)+
ESC Strategic 1.00% 0.75% 1.30% 3.05%
International Equity Fund
(Class D)*
STI Classic International 1.25% 1.00% 0.59% 2.84%
Equity Fund (Flex Shares)+
- -------------------------------------------------------------------------------
</TABLE>
* STES has contractually agreed to waive a portion of its fees and/or reim-
burse the ESC International Equity Fund to limit Net Annual Operating
Expenses to 2.50% for Class A and 3.00% for Class D, until March 31, 2000.
+ The table shows the highest expenses that could be currently charged to the
STI Classic International Equity Fund. Actual expenses are lower because STI
Capital and SEI Distributors are voluntarily waiving a portion of their
fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating
Expenses for Investor Shares are 1.20%, 0.28% and 1.83%, respectively.
Actual Investment Advisory Fees, Distribution Fees and Total Operating
Expenses for Flex Shares are 1.20%, 0.74% and 2.53%, respectively. STI Capi-
tal and SEI Distributors could discontinue these voluntary waivers at any
time.
Pro forma Shareholder Fees
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ---------------------------------------------------------------------------------
<S> <C> <C>
STI Classic 3.75% None
International Equity
Fund (Investor Shares)
STI Classic None 2.00%
International Equity
Fund (Flex Shares)
- ---------------------------------------------------------------------------------
</TABLE>
Pro forma Annual Operating Expenses+
(as a percentage of average net assets)
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic International 1.25% 0.33% 0.35% 1.93%
Equity Fund (Investor
Shares)
STI Classic International 1.25% 1.00% 0.59% 2.84%
Equity Fund (Flex Shares)
- ------------------------------------------------------------------------------
</TABLE>
+ The table shows the highest expenses that could be currently charged to the
STI Classic International Equity Fund, following the Reorganization. Actual
expenses will be lower because STI Capital and SEI Distributors will con-
tinue to voluntarily waive a portion of their fees. Actual Investment Advi-
sory Fees, Distribution Fees and Total Operating Expenses for Investor
Shares will be 1.20%, 0.28% and 1.83%, respectively. Actual Investment Advi-
sory Fees, Distribution Fees and Total Operating Expenses for Flex Shares
will be 1.20%, 0.74% and 2.53%, respectively. STI Capital and SEI Distribu-
tors could discontinue these voluntary waivers at any time.
13
<PAGE>
Examples
These examples are intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in each Fund for the time periods
indicated, that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions you would pay the following expenses if
you redeem all of your shares at the end of the time periods indicated:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic International Equity Fund (Class $692 $1,203 $1,740 $3,202
A)
STI Classic International Equity Fund $564 $958 $1,378 $2,544
(Investor Shares)
ESC Strategic International Equity Fund (Class $448 $1,073 $1,723 $3,461
D)
STI Classic International Equity Fund $487 $880 $1,499 $3,166
(Flex Shares)
- -------------------------------------------------------------------------------
</TABLE>
Pro forma Example
<TABLE>
- ----------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic International Equity Fund $564 $958 $1,378 $2,544
(Investor Shares)
STI Classic International Equity Fund $487 $880 $1,499 $3,166
(Flex Shares)
- ----------------------------------------------------------------------
</TABLE>
The Examples above should not be considered a representation of future
expenses of the Fund. Actual expenses may be greater or less than those shown.
ESC STRATEGIC APPRECIATION FUND - STI CLASSIC GROWTH AND INCOME FUND
Comparison of Shareholder Fees
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- -----------------------------------------------------------------------------------
<S> <C> <C>
ESC Strategic 4.50% None
Appreciation Fund (Class
A)
STI Classic Growth and 3.75% None
Income Fund (Investor
Shares)
ESC Strategic 1.50% None
Appreciation Fund (Class
D)
STI Classic Growth and None 2.00%*
Income Fund
(Flex Shares)
- -----------------------------------------------------------------------------------
</TABLE>
* The CDSC will be waived for Flex Shares issued to shareholders of the ESC
Strategic Funds as a result of the Reorganization. This waiver does not
apply to shares of the STI Classic Funds purchased following the Effective
Times of the Reorganization.
14
<PAGE>
Comparison of Annual Operating Expenses
(as a percentage of average net assets)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Appreciation 1.00% 0.25% 0.72% 1.97%
Fund (Class A)*
STI Classic Growth and 0.90% 0.25% 0.20% 1.35%
Income Fund (Investor
Shares)+
ESC Strategic Appreciation 1.00% 0.75% 0.72% 2.47%
Fund (Class D)*
STI Classic Growth and 0.90% 1.00% 0.22% 2.12%
Income Fund (Flex Shares)+
- -------------------------------------------------------------------------------
</TABLE>
* STES has contractually agreed to waive a portion of its fees and/or reimburse
the ESC Strategic Appreciation Fund to limit Net Annual Operating Expenses to
2.00% for Class A and 2.50% for Class D, until March 31, 2000.
+ The table shows the highest expenses that could be currently charged to the
STI Classic Growth and Income Fund. Actual expenses are lower because Trusco
and SEI Distributors are voluntarily waiving a portion of their fees. Actual
Investment Advisory Fees, Distribution Fees and Total Operating Expenses for
Investor Shares are 0.90%, 0.08% and 1.18%, respectively. Actual Investment
Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares
are 0.90%, 0.81% and 1.93%, respectively. Trusco and SEI Distributors could
discontinue these voluntary waivers at any time. Net waiver fees for the STI
Classic Growth and Income Fund have been restated to reflect anticipated fees
for the fiscal year ending May 31, 2000.
Pro forma Shareholder Fees
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ---------------------------------------------------------------------------------
<S> <C> <C>
STI Classic Growth and 3.75% None
Income Fund (Investor
Shares)
STI Classic Growth and None 2.00%
Income Fund
(Flex Shares)
- ---------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Pro forma Annual Operating Expenses+
(as a percentage of average net assets)
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Growth and 0.90% 0.25% 0.20% 1.35%
Income Fund (Investor
Shares)
STI Classic Growth and 0.90% 1.00% 0.22% 2.12%
Income Fund (Flex Shares)
- ------------------------------------------------------------------------------
</TABLE>
+ The table shows the highest expenses that could be currently charged to the
STI Classic Growth and Income Fund, following the Reorganization. Actual
expenses will be lower because Trusco and SEI Distributors will continue to
voluntarily waive a portion of their fees. Actual Investment Advisory Fees,
Distribution Fees and Total Operating Expenses for Investor Shares will be
0.90%, 0.08% and 1.18%, respectively. Actual Investment Advisory Fees, Dis-
tribution Fees and Total Operating Expenses for Flex Shares will be 0.90%,
0.81% and 1.93%, respectively. Trusco and SEI Distributors could discontinue
these voluntary waivers at any time.
Examples
These examples are intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in each Fund for the time periods
indicated, that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions you would pay the following expenses if
you redeem all of your shares at the end of the time periods indicated:
<TABLE>
- --------------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Appreciation Fund (Class A) $641 $1,040 $1,465 $2,642
STI Classic Growth and Income Fund $507 $ 787 $1,087 $1,938
(Investor Shares)
ESC Strategic Appreciation Fund (Class D) $396 $ 908 $1,446 $2,914
STI Classic Growth and Income Fund $415 $ 664 $1,139 $2,452
(Flex Shares)
- --------------------------------------------------------------------------
</TABLE>
Pro forma Example
<TABLE>
- -------------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Growth and Income Fund $507 $787 $1,087 $1,938
(Investor Shares)
STI Classic Growth and Income Fund $415 $664 $1,139 $2,452
(Flex Shares)
- -------------------------------------------------------------------
</TABLE>
The Examples above should not be considered a representation of future
expenses of the Fund. Actual expenses may be greater or less than those shown.
Under the Reorganization Agreement, the ESC Strategic Income Fund will trans-
fer all its assets and stated liabilities to the STI Classic High Income Fund.
The following comparative fee table
16
<PAGE>
shows the current fees and expenses for the ESC Strategic Income Fund. Because
the STI Classic High Income Fund was not yet operational as of the date of
this Proxy Statement/Prospectus, other expenses are estimated. The Pro forma
tables show the fees you would pay if the Reorganization is approved. Both
sets of tables show fees and expenses without any waivers. The footnotes fol-
lowing the tables show what the actual fees and expenses will be after waiv-
ers, if any.
ESC STRATEGIC INCOME FUND - STI CLASSIC HIGH INCOME FUND
Comparison of Shareholder Fees
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
ESC Strategic Income 4.50% None
Fund (Class A)
STI Classic High Income None 2.00%
Fund
(Flex Shares)
ESC Strategic Income 1.50% None
Fund (Class D)
STI Classic High Income None 2.00%*
Fund
(Flex Shares)
- ----------------------------------------------------------------------------------
</TABLE>
* The CDSC will be waived for Flex Shares issued to shareholders of the ESC
Strategic Funds as a result of the Reorganization. This waiver does not
apply to shares of the STI Classic Funds purchased following the Effective
Times of the Reorganization.
Comparison of Annual Operating Expenses
(as a percentage of average net assets)
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Income Fund 1.00% 0.25% 0.97% 2.22%
(Class A)*
STI Classic High Income 0.80% 1.00% 0.35% 2.15%
Fund+
(Flex Shares)
ESC Strategic Income Fund 1.00% 0.75% 0.97% 2.72%
(Class D)*
STI Classic High Income 0.80% 1.00% 0.35% 2.15%
Fund+
(Flex Shares)
- ------------------------------------------------------------------------------
</TABLE>
* STES has contractually agreed to waive a portion of its fees and/or reim-
burse the ESC Strategic Income Fund to limit Net Annual Operating Expenses
to 2.00% for Class A and 2.50% for Class D, until March 31, 2000.
+ The table shows the highest expenses that could be currently charged to the
STI Classic High Income Fund, following the Reorganization. Actual expenses
will be lower because Trusco and SEI Distributors will voluntarily waive a
portion of their fees. Actual Investment Advisory Fees, Distribution Fees
and Total Operating Expenses for Flex Shares will be 0.65%, 0.40% and 1.40%,
respectively. Because the STI Classic High Income Fund was not yet opera-
tional as of the date of this Proxy Statement/Prospectus, Other Expenses are
estimated. Trusco and SEI Distributors could discontinue these voluntary
waivers at any time.
17
<PAGE>
Pro forma Shareholder Fees
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
Maximum Sales Charge (Load)
Imposed on Purchase (as a Maximum Deferred Sales Charge
percentage of offering (Load) (as a percentage of
FUND price) net asset value)
- ----------------------------------------------------------------------------------
<S> <C> <C>
STI Classic High Income None 2.00%
Fund (Flex Shares)
- ----------------------------------------------------------------------------------
</TABLE>
Pro forma Annual Operating Expenses+
(as a percentage of average net assets)
<TABLE>
- ----------------------------------------------------------------------------
<CAPTION>
Investment Distribution Other Total Operating
FUND Advisory Fees (12b-1) Fees Expenses Expenses
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic High Income 0.80% 1.00% 0.35% 2.15%
Fund (Flex Shares)
- ----------------------------------------------------------------------------
</TABLE>
+ The table shows the highest expenses that could be currently charged to the
STI Classic Small Cap Growth Stock Fund, following the Reorganization.
Actual expenses are lower because Trusco and SEI Distributors are voluntar-
ily waiving a portion of their fees. Actual Investment Advisory Fees, Dis-
tribution Fees and Total Operating Expenses for Flex Shares will be 0.65%,
0.40% and 1.40%, respectively. Because the STI Classic High Income Fund was
not yet operational as of the date of this Proxy Statement/Prospectus, Other
Expenses are estimated. Trusco and SEI Distributors could discontinue these
voluntary waivers at any time.
Examples
These examples are intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in each Fund for the time periods
indicated, that your investment has a 5% return each year and that each Fund's
operating expenses remain the same. Although your actual costs may be higher
or lower, based on these assumptions you would pay the following expenses if
you redeem all of your shares at the end of the time periods indicated:
<TABLE>
- -------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Strategic Income Fund $644 $1,093 $1,567 $2,873
(Class A)
STI Classic High Income Fund $418 $673 $1,154 $2,483
(Flex Shares)
ESC Strategic Income Fund $399 $961 $1,549 $3,140
(Class D)
STI Classic High Income Fund $418 $673 $1,154 $2,483
(Flex Shares)
- -------------------------------------------------------------
</TABLE>
Pro forma Example
<TABLE>
- -------------------------------------------------------------
<CAPTION>
FUND 1 year 3 years 5 years 10 years
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic High Income Fund $424 $673 $1,154 $2,483
(Flex Shares)
- -------------------------------------------------------------
</TABLE>
The Examples above should not be considered a representation of future
expenses of the Fund. Actual expenses may be greater or less than those shown.
18
<PAGE>
Investment Advisers. STI Capital and Trusco, the investment advisers to
the STI Classic Funds, are each indirect wholly-owned subsidiaries of
SunTrust. Trusco is registered as an investment adviser under the Advisers
Act. Trusco, located at 50 Hurt Plaza, Suite 1400, Atlanta, GA 30303, had
approximately $30 billion of assets under management as of July 1, 1999.
Trusco serves as the investment adviser to the STI Classic Growth and Income
Fund and Small Cap Growth Stock Fund and will serve as investment adviser to
High Income Fund. STI Capital is a bank and is, therefore, not required to
register as an investment adviser. STI Capital had approximately $14.5 billion
of assets under management as of July 1, 1999 and its address is P.O. Box
3808, Orlando, FL 32802. STI Capital serves as the investment adviser to the
STI Classic International Equity Fund.
STES, a wholly-owned subsidiary of SunTrust and a registered investment
adviser, is the investment adviser to the Strategic Funds. STES has more than
$1.5 billion of assets under management, and its address is 800 Nashville City
Center, Nashville, TN 37219.
Equitable Asset Management, Inc., an affiliate of STES, is the sub-
adviser to the ESC Strategic Small Cap Fund and the ESC Strategic Small Cap II
Fund. Westcap Investors, LLC, Brandes Investment Partners, L.P. and Atlantic
Capital Management, LLC are each a sub-adviser for the ESC Strategic Apprecia-
tion Fund. Murray Johnstone International Limited is the sub-adviser and is
primarily responsible for the daily management of the ESC Strategic Interna-
tional Equity Fund. Cincinnati Asset Management, Inc. is the sub-adviser and
is responsible for the daily management of the ESC Strategic Income Fund.
Investment Advisory Fees. The following table compares management fees
paid to STES for each ESC Strategic Fund and to the Adviser(s) for the corre-
sponding STI Classic Fund, respectively. The table shows advisory fees before
any waivers or reimbursements ("Contractual") and advisory fees after any
waivers or reimbursements ("Net of Waivers"). The fees listed are as of the
dates stated in the footnotes following the table.
19
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESC Strategic Funds Fee*
- --------------------------------
<S> <C>
Small Cap Fund
Contractual............. 1.00%
Net of Waivers.......... 1.00%
Small Cap II Fund
Contractual............. 1.25%
Net of Waivers.......... 0.98%
International Equity Fund
Contractual............. 1.00%
Net of Waivers.......... 0.95%
Appreciation Fund
Contractual............. 1.00%
Net of Waivers.......... 1.00%
Income Fund
Contractual............. 1.00%
Net of Waivers.......... 0.78%
</TABLE>
<TABLE>
<CAPTION>
STI Classic Funds Fee
<S> <C>
Small Cap Growth Stock Fund**
Contractual................ 1.15%
Net of Waivers............. 0.86%
Small Cap Growth Stock Fund**
Contractual................ 1.15%
Net of Waivers............. 0.86%
International Equity Fund**
Contractual................ 1.25%
Net of Waivers............. 1.20%
Growth and Income Fund+
Contractual................ 0.90%
Net of Waivers............. 0.90%
High Income Fund++
Contractual................ 0.80%
Net of Waivers............. 0.65%
</TABLE>
- -------------------------------------------------------------------------------
* Net of Waiver fees for the ESC Strategic Funds are based on STES
contractually agreeing to waive a portion of its fee or reimburse expenses
until at least March 31, 2000.
** Net of Waiver fees for the Existing STI Classic Funds are based on the
Adviser(s) voluntarily agreeing to waive a portion of advisory fees for the
fiscal year ending May 31, 1999.
+ Net of Waiver fees for the STI Classic Growth and Income Fund have been
restated to reflect anticipated fees for the fiscal year ending May 31,
2000.
++ Because the STI Classic High Income Fund was not yet operational as of the
date of this Proxy Statement/Prospectus, Net of Waiver fees are based on
Trusco's anticipated voluntary fee waivers.
Sales Loads and Contingent Deferred Sales Charges. The following chart
compares front-end sales loads and contingent deferred sales charges ("CDSC")
for the ESC Strategic Funds and their corresponding STI Classic Funds.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESC Strategic Funds Charge
- -----------------------------------
<S> <C>
Small Cap Fund
Class A - Front-End Load.. 4.50%
Class D - Front-End Load.. 1.50%
Class D - CDSC............ None
Small Cap II Fund
Class A - Front-End Load.. 4.50%
Class D - Front-End Load.. 1.50%
Class D - CDSC............ None
International Equity Fund
Class A - Front-End Load.. 4.50%
Class D - Front-End Load.. 1.50%
Class D - CDSC............ None
Appreciation Fund
Class A - Front-End Load.. 4.50%
Class D - Front-End Load.. 1.50%
Class D - CDSC............ None
Income Fund
Class A - Front-End Load.. 4.50%
Class D - Front-End Load.. 1.50%
Class D - CDSC............ None
</TABLE>
<TABLE>
<CAPTION>
STI Classic Funds Charge
<S> <C>
Small Cap Growth Stock Fund
Investor Shares - Front-End
Load......................... 3.75%
Flex Shares - Front-End Load.. None
Flex Shares - CDSC............ 2.00%
Small Cap Growth Stock Fund
Investor Shares - Front-End
Load......................... 3.75%
Flex Shares - Front-End Load.. None
Flex Shares - CDSC............ 2.00%
International Equity Fund
Investor Shares - Front-End
Load......................... 3.75%
Flex Shares - Front-End Load.. None
Flex Shares - CDSC............ 2.00%
Growth and Income Fund
Investor Shares - Front-End
Load......................... 3.75%
Flex Shares - Front-End Load.. None
Flex Shares - CDSC............ 2.00%
High Income Fund
Flex Shares - Front-End Load.. None
Flex Shares - CDSC............ 2.00%
</TABLE>
- -------------------------------------------------------------------------------
20
<PAGE>
Contingent Deferred Sales Charges. The ESC Strategic Funds are not sub-
ject to a CDSC. Flex Shares of the participating STI Classic Funds are subject
to a 2.00% CDSC that decreases to 0% after the first year. Shareholders of the
ESC Strategic Funds will not be charged a CDSC for any redemptions of Flex
Shares of the STI Classic Funds they receive as a result of the Reorganiza-
tion.
Investment Objectives, Policies and Restrictions.
This section will help you compare the investment objectives and poli-
cies of each ESC Strategic Fund with its corresponding STI Classic Fund.
Please be aware that this is only a brief discussion. More complete informa-
tion may be found in the ESC Strategic Funds' and STI Classic Funds' prospec-
tuses.
ESC Strategic Small Cap Fund : STI Classic Small Cap Growth Stock Fund
The investment objective of the ESC Strategic Small Cap Fund is to pro-
vide investors with a high level of capital appreciation. The Fund pursues its
objectives by investing, under normal market conditions, primarily in compa-
nies with market capitalizations under $800 million. The Fund's investment
adviser selects equity securities of companies it believes show prospects for
growth due, for example, to promising new products, new distribution strate-
gies, new manufacturing technologies or new management teams or management
philosophy, as well as fundamental factors. The Fund is classified as a "non-
diversified" investment company.
The investment objective of the STI Classic Small Cap Growth Stock Fund
is to provide long-term capital appreciation. It invests primarily in small
U.S. companies with market capitalizations between $50 million and $3 billion.
The Adviser selects companies that demonstrate above average earnings and
sales growth potential. The selected companies tend to have an established
operating history and a solid balance sheet. The Fund is classified as a "di-
versified" investment company.
Differences: As a "non-diversified" fund, the ESC Strategic Small Cap
Fund may invest a greater portion of its assets in a more limited number of
issuers than the STI Classic Small Cap Growth Stock Fund (see "RISKS," below,
for a discussion of the differences between "diversified" and "non-diversi-
fied" funds). The STI Classic Small Cap Growth Stock Fund invests in companies
with market capitalizations of up to $3 billion whereas the ESC Strategic
Small Cap Fund invests in companies with market capitalizations under $800
million. The STI Classic Small Cap Growth Stock Fund may not acquire more than
10% of any one issuer, while the ESC Strategic Small Cap Fund has no such
restriction. The STI Classic Small Cap Growth Stock Fund has a fundamental
policy which restricts it from pledging, mortgaging or hypothecating assets in
excess of 10% of its total assets whereas the ESC Strategic Small Cap Fund has
a similar non-fundamental policy that limits such activities to 15% or less of
its assets. Unlike the ESC Strategic Small Cap Fund, the STI Classic Small Cap
Growth Stock Fund may not may make short sales of securities and maintain
short positions or lend its portfolio securities. The STI Classic Small Cap
Growth Stock Fund may only purchase investment company securities of money
market funds and CMOs and REMICs deemed to be investment companies (and then,
only as permitted by the 1940 Act). As a non-fundamental policy, the ESC Stra-
tegic Small Cap Fund may purchase securities of any investment company pro-
vided the purchase does not violate the 1940 Act.
21
<PAGE>
ESC Strategic Small Cap II Fund : STI Classic Small Cap Growth Stock Fund
The investment objective of the ESC Strategic Small Cap II Fund is to
provide a high level of capital appreciation. The Fund is a diversified fund
which seeks to achieve its objective by investment, under normal market condi-
tions, primarily in equity securities of companies with market capitalizations
under $800 million. In selecting securities for the Fund, the Fund's invest-
ment adviser employs fundamental analysis of traditional small capitalization
companies it believes have prospects for rapid growth. The Fund's management
style is generally comparable to that of the ESC Strategic Small Cap Fund,
stated above.
The investment objective of the STI Classic Small Cap Growth Stock Fund
is to provide long-term capital appreciation. It is a diversified fund which
invests primarily in small U.S. companies with market capitalizations between
$50 million and $3 billion. The Adviser selects companies that demonstrate
above average earnings and sales growth potential. The selected companies tend
to have an established operating history and a solid balance sheet.
Differences: The STI Classic Small Cap Growth Stock Fund invests in com-
panies with market capitalizations of up to $3 billion whereas the ESC Strate-
gic Small Cap II Fund invests in companies with market capitalizations under
$800 million. The STI Classic Small Cap Growth Stock Fund may not acquire more
than 10% of the voting securities of any one issuer, while the ESC Strategic
Small Cap II Fund has the same restriction, although only with respect to 75%
of its total assets. The STI Classic Small Cap Growth Stock Fund has a funda-
mental policy which restricts it from pledging, mortgaging or hypothecating
assets in excess of 10% of its total assets whereas the ESC Strategic Small
Cap II Fund has a similar non-fundamental policy that limits such activities
to 15% or less of its assets. As a fundamental policy, the STI Classic Small
Cap Growth Stock Fund may not invest in companies for the purpose of exercis-
ing control. The ESC Strategic Small Cap II Fund is also subject to this
restriction, however, it is a non-fundamental policy of the fund. Unlike the
ESC Strategic Small Cap II Fund, the STI Classic Small Cap Growth Stock Fund
may not may make short sales of securities and maintain short positions or
lend its portfolio securities. Both the STI Classic Small Cap Growth Stock
Fund and the ESC Strategic Small Cap II Fund may not purchase securities on
margin, however, this is a fundamental policy for the STI Classic Fund and a
non-fundamental policy for the ESC Fund. The STI Classic Small Cap Growth
Stock Fund may only purchase investment company securities of money market
funds and CMOs and REMICs deemed to be investment companies (and then, only as
permitted by the 1940 Act). As a non-fundamental policy, the ESC Strategic
Small Cap II Fund may purchase securities of any investment company provided
the purchase does not violate the 1940 Act.
ESC Strategic International Equity Fund : STI Classic International Equity
Fund
The investment objective of the ESC Strategic International Equity Fund
is to provide long-term capital appreciation. The Fund is a diversified fund
which normally invests primarily in a diversified portfolio of publicly traded
common stocks and securities convertible into or exchangeable for common stock
of non-U.S. based companies. The Fund diversifies its investments among vari-
ous non-U.S. countries. Investments are made in countries deemed to offer
favorable operating environments and companies for investment are selected
within those countries based on analysis of various fundamental factors.
Anticipated currency movements are a factor in both country and stock selec-
tion. The Fund also follows the Emerging Markets Strategy
22
<PAGE>
which means that its investment adviser may seek to enhance investment return
for the Fund through investing in emerging markets that are exhibiting, or are
in the early stages of exhibiting, very high economic growth rates relative to
countries in the Organization for European Community Development.
The investment objective of the STI Classic International Equity Fund is
to provide long-term capital appreciation. It is a diversified fund which
invests primarily in common stocks and other equity securities of foreign com-
panies. In selecting investments for the Fund, the Adviser diversifies the
Fund's investments among at least three foreign countries. The Fund invests
primarily in developed countries, but may invest in countries with emerging
markets.
Differences: The STI Classic International Equity Fund has a fundamental
policy which restricts it from pledging, mortgaging or hypothecating assets in
excess of 10% of its total assets whereas the ESC International Equity Fund
has a similar non-fundamental policy that limits such activities to 15% or
less of its assets. The STI Classic International Equity Fund may not acquire
more than 10% of the voting securities of any one issuer, while the ESC Stra-
tegic International Equity Fund has the same restriction, although only with
respect to 75% of its total assets. As a fundamental policy, the STI Classic
International Equity Fund may not invest in companies for the purpose of exer-
cising control. The ESC Strategic International Equity Fund is also subject to
this restriction, however, it is a non-fundamental policy of the Fund. Unlike
the ESC Strategic International Equity Fund, the STI Classic International
Equity Fund may not may make short sales of securities and maintain short
positions or lend its portfolio securities. Both the STI Classic International
Equity Fund and the ESC International Equity Fund may not purchase securities
on margin, however, this is a fundamental policy for the STI Classic Fund and
a non-fundamental policy for the ESC Fund.
ESC Strategic Appreciation Fund : STI Classic Growth and Income Fund
The investment objective of the ESC Strategic Appreciation Fund is to
provide long-term capital appreciation. The Fund is a diversified fund which
pursues its objective by investing, under normal market conditions, primarily
in a diversified portfolio of common stocks and securities convertible into
common stock issued by U.S. based companies. The Fund's rebalancing procedures
require the Fund to sell securities in sectors that become overweighted (and
presumably overvalued) and to purchase securities in underweighted (and pre-
sumably undervalued) sectors. The Fund uses a multiple manager strategy (see
"Investment Advisers," above, for a list of the sub-advisers to the Fund).
The primary investment objective of the STI Classic Growth and Income
Fund is to provide long-term capital appreciation. It is a diversified fund
which invests primarily in equity securities, including common stock and
listed American Depository Receipts ("ADRs") of domestic and foreign companies
with market capitalizations of at least $1 billion. However, the average mar-
ket capitalization can vary throughout a full market cycle and will be flexi-
ble to allow the Adviser to capture market opportunities. The Adviser uses a
quantitative screening process to identify companies with an attractive funda-
mental profile. The portfolio management team selects stocks of companies with
strong financial quality and above average earnings momentum to secure the
best relative values in each economic sector.
23
<PAGE>
Differences: The STI Classic Growth and Income Fund invests in companies
with market capitalizations of at least $1 billion whereas the ESC Strategic
Appreciation Fund has no minimum market capitalization requirement. The STI
Classic Growth and Income Fund may not acquire more than 10% of the voting
securities of any one issuer, while the ESC Strategic Appreciation Fund has
the same restriction, although only with respect to 75% of its total assets.
The STI Classic Growth and Income Fund has a fundamental policy which
restricts it from pledging, mortgaging or hypothecating assets in excess of
10% of total assets whereas the ESC Strategic Appreciation Fund has a non-fun-
damental policy subject to a limitation of 15% or less. As a fundamental poli-
cy, the STI Classic Growth and Income Fund may not invest in companies for the
purpose of exercising control. The ESC Strategic Appreciation Fund is also
subject to this restriction, however, it is a non-fundamental policy of the
Fund. The ESC Strategic Appreciation Fund may make short sales of securities
and maintain short positions whereas the STI Classic Growth and Income Fund
may not. The STI Classic Growth and Income Fund may not lend its portfolio
securities. Both the STI Classic Growth and Income Fund and the ESC Strategic
Appreciation Fund may not purchase securities on margin, however this is a
fundamental policy for the STI Classic Fund and a non-fundamental policy for
the ESC Fund. The STI Classic Growth and Income Fund may only purchase invest-
ment company securities of money market funds and CMOs and REMICs deemed to be
investment companies (and then, only as permitted by the 1940 Act). As a non-
fundamental policy, the ESC Strategic Appreciation Fund may purchase securi-
ties of any investment company provided the purchase does not violate the 1940
Act.
The ESC Strategic Income Fund would transfer its assets and certain
stated liabilities into the STI Classic High Income Fund which was not yet
operational as of the date of this Proxy/Prospectus Statement. The investment
objectives and policies of the STI Classic High Income Fund will be substan-
tially similar to the ESC Strategic Income Fund. There are no material differ-
ences in the investment restrictions of the ESC Strategic Income Fund and the
STI Classic High Income Fund.
ESC Strategic Income Fund : STI Classic High Income Fund
The investment objective of the ESC Strategic Income Fund is to provide
a high level of current income with a secondary objective of total return. The
Fund is a diversified fund which invests primarily in a diversified portfolio
of high yielding, lower rated corporate, government and other debt instruments
of U.S. issuers, although up to 35% of its assets may be invested in debt
instruments of non-U.S. issuers. The Fund may invest up to 100% of its assets
in debt securities rated below investment grade. Such debt securities are com-
monly known as "junk bonds." The Fund's investment adviser seeks out companies
with good fundamentals and performing prospects that are currently out of
favor with investors. The investment adviser prefers securities that produce
current income. The Fund also follows the Emerging Markets Strategy which
means that its investment adviser may seek to enhance investment return for
the Fund through investing in emerging markets that are exhibiting, or are in
the early stages of exhibiting, very high economic growth rates relative to
countries in the Organization for European Community Development.
The investment objective of the STI Classic High Income Fund will be
substantially similar to the investment objective of the ESC Strategic Income
Fund.
24
<PAGE>
Differences: The STI Classic High Income Fund may not acquire more than
10% of the voting securities of any one issuer, while the ESC Strategic Income
has the same restriction, although only with respect to 75% of its total
assets.
The Funds' Purchase, Exchange and Redemption Procedures
Purchase Procedures.
STI Classic Funds. Once a brokerage account is opened with SunTrust
Securities, shares of the STI Classic Funds, other than Trust Shares, may be
purchased by mail, telephone, wire, or through Automated Clearing House
("ACH"). Investor Shares and Flex Shares may also be purchased through invest-
ment representatives of certain correspondent banks of SunTrust and other
financial institutions that are authorized to place transactions in Fund
shares for their customers. Trust Shares are offered only to financial insti-
tutions or intermediaries, including subsidiaries of SunTrust on behalf of
their own or their customers' accounts for which they act as fiduciary, agent,
investment adviser, or custodian. As a result, customers of financial institu-
tions may purchase Trust Shares through accounts made with financial institu-
tions and potentially through a Preferred Portfolio Account (an asset alloca-
tion account available through SunTrust Securities, Inc.). The minimum initial
purchase requirement for Investor Shares is $2,000, and for Flex Shares is
$5,000 ($2,000 for retirement plans). Additional Investor Shares or Flex
Shares may be purchased for a minimum of $1,000.
The net asset value ("NAV") of the STI Classic Funds is calculated once
each day the New York Stock Exchange ("NYSE") is open for business (a "Busi-
ness Day"), at the regularly scheduled close of normal trading on the NYSE
(normally, 4:00 p.m. Eastern time). The NAV per share is calculated by divid-
ing the total market value of each Fund's investments and other assets, less
any liabilities, by the total outstanding shares of that Fund.
STI Classic Funds may suspend a shareholder's right to sell shares if
the NYSE restricts trading, the SEC declares an emergency or for other rea-
sons. More information about this is in the STI Classic Funds Statement of
Additional Information, incorporated herein by reference.
ESC Strategic Funds. Shares of ESC Strategic Funds may be purchased
through the Funds' distributor or through banks, brokers and other investment
representatives, which may charge additional fees and may require higher mini-
mum investments or impose other limitations on buying and selling shares. If
shares are purchased through an investment representative, that party is
responsible for transmitting orders by close of business and may have an ear-
lier cut-off time for purchase and sale requests. Shares of the Funds may also
be purchased by mail, wire, through an Automatic Investment Plan, or electron-
ically through ACH. The minimum initial purchase requirement for both classes
of the Funds is $1,000 for regular, non-retirement accounts, $1,000 for the
Automatic Investment Plan, and $250 for individual retirement accounts
("IRA"). The minimum subsequent investment for all shareholders is $50. A Fund
may waive its minimum purchase requirement and the Fund's distributor may
reject a purchase order if it considers it in the best interest of the Fund
and its shareholders.
25
<PAGE>
The NAV for each ESC Strategic Fund is determined and its shares are
priced at the close of regular trading on the NYSE, normally at 4:00 p.m.,
Eastern time, on days the NYSE is open. Some of the Funds invest in securities
that are primarily listed on foreign exchanges and trade on weekends or other
days when the Fund does not price its shares. As a result, a Fund's NAV may
change on days when shareholders will be unable to purchase or redeem the
Fund's shares. Each Fund's securities are generally valued at current market
prices. If market quotations are not available, prices will be based on fair
value as determined by methods approved by the Funds' Directors. After the
pricing of a foreign security has been established, if an event occurs which
would likely cause the value to change, the value of the foreign security may
be priced at fair value as determined in good faith by or at the direction of
the Funds' Directors.
Exchange Privileges.
STI Classic Funds. For Investor Shares and Flex Shares, exchange
requests must be for an amount of at least $1,000. For each shareholder,
exchanges are allowed up to four times during a calendar year. This exchange
privilege may be changed or canceled at any time upon 60 days' notice.
Investor Shares of any Fund (including Funds not participating in the Reorga-
nization) may be exchanged for Investor Shares of any other Fund. If shares
are exchanged that were purchased without a sales charge or with a lower sales
charge into a Fund with a sales charge or with a higher sales charge, the
exchange is subject to an incremental sales charge (e.g., the difference
between the lower and higher applicable sales charges). If shares are
exchanged into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange. Flex Shares of any Fund may be
exchanged for Flex Shares of any other Fund.
ESC Strategic Funds. ESC Strategic Fund shares may be exchanged in one
Fund for shares of the same class of another ESC Strategic Fund, usually with-
out paying additional sales charges. No transaction fees are charged for
exchanges. The minimum amount for an initial exchange is $2,000. Shares of a
class of one Fund or shares of the same class of another Fund may not be
exchanged if that Fund is not qualified for sale in the shareholder's state of
residence. The exchange privilege (including automatic exchanges) may be
changed or eliminated at any time without notice to shareholders.
Redemption Procedures.
STI Classic Funds. Investor Shares and Flex Shares held through a bro-
kerage account with SunTrust Securities may be redeemed on any Business Day by
contacting SunTrust Securities directly by mail or telephone. The minimum
amount for telephone redemptions is $1,000. If shares are held through an
account with a broker or other financial institution, shareholders should con-
tact that broker or institution to sell shares. For redemptions of $25,000 or
more, STI Classic Funds must be notified in writing and a signature guarantee
by a bank or other financial institution must be included (a notarized signa-
ture is not sufficient). Holders of Trust Shares may redeem their shares on
any Business Day by contacting SunTrust or the shareholder's financial insti-
tution and by following the procedures established when they opened their
account or accounts with the Funds or with their financial institution or
intermediary. The sale price of each share will be the next NAV determined
after a request is received less, in the case of Flex Shares, any applicable
deferred sales charge. Shareholders with at least $10,000 in their account may
26
<PAGE>
use the systematic withdrawal plan. Under the plan, shareholders may arrange
monthly, quarterly, semi-annual or annual automatic withdrawals of at least
$50 from any Fund.
ESC Strategic Funds. Shareholders may redeem shares at any time. The
sales price will be the next NAV after the sell order is received by the Fund,
its transfer agent, or a shareholder's investment representative. Shareholders
selling shares through a financial adviser or broker may have alternative
redemption procedures. In addition, an adviser and/or broker may have transac-
tion minimums and/or transaction times which will affect the redemption.
Shares may also be redeemed by mail, wire, electronically through ACH, or
through a Systematic Withdrawal Plan. The Systematic Withdrawal Plan requires
that a shareholder's account have a value of $12,000 or more to start with-
drawals. If the value of such account falls below $500 due to withdrawals, the
shareholder may be asked to add sufficient funds to bring the account back to
$500, or the Fund may close the account and mail the proceeds to the share-
holder.
Redemptions In Kind
STI Classic Funds. The Funds generally pay sale (redemption) proceeds in
cash. However, under unusual conditions that make the payment of cash unwise
(and for the protection of the Fund's remaining shareholders) a Fund may pay
all or part of a shareholder's redemption proceeds in liquid securities with a
market value equal to the redemption price (redemption in kind). In the
unlikely event that shares were ever redeemed in kind, shareholders would have
to pay brokerage costs to sell the securities distributed to them, as well as
taxes on any capital gains from the sale, as with any redemption.
ESC Strategic Funds. The Funds reserve the right to make redemptions in
kind with payment in securities rather than cash. This could occur under
extraordinary circumstances, such as a very large redemption that could affect
the Funds' operations (for example, more than 1% of a Fund's net assets). If
the Fund deems it advisable for the benefit of all shareholders, redemption in
kind will consist of securities equal in market value to a shareholder's
shares. When a shareholder converts these securities to cash, shareholder will
pay brokerage charges.
Dividend Policies.
STI Classic Funds. The Small Cap Growth Stock Fund and Growth and Income
Fund distribute income dividends quarterly. The International Equity Fund dis-
tributes income dividends annually. The High Income Fund will distribute
income dividends monthly.
ESC Strategic Funds. Income dividends on the Appreciation Fund, Interna-
tional Equity Fund, Small Cap Fund and Strategic Small Cap II Fund are paid at
least annually. Dividends on the Income Fund are paid monthly.
For both the STI Classic Funds and ESC Strategic Funds, capital gains,
if any, are distributed at least annually.
27
<PAGE>
RISKS
ESC Strategic Small Cap Fund : STI Classic Small Cap Growth Stock Fund
The ESC Strategic Small Cap Fund invests, under normal market condi-
tions, primarily in companies with market capitalization under $800 million.
The principal risks of investing in this Fund are "Market Risk," which is the
risk that the value of a Fund's investments will fluctuate as the stock or
bond markets fluctuate and that prices overall will decline over short or
longer-term periods; "Management Risk," which means the possibility that a
Fund's manager(s) may make poor choices in selecting securities and that the
Fund will not perform as well as other funds; "Equity Risk," which is the risk
that stocks (equity securities) have no guaranteed value and their market
prices can fluctuate, at times dramatically, in response to factors including
market conditions, political and other events and developments affecting the
particular issuer or its industry or market segments; and "Small Capitaliza-
tion Risk," which is the risk that investments in small-capitalization compa-
nies tend to be more volatile and less easily traded than investments in
large-capitalization companies. In addition, small-capitalization companies
may have more risk because they often have limited product lines, markets or
financial resources. Furthermore, investing in companies that are undergoing
internal change may involve special risks due to the unknown effects of
change. Additionally, the Fund is not a "diversified" investment company and
therefore may invest a substantial portion of its assets in securities of par-
ticular issuers. This exposes the Fund to greater risk of negative develop-
ments affecting such an issuer than would be the case for a diversified
investment company. The Fund does intend, however, to meet the regulated
investment company diversification requirements under the Internal Revenue
Code of 1986.
The STI Classic Small Cap Growth Stock Fund invests primarily in U.S.
companies that demonstrate above-average growth potential. The Fund invests in
companies with an established operating history, a solid balance sheet and
market capitalizations of up to about $3 billion. Due to its investment strat-
egy, the Fund may buy and sell securities frequently. This may result in
higher transactions costs and additional capital gains taxes. Because the Fund
invests primarily in common stocks of smaller U.S. companies, the Fund is sub-
ject 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, the prices of these securities could be less sta-
ble than those of large, more established companies.
Risk Differences: The ESC Strategic Small Cap Fund is a "non-diversi-
fied" investment company which means it may invest substantial portions of its
assets in securities of particular issuers and, therefore, be exposed to a
greater risk of negative developments affecting such issuers than would be the
case for the STI Classic Small Cap Growth Stock Fund, which is a "diversified"
investment company. Although both Funds invest in securities of companies with
small capitalizations, the ESC Strategic Small Cap Fund invests in securities
of companies that
28
<PAGE>
generally have smaller capitalization levels than securities of companies held
by the STI Classic Small Cap Growth Fund. As a result, the risks associated
with investments in small-cap companies may be greater for the ESC Strategic
Small Cap Fund.
ESC Strategic Small Cap II Fund: STI Classic Small Cap Growth Stock Fund
The ESC Strategic Small Cap II Fund has all the same risks as the ESC
Strategic Small Cap Fund except, unlike the ESC Strategic Small Cap Fund, the
ESC Strategic Small Cap II Fund is a "diversified" investment company and
would, therefore, not invest substantial portions of its assets in securities
of particular issuers which could expose the Fund to a greater risk of nega-
tive developments affecting these issuers.
The STI Classic Small Cap Growth Stock Fund risks are listed above.
Risk Differences: Although both Funds invest in securities of companies
with small capitalizations, the ESC Strategic Small Cap II Fund invests in
securities of companies that generally have smaller capitalization levels than
securities of companies held by the STI Classic Small Cap Growth Fund. As a
result, the risks associated with investments in small-cap companies may be
greater for the ESC Strategic Small Cap II Fund.
ESC Strategic International Equity Fund: STI Classic International Equity Fund
The ESC Strategic International Equity Fund invests primarily in a
diversified portfolio of publicly traded common stocks and securities convert-
ible into or exchangeable for common stock of non-U.S. based companies. The
Fund diversifies its investments among various non-U.S. countries. Because the
Fund invests in foreign countries, it is subject to "Foreign Risk," which is
the risk that investments in issuers located in foreign countries may have
greater price volatility and less liquidity. Investments in foreign securities
also are subject to political, regulatory and diplomatic risks. Changes in
currency rates are an additional risk of investments in foreign securities and
investments in emerging markets involve additional risks. The Fund is also
subject to Equity Risk, Market Risk and Management Risk, as defined above.
The STI Classic International Equity Fund invests primarily in common
stocks and other equity securities of foreign companies. The Fund's invest-
ments are diversified among at least three foreign countries. The Fund invests
primarily in developed countries, but may invest in countries with emerging
markets. Since it purchases equity securities, the Fund is subject to the risk
that stock prices will fall over short or extended periods of time. Histori-
cally, the equity markets have moved in cycles, and the value of the Fund's
equity securities may fluctuate drastically from day-to-day. Individual compa-
nies may report poor results or be negatively affected by industry and/or eco-
nomic trends and developments. The prices of securities issued by such compa-
nies may suffer a decline in response. These factors contribute to price vola-
tility, which is the principal risk of investing in the Fund. The Fund is also
subject to the risk that its market segment, foreign common stocks, may
underperform other equity market segments or the equity markets as a whole.
Investing in foreign countries poses additional risks since political and eco-
nomic events unique to a country or region will affect those markets and their
issuers. These events will not necessarily affect the U.S. economy or similar
issuers located in the U.S.
29
<PAGE>
In addition, investments in foreign countries are generally denominated in a
foreign currency. As a result, changes in the value of those currencies com-
pared to the U.S. dollar may affect (positively or negatively) the value of
the Fund's investments. These currency movements may happen separately from
and in response to events that do not otherwise affect the value of the secu-
rity in the issuer's home country.
Emerging market countries are countries that the World Bank or the
United Nations considers to be emerging or developing. Emerging markets may be
more likely to experience political turmoil or rapid changes in market or eco-
nomic conditions than more developed countries. In addition, the financial
stability of issuers (including governments) in emerging market countries may
be more precarious than in other countries. As a result, there will tend to be
an increased risk of price volatility associated with the Fund's investments
in emerging market countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.
Risk Differences: No significant differences.
ESC Strategic Appreciation Fund : STI Classic Growth and Income Fund
The ESC Strategic Appreciation Fund invests primarily in a diversified
portfolio of common stocks and securities convertible into common stock issued
by U.S. based companies. The Fund's rebalancing procedures require the Fund to
sell securities in sectors that become overweighted (and presumably over-
valued) and to purchase securities in underweighted (and presumably underval-
ued) sectors. The principal risks of investing in the Fund are Equity Risk,
Market Risk and Management Risk, as defined above. However, other important
risks are Foreign Risk, also defined above, "Interest Rate Risk" and "Credit
Risk," including risks related to investment in securities rated Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Rat-
ings Services ("S&P"), which may be deemed to have speculative characteris-
tics. "Interest Rate Risk" is the risk that the value of the Fund's invest-
ments in income-producing or fixed-income or debt securities will decline as
interest rates rise. "Credit Risk" is the risk that the issuer of a security
will be unable or unwilling to make timely payments of interest or principal,
or to otherwise honor its obligations. This risk is greater for lower rated
securities.
The STI Classic Growth and Income Fund invests primarily in equity secu-
rities, including common stock and listed ADRs of domestic and foreign compa-
nies with market capitalizations of at least $1 billion. However, the average
market capitalization can vary throughout a full market cycle and will be
flexible to allow the Adviser to capture market opportunities. Since it pur-
chases equity securities, the Fund is subject to the risk that stock prices
will fall over short or extended periods of time. Historically, the equity
markets have moved in cycles, and the value of the Fund's securities may fluc-
tuate drastically from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is
the principal risk of investing in the Fund. Investing in foreign countries
poses additional risks since political and economic events unique to a country
or region will affect those markets and their issuers. These events will not
necessarily affect the U.S. economy or similar issuers located in the United
States. In
30
<PAGE>
addition, investments in foreign countries are generally denominated in a for-
eign currency. As a result, changes in the value of those currencies compared
to the U.S. dollar may affect (positively or negatively) the value of a Fund's
investments. These currency movements may happen separately from and in
response to events that do not otherwise affect the value of the security in
the issuer's home country.
Risk Differences: No significant differences.
ESC Strategic Income Fund : STI Classic High Income Fund
The ESC Strategic Income Fund invests primarily in a diversified portfo-
lio of high yielding, lower rated corporate, government and other debt instru-
ments of U.S. issuers, although up to 35% of its assets may be invested in
debt instruments of non-U.S. issuers. The Fund may invest up to 100% of its
assets in debt securities rated below investment grade. Such debt securities
are commonly known as "junk bonds." The principal risks of investing in the
Fund include Market Risk, Management Risk, Foreign Risk, Interest Rate Risk
and Credit Risk, as defined above. Because Credit Risk is greater for lower
rated securities, securities rated Baa by Moody's or BBB by S&P may have spec-
ulative characteristics. Junk bond investments typically have higher yields
than higher rated securities. However, junk bond investments also have greater
risk of untimely payment of principal and interest, as well as greater default
and other risks, than higher rated securities.
The STI Classic High Income Fund will have essentially the same risks as
the ESC Strategic Income Fund.
Risk Differences: No significant differences.
INFORMATION RELATING TO THE REORGANIZATION
Description of the Reorganization. The following summary is qualified in
its entirety by reference to the Reorganization Agreement found in Exhibit A.
The Reorganization Agreement provides that all of the assets and stated
liabilities of each ESC Strategic Fund will be transferred to the correspond-
ing STI Classic Fund at the applicable Effective Time of the Reorganization.
In exchange for the transfer of these assets, the Trust will simultaneously
issue at the applicable Effective Time of the Reorganization a number of full
and fractional shares of each STI Classic Fund to its corresponding ESC Stra-
tegic Fund equal in value to the respective net asset values of that ESC Stra-
tegic Fund immediately prior to the applicable Effective Time of the Reorgani-
zation.
Following the transfer of assets and liabilities in exchange for STI
Classic Fund shares, each ESC Strategic Fund will distribute, in complete liq-
uidation pro rata to its shareholders of record, all the shares of the corre-
sponding STI Classic Funds so received to its shareholders. Shareholders of
each ESC Strategic Fund owning shares at the Effective Times of the Reorgani-
zation will receive a number of shares of the applicable class of the corre-
sponding STI Classic Fund with the same aggregate value as the shareholder had
in the ESC Strategic Fund immedi-
31
<PAGE>
ately before the Reorganization. Such distribution will be accomplished by the
establishment of accounts in the names of the shareholders of the ESC Strate-
gic Funds' shareholders on the share records of STI Classic Funds' transfer
agent. Each account will represent the respective pro rata number of full and
fractional shares of the STI Classic Funds due to the shareholders of the cor-
responding ESC Strategic Funds. The STI Classic Funds do not issue share cer-
tificates to shareholders. Shares of the STI Classic Funds to be issued will
have no preemptive or conversion rights. No front-end sales loads or contin-
gent deferred sales charges will be imposed in connection with the receipt of
such shares by the ESC Strategic Funds' shareholders. The ESC Strategic Funds
then will be terminated under state law.
The Reorganization Agreement provides for the Reorganization to occur in
two steps. For ESC Strategic Funds combining with Existing STI Classic Funds,
the Closing Date is March 27, 2000. For the ESC Strategic Fund transferring
its assets to the New STI Classic Fund, the Closing Date is March 28, 2000.
The Reorganization Agreement provides that the ESC Strategic Funds will pay a
portion of the Reorganization expenses up to the amount each Fund would have
paid during the fiscal year ending March 31, 2000 under the expense caps that
are currently in place for each ESC Strategic Fund. All remaining expenses
will be borne by STES and/or SunTrust.
The Reorganization Agreement contains customary representations, warran-
ties and conditions designed to ensure that the Reorganization is fair to both
parties. The Reorganization Agreement provides that the consummation of the
Reorganization with respect to each ESC Strategic Fund is contingent upon,
among other things: (i) approval of the Reorganization Agreement by the ESC
Strategic Funds shareholders; (ii) the receipt by the ESC Strategic Funds and
the STI Classic Funds of a tax opinion to the effect that the Reorganization
will be tax-free to the ESC Strategic Funds and the STI Classic Funds and
their shareholders; and (iii) receipt by the ESC Strategic Funds and the STI
Classic Funds of an order from the SEC permitting the Reorganization. The
Reorganization Agreement may be terminated if, on the applicable Closing Date,
any of the required conditions have not been met or if the representations and
warranties are not true or, if at any time prior to the Effective Time of the
Reorganization, the Board of Directors of the Corporation or the Board of
Trustees of the Trust determines that the consummation of the transactions
contemplated by the Reorganization Agreement is not in the best interest of
the shareholders of the ESC Strategic Funds or the STI Classic Funds, respec-
tively.
Costs of Reorganization. The ESC Strategic Funds will pay a portion of
the Reorganization expenses up to the amount each Fund would have paid during
the fiscal year ending March 31, 2000 under the expense caps that are cur-
rently in place for each ESC Strategic Fund. There is no expectation that
there will be any rebalancing of the investment portfolios of any STI Classic
Fund as a result of the Reorganization. Nonetheless, should any STI Classic
Fund incur any additional brokerage expenses as a result of any such
rebalancing, those expenses will be borne by that STI Classic Fund. All
remaining expenses will be borne by STES and/or SunTrust. Reorganization
expenses include, without limitation: (a) expenses associated with the prepa-
ration and filing of this Proxy Statement/Prospectus; (b) postage; (c) print-
ing; (d) accounting fees; (e) legal fees incurred by each of the ESC Strategic
Funds; and (f) solicitation costs of the transaction.
32
<PAGE>
Federal Income Taxes. Each combination of an ESC Strategic Fund and a
corresponding STI Classic Fund in the Reorganization is intended to qualify
for federal income tax purposes as a separate tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended. If so, nei-
ther the ESC Strategic Funds nor their shareholders will recognize gain or
loss as a result of the Reorganization; the tax basis of the STI Classic Funds
shares received will be the same as the basis of the ESC Strategic Funds
shares exchanged; and the holding period of the STI Classic Funds shares
received will include the holding period of the ESC Strategic Funds shares
exchanged, provided that the shares exchanged were held as capital assets at
the time of the Reorganization. As a condition to the closing of the Reorgani-
zation, the Companies will receive an opinion from counsel to the Trust to
that effect. No tax ruling from the Internal Revenue Service regarding the
Reorganization has been requested. The opinion of counsel is not binding on
the Internal Revenue Service and does not preclude the Internal Revenue Serv-
ice from adopting a contrary position. Nevertheless, the sale of securities by
the ESC Strategic Funds prior to the Reorganization, whether in the ordinary
course of business or in anticipation of the Reorganization, could result in a
taxable capital gains distribution prior to the Reorganization. Shareholders
should consult their own tax advisers concerning the potential tax conse-
quences of the Reorganization to them, including foreign, state and local tax
consequences.
Capitalization. The following table sets forth as of November 30, 1999:
(i) the unaudited capitalization of each of the STI Classic Funds; (ii) the
unaudited capitalization of each of the ESC Strategic Funds; and (iii) the
unaudited pro forma combined capitalization of the Funds assuming the Reorga-
nization has been approved. If the Reorganization is consummated, the capital-
izations are likely to be different on the Closing Dates as a result of daily
share purchase and redemption activity in the Funds.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Net Asset Shares
Fund Net Assets Value Per Share Outstanding (000)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
STI Classic Small Cap Growth
Stock
Trust Shares $ 206,080,503 $ 16.23 12,700,058
Investor Shares/3/ 12,481,849 16.52 755,473
Flex Shares 6,926,039 16.04 431,730
Total 225,488,391 13,887,261
ESC Strategic Small Cap
Class A 45,102,729 16.95 2,660,246
Class D 14,397,619 16.56 869,339
Total 59,500,348 3,529,586
Combined Funds
Trust Shares 206,080,503 16.23 12,700,058
Investor Shares 57,584,578 16.52 3,485,662
Flex Shares 21,323,658 16.04 1,329,338
Total 284,988,739 17,515,058
STI Classic Small Cap Growth
Stock
Trust Shares 206,080,503 16.23 12,700,058
Investor Shares/3/ 12,481,849 16.52 755,473
Flex Shares 6,926,039 16.04 431,730
Total 225,488,391 13,887,261
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Net Asset Shares
Fund Net Assets Value Per Share Outstanding (000)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ESC Strategic Small Cap II
Class A 10,581,997 10.21 1,036,008
Class D 5,262,760 10.09 521,754
Total 15,844,757 1,557,762
Combined Funds
Trust Shares 206,080,503 16.23 12,700,058
Investor Shares 23,063,826 16.52 1,396,029
Flex Shares 12,188,799 16.04 759,833
Total 241,331,128 14,855,920
STI Classic International
Equity
Trust Shares $ 563,543,423 $ 13.30 42,362,691
Investor Shares 13,209,257 13.19 1,001,173
Flex Shares 15,294,295 12.81 1,193,659
Total 592,046,975 44,557,523
ESC Strategic International
Equity
Class A 6,020,136 9.25 650,674
Class D 1,497,878 8.87 168,965
Total 7,518,014 819,639
Combined Funds
Trust Shares 563,543,423 13.30 42,362,691
Investor Shares 19,229,393 13.19 1,457,590
Flex Shares 16,792,173 12.81 1,310,589
Total 599,564,989 45,130,870
STI Classic Growth and
Income
Trust Shares 679,408,422 15.36 44,243,039
Investor Shares 38,878,160 15.47 2,512,324
Flex Shares 49,931,771 15.33 3,256,380
Total 768,218,353 50,011,743
ESC Strategic Appreciation
Class A 13,084,430 10.45 1,252,499
Class D 3,574,626 10.09 354,329
Total 16,659,056 1,606,828
Combined Funds
Trust Shares 679,408,422 15.36 44,243,039
Investor Shares 51,962,590 15.47 3,358,118
Flex Shares 53,506,397 15.33 3,489,559
Total 784,877,409 51,090,716
STI Classic High Income
Flex Shares N/A N/A N/A
Total N/A N/A N/A
ESC Income
Class A 5,672,094 8.98 631,298
Class D 432,829 9.05 47,813
Total 6,104,923 679,111
Combined Funds
Flex Shares 6,104,923 8.98 679,497
Total 6,104,923 679,497
- ------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
REASONS FOR THE REORGANIZATION
The ESC Strategic Funds consist of five Funds, having in the aggregate
approximately $78 million in assets as of December 31, 1999. The STI Classic
Funds currently consist of 37 Funds, having in the aggregate approximately $19
billion in assets. The net expenses of the STI Classic Funds are lower than
the corresponding ESC Strategic Funds and, for the most part, the performance
of the Existing STI Classic Funds is better than the corresponding ESC Strate-
gic Funds performance. In the case of the New STI Classic Fund, the antici-
pated net expense ratios are expected to be the same or lower than the expense
ratios of its corresponding ESC Strategic Fund. Management of ESC Strategic
Funds believes that the shareholders of the ESC Strategic Funds would benefit
from the generally lower net expenses, better performance, larger asset base,
increased product array and anticipated economies of scale that are expected
to result from the Reorganization.
At a meeting held on December 9, 1999, the Corporation's Board of Direc-
tors determined that the proposed Reorganization would be in the best inter-
ests of each ESC Strategic Fund and its shareholders and that the interests of
the shareholders would not be diluted. Before approving the Reorganization,
the Board examined all factors that it considered relevant, including informa-
tion regarding comparative expense ratios. The Board noted that, in the case
of each STI Classic Fund, expense ratios, taking into account voluntary waiv-
ers, will be lower than the corresponding ESC Strategic Fund. The Board also
compared other aspects of the ESC Strategic Funds and the STI Classic Funds,
including relative performance information, the compatibility of the Funds'
investment objectives, the continuing viability of each class and Fund, the
potential for improved economies of scale, and the Funds' service features,
including the fact that ESC Strategic Fund shareholders will be able to use
exchange privileges as part of a larger and more diverse family of mutual
funds. The Board examined the terms of the Reorganization, including the costs
that will be incurred by the ESC Strategic Funds and the tax consequences of
the Reorganization. The Boards also considered other alternatives to the Reor-
ganization and concluded that, taking into account these other alternatives,
the Reorganization was the course of action that is in the best interests of
the ESC Strategic Funds' shareholders. Based on this information, the Board
recommends that the shareholders of each ESC Strategic Fund approve the Reor-
ganization.
SHAREHOLDER RIGHTS
STI Classic Funds
General. The Trust was established as a business trust under Massachu-
setts law by a Declaration of Trust dated January 15, 1992. The Trust is also
governed by its By-laws and by applicable Massachusetts law.
Shares. STI Funds is authorized to issue an unlimited number of shares
of beneficial interest, without par value, from an unlimited number of series
of shares. Currently, STI Classic Funds consists of 37 separate investment
series offering up to four classes of shares, Trust Shares, Investor Shares,
Flex Shares and Institutional Shares (the STI Classic Funds participating in
the Reorganization do not offer Institutional Shares). The four classes differ
with respect to
35
<PAGE>
minimum investment requirements, Fund expenses, distribution and shareholder
servicing costs, front-end sales loads and contingent deferred sales charges,
as set forth in the STI Classic Funds prospectuses. The shares of each STI
Classic Fund have no preference as to conversion, exchange, dividends, retire-
ment or other features, and have no preemptive rights.
Voting Requirements. Holders of shares of the STI Classic Funds are
entitled to one vote for each full share held and fractional votes for frac-
tional shares. On any matter submitted to a vote of shareholders, all shares
of the Trust entitled to vote shall be voted on by individual series or class,
except that: (i) when so required by the 1940 Act, then shares shall be voted
in the aggregate and not by individual series or class; and (ii) when the
trustees of the Trust (the "Trustees") have determined that the matter only
affects the interest of one or more series or class, then only shareholders of
such series or class(es) shall be entitled to vote.
Shareholder Meetings. Annual meetings of shareholders will not be held,
but special meetings of shareholders may be held under certain circumstances.
A special meeting of the shareholders may be called at any time by the Trust-
ees, 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 the meeting.
Election and Term of Trustees. The STI Classic Funds' affairs are super-
vised by the Trustees under the laws governing business trusts in the state of
Massachusetts. Trustees of the Trust are elected by shareholders holding a
majority of shares entitled to vote. Trustees hold office until their succes-
sors are duly elected and qualified or until their death, removal or resigna-
tion. Shareholders may remove a Trustee by vote of a majority of the votes
entitled to vote, with or without cause. A Trustee elected thereby serves for
the balance of the term of the removed Trustee.
Shareholder Liability. Pursuant to the Trust's Declaration of Trust,
shareholders of the STI Classic Funds generally are not personally liable for
the acts, omissions or obligations of the Trustees or the Trust.
Liability of Trustees. The Trustees shall not be personally liable for
any obligation of the Trust. The Trust will indemnify its Trustees and offi-
cers against all liabilities and expenses except for liabilities arising from
such person's willful misfeasance, bad faith, gross negligence or reckless
disregard of that person's duties.
ESC Strategic Funds
General. The Corporation was organized as a Maryland corporation on
November 24, 1993. The Corporation is governed by its Articles of Incorpora-
tion dated November 24, 1993, as amended, its By-Laws, and applicable Maryland
law.
Shares. The Corporation is authorized to issue up to 650 million shares
of capital stock, with a par value per share of $.001, all of which are desig-
nated Common Stock. The Board of Directors may classify or reclassify any
unissued shares of capital stock into one or more
36
<PAGE>
additional or other classes or series as may be established from time to time
by setting or changing in any one or more respects the designations, prefer-
ences, conversion or other rights, voting powers, restrictions, limitations as
to dividends, qualifications or terms of such shares of stock and pursuant to
such classification or reclassification to increase or decrease the number of
authorized shares of stock, or shares of any existing class or series of
stock. The shares of Common Stock of each of the ESC Strategic Funds are cur-
rently classified into two classes, Class A and Class D shares. The two clas-
ses differ from each other with respect to Fund expenses, distribution costs,
and front-end sales loads, as set forth in the ESC Strategic Funds prospec-
tuses incorporated herein by reference. The shares have no preference as to
conversion, exchange, dividends, retirement or other features and have no pre-
emptive rights.
Voting Requirements. Shareholders of the ESC Strategic Funds are enti-
tled to one vote for each full share held and fractional votes for fractional
shares. At meetings of shareholders, the holders of one-third of the shares of
stock of the Corporation entitled to vote at the meeting, present in person or
by proxy, constitute a quorum unless voting by separate class or series is
required, in which case the presence of one-third of the shares of stock of
such class or series shall constitute a quorum. All shares of all classes and
series shall vote together as a single class, provided that (a) when the Mary-
land General Corporation Law or the Investment Company Act of 1940 requires
that a class or series vote separately with respect to a given matter, the
separate voting requirements of the applicable law shall govern with respect
to the affected class(es) and/or series and other classes and series shall
vote as a single class and (b) unless otherwise required by those laws, no
class or series shall vote on any matter which does not affect the interest of
that class or series.
Shareholder Meetings. An annual meeting of shareholders for the election
of Directors and the transaction of such other business as may properly come
before the meeting will be held at such time and place as the Board of Direc-
tors selects. The Corporation is not required to hold an annual meeting of its
shareholders in any year in which the election of directors is not required to
be acted upon under the 1940 Act. Special meetings of shareholders of a Fund
or class of shareholders may be called at any time by the President, the Sec-
retary or by a majority of the Board of Directors and will be held at such
time and place as may be stated in the notice of the meeting. The Secretary
may call a special meeting of shareholders upon written request by sharehold-
ers entitled to cast no less than 10% of the votes entitled to be cast at the
meeting. Before a notice of a special meeting called by shareholders will be
sent out by the Secretary, such shareholders must pay the estimated costs of
preparing and mailing the notice.
Election and Term of Directors. Directors are elected annually, by writ-
ten ballot at the annual meeting of shareholders or a special meeting held for
that purpose. If no annual meeting of the shareholders of the Corporation is
required to be held in a particular year pursuant to the By-Laws, Directors
will be elected at the next annual meeting held. The term of office of each
Director shall be from the time of his or her election and qualification until
the election of Directors next succeeding his or her election and until his or
her successor shall have been elected and shall have qualified. Any Director
may be removed by a majority vote of the votes entitled to be cast for the
election of Directors. If any vacancy occurs in the Board of Directors by rea-
son of death, resignation, removal or otherwise, the remaining Directors shall
continue to act and, subject to the provisions of the 1940 Act, the vacancy
may be filled by a majority of the
37
<PAGE>
remaining Directors, although less than a quorum (if not previously filled by
the shareholders). Vacancies created by reason of an increase in the autho-
rized number of Directors (if not previously filled by the shareholders) may
be filled only by a majority vote of the entire Board of Directors.
Shareholder Liability. The shareholders of the ESC Strategic Funds have
no personal liability for acts or obligations of the Corporation.
Liability of Directors. To the fullest extent permitted by the Maryland
General Corporation Law and the 1940 Act, no Director or officer of the Corpo-
ration shall be liable to the Corporation or to its shareholders for money
damages. The Articles of Incorporation provide that the Corporation will
indemnify its directors and officers to the fullest extent permitted under
Maryland Law and the 1940 Act.
Liquidation or Dissolution. At any time there are no shares outstanding
for a particular class or series, the Board of Directors may liquidate such
class or series in accordance with applicable law. In the event of the liqui-
dation or dissolution of the Corporation, or of a class or series, when there
are shares outstanding of the Corporation or of the class or series, the
shareholders of the Corporation or of each class or series, as applicable, are
entitled to receive, as declared by the Board of Directors, the excess of the
assets attributable to that class or series over the liabilities of that class
or series. The excess amounts will be distributed to each shareholder of the
class or series in proportion to the number of outstanding shares of that
class or series held by that shareholder.
The foregoing is only a summary of certain rights of shareholders of the
STI Classic Funds and the ESC Strategic Funds under their governing charter
documents and By-Laws, state law and the 1940 Act and is not a complete
description of provisions contained in those sources. Shareholders should
refer to the provisions of state law, the 1940 Act and rules thereunder
directly for a more thorough description.
INFORMATION ABOUT THE STI CLASSIC FUNDS AND ESC STRATEGIC FUNDS
Information concerning the operation and management of the STI Classic
Funds is incorporated herein by reference to the current prospectus relating
to the Existing STI Classic Funds and the New STI Classic Fund, which is
incorporated herein by reference and a copy of which accompanies this Proxy
Statement/Prospectus. Additional information about the STI Classic Funds is
included in the Statements of Additional Information for the Existing STI
Classic Funds dated October 1, 1999, and for the New STI Classic Fund dated
January 24, 2000, which are available upon request and without charge by call-
ing 1-800-874-4770.
Information about the ESC Strategic Funds is included in the current
prospectus relating to those Funds dated July 30, 1999, which is incorporated
by reference herein. Additional information is included in the Statement of
Additional Information of ESC Strategic Funds dated July 29, 1999, which is
available upon request and without charge by calling 1-800-261-FUND (3863).
The current prospectus and Statement of Additional Information have been filed
with the SEC.
38
<PAGE>
The STI Classic Funds and ESC Strategic Funds are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information, including
proxy material and charter documents, with the SEC. These items may be
inspected and copied at the Public Reference Facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549.
Interest of Certain Persons in the Transactions. SunTrust may be deemed
to have an interest in the Reorganization because certain of its subsidiaries
provide investment advisory services to the STI Classic Funds and the ESC
Strategic Funds pursuant to advisory agreements with the Funds. Future growth
of the STI Classic Funds can be expected to increase the total amount of fees
payable to these subsidiaries and to reduce the number of fees required to be
waived to maintain total fees of the Funds at agreed upon levels.
Financial Statements. The financial statements of the Existing STI Clas-
sic Funds contained in the STI Classic Funds annual report to shareholders for
the fiscal year ended May 31, 1999 have been audited by Arthur Andersen, LLP,
its independent accountants. These financial statements, as well as interim
financial statements for the Existing STI Classic Funds dated as of November
30, 1999 and pro forma financial statements for the STI Classic Small Cap
Growth Stock Fund and STI Classic High Income Fund reflecting those Funds
after the Reorganization (as of November 30, 1999, the ESC Strategic Interna-
tional Equity Fund and ESC Strategic Appreciation Fund each had a net asset
value which was not more than 10 percent of its corresponding STI Classic
Fund's net asset value), are incorporated by reference into this Proxy
Statement/Prospectus insofar as such financial statements relate to the par-
ticipating STI Classic Funds, and not to any other Funds that are part of the
STI Classic Fund families and described therein.
The financial statements of the ESC Strategic Funds contained in ESC
Strategic Funds' Annual Report to shareholders for the fiscal year ended March
31, 1999 have been audited by PricewaterhouseCoopers LLP, its independent
accountants. These financial statements are incorporated by reference into
this Proxy Statement/Prospectus. The STI Classic Funds and ESC Strategic Funds
each will furnish, without charge, a copy of its most recent Semi-Annual
Report succeeding such Annual Report, if any, on request. Requests should be
directed to the STI Classic Funds at SEI Investments Distribution Co., Oaks,
PA 19456 or by calling 1-800-874-4770 and to the ESC Strategic Funds at P.O.
Box 182487, Columbus, OH 43218-2487 or by calling 1-800-261-FUND (3863).
Pending Litigation. On May 19, 1999, a class action complaint was filed
in the State of Tennessee Circuit Court for Davidson County at Nashville
against the Corporation and STES by Allison Hines, on behalf of herself and
all others similarly situated who invested in the ESC Strategic Value Fund
(the "Value Fund"), a series of the Corporation that voluntarily liquidated in
March 1999. On June 17, 1999, defendants removed the case to the United States
District Court for the Middle District of Tennessee (Nashville Division). On
June 23, 1999, plaintiff filed an amended complaint ("Complaint") alleging
claims under Section 12(2) of the Securities Act of 1933 and Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as
well as state law claims for securities fraud, common law fraud, breach of
fiduciary duty, and breach of implied contract. The crux of the Complaint is
that the prospectus and
39
<PAGE>
other filings related to the Value Fund failed to disclose the circumstances
and risks under which the Value Fund might liquidate and that Value Fund made
misrepresentations about seeking investors for the long term. The Complaint
seeks rescission and/or damages in an amount to be proved at trial, punitive
damages and attorney's fees. On September 17, 1999, the state securities fraud
claim, as well as the common law fraud and breach of implied contract claims
were dismissed with prejudice. The federal securities law and breach of fidu-
ciary duty claims remain pending.
THE BOARD OF DIRECTORS OF THE ESC STRATEGIC FUNDS, INC. RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT.
VOTING MATTERS
General Information. This Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies by the Board of Directors of
the ESC Strategic Funds in connection with the Meeting. It is expected that
the solicitation of proxies will be primarily by mail. Officers and service
contractors of the STI Classic Funds and ESC Strategic Funds may also solicit
proxies by telephone, facsimile, Internet or in person. The cost of solicita-
tion will be borne by STES.
Voting Rights and Required Vote. Shareholders of the ESC Strategic Funds
are entitled to one vote for each full share held and fractional votes for
fractional shares. The holders of one-third of the shares of stock of the Cor-
poration and entitled to vote at the Meeting, present in person or by proxy,
constitute a quorum. Approval of the Reorganization with respect to each ESC
Strategic Fund requires the affirmative vote of a majority of the aggregate
number of votes entitled to be cast. Any shareholder giving a proxy may revoke
it at any time before it is exercised by submitting to ESC Strategic Funds a
written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person. The proposed Reorganization of the ESC Stra-
tegic Funds will be voted upon separately by the shareholders of the respec-
tive Funds. The consummation of each Fund's Reorganization is not conditioned
on the approval of any other Fund.
Shares represented by a properly executed proxy will be voted in accor-
dance with the instructions thereon, or if no specification is made, the
shares will be voted "FOR" the approval of the Reorganization. It is not
anticipated that any matters other than the approval of the Reorganization
will be brought before the Meeting. Should other business properly be brought
before the Meeting, it is intended that the accompanying proxies will be voted
in accordance with the judgment of the persons named as such proxies. For the
purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (that is, proxies from brokers
or nominees indicating that such persons have not received instructions from
the beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will be treated as shares that are present but which have not been vot-
ed. For this reason, abstentions and broker non-votes will have the effect of
a "no" vote for purposes of obtaining the requisite approval of the Reorgani-
zation.
40
<PAGE>
If sufficient votes in favor of the proposals set forth in the Notice of
the Special Meeting are not received by the time scheduled for the Meeting,
the holders of a majority of shares present in person or by proxy at the meet-
ing and entitled to vote at the Meeting, whether or not sufficient to consti-
tute a quorum, or any officer present entitled to preside or act as Secretary
of such meeting, may adjourn the meeting without determining the date of the
new meeting or from time to time without further notice to a date not more
than 120 days after the original record date. Any business that might have
been transacted at the meeting originally called may be transacted at any such
adjourned meeting at which a quorum is present. The costs of any additional
solicitation and of any adjourned session will be borne by STES.
Record Date and Outstanding Shares. Only shareholders of record of the
ESC Strategic Funds at the close of business on January 18, 2000 (the "Record
Date") are entitled to notice of and to vote at the Meeting and any postpone-
ment or adjournment thereof. At the close of business on the Record Date there
were outstanding and entitled to vote:
<TABLE>
<CAPTION>
ESC Strategic Funds Shares of common stock
------------------- ----------------------
<S> <C>
Small Cap Fund
Class A........................................... 1,661,039.605
Class D........................................... 573,479,131
Small Cap II Fund
Class A........................................... 607,839.799
Class D........................................... 391,020.787
International Equity Fund
Class A........................................... 186,392.847
Class D........................................... 120,489.634
Appreciation Fund
Class A........................................... 809,356.858
Class D........................................... 254,909.703
Income Fund
Class A........................................... 405,903.703
Class D........................................... 50,523.243
</TABLE>
41
<PAGE>
Security Ownership of Certain Beneficial Owners and Management.
ESC Strategic Funds. As of the Record Date, the officers and Directors
of the ESC Strategic Funds as a group, beneficially owned less than 1% of the
outstanding Class A and Class D shares of the ESC Strategic Funds. As of the
Record Date, to the best of the knowledge of the ESC Strategic Funds, the fol-
lowing persons owned of record or beneficially 5% or more of the outstanding
shares of each of the classes of the following ESC Strategic Funds:
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Percentage Type of
Name and Address Fund/Class Ownership Ownership
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
DB ALEX BROWN LLC.............. Appreciation Fund, Class 64.43% **
A
PO BOX 1346
BALTIMORE, MD 21203-
DB ALEX BROWN LLC.............. International Equity 18.14% **
PO BOX 1346 Fund, Class A
BALTIMORE, MD 21203-
EQUITABLE TRUST COMPANY........ International Equity 26.08% **
800 NASHVILLE CITY CTR Fund, Class A
NASHVILLE, TN 37219-1743
JUPITER & CO................... Small Cap Fund, Class A 13.50% **
PO BOX 9130 FPG 90
BOSTON, MA 02117-
EQUITABLE TRUST COMPANY........ Small Cap Fund, Class A 8.14% **
800 NASHVILLE CITY CTR
NASHVILLE, TN 37219-1743
DB ALEX BROWN LLC.............. Income Fund, Class A 6.39% **
PO BOX 1346
BALTIMORE, MD 21203-
HOMESURE OF AMERICA INC........ Income Fund, Class A 65.07% **
PO BOX 551510
FT LAUDERDALE, FL 33355-1510
EQUITABLE SECURITIES Small Cap II Fund, Class
CORPORATION................... A 8.26% **
800 NASHVILLE CITY CTR
NASHVILLE, TN 37219-1743
VANGUARD GROUP................. Small Cap II Fund, Class 8.00% **
A
PO BOX 2600 VM 613
VALLEY FORGE, PA 19482-
DB ALEX BROWN LLC.............. Appreciation Fund, Class 11.64% **
D
PO BOX 1346
BALTIMORE, MD 21203-
DB ALEX BROWN LLC.............. International Equity 56.47% **
Fund,
PO BOX 1346 Class D
BALTIMORE, MD 21203-
</TABLE>
42
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Percentage Type of
Name and Address Fund/Class Ownership Ownership
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
DB ALEX BROWN LLC.............. Income Fund, Class D 67.59% **
PO BOX 1346
BALTIMORE, MD 21203-
PAINEWEBBER FOR THE BENEFIT OF
MARY E MOORE.................. Income Fund, Class D 5.02% +
935 DAVIS DRIVE NW
ATLANTA, GA 30327-4533
ROCKIE D MILLER................ Income Fund, Class D 8.10% +
345 HIGHLAND ST
BELMONT, WI 53510-
PAINEWEBBER FOR THE BENEFIT OF Small Cap II Fund, Class
JANE B COKER.................. D 5.25% +
1350 BARRON COURT NW
ATLANTA, GA 30327-1804
- ------------------------------------------------------------------------------
</TABLE>
* Record and Beneficial Ownership.
** Record Ownership Only.
+ Beneficial Owner Only.
43
<PAGE>
STI Classic Funds. As of the Record Date, the officers and Trustees of
the participating STI Classic Funds as a group, beneficially owned less than
1% of the outstanding Trust Shares, Investor Shares and Flex Shares of the
participating STI Classic Funds. As of the Record Date, to the best of the
knowledge of the STI Classic Funds, the following persons owned of record or
beneficially 5% or more of the outstanding shares of each of the three classes
of the following STI Classic Funds:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Percentage Type of
Name and Address Fund/Class Ownership Ownership
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
TRUSTMAN--..................... International Equity 93.14% **
SUNTRUST BANKS Fund, Trust Class
MUTUAL FUND RECONCILIATION UNIT
MAIL CENTER 3144
P O BOX 105870
ATLANTA GA 30348-5870
TRUSTMAN--..................... Small Cap Growth Stock 85.90% **
SUNTRUST BANKS Fund, Trust Class
MUTUAL FUND RECONCILIATION UNIT
MAIL CENTER 3144
P O BOX 105870
ATLANTA GA 30348-5870
P O BOX 105870
ATLANTA GA 30348-5870
TRUSTMAN--..................... Growth and Income, Trust 90.89% **
SUNTRUST BANKS Class
MUTUAL FUND RECONCILIATION UNIT
MAIL CENTER 3144
P O BOX 105870
ATLANTA GA 30348-5870
</TABLE>
- -------------------------------------------------------------------------------
* Record and Beneficial Ownership.
** Record Ownership Only.
+ Beneficial Owner Only.
Expenses. In order to obtain the necessary quorum at the Meeting, addi-
tional solicitations may be made by mail, telephone, telegraph, facsimile or
personal interview by representatives of the Trust or the Advisers at an esti-
mated cost of approximately $15,000. All costs of solicitation (including the
printing and mailing of this proxy statement, meeting notice and form of
proxy, as well as any necessary supplementary solicitations) will be paid by
the ESC Strategic Funds and STES and/or SunTrust. Persons holding shares as
nominees will, upon request, be reimbursed for their reasonable expenses in
sending soliciting material to their principals.
OTHER BUSINESS
The Board of Directors of the Corporation knows of no other business to
be brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
44
<PAGE>
SHAREHOLDER INQUIRIES
ESC Strategic Funds. Shareholder inquiries may be addressed to ESC Stra-
tegic Funds in writing at the address on the cover page of this Proxy
Statement/Prospectus or by telephoning 1-800-261-FUND (3863).
STI Classic Funds. Shareholder inquiries may be addressed to STI Classic
Funds in writing at SEI Investments Distribution Co. or by calling 1-800-874-
4770.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO VOTE BY MAIL, PHONE, THE INTERNET, OR IN PERSON AT THE MEETING.
INFORMATION ON THE VARIOUS MANNERS OF VOTING ARE SET FORTH IN THE ENCLOSED
PROXY.
SHAREHOLDER INQUIRIES
ESC Strategic Funds. Shareholder inquiries may be addressed to ESC Stra-
tegic Funds in writing at the address on the cover page of this Proxy
Statement/Prospectus or by telephoning 1-800-261-FUND (3863).
STI Classic Funds. Shareholder inquiries may be addressed to STI Classic
Funds in writing at SEI Investments Distribution Co. or by calling 1-800-874-
4770.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO VOTE BY MAIL, PHONE, THE INTERNET, OR IN PERSON AT THE MEETING.
INFORMATION ON THE VARIOUS MANNERS OF VOTING ARE SET FORTH IN THE ENCLOSED
PROXY.
45
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this day of February, 2000, by and between STI Classic Funds, a Massa-
chusetts business trust, with its principal place of business at 2 Oliver
Street, Boston, MA 02109 (the "Trust"), with respect to its Small Cap Growth
Stock Fund, International Equity Fund, Growth and Income Fund and High Income
Fund, each a separate series of the Trust (each an "Acquiring Fund" and,
together, the "Acquiring Funds"), and ESC Strategic Funds, Inc., a Maryland
corporation, with its principal place of business at 3435 Stelzer Road, Colum-
bus, OH 43219 ("ESC Strategic Funds"), with respect to its Small Cap Fund,
Small Cap II Fund, International Equity Fund, Appreciation Fund and Income
Fund, each a separate series of ESC Strategic Funds (each a "Selling Fund"
and, together the "Selling Funds" and, collectively with the Acquiring Funds,
the "Funds").
This Agreement is intended to be, and is adopted as, a plan of reorgani-
zation within the meaning of Section 368(a) of the United States Internal Rev-
enue Code of 1986, as amended (the "Code"). The reorganization will consist
of: (i) the transfer of all of the assets of each Selling Fund in exchange
for, as applicable, Investor Shares and Flex Shares of beneficial interest, no
par value per share, of its respective Acquiring Fund ("Acquiring Fund
Shares") as set forth on Schedule A attached hereto; (ii) the assumption by
each Acquiring Fund of the identified liabilities of each Selling Fund; and
(iii) the distribution, after the Closing Dates hereinafter referred to, of
the Acquiring Fund Shares to the shareholders of each Selling Fund and the
liquidation of each Selling Fund as provided herein, all upon the terms and
conditions set forth in this Agreement (the "Reorganization").
WHEREAS, each Acquiring Fund and each Selling Fund is a separate series
of the Trust and ESC Strategic Funds, respectively, and the Trust and ESC
Strategic Funds are open-end, registered management investment companies and
each Selling Fund owns securities that generally are assets of the character
in which its respective Acquiring Fund is permitted to invest;
WHEREAS, each Fund is authorized to issue its shares of beneficial
interest or shares of common stock, as the case may be;
WHEREAS, the Trustees of the Trust have determined that the Reorganiza-
tion, with respect to each Acquiring Fund, is in the best interests of each
Acquiring Fund's shareholders and that the interests of the existing share-
holders of the Acquiring Fund will not be diluted as a result of the Reorgani-
zation;
WHEREAS, the Directors of ESC Strategic Funds have determined that the
Reorganization, with respect to each Selling Fund, is in the best interests of
the Selling Fund's shareholders and that the interests of the existing share-
holders of the Selling Fund will not be diluted as a result of the Reorganiza-
tion;
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows;
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUNDS IN EXCHANGE FOR ACQUIRING FUND SHARES
AND THE ASSUMPTION OF SELLING FUNDS' LIABILITIES AND LIQUIDATION OF THE
SELLING FUNDS
1.1 The Exchange. Subject to the terms and conditions contained herein
and on the basis of the representations and warranties contained herein, each
Selling Fund agrees to transfer all of its assets and stated liabilities, as
set forth in paragraph 1.2, to its respective Acquiring Fund. In exchange,
each Acquiring Fund agrees: (i) to deliver to its respective Selling Fund the
number of full and fractional Acquiring Fund Shares, determined by (a) multi-
plying the shares outstanding of each class of the Selling Fund by (b) the
ratio computed by dividing (x) the net asset value per share of each such
class of the Selling Fund by (y) the net asset value per share of the corre-
sponding class of Acquiring Fund Shares computed in the manner and as of the
time and date set forth in paragraph 2.2; and (ii) to assume the identified
liabilities of the Selling Fund, as set forth in paragraph 1.3. Such transac-
tions shall take place at the closing dates provided for in paragraph 3.1.
1.2 Assets to be Acquired. The assets of each Selling Fund to be
acquired by its respective Acquiring Fund shall consist of all property,
including, without limitation, all cash, securities, commodities, interests in
futures and dividends or interest receivables, owned by the Selling Fund and
any deferred or prepaid expenses shown as an asset on the books of such Sell-
ing Fund on its respective Closing Date.
Each Selling Fund has provided its respective Acquiring Fund with its
most recent audited financial statements, which contain a list of all of the
Selling Fund's assets as of the date of such statements. Each Selling Fund
hereby represents that as of the date of the execution of this Agreement,
there have been no changes in its financial position as reflected in such
financial statements other than those occurring in the ordinary course of
business in connection with the purchase and sale of securities and the pay-
ment of normal operating expenses and the payment of dividends, capital gains
distributions and redemption proceeds to shareholders.
Each Selling Fund will, within a reasonable period of time prior to its
respective Closing Date, furnish each Acquiring Fund with a list of the Sell-
ing Fund's portfolio securities and other investments. Each Acquiring Fund
will, within a reasonable time prior to its respective Closing Date, furnish
its respective Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to above that do not conform to the Acquiring
Fund's investment objectives, policies, and restrictions. A Selling Fund, if
requested by its Acquiring Funds, will dispose of securities on the Acquiring
Fund's list prior to its respective Closing Date. In addition, if it is deter-
mined that the portfolios of a Selling Fund and its Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the Acquiring Fund with respect to such investments, the Selling
Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount
of such investments as may be necessary to avoid violating such
2
<PAGE>
limitations as of its respective Closing Date. Notwithstanding the foregoing,
nothing herein will require a Selling Fund to dispose of any investments or
securities if, in the reasonable judgment of the Selling Fund's directors or
adviser, such disposition would adversely affect the tax-free nature of the
Reorganization or would violate their fiduciary duties to the Selling Fund's
shareholders.
1.3 Liabilities to be Assumed. Each Selling Fund will endeavor to dis-
charge all of its known liabilities and obligations to the extent possible
prior to its respective Closing Date. Each Acquiring Fund shall assume only
those liabilities, expenses, costs, charges and reserves reflected on a State-
ment of Assets and Liabilities of its respective Selling Fund prepared on
behalf of the Selling Fund, as of the Valuation Date (as defined in paragraph
2.1), in accordance with generally accepted accounting principles consistently
applied from the prior audited period. Each Acquiring Fund shall assume only
those liabilities of its respective Selling Fund reflected in its Statement of
Assets and Liabilities and shall not assume any other liabilities, whether
absolute or contingent, known or unknown, accrued or unaccrued, all of which
shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of cal-
culating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by an Acquiring Fund under the National Asso-
ciation of Securities Dealers, Inc. ("NASD") Conduct Rule 2830 (the "Maximum
Amount"), each Acquiring Fund will add to the Maximum Amount immediately prior
to the Reorganization, the Maximum Amount of each Selling Fund immediately
prior to the Reorganization, calculated in accordance with NASD Conduct Rule
2830.
1.4 Prior to each Closing Date, the Trust and ESC Strategic Funds shall
file appropriate Articles of Transfer pursuant to the laws of the State of
Maryland, effective as of each respective Closing Date.
1.5 Liquidation and Distribution. On or as soon after its Closing Date
as is conveniently practicable (the "Liquidation Date"): (a) each Selling Fund
will distribute in complete liquidation of the Selling Fund, pro rata to its
shareholders of record, determined as of the close of business on the Valua-
tion Date (the "Selling Fund Shareholders"), all of the Acquiring Fund Shares
received by the Selling Fund pursuant to paragraph 1.1; and (b) the Selling
Fund will thereupon proceed to dissolve and terminate as set forth in para-
graph 1.9 below. Such distribution will be accomplished by the transfer of
Acquiring Fund Shares credited to the account of the Selling Fund on the books
of the Acquiring Fund to open accounts on the share records of the Acquiring
Fund in the name of the Selling Fund Shareholders, and representing the
respective pro rata number of Acquiring Fund Shares due such shareholders. All
issued and outstanding shares of the Selling Fund will simultaneously be can-
celed on the books of the Selling Fund. The Acquiring Fund shall not issue
certificates representing Acquiring Fund Shares in connection with such trans-
fer. Each Selling Fund Shareholder shall have the right to receive any unpaid
dividends or other distributions that were declared by the Selling Fund before
the Effective Time with respect to Selling Fund shares that are held of record
by a Selling Fund Shareholder at the Effective Time on its respective Closing
Date.
3
<PAGE>
1.6 Ownership of Shares. Ownership of Acquiring Fund Shares will be
shown on the books of each Acquiring Fund's transfer agent. Shares of each
Acquiring Fund will be issued simultaneously to its corresponding Selling
Fund, in an amount equal in value to the net asset value of each Selling
Fund's shares, to be distributed to shareholders of each Selling Fund.
1.7 Transfer Taxes. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the Sell-
ing Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Reporting Responsibility. Any reporting responsibility of each Sell-
ing Fund is and shall remain the responsibility of the Selling Fund, up to and
including its respective Closing Date, and such later date on which the Sell-
ing Fund is terminated.
1.9 Termination. Each Selling Fund shall be terminated promptly follow-
ing its respective Closing Date and the making of all distributions pursuant
to paragraph 1.5.
1.10 Subject to the conditions set forth in this Agreement, the failure
of one of the Selling Funds to consummate the transactions contemplated hereby
shall not affect the consummation or validity of the Reorganization with
respect to any other Selling Fund, and the provisions of this Agreement shall
be construed to effect this intent, including, without limitation, as the con-
text requires, construing the terms "Acquiring Fund" and "Selling Fund" as
meaning only those series of the Trust and ESC Strategic Funds, respectively,
which are involved in the Reorganization as of the Closing Dates.
ARTICLE II
VALUATION
2.1 Valuation of Assets. The value of a Selling Fund's assets to be
acquired by its respective Acquiring Fund hereunder shall be the value of such
assets computed as of the close of regular trading on the New York Stock
Exchange ("NYSE") on the business day immediately prior to each respective
Closing Date (such time and date being hereinafter called a "Valuation Date"),
using the valuation procedures set forth in the ESC Strategic Funds' Articles
of Incorporation and each Selling Fund's then current prospectuses and state-
ments of additional information or such other valuation procedures as shall be
mutually agreed upon by the parties. Each Acquiring Fund and Selling Fund
agrees, however, to use all commercially reasonable efforts to resolve any
material pricing differences between the prices of portfolio securities deter-
mined in accordance with the pricing policies and procedures of an Acquiring
Fund and those determined in accordance with the pricing policies and proce-
dures of its respective Selling Fund.
2.2 Valuation of Shares. The net asset value per share of Acquiring Fund
Shares shall be the net asset value per share computed as of the close of nor-
mal trading on the NYSE on the Valuation Date, using the valuation procedures
set forth in the Trust's Declaration of Trust and each Acquiring Fund's then
current prospectuses and statements of additional information.
4
<PAGE>
2.3 Shares to be Issued. The number of each Acquiring Fund's shares of
each class to be issued (including fractional shares, if any) in exchange for
its respective Selling Fund's assets, shall be determined by (a) multiplying
the shares outstanding of each class of the Selling Fund by (b) the ratio com-
puted by (x) dividing the net asset value per share of the Selling Fund of
each of its classes by (y) the net asset value per share of the corresponding
classes of the Acquiring Fund determined in accordance with paragraph 2.2
[(a) X (b), where (b) = (x) / (y)]. Holders of Class A shares of the Selling
Funds, with the exception of the ESC Strategic Income Fund, will receive
Investor Shares of the corresponding Acquiring Funds. Holders of Class D
shares of the Selling Funds and holders of Class A shares of the ESC Strategic
Income Fund will receive Flex Shares of the corresponding Acquiring Funds.
Holders of Class A shares and Class D shares, respectively, of the ESC Strate-
gic Small Cap Fund and the ESC Strategic Small Cap II Fund will receive
Investor Shares and Flex Shares, respectively, of the STI Classic Small Cap
Growth Stock Fund.
2.4 Determination of Value. Except with respect to a Selling Fund's
assets, which shall be valued by BISYS Fund Services, Limited Partnership
("BISYS"), all computations of value shall be made by SunTrust Bank, Atlanta
in accordance with its regular practice in pricing the shares and assets of
each Acquiring Fund.
ARTICLE III
CLOSINGS AND CLOSING DATES
3.1 Closing Dates. The closing (each a "Closing" and collectively, the
"Closings") shall occur in two steps. There will be a separate closing on or
about March 27, 2000 for the ESC Strategic Funds' Small Cap Fund, Small Cap II
Fund, International Equity Fund and Appreciation Fund and a separate closing
on March 28, 2000 for the ESC Income Fund or such other date(s) as the parties
may agree to in writing (each a "Closing Date" and collectively, the "Closing
Dates"). All acts taking place at the Closings shall be deemed to take place
immediately prior to the Closing Dates unless otherwise provided. The Closings
shall be held as of 9:00 a.m. (the "Effective Time") at the offices of the SEI
Investments, One Freedom Valley Drive, Oaks, PA 19456, or at such other time
and/or place as the parties may agree.
3.2 Custodian's Certificate. Union Bank of California, as custodian for
each Selling Fund (the "Custodian"), shall deliver at the Closing a certifi-
cate of an authorized officer stating that: (a) each Selling Fund's portfolio
securities, cash, and any other assets shall have been delivered in proper
form to its respective Acquiring Fund on the Closing Dates; and (b) all neces-
sary taxes including all applicable federal and state stock transfer stamps,
if any, shall have been paid, or provision for payment shall have been made,
in conjunction with the delivery of portfolio securities by the Selling Fund.
3.3 Effect of Suspension in Trading. In the event that on the Valuation
Date, either: (a) the NYSE or another primary exchange on which the portfolio
securities of an Acquiring Fund or a Selling Fund are purchased or sold, shall
be closed to trading or trading on such exchange shall be restricted; or (b)
trading or the reporting of trading on the NYSE or elsewhere shall be dis-
rupted so that accurate appraisal of the value of the net assets of an Acquir-
ing Fund
5
<PAGE>
or a Selling Fund is impracticable, the Valuation Date shall be postponed
until the first business day after the day when trading is fully resumed and
reporting is restored.
3.4 Transfer Agent's Certificate. BISYS, as transfer agent for each
Selling Fund as of the Closing Dates, shall deliver at the Closings a certifi-
cate of an authorized officer stating that its records contain the names and
addresses of Selling Fund Shareholders, and the number and percentage owner-
ship of outstanding shares owned by each such shareholder immediately prior to
the Closings. Each Acquiring Fund shall issue and deliver or cause Federated
Services Company, its transfer agent, to issue and deliver a confirmation evi-
dencing Acquiring Fund Shares to be credited on the Closing Dates to the Sec-
retary of ESC Strategic Funds or provide evidence satisfactory to the Selling
Fund that such Acquiring Fund Shares have been credited to the Selling Fund's
account on the books of the Acquiring Fund. At the Closings, each party shall
deliver to the other such bills of sale, checks, assignments, share certifi-
cates, receipts and other documents, if any, as such other party or its coun-
sel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations of the Selling Funds. Each Selling Fund represents
and warrants to its respective Acquiring Fund as follows:
(a) The Selling Fund is a separate series of a corporation duly orga-
nized, validly existing, and in good standing under the laws of the State of
Maryland.
(b) The Selling Fund is a separate series of a Maryland corporation that
is registered as an open-end management investment company, and such corpora-
tion's registration with the Securities and Exchange Commission (the "Commis-
sion") as an investment company under the Investment Company Act of 1940 (the
"1940 Act"), is in full force and effect.
(c) The current prospectus and statement of additional information of
the Selling Fund conform in all material respects to the applicable require-
ments of the Securities Act of 1933 (the "1933 Act") and the 1940 Act, and the
rules and regulations thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated or nec-
essary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) The Selling Fund is not, and the execution, delivery, and perfor-
mance of this Agreement (subject to shareholder approval) will not result in
the violation of any provision of ESC Strategic Funds' Articles of Incorpora-
tion or By-Laws or of any material agreement, indenture, instrument, contract,
lease, or other undertaking to which the Selling Fund is a party or by which
it is bound.
(e) The Selling Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to it prior
to the Closing Date, except for
6
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liabilities, if any, to be discharged or reflected in the Statement of Assets
and Liabilities as provided in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or to its knowl-
edge threatened against the Selling Fund or any of its properties or assets,
which, if adversely determined, would materially and adversely affect its
financial condition, the conduct of its business, or the ability of the Sell-
ing Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution
of such proceedings and are not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially
and adversely affects the Selling Fund's business or its ability to consummate
the transactions contemplated herein.
(g) The financial statements of the Selling Fund are in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquiring Funds) fairly reflect the financial con-
dition of the Selling Fund as of September 30, 1999, and there are no known
contingent liabilities of the Selling Fund as of that date not disclosed in
such statements.
(h) Since September 30, 1999, there have been no material adverse
changes in the Selling Fund's financial condition, assets, liabilities for
business (other than changes occurring in the ordinary course of business), or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h),
a decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and reports
of the Selling Fund required by law to be filed by such date, shall have been
filed, and all federal and other taxes shown due on such returns and reports
shall have been paid, or provision shall have been made for the payment there-
of. To the best of the Selling Fund's knowledge, no such return is currently
under audit, and no assessment has been asserted with respect to such returns.
(j) All issued and outstanding shares of the Selling Fund are, and at
the Closing Date, will be duly and validly issued and outstanding, fully paid
and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by
the persons and in the amounts set forth in the records of the Selling Fund's
transfer agent as provided in paragraph 3.4. The Selling Fund has no outstand-
ing options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, and has no outstanding securities convertible into any of
the Selling Fund shares.
(k) At the Closing Date, the Selling Fund will have good and marketable
title to the Selling Fund's assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2, and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, and the filing of Articles of Transfer pursuant to
the laws of the State of Maryland, the Acquiring Fund will acquire good and
marketable title, subject to
7
<PAGE>
no restrictions on the full transfer of such assets, including such restric-
tions as might arise under the 1933 Act, other than as disclosed to and
accepted by the Acquiring Fund.
(l) The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action on the part of the Selling Fund. Sub-
ject to approval by the Selling Fund Shareholders, this Agreement constitutes
a valid and binding obligation of the Selling Fund, enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency, reorga-
nization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(m) The information to be furnished by the Selling Fund for use in no-
action letters, applications for orders, registration statements, proxy mate-
rials, and other documents that may be necessary in connection with the trans-
actions contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal securities and
other laws and regulations.
(n) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Selling Fund Sharehold-
ers and on the Closing Date, any written information furnished by the Selling
Fund with respect to the Selling Fund for use in the Prospectus/Proxy State-
ment (as defined in paragraph 5.7), the Registration Statement or any other
materials provided in connection with the Reorganization, does not and will
not contain any untrue statement of a material fact or omit to state a mate-
rial fact required to be stated or necessary to make the statements, in light
of the circumstances under which such statements were made, not misleading.
(o) The Selling Fund has elected to qualify and has qualified as a "reg-
ulated investment company" under the Code (a "RIC"), as of and since its first
taxable year; has been a RIC under the Code at all times since the end of its
first taxable year when it so qualified; and qualifies and shall continue to
qualify as a RIC under the Code for its taxable year ending upon its liquida-
tion.
(p) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act"), the 1940 Act or Maryland law for the execution of this Agreement by ESC
Strategic Funds, for itself and on behalf of each Selling Fund, except for the
effectiveness of the Registration Statement, the necessary exemptive relief
requested from the Commission or its staff with respect to Sections 17(a) and
17(b) of the 1940 Act, and the filing of Articles of Transfer pursuant to
Maryland law, and except for such other consents, approvals, authorizations
and filings as have been made or received, and such consents, approvals,
authorizations and filings as may be required subsequent to the Closing Date,
it being understood, however, that this Agreement and the transactions contem-
plated herein must be approved by the shareholders of the Selling Fund as
described in paragraph 5.2.
4.2 Representations of the Acquiring Funds. Each Acquiring Fund repre-
sents and warrants to its respective Selling Fund as follows:
8
<PAGE>
(a) The Acquiring Fund is a separate series of a Massachusetts business
trust, duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate series of a Massachusetts business
trust that is registered as open-end management investment company, and such
Massachusetts business trust's registration with the Commission as an invest-
ment company under the 1940 Act is in full force and effect.
(c) The current prospectuses and statements of additional information of
the Acquiring Fund conform in all material respects to the applicable require-
ments of the 1933 Act and the 1940 Act and the rules and regulations thereun-
der, and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary to make such state-
ments therein, in light of the circumstances under which they were made, not
misleading.
(d) The Acquiring Fund is not, and the execution, delivery and perfor-
mance of this Agreement will not result, in a violation of the Trust's Decla-
ration of Trust or By-Laws or of any material agreement, indenture, instru-
ment, contract, lease, or other undertaking to which the Acquiring Fund is a
party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling Fund and
accepted by the Selling Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently pend-
ing, or to its knowledge, threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or
the ability of the Acquiring Fund to carry out the transactions contemplated
by this Agreement. The Acquiring Fund knows of no facts that might form the
basis for the institution of such proceedings and it is not a party to or sub-
ject to the provisions of any order, decree, or judgment of any court or gov-
ernmental body that materially and adversely affects its business or its abil-
ity to consummate the transaction contemplated herein.
(f) The financial statements of the Acquiring Fund are in accordance
with generally accepted accounting principles, and such statements (copies of
which have been furnished to the Selling Funds) fairly reflect the financial
condition of the Acquiring Fund as of September 30, 1999 and there are no
known contingent liabilities of the Acquiring Fund as of such date which are
not disclosed in such statements.
(g) Since November 30, 1999, there have been no material adverse changes
in the Acquiring Fund's financial condition, assets, liabilities, or business
(other than changes occurring in the ordinary course of business), or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
9
<PAGE>
(h) At the Closing Date, all federal and other tax returns and reports
of the Acquiring Fund required by law to be filed by such date shall have been
filed. All federal and other taxes shown due on such returns and reports shall
have been paid or provision shall have been made for their payment. To the
best of the Acquiring Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such returns.
(i) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Acquiring Fund. The Acquiring Fund has no outstanding
options, warrants, or other rights to subscribe for or purchase any Acquiring
Fund Shares, and there are no outstanding securities convertible into any
Acquiring Fund Shares.
(j) The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring Fund, and
this Agreement constitutes a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights and to general equity principles.
(k) Acquiring Fund Shares to be issued and delivered to the Selling Fund
for the account of the Selling Fund Shareholders pursuant to the terms of this
Agreement will, at the Closing Date, have been duly authorized. When so issued
and delivered, such shares will be duly and validly issued Acquiring Fund
Shares, and will be fully paid and non-assessable.
(l) The information to be furnished by the Acquiring Fund for use in no-
action letters, applications for orders, registration statements, proxy mate-
rials, and other documents that may be necessary in connection with the trans-
actions contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal securities and
other laws and regulations.
(m) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Selling Fund sharehold-
ers and on the Closing Date, any written information furnished by the Trust
with respect to the Acquiring Fund for use in the Prospectus/Proxy Statement
(as defined paragraph 5.7), the Registration Statement or any other materials
provided in connection with the Reorganization, does not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated or necessary to make the statements, in light of the
circumstances under which such statements were made, not misleading.
(n) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act, and
any state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
(o) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Massachusetts law
for the execution of this Agreement by the Trust, for itself and on behalf of
the Acquiring Fund, or the performance of the Agreement by the Trust, for
itself and on behalf of the Acquiring Fund, except for the effectiveness of
the
10
<PAGE>
Registration Statement, the necessary exemptive relief requested from the Com-
mission or its staff with respect to Sections 17(a) and 17(b) of the 1940 Act,
and such other consents, approvals, authorizations and filings as have been
made or received, and except for such consents, approvals, authorizations and
filings as may be required subsequent to the Closing Date.
(p) The Acquiring Fund intends to qualify as a RIC under the Code, and
with respect to each Acquiring Fund that has conducted material investment
operations prior to the Closing Date, the Acquiring Fund has elected to qual-
ify and has qualified as a RIC under the Code as of and since its first tax-
able year; has been a RIC under the Code at all times since the end of its
first taxable year when it so qualified; and qualifies and shall continue to
qualify as a RIC under the Code for its current taxable year.
ARTICLE V
COVENANTS OF EACH ACQUIRING FUND AND EACH SELLING FUND
5.1 Operation in Ordinary Course. Subject to paragraph 8.5 each Acquir-
ing Fund and Selling Fund will operate its respective business in the ordinary
course between the date of this Agreement and the respective Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions and shareholder redemptions.
5.2 Approval of Shareholders. ESC Strategic Funds will call a special
meeting of Selling Fund Shareholders to consider and act upon this Agreement
and to take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 Investment Representation. Each Selling Fund covenants that the
Acquiring Fund Shares to be issued pursuant to this Agreement are not being
acquired for the purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this Agreement.
5.4 Additional Information. Each Selling Fund will assist its respective
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Selling Fund's shares.
5.5 Further Action. Subject to the provisions of this Agreement, each
Acquiring Fund and its respective Selling Fund will each take or cause to be
taken, all action, and do or cause to be done, all things reasonably neces-
sary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, including any actions required to be taken
after the applicable Closing Date.
5.6 Statement of Earnings and Profits. As promptly as practicable, but
in any case within sixty days after the applicable Closing Date, each Selling
Fund shall furnish its respective Acquiring Fund, in such form as is reasona-
bly satisfactory to the Acquiring Fund, a statement of the earnings and prof-
its of the Selling Fund for federal income tax purposes that will be carried
over by the Acquiring Fund as a result of Section 381 of the Code, and which
will be reviewed by PricewaterhouseCoopers LLP and certified by ESC Strategic
Funds' Treasurer.
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<PAGE>
5.7 Preparation of Form N-14 Registration Statement. The Trust will pre-
pare and file with the Commission a registration statement on Form N-14 under
the 1933 Act (the "Registration Statement"), relating to the Acquiring Fund
Shares, which, without limitation, shall include a proxy statement of each
Selling Fund and the prospectus of each Acquiring Fund relating to the trans-
action contemplated by this Agreement (the "Prospectus/Proxy Statement"). The
Registration Statement shall be in compliance with the 1933 Act, the 1934 Act
and the 1940 Act. Each Selling Fund will provide its respective Acquiring
Funds with the materials and information necessary to prepare the
Prospectus/Proxy Statement for inclusion in the Registration Statement, in
connection with the meetings of the Selling Funds Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 Indemnification of Directors. The Trust will assume certain liabili-
ties and obligations of ESC Strategic Funds relating to any obligation of ESC
Strategic Funds to indemnify its current and former Directors and officers,
acting in their capacities as such, to the fullest extent permitted by law and
the ESC Strategic Funds' Articles of Incorporation, as in effect as of the
date of this Agreement. Without limiting the foregoing, the Trust agrees that
all rights to indemnification and all limitations of liability existing in
favor of the current and former Directors and officers, acting in their capac-
ities as such, under the ESC Strategic Funds' Articles of Incorporation as in
effect as of the date of this Agreement shall survive the Reorganization and
shall continue in full force and effect, without any amendment thereto, and
shall constitute rights which may be asserted against the Trust, its succes-
sors or assigns.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH SELLING FUND
The obligations of each Selling Fund to consummate the transactions pro-
vided for herein shall be subject, at its election, to the performance by its
respective Acquiring Fund of all the obligations to be performed by it pursu-
ant to this Agreement on or before the applicable Closing Date, and, in addi-
tion, subject to the following conditions:
6.1 All representations, covenants, and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date, with the same force and
effect as if made on and as of that Closing Date. Each Acquiring Fund shall
have delivered to its respective Selling Fund a certificate executed in the
Acquiring Fund's name by the Trust's President or Vice President and its Trea-
surer or Assistant Treasurer, in form and substance satisfactory to the Sell-
ing Fund and dated as of the Closing Date, to such effect and as to such other
matters as the Selling Fund shall reasonably request.
6.2 The Selling Funds shall have received on the Closing Date an opinion
from Morgan, Lewis & Bockius LLP, counsel to the Trust, dated as of such Clos-
ing Date, in a form reasonably satisfactory to the Selling Funds, covering the
following points:
(a) The Trust is a business trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts, and, to
such counsel's knowledge, has
12
<PAGE>
the power to own all of its properties and assets and to carry on its business
as presently conducted.
(b) The Trust is registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission is in
full force and effect.
(c) This Agreement has been duly authorized, executed, and delivered by
the Trust on behalf of each Acquiring Fund and, assuming due authorization,
execution and delivery of this Agreement by the Selling Funds, is a valid and
binding obligation of the Acquiring Funds enforceable against each Acquiring
Funds in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally and to general equity
principles.
(d) Assuming that a consideration of not less than the net asset value
of Acquiring Fund Shares has been paid, Acquiring Fund Shares to be issued and
delivered to each Selling Fund on behalf of the Selling Fund Shareholders, as
provided by this Agreement, are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of an Acquiring Fund has any preemptive rights with respect to
Acquiring Fund Shares.
(e) The Registration Statement, has been declared effective by the Com-
mission and to such counsel's knowledge, no stop order under the 1933 Act per-
taining thereto has been issued, and to the knowledge of such counsel, no con-
sent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts is required for con-
summation by the Acquiring Funds of the transactions contemplated herein,
except as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act, and as may be required under state securities laws.
(f) The execution and delivery of this Agreement did not, and the con-
summation of the transactions contemplated herein will not result in a viola-
tion of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertak-
ing (in each case known to such counsel) to which an Acquiring Fund is a party
or by which an Acquiring Fund or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which
an Acquiring Fund is a party or by which it is bound.
(g) In the ordinary course of such counsel's representation of the
Acquiring Funds, and without having made any investigation, such counsel does
not know of any legal or governmental proceedings (only insofar as they relate
to an Acquiring Fund) existing on or before the effective date of the Regis-
tration Statement or the Closing Date which are required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement which are not described or filed as required.
(h) In the ordinary course of such counsel's representation of the
Acquiring Funds, and without having made any investigation, and except as oth-
erwise disclosed, such counsel is not
13
<PAGE>
aware of any litigation or administrative proceeding or investigation of or
before any court or governmental body that is presently pending or threatened
as to an Acquiring Fund or any of its properties or assets. In the ordinary
course of such counsel's representation of the Acquiring Funds, and without
having made any investigation, to the knowledge of such counsel, the Acquiring
Funds are not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body, which materially and adversely
affects the Acquiring Funds' business, other than as previously disclosed in
the Registration Statement.
Such counsel shall also state that they have participated in conferences
with officers and other representatives of each Acquiring Fund at which the
contents of the Prospectus/Proxy Statement and related matters were discussed.
Although such counsel is not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus/Proxy Statement, on the basis of the foregoing (relying as to mate-
riality exclusively upon the opinions of the Trust's officers and other repre-
sentatives of each Acquiring Fund) and without such counsel having made any
investigations of the statements made in the Prospectus/Proxy Statement, no
facts have come to their attention that lead them to believe that the
Prospectus/Proxy Statement as of its date, as of the date of each Selling Fund
Shareholders' meeting, and as of the Closing Date, contained an untrue state-
ment of a material fact or omitted to state a material fact required to be
stated regarding an Acquiring Fund or necessary, in the light of the circum-
stances under which they were made, to make the such statements regarding an
Acquiring Fund not misleading. Such opinion may state that such counsel does
not express any opinion or belief as to the financial statements or any finan-
cial or statistical data, or as to the information relating to each Selling
Fund, contained in the Prospectus/Proxy Statement or the Registration State-
ment, and that such opinion is solely for the benefit of ESC Strategic Funds
and each Selling Fund. Such opinion shall contain such other assumptions and
limitations as shall be in the opinion of Morgan, Lewis & Bockius LLP appro-
priate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 As of the Closing Date with respect to the Reorganization of the
Selling Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any material change in the investment
management fees, fee levels payable pursuant to the 12b-1 plan of distribu-
tion, other fees payable for services provided to each Acquiring Fund, fee
waiver or expense reimbursement undertakings, or sales loads of the Acquiring
Funds from those fee amounts, undertakings and sales load amounts of the
Acquiring Fund described in the Prospectus/Proxy Statement.
6.4 For the period beginning at the Closing Date and ending not less
than six years thereafter, the Trust, its successor or assigns shall provide,
or cause to be provided, liability coverage at least as comparable to the lia-
bility coverage currently applicable to both former and current Directors and
officers of ESC Strategic Funds, covering the actions of such Directors and
officers of ESC Strategic Funds for the period they served as such.
14
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH ACQUIRING FUND
The obligations of each Acquiring Fund to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
each corresponding Selling Fund of all the obligations to be performed by the
Selling Fund pursuant to this Agreement, on or before the applicable Closing
Date and, in addition, shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of a Selling Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date, with the same force and
effect as if made on and as of such Closing Date. Each Selling Fund shall have
delivered to its respective Acquiring Funds on such Closing Date a certificate
executed in the Selling Fund's name by ESC Strategic Funds' President or Vice
President and the Treasurer or Assistant Treasurer, in form and substance sat-
isfactory to the Acquiring Fund and dated as of such Closing Date, to such
effect and as to such other matters as the Acquiring Fund shall reasonably
request.
7.2 The Selling Fund shall have delivered to its respective Acquiring
Fund a statement of the Selling Fund's assets and liabilities, together with a
list of the selling Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Clos-
ing Dates, certified by the Treasurer of ESC Strategic Funds.
7.3 The Acquiring Fund shall have received on the applicable Closing
Date an opinion of Dechert Price & Rhoads, counsel to each Selling Fund, dated
as of such Closing Date in a form satisfactory to the Acquiring Fund covering
the following points:
(a) ESC Strategic Funds is a corporation duly organized, validly exist-
ing and in good standing under the laws of the State of Maryland and, to such
counsel's knowledge, has the power to own all of its properties and assets and
to carry on its business as presently conducted.
(b) ESC Strategic Funds is registered as an investment company under the
1940 Act, and, to such counsel's knowledge, such registration with the Commis-
sion is in full force and effect.
(c) This Agreement has been duly authorized, executed and delivered by
ESC Strategic Funds on behalf of each Selling Fund and, assuming due authori-
zation, execution and delivery of this Agreement by the Trust on behalf of
each Acquiring Fund is a valid and binding obligation of the Selling Fund
enforceable against the Selling Fund in accordance with its terms, subject as
to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganiza-
tion, moratorium and other laws relating to or affecting creditors' rights
generally and to general equity principles.
(d) To the knowledge of such counsel, except for the filing of Articles
of Transfer pursuant to Maryland law, no consent, approval, authorization or
order of any court or governmental authority of the United States or the State
of Maryland is required for consummation by
15
<PAGE>
a Selling Fund of the transactions contemplated herein, except as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(e) The execution and delivery of this Agreement did not, and the con-
summation of the transactions contemplated hereby will not result in a viola-
tion of ESC Strategic Funds' Articles of Incorporation or By-laws, or any pro-
vision of any material agreement, indenture, instrument, contract, lease or
other undertaking (in each case known to such counsel) to which a Selling Fund
is a party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which
the Selling Fund is a party or by which it is bound.
(f) In the ordinary course of such counsel's representation of the Sell-
ing Funds, and without having made any investigation, such counsel does not
know of any legal or governmental proceedings (insofar as they relate to a
Selling Fund) existing on or before the date of mailing of the
Prospectus/Proxy Statement and the Closing Date, which are required to be
described in the Prospectus/Proxy Statement or to be filed as an exhibit to
the Registration Statement which are not described or filed as required.
(g) In the ordinary course of such counsel's representation of the Sell-
ing Funds, and without having made any investigation, and except as otherwise
disclosed, such Counsel in not aware of any litigation or administrative pro-
ceeding or investigation of or before any court or governmental body that is
presently pending or threatened as to a Selling Fund or any of its respective
properties or assets. In the ordinary course of such counsel's representation
of the Selling Funds, and without having made any investigation, to the knowl-
edge of such counsel, no Selling Fund is a party to or subject to the provi-
sions of any order, decree or judgment of any court or governmental body,
which materially and adversely affects the Selling Fund's business other than
as previously disclosed in the Prospectus/Proxy Statement.
(h) Assuming that a consideration of not less than the net asset value
of Selling Fund Shares has been paid, and assuming that such shares were
issued in accordance with the terms of each Selling Fund's registration state-
ment, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
Such counsel shall also state that they have participated in conferences
with officers and other representatives of each Selling Fund at which the con-
tents of the Prospectus/Proxy Statement and related matters were discussed.
Although such counsel are not passing upon and do not assume any responsibil-
ity for the accuracy, completeness or fairness of the statements contained in
the Prospectus/Proxy Statement, on the basis of the foregoing (relying as to
materiality to exclusively upon the opinions of ESC Strategic Funds' officers
and other representatives of each Selling Fund) and without such counsel hav-
ing made any investigations of the statements made in the Prospectus/Proxy
Statement, no facts have come to their attention that lead them to believe
that the Prospectus/Proxy Statement as of its date, as of the date of each
Selling Fund Shareholders' meeting, and as of the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein regarding a Selling Fund or
16
<PAGE>
necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Selling Fund not misleading. Such
opinion may state that such counsel do not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to each Acquiring Fund contained in the Prospectus/Proxy
Statement or Registration Statement, and that such opinion is solely for the
benefit of the Trust and each Acquiring Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Dechert Price
& Rhoads appropriate to render the opinions expressed therein, and shall indi-
cate, with respect to matters of Maryland law, that such opinions are based
either upon the review of published statutes, cases and rules and regulations
of the State of Maryland or upon an opinion of Maryland counsel.
In this paragraph 7.3, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH ACQUIRING FUND AND SELLING
FUND
If any of the conditions set forth below do not exist on or before the
applicable Closing Date with respect to each Selling Fund or its respective
Acquiring Fund, the other party to this Agreement shall, at its option, not be
required to consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein, with
respect to each Selling Fund, shall have been approved by the requisite vote
of the holders of the outstanding shares of the respective Selling Fund in
accordance with Maryland law and the provisions of ESC Strategic Funds' Arti-
cles of Incorporation and By-Laws. Certified copies of the resolutions evi-
dencing such approval shall have been delivered to the respective Acquiring
Fund. Notwithstanding anything herein to the contrary, neither an Acquiring
Fund nor a Selling Fund may waive the conditions set forth in this paragraph
8.1.
8.2 On each Closing Date, the Commission shall not have issued an unfa-
vorable report under Section 25(b) of the 1940 Act, or instituted any proceed-
ing seeking to enjoin the consummation of the transactions contemplated by
this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action,
suit or other proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities (in-
cluding those of the Commission and of State Blue Sky securities authorities,
including any necessary "no-action" positions and exemptive orders from such
federal and state authorities) to permit consummation of the transactions con-
templated herein shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties
17
<PAGE>
of an Acquiring Fund or a Selling Fund, provided that either party hereto may
waive any such conditions for itself.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued. To the best knowledge of the parties to this Agreement, no inves-
tigation or proceeding for that purpose shall have been instituted or be pend-
ing, threatened or contemplated under the 1933 Act.
8.5 Each Selling Fund shall have declared and paid a dividend or divi-
dends which, together with all previous such dividends, shall have the effect
of distributing to its shareholders all of the Selling Fund's net investment
company taxable income for all taxable periods ending on or prior to the
applicable Closing Dates (computed without regard to any deduction for divi-
dends paid) and all of its net capital gains realized in all taxable periods
ending on or prior to such Closing Dates (after reduction for any capital loss
carry forward).
8.6 The parties shall have received a favorable opinion of Morgan, Lewis
& Bockius LLP addressed to each Acquiring Fund and Selling Fund substantially
to the effect that for federal income tax purposes with respect to each Sell-
ing Fund:
(a) The transfer of all of the Selling Fund's assets in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identi-
fied liabilities of the Selling Fund (followed by the distribution of Acquir-
ing Fund Shares to the Selling Fund shareholders in dissolution and liquida-
tion of the Selling Fund) will constitute a "reorganization" within the mean-
ing of Section 368(a) of the Code and the Acquiring Fund and the Selling Fund
will each be a "party to a reorganization" within the meaning of Section
368(b) of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Selling Fund solely in exchange for Acquiring
Funds Share and the assumption by the Acquiring Fund of the identified liabil-
ities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund upon the
transfer of the Selling Fund's assets to the Acquiring Fund in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identi-
fied liabilities of the Selling Fund or upon the distribution (whether actual
or constructive) of Acquiring Fund Shares to Selling Fund Shareholders in
exchange for such shareholders' shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund Shareholders
upon the exchange of their Selling Fund shares for Acquiring Fund Shares in
the Reorganization.
(e) The aggregate tax basis for Acquiring Fund Shares received by each
Selling Fund Shareholder pursuant to the Reorganization will be the same as
the aggregate tax basis of the Selling Fund shares exchanged therefor by such
shareholder. The holding period of Acquiring Funds Share to be received by
each Selling Fund Shareholder will include the period during which the Selling
Fund shares exchanged therefore were held by such shareholder, provided the
Selling Fund shares are held as capital assets at the time of the Reorganiza-
tion.
18
<PAGE>
(f) The tax basis of the Selling Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Selling Fund
immediately prior to the Reorganization. The holding period of the assets of
the Selling Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Selling Fund.
Such opinion shall be based on customary assumptions and such represen-
tations as Morgan, Lewis & Bockius LLP may reasonably request, and each Sell-
ing Fund and Acquiring Fund will cooperate to make and certify the accuracy of
such representations. Notwithstanding anything herein to the contrary, neither
an Acquiring Fund nor a Selling Fund may waive the conditions set forth in
this paragraph 8.6.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, expenses related to the
Reorganization that are incurred by the Selling Funds will be paid as follows:
The Selling Funds will pay a portion of the Reorganization expenses up to the
amount each Selling Fund would have paid during the fiscal year ending March
31, 2000 under the expense caps that are currently in place for each Selling
Fund. All remaining expenses will be borne by the investment adviser to the
Selling Funds, SunTrust Equitable Securities Corporation, a wholly-owned sub-
sidiary of SunTrust Banks, Inc. ("SunTrust") and/or SunTrust. Reorganization
expenses include, without limitation: (a) expenses associated with the prepa-
ration and filing of the Registration Statement/Proxy Statement on Form N-14
under the 1933 Act covering Acquiring Fund Shares to be issued pursuant to the
provisions of this Agreement; (b) postage; (c) printing; (d) accounting fees;
(e) legal fees incurred by each Selling Funds; and (f) solicitation costs of
the transaction.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of each Acquiring Fund and ESC Strategic Funds
on behalf of each Selling Fund agrees that neither party has made to the other
party any representation, warranty and/or covenant not set forth herein, and
that this Agreement constitutes the entire agreement between the parties.
10.2 Except as specified in the next sentence set forth in this section
10.2, the representation, warranties, and covenants contained in this Agree-
ment or in any document delivered pursuant to or in connection with this
Agreement, shall not survive the consummation of the transactions contemplated
hereunder. The covenants to be performed after each Closing Date, and the
obligations of each of the Acquiring Funds in sections 5.9 and 6.4, shall con-
tinue in effect beyond the consummation of the transactions contemplated here-
under.
19
<PAGE>
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Trust and ESC Strategic Funds. In addition, either the Trust or ESC Strategic
Funds may at their option terminate this Agreement at or prior to either Clos-
ing Date due to:
(a) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or prior to each Closing Date, if not
cured within 30 days;
(b) a condition herein expressed to be precedent to the obligations of
the terminating party that has not been met and it reasonably appears that it
will not or cannot be met; or
(c) a determination by the parties' Board of Directors or Board of
Trustees, as appropriate, determine that the consummation of the transactions
contemplated herein are not in the best interest of ESC Strategic Funds or the
Trust, respectively, and give notice to the other party hereto.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either an
Acquiring Fund, a Selling Fund, the Trust, ESC Strategic Funds, the respective
Trustees, Directors or officers, to the other party or its Trustees, Directors
or officers, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
each Selling Funds and the Acquiring Fund; provided, however, that following
the meetings of the Selling Fund Shareholders called by a Selling Fund pursu-
ant to paragraph 5.2 of this Agreement, no such amendment may have the effect
of changing the provisions for determining the number of Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the det-
riment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
20
<PAGE>
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without giving effect to
the conflicts of laws provisions thereof; provided, however, that the due
authorization, execution and delivery of this Agreement, in the case of each
Selling Fund, shall be governed and construed in accordance with the laws of
the State of Maryland, without giving effect to the conflicts of laws provi-
sions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obliga-
tions hereunder shall be made by any party without the written consent of the
other party. Nothing herein expressed or implied is intended or shall be con-
strued to confer upon or give any person, firm, or corporation, other than the
parties hereto and their respective successors and assigns, any rights or rem-
edies under or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of each Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nomi-
nees, officers, agents, or employees of the Trust personally, but shall bind
only the trust property of the Acquiring Fund, as provided in the Declaration
of Trust of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust on behalf of each Acquiring Fund and
signed by authorized officers of the Trust, acting as such. Such authorization
by such Trustees nor such execution and delivery by such officers shall not be
deemed to have been made by any of them individually or to impose any liabil-
ity on any of them personally, but shall bind only the trust property of each
Acquiring Fund as provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
STI CLASSIC FUNDS
By: ________________
Name: Kevin P. Robins
Title: Vice President
ESC STRATEGIC FUNDS, INC.
By: ________________
Name: R. Jeffrey Young
Title: President
21
<PAGE>
Exhibit B
MANAGEMENTS DISCUSSION OF FUND PERFORMANCE
------------------------------------------
STI Classic Growth and Income Fund
----------------------------------
The STI Classic Growth and Income Fund (the "Fund") is the newest equity fund
member of the STI Classic family, as the successor fund to the former CrestFunds
Value Fund. CrestFunds merged into STI on May 24, 1999. The Growth and Income
Fund invests primarily in a diversified mix of domestic and the ADR's of foreign
common stocks of companies with market capitalization of at least $1 billion.
The Funduses a quantitative screening process to help select stocks of companies
from both the value and growth equity investment styles. The Fund seeks long
term appreciation from large-cap equities while buffering the volatility of
returns.
The past year was turbulent, but gratifying, for the economy and the stock
markets, as policy-makers and investors successfully navigated potential
significant pitfalls. The current economic expansion reached its eighth
anniversary, with continued low inflation, while both the Dow Jones Industrial
Average and the S&P 500 achieved another year of double-digit returns. The Fund
performed well in this changing environment, taking advantage of its positioning
in both select growth and value type issues. The Fund returned 15.58% (Trust
Shares) during the fiscal year ended May 31, 1999.
The beginning of the fiscal year, the second half of 1998, was strongly
influenced by continuing reverberations of the 1997 Asian financial crisis.
Russia and Latin America suffered most from the backlash as investors moved to
higher quality, more liquid financial markets. Diminishing profit expectations
and political scandal here at home only added to investor uncertainty. The S&P
500 fell 10.3% during the third quarter on a price-only basis, though it lost as
much as 19.3% between mid-July and the end of August. Falling commodity prices
across the spectrum hurt stocks in the basic materials and energy sectors, while
rising credit concerns and trading losses pummeled financial stocks. Corporate
profits during this time were increasingly weak, contracting over 3% on a year
over year basis in the third quarter.
The Federal Reserve responded to the crisis last fall by cutting interest rates
three times, and the major indexes completely recovered from the "bear" market
within another six weeks. Stock market sectors that fared well tended to have a
domestic, consumer-oriented focus or were linked to technology and productivity
investment. Healthcare companies and consumer cyclicals represented the former,
while networking, software, and computer-related companies represented the
latter category. Large growth issues performed extremely well while most value-
oriented stocks struggled. The Fund's best performance was realized from
technology holdings such as Cisco Systems, Microsoft, Intel and Sun
Microsystems. Outside of technology, holdings such as Lowe's, Schering-Plough,
Amgen, and CIGNAalso contributed strong relative performance.
By the first quarter of 1999, glimmers of economic hope began to appear for
battered economies in the Pacific rim region as well as in Latin America. In
addition, oil prices, which plummeted to under $11/barrel, jumped over 70% on
news that world oil producers were acting together to reduce the global energy
glut. S&P 500 operating profits rose by 10% during the first quarter. Big cap,
growth oriented, technology companies, continued to fare well though vigorous
sector rotation persisted. Along with technology, consumer cyclical, energy and
finance shares rose during the first quarter, a harbinger that the under-
performing value stocks were poised for recovery.
In April, fears of future inflation helped investors dramatically reduce their
exposure to the high price/earnings growth stocks in favor of more cyclically
and inflation sensitive value-oriented companies. During the early part of the
year, the Fund reduced its exposure to healthcare and technology while
increasing its exposure to depressed and economically sensitive areas of the
market. The dramatic under performance of the "value" issues offered an
opportunity to increase the portfolio's "tilt" toward value, which had a
significant positive impact on performance in the closing months of the fiscal
year.
The outlook for the U.S. and world economies remains favorable based on current
reports, improving prospects for corporate earnings growth over the near term.
While tight labor markets remain a concern for the inflation-wary Fed,
structural imbalances and excess inventories appear to be lacking. This suggests
that companies may be able to adjust price and production schedules relatively
quickly in response to future changes demand or Fed policy. The STI Classic
Growth and Income Fund will continue to adjust its mix of value and growth
stocks in this evolving environment in order to maximize returns to our
shareholders while limiting volatility.
/s/ Jeffrey E. Markunas
Jeffrey E. Markunas, CFA
1
<PAGE>
Trust Shares
- --------------------------------------------------------------------------------
Annualized Annualized Annualized Cumulative
One Year 3 Year 5 Year Inception Inception
Return Return Return to Date to Date
- --------------------------------------------------------------------------------
15.58% 21.38% 20.70% 17.68% 196.58%
- --------------------------------------------------------------------------------
STI Classic Growth and Income Fund, Trust Shares
S&P 500 Index
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Investor Shares
- ------------------------------------------------------------------
Annualized Annualized Annualized Cumulative
One Year 3 Year 5 Year Inception Inception
Return Return Return to Date to Date
- ------------------------------------------------------------------
15.66% 21.38% 20.69% 17.49% 165.93% Without load
- ------------------------------------------------------------------
11.30% 19.86% 19.77% 16.75% 155.96% With load
- ------------------------------------------------------------------
STI Classic Growth and Income Fund, Investor Shares
S&P 500 Index
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Flex Shares
- ------------------------------------------------------------------
Annualized Annualized Cumulative
One Year 3 Year Inception Inception
Return Return to Date to Date
- ------------------------------------------------------------------
14.76% 20.51% 21.70% 125.68% Without load
- ------------------------------------------------------------------
12.76% With load
- -------------
STI Classic Growth and Income Fund, Flex Shares
S&P 500 Index
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Past performance is no indication of future performance.
The Funds' comparative benchmarks do not include the annual operating expenses
incurred by the Fund.
2
<PAGE>
STI Classic International Equity Fund
-------------------------------------
The STI Classic International Equity Fund ("The Fund") invests in equity
securities of foreign issuers and seeks to provide long term capital
appreciation. We strive to obtain investment results that outperform the
international markets and the average international mutual funds. The Fund
focuses on sector and company fundamentals specifically looking for companies
that exhibit top managements, quality products and sound financial positions.
Our goal is to find companies that fit the above criteria but are still selling
at a discount to their global peers.
The Fund's performance for the year June 1998 to May 1999 was -7.43% (Trust
Shares) vs. MSCI EAFE of 4.36%.
Over the past year, many changes have occurred. Eleven western european
countries combined currencies to create one common currency, the Euro, Asia has
rallied off its bottom, and many markets have seen +50% returns. Brazil and
Latin America experienced a collapse, only to quickly rebound after Brazil
depegged its currency from the dollar. Japan has also rebounded off its lows due
to economic stimulus packages and positive news flow, though earnings are still
lagging. Recent concern over increasing growth has caused economic over-heating
concerns across the European community where the Fund maintains its largest
weighting. Many of the cyclical and commodity oriented companies have rallied on
the back of the expectation of strong growth and inflation. While we do have
exposure to these sectors, we do not believe this outperformance will continue.
Financial companies have been the hardest hit as interest rate concerns have
been a heavy burden on bond prices and fears of slower growth have tempered the
performance of insurance companies and banks. This weakness has provided
opportunities as we believe the markets have over-corrected for such fears.
The Fund added some Brazilian and Mexican equities in February including Tele
Norte, a fixed line telephone operator in Brazil and Telefonos de Mexico,
Mexico's dominant phone company. These investments have experienced tremendous
strength since their addition. We continue to monitor Latin America and Asia for
value opportunities.
Concerning the future outlook for international markets, we continue to see
value across Europe and expect to remain overweighted here. Japan has rallied on
hopes, not fundamentals, and we remain underweighted. We have added names in
Japan such as Takefuji, a consumer finance company and FamilyMart, Japan's
second largest convenient store operator. While we see some fundamentals turning
in Japan, the changes are company specific. In our opinion, the macro picture
remains mired in high unemployment, overvalued assets, and zero growth.
/s/ Ned Dau
Ned Dau
Managing Director
3
<PAGE>
Trust Shares
- --------------------------------------------------------------------------------
Annualized Annualized Cumulative
One Year 3 Year Inception Inception
Return Return to Date to Date
- --------------------------------------------------------------------------------
-7.43% 11.62% 14.12% 58.55%
- --------------------------------------------------------------------------------
STI Classic International Equity Fund, Trust Shares
MSCI EAFE Index, in U.S.$
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Investor Shares
- -----------------------------------------------------
Annualized Annualized Cumulative
One Year 3 Year Inception Inception
Return Return to Date to Date
- -----------------------------------------------------
-7.82% 11.19% 12.62% 49.85% Without load
- -----------------------------------------------------
-11.27% 9.79% 11.36% 44.18% With load
- -----------------------------------------------------
STI Classic International Equity Fund, Investor Shares
MSCI EAFE Index, in U.S.$
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Flex Shares
- -----------------------------------------------------
Annualized Annualized Cumulative
One Year 3 Year Inception Inception
Return Return to Date to Date
- -----------------------------------------------------
-8.48% 10.40% 11.89% 46.56% Without load
- -----------------------------------------------------
-10.19% With load
- -------------
STI Classic International Equity Fund, Flex Shares
MSCI EAFE Index, in U.S.$
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Past performance is no indication of future performance.
The Funds' comparative benchmarks do not include the annual operating expenses
incurred by the Fund.
4
<PAGE>
STI Classic Small Cap Growth Stock Fund
---------------------------------------
The objective of the STI Classic Small Cap Growth Stock Fund (the "Fund") is to
provide long-term capital appreciation by investing in smaller companies,
domiciled primarily in the U.S., with market capitalizations ranging from $50
million to $3 billion. The philosophy of the Fund is that a portfolio of small
capitalization companies with positive earnings characteristics and reasonable
valuation will provide superior returns over time.
The Fund invests in stocks of companies that are currently demonstrating strong
earnings trends, characterized by solid historical earnings growth, high
earnings and sales growth momentum, and positive earnings estimate revisions and
earnings surprises. However, we try not to pay huge premiums for these
companies. Consequently, we identify those companies that are reasonably valued
relative to their earnings trends and relative to our universe of companies. In
addition, we look for companies that have a history of generating high returns
on invested capital and/or are demonstrating improving returns.
The investment process of the Fund features a two-tiered strategy that includes
a quantitative methodology to identify those companies with the best combination
of the aforementioned characteristics and a qualitative overlay that involves
basic fundamental analysis of each company. Our investment team looks at each
company to understand the company's basic business model and competitive
environment surrounding the company. In addition, we dig into the financials of
each company, analyzing the income statement and balance sheet in order to
identify any accounting irregularities, understand the capital structure of the
company, how the company has grown in the past, and how it intends to fund its
growth in the future.
The Fund features a very disciplined approach for both the buying and selling of
stocks. Furthermore, we exercise portfolio management techniques that are geared
toward risk aversion, unlike most other aggressive small cap growth portfolios.
The Fund equal-weights the portfolio among the top 15% to 20% of stocks in our
investment universe (approximately 150-160 companies). Thus, we maintain a very
diversified portfolio taking on very little company specific risk. In addition,
we maintain controlled sector weightings to keep the portfolio from becoming
over-concentrated in one particular economic sector.
We are confident that our process will provide excellent risk-adjusted returns
over time relative to the S&P Small Cap 600 Index and relative to other small
cap mutual funds. We are very pleased with the Fund's results since inception on
October 8, 1998 and feel very comfortable with how the portfolio is currently
positioned. Since late March 1999, the broadening of the market has brought
about a resurgence in small cap stock returns. Should this trend continue, this
will be an excellent year for the STI Classic Small Cap Growth Stock Fund.
/s/ Mark D. Garfinkel
Mark D. Garfinkel, CFA
Vice President and Portfolio Manager
5
<PAGE>
Trust Shares*
Cumulative
Inception
to Date
- ----------------
45.70%
- ----------------
STI Classic Small Cap Growth Stock Fund, Trust Shares
S&P Small Cap 600 Index
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
Flex Shares*
Cumulative
Inception
to Date
- ----------------
44.78% Without load
- ----------------
42.78% With load
- ----------------
STI Classic Small Cap Growth Stock Fund, Flex Shares S&P Small Cap 600 Index
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
[GRAPH]
[PLOT POINTS TO COME]
*Commenced operations on October 8, 1998.
Past performance is no indication of future performance.
The Funds' comparative benchmarks do not include the annual operating expenses
incurred by the Fund.
6
<PAGE>
Introduction to Pro Forma Combining Statements
March 24, 2000
The accompanying unaudited Pro Forma Combining Statements of Assets and
Liabilities, Pro Forma Combining Statements of Operations and Pro Forma
Combining Schedule of Investments reflect the accounts of the ESC Strategic
Small Cap Fund and ESC Strategic Income Fund (the "Acquired Funds") and the STI
Classic Small Cap Growth Stock Fund and STI Classic High Income Fund (the
"Acquiring Funds").
These statements have been derived from the underlying accounting records of the
Acquired Funds and Acquiring Funds that were used in calculating net assets for
the twelve-month period ended May 31, 1999 for the STI Funds and March 31, 1999
for the ESC Funds. The Pro Forma Combining Statements of Operations have been
prepared based upon the fee and expense structure of the Acquired Funds.
Under the proposed agreement and plan of reorganization, all outstanding shares
of the Acquired Funds will be issued in exchange for shares of the Acquiring
Funds.
<PAGE>
PRO FORMA COMBINING STATEMENT OF OPERATIONS
PERIOD ENDING MAY 31, 1999
<TABLE>
<CAPTION>
STI Small Cap Esc Strategic
Growth Stock Fund Small Cap Fund Combined
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 119 $ 763 $ 882
Dividend income 77 741 818
Income from securities lending activities 77 63 140
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 273 1,567 1,840
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 314 1,253 1,567
Trustees' fees - 22 22
Administrative personnel and services fees 21 223 244
Custodian and recordkeeping fees and expenses 7 17 24
Transfer Agent Fees-ESC 197 197
Transfer Agent Fees-Trust Shares 11 11
Transfer Agent Fees-Investor Shares -
Transfer Agent Fees-Flex Shares 9 9
Transfer Agent Out of Pocket Fees 15 15
Fund share registration costs 16 16
Auditing fees 4 15 19
Legal fees 4 42 46
Printing and postage 10 10
Insurance premiums - -
Distribution services fees-Investor Shares - 242 242
Distribution services fees-Flex Shares 12 214 226
Amortization of deferred organizational costs - 11 11
Miscellaneous 1 149 150
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 424 2,385 2,809
- ----------------------------------------------------------------------------------------------------------------------------------
Deduct-
Waiver of investment advisory fees (79) - (79)
Waiver of distribution services fees-Investor Shares - - -
Waiver of distribution services fees-Flex Shares (8) - (8)
- ----------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 337 2,385 2,722
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (64) (818) (882)
- ----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments (identified cost basis) 2,335 2,509 4,844
Net change in unrealized appreciation (depreciation) on investments 4,550 (42,489) (37,939)
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 6,885 (39,980) (33,095)
- ----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,821 $ (40,798) (33,977)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Pro Forma Combined
STI Small Cap
Adjustments Growth Stock Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 882
Dividend income 818
Income from securities lending activities 140
- ------------------------------------------------------------------------------------------------------------------
Total investment income 1,840
- ------------------------------------------------------------------------------------------------------------------
EXPENSES: -
Investment advisory fees 186 1,753
Trustees' fees 22
Administrative personnel and services fees (135) 109
Custodian and recordkeeping fees and expenses -5 19
Transfer Agent Fees-ESC -197 -
Transfer Agent Fees-Trust Shares 11
Transfer Agent Fees-Investor Shares 48 48
Transfer Agent Fees-Flex Shares 12 21
Transfer Agent Out of Pocket Fees 15
Fund share registration costs 16
Auditing fees 19
Legal fees 46
Printing and postage 10
Insurance premiums -
Distribution services fees-Investor Shares 241 483
Distribution services fees-Flex Shares 71 297
Amortization of deferred organizational costs 11
Miscellaneous 150
- ------------------------------------------------------------------------------------------------------------------
Total expenses 221 3,030
- ------------------------------------------------------------------------------------------------------------------
Deduct- 0
Waiver of investment advisory fees (88) (167)
Waiver of distribution services fees-Investor Shares (188) (188)
Waiver of distribution services fees-Flex Shares 3 (5)
- ------------------------------------------------------------------------------------------------------------------
NET EXPENSES 2,670
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (830)
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments: 0
Net realized gain (loss) on investments (identified cost basis) 4,844
Net change in unrealized appreciation (depreciation) on investments (37,939)
- ------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (33,095)
- ------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (33,925)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
Pro Forma Statement of Assets and Liabilities (Unaudited)
STI Classic Funds Small Cap Growth Stock Fund
May 31, 1999
(000)
<TABLE>
<CAPTION>
Pro Forma Combined
STI Classic Funds ESC STI Classic Funds
Small Cap Growth Strategic Small Pro Forma Small Cap Growth
Stock Fund Cap Fund Adjustments Stock Fund
<S> <C> <C> <C> <C>
ASSETS
Total Investments at Market Value (Cost $148,958,
$113,771 and $262,729) $162,338 $110,281 $272,619
Cash (333) 0 (333)
Accrued Income 28 34 62
Receivables for Investment Securities Sold 3,919 205 4,124
Receivables for Capital Shares Sold 27 13 40
Other Receivables 22 0 22
Other Assets 13 1 14
------------- ------------- ---------------
Total Assets 166,014 110,534 276,548
------------- ------------- ---------------
LIABILITIES
Accrued Expenses (198) (177) (375)
Payable for Investment Securities Purchased (7,317) (727) (8,044)
Payable for Capital Shares Redeemed (51) (347) (398)
Payable for return of collateral received (51) (12,468) (12,519)
------------- ------------- ---------------
Total Liabilities (7,617) (13,719) (21,336)
------------- ------------- ---------------
158,397 96,815 255,212
NET ASSETS
Portfolio shares of the Trust Class (unlimited
authorization - no par value) based on (10,464,063,
0, 10,464,063) outstanding shares of beneficial interest 137,985 75,756 213,741
Portfolio shares of the Investor Class (unlimited
authorization - no par value) based on (0, 4,504,805,
5,136,734) outstanding shares of beneficial interest 0 22,040 22,040
Portfolio shares of the Flex Class (unlimited
authorization - no par value) based on (425,752,
1,357,437, 1,952,407) outstanding shares of beneficial interest 6,037 0 6,037
Undistributed net investment income 0 0 0
Accumulated net realized gain (loss) on investments 1,046 2,509 3,555
Net unrealized appreciation on investments 13,380 (3,490) 9,890
------------- ------------- ---------------
Total Net Assets $158,448 $96,815 $255,263
------------- ------------- ----------- ---------------
------------- ------------- ----------- ---------------
Net Asset Value, Offering and Redemption Price Per
Share - Trust Shares $14.55 $14.55
------------- ------------- ---------------
------------- ------------- ---------------
Net Asset Value and Redemption Price Per
Share - Investor Shares $16.59
------------- ---------------
------------- ---------------
Maximum Offering Price Per Share - Investor Shares $17.37
------------- ---------------
------------- ---------------
Net Asset Value, Offering and Redemption Price
Per Share - Investor Shares $14.55
------------- ------------- ---------------
------------- ------------- ---------------
Net Asset Value and Redemption Price Per
Share - Flex Shares $14.46 $16.26
------------- ------------- ---------------
------------- ------------- ---------------
Maximum Offering Price Per Share - Flex Shares $16.51
------------- ------------- ---------------
------------- ------------- ---------------
Net Asset Value, Offering and Redemption
Price Per Share -Flex Shares $14.46
------------- ------------- ---------------
------------- ------------- ---------------
$158,397 $96,815 $255,212
------------- ------------- ---------------
------------- ------------- ---------------
</TABLE>
Page 2
<PAGE>
ADJUSTMENTS TO FINANCIALS
FUNDSHARE
<TABLE>
<CAPTION>
Esc Small Cap NA Small Cap NAV Adjusted Shares STI Shares Combined
<S> <C> <C> <C> <C> <C>
Trust 0.00 14.55 0 10,464,063 10,464,063
Investor 74,739,484.00 14.55 5,136,734 0 5,136,734
Flex 22,075,437.00 14.46 1,526,655 425,752 1,952,407
</TABLE>
ADVISORY FEE
<TABLE>
<CAPTION>
ESC Small Cap
Avg Net Assets Small Cap BPS ESC Small Cap Fee Small Cap Fee Difference
----------------------- ---------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
125,111,776.00 1.15% 1,252,991.00 1,438,785.42 185,794.42
----------------
185,794.42
----------------
----------------
</TABLE>
DISTRIBUTION
<TABLE>
<CAPTION>
ESC Small Cap
Avg Net Assets Small Cap BPS ESC Small Cap Fee Small Cap Fee Difference
----------------------- ---------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investor* 96,628,553.00 0.50% 241,928.00 483,142.77 241,214.77
Flex 28,483,222.00 1.00% 213,957.00 284,832.22 70,875.22
Total
----------------
312,089.99
----------------
----------------
</TABLE>
T/A FEES
ADMINISTRATION
<TABLE>
<CAPTION>
ESC Small Cap
Avg Net Assets Small Cap BPS ESC Small Cap Fee Small Cap Fee Difference
----------------------- ---------------------- -------------------------------------------------------------------
----------------------- ---------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
125,111,776.00 0.07% 222,498.00 87,578.24 -134,919.76
----------------
-134,919.76
----------------
----------------
</TABLE>
and allocated pro-rata amongst the funds.
ADVISORY & 12B-1 WAIVERS
<TABLE>
<CAPTION>
Advisory 12b-1 INVESTOR 12b-1 FLEX
<S> <C> <C> <C>
Total Expenses 3,030,000 Adj Total Exp Bps 1.294% 1.294%
Less Class Specific -864,000 T/A Fee 48000 21000
Fund Expenses 2,166,000 T/A Bps 0.050% 0.071%
Avg Net Assets 167,326,000 12b-1 Fee Bps 0.500% 1.000%
Fund Expenses BPS 1.294% Advisory Waiver 0.099% 0.099%
Trust Class T/A Fee BPS 0.005% Net Exp Before W 1.745% 2.266%
Adj Total Expenses BPS 1.299% Base Cap 1.550% 2.250%
Less Base Cap -1.200% 12b-1 Waiver Bps 0.195% 0.016%
Advisory Waiver BPS 0.099% 12b-1 Waiver 188,401.29 4,743.76
Advisory Waiver 165,952
</TABLE>
Avg Net Assets
<TABLE>
<CAPTION>
TOTAL TRUST INVESTOR FLEX
<S> <C> <C> <C> <C>
Trust Sunbelt 0 0
Investor ESC 96,628,553.00 96,628,553
Flex ESC 28,483,222.00 28,483,222
Trust Small Cap 25,835,862 25,835,862
Flex Small Cap 1,235,687 1,235,687
-------------------- ------------------------------------------------------------------
152,183,324 25,835,862 96,628,553 29,718,909
-------------------- ------------------------------------------------------------------
-------------------- ------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
Exp Proj
<TABLE>
<CAPTION>
Fee Table Year
<S> <C> <C>
Fund: 1 507
A= Sales Load 2
B= Total fund operating expenses 3 787
C= Redemption fee 4
D= Years CDSC is applicable 5 1087
Actuals 6
A= 3.75% 7
B= 1.35% 8
C= 0.00% 9
D= - 10 1938
</TABLE>
<TABLE>
<CAPTION>
5%
less
Amount Sales Beginning Expense Ending Average Expense Annual
Year Invested - Load = Value + Ratio = Value Value x Ratio = Expenses
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10000 375 9625 351.31 9976.31 9800.656 1.35% 132.31
2 9976.313 364.14 10340.45 10158.38 1.35% 137.14
3 10340.45 377.43 10717.87 10529.16 1.35% 142.14
4 10717.87 391.20 11109.08 10913.48 1.35% 147.33
5 11109.08 405.48 11514.56 11311.82 1.35% 152.71
6 11514.56 420.28 11934.84 11724.7 1.35% 158.28
7 11934.84 435.62 12370.46 12152.65 1.35% 164.06
8 12370.46 451.52 12821.98 12596.22 1.35% 170.05
9 12821.98 468.00 13289.99 13055.98 1.35% 176.26
10 13289.99 485.08 13775.07 13532.53 1.35% 182.69
Exp Proj
<CAPTION>
Total
Amounts
Aggregate Redemption for Fee
Year Expenses + Fee = Table
<S> <C> <C> <C>
1 507.31 0.00 507.31
2 137.14 0.00 644.45
3 142.14 0.00 786.59
4 147.33 0.00 933.92
5 152.71 0.00 1086.63
6 158.28 0.00 1244.92
7 164.06 0.00 1408.98
8 170.05 0.00 1579.03
9 176.26 0.00 1755.28
10 182.69 0.00 1937.97
</TABLE>
Page 4
<PAGE>
STI FUNDS
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- -------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI SMALL CAP GROWTH EQUITY
Trust Class 206,080,503 16.23 12,700,058 16.226738
Investor Shares* 12,481,849 16.52 755,473 16.521900
Flex Shares 6,926,039 16.04 431,730 16.042510
Total 225,488,391 13,887,261
- ----------------------------------------------------------------------------------------------
ESC STRATEGIC SMALL CAP
Class A 45,102,729 16.95 2,660,246 16.954344
Class D 14,397,619 16.56 869,339 16.561562
Total 59,500,348 3,529,586
- ----------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 206,080,503 16.23 12,700,057.54 16.226738
Investor Shares* 57,584,578 16.52 3,485,662.43 16.520412
Flex Shares 21,323,658 16.04 1,329,337.57 16.040815
Total 284,988,739 17,515,058
- ----------------------------------------------------------------------------------------------
</TABLE>
*This includes Investor class numbers from 12/13/99 (the date the class opened).
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- -------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI SMALL CAP GROWTH EQUITY
Trust Class 206,080,503 16.23 12,700,058 16.226738
Investor Shares* 12,481,849 16.52 755,473 16.521900
Flex Shares 6,926,039 16.04 431,730 16.042510
Total 225,488,391 13,887,261
- ----------------------------------------------------------------------------------------------
ESC STRATEGIC SMALL CAP II
Class A 10,581,977 10.21 1,036,008 10.214186
Class D 5,262,760 10.09 521,754 10.086677
Total 15,844,737 1,557,761
- ----------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 206,080,503 16.23 12,700,057.54 16.226738
Investor Shares* 23,063,826 16.52 1,396,028.52 16.521028
Flex Shares 12,188,799 16.04 759,832.65 16.041426
Total 241,333,128 14,855,919
- ----------------------------------------------------------------------------------------------
</TABLE>
*This includes Investor class numbers from 12/13/99 (the date the class opened).
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- -------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI INTERNATIONAL EQUITY
Trust Class 563,543,423 13.30 42,362,691 13.302824
Investor Shares 13,209,257 13.19 1,001,173 13.193777
Flex Shares 15,294,295 12.81 1,193,659 12.812954
Total 592,046,975 44,557,523
- ----------------------------------------------------------------------------------------------
ESC STRATEGIC INTERNATIONAL
Class A 6,020,136 9.25 650,674 9.252152
Class D 1,497,878 8.87 168,965 8.865025
Total 7,518,015 819,639
- ----------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 563,543,423 13.30 42,362,691 13.302824
Investor Shares 19,229,394 13.19 1,457,590 13.192594
Flex Shares 16,792,173 12.81 1,310,589 12.812690
Total 599,564,990 45,130,870
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- -------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI GROWTH AND INCOME
Trust Class 679,408,422 15.36 44,243,039 15.356279
Investor Shares 38,878,160 15.47 2,512,324 15.474978
Flex Shares 49,931,771 15.33 3,256,380 15.333521
Total 768,218,353 50,011,743
- ----------------------------------------------------------------------------------------------
ESC STRATEGIC APPRECIATION
Class A 13,084,430 10.45 1,252,499 10.446658
Class D 3,574,626 10.09 354,329 10.088435
Total 16,659,056 1,606,828
- ----------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 679,408,422 15.36 44,243,039 15.356279
Investor Shares 51,962,590 15.47 3,358,118 15.473724
Flex Shares 53,506,397 15.33 3,489,559 15.333286
Total 784,877,409 51,090,715
- ----------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
Pro Forma Combining Statement of Operations
Period Ended May 31, 1999
<TABLE>
<CAPTION>
Pro Forma Combined
ESC Strategic STI Classsic
Income Fund Combined Adjustments High Income Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,149 $ 1,149 $ 1,149
Dividend income 25 25 25
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 1,174 1,174 1,174
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES: -
Investment advisory fees 167 167 (34) 133
Trustees' fees 2 2 2
Administrative personnel and services fees 62 62 (50) 12
Custodian and recordkeeping fees and expenses 6 6 -11 6
Transfer Agent Fees 25 25 14
Transfer Agent Fees-Flex Shares - -
Transfer Agent Out of Pocket Fees - -
Fund share registration costs - -
Auditing fees 16 16 16
Legal fees 6 6 6
Printing and postage - -
Insurance premiums - -
Distribution services fees-Investor Shares 40 40 (40) -
Distribution services fees-Flex Shares 5 5 117 122
Amortization of deferred organizational costs 8 8 8
Miscellaneous 38 38 38
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 375 375 (18) 357
- ----------------------------------------------------------------------------------------------------------------------------------
Deduct- 0
Waiver of investment advisory fees (53) (53) (98)
Waiver of distribution services fees-Investor Shares - -
Waiver of distribution services fees-Flex Shares - (25)
- ----------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 322 322 234
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 852 852 940
- ----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments: 0
Net realized gain (loss) on investments (identified cost basis) 58 58 58
Net change in unrealized appreciation (depreciation) on investments (194) (194) (194)
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (136) (136) (136)
- ----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 716 716 804
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
Pro Forma Statement of Assets and Liabilities (Unaudited)
STI Classic High Income Fund
March 31, 1999
(000)
<TABLE>
<CAPTION>
Pro Forma Combined
ESC STI Classic Funds
Strategic Pro Forma Small Cap Growth
Income Fund Adjustments Stock Fund
<S> <C> <C> <C>
ASSETS
Total Investments at Market Value (Cost $7,666 and
$7,666) $ 7,665 $7,665
Cash 0
Accrued Income 192 192
Receivables for Investment Securities Sold 0 0
Receivables for Capital Shares Sold 0 0
Other Receivables 0 0
Other Assets 6 6
------------- ------------- ---------------
Total Assets 7,863 7,863
------------- ------------- ---------------
LIABILITIES
Accrued Expenses (32) (32)
Income distribution payable (53) (53)
Payable for Investment Securities Purchased 0
Payable for Capital Shares Redeemed 0
------------- ------------- ---------------
Total Liabilities (85) (85)
------------- ------------- ---------------
7,778 7,778
NET ASSETS
Portfolio shares of the Trust Class (unlimited
authorization - no par value) based on (0,
0, 0) outstanding shares of beneficial interest 0
Portfolio shares of the Investor Class (unlimited
authorization - no par value) based on (0, 740, 072, 0)
outstanding shares of beneficial interest 7,289 (7,289) 0
Portfolio shares of the Flex Class (unlimited
authorization - no par value) based on (55,694, 796,163)
outstanding shares of beneficial interest 543 7,289 7,832
Undistributed net investment income (53) (53)
Accumulated net realized gain (loss) on investments 0 0
Net unrealized appreciation on investments (1) (1)
------------- ------------- ---------------
Total Net Assets $7,778 $7,778
------------- ------------- ---------- ---------------
------------- ------------- ---------- ---------------
Net Asset Value, Offering and Redemption Price Per
Share - Trust Shares
------------- ------------- ---------------
------------- ------------- ---------------
Net Asset Value and Redemption Price Per
Share - Investor Shares $9.77
------------- ---------------
------------- ---------------
Maximum Offering Price Per Share - Investor Shares $10.23
------------- ---------------
------------- ---------------
Net Asset Value and Redemption Price Per
Share - Flex Shares $9.84
------------- ------------- ---------------
------------- ------------- ---------------
Maximum Offering Price Per Share - Flex Shares $9.99
------------- ------------- ---------------
------------- ------------- ---------------
Net Asset Value, Offering and Redemption
Price Per Share -Flex Shares $9.84
------------- ------------- ---------------
------------- ------------- ---------------
$7,778 $7,778
------------- ------------- ---------------
------------- ------------- ---------------
</TABLE>
Page 7
<PAGE>
Adjustments
ADJUSTMENTS TO FINANCIALS
FUNDSHARE
<TABLE>
<CAPTION>
Esc Income NA High Income NAV Adjusted Shares STI Shares Combined
<S> <C> <C> <C> <C> <C>
Trust 0.00 0.00 #DIV/0! 0 #DIV/0!
Investor 7,230,434.00 9.77 740,065 0 740,072
Flex 548,012.00 9.77 56,091 0 56,091
-----------------
796,163
-----------------
-----------------
</TABLE>
ADVISORY FEE
<TABLE>
<CAPTION>
ESC Income Fund
----------------------
Avg Net Assets High Income BPS ESC Income Fund STI High Income Difference
---------------------- ---------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
16,695,685.00 0.80% 167,336.00 133,565.48 -33,770.52
16,695,685.00 0.65% 167,336.00 108,521.95 -58,814.05
----------------------------------------
25,043.53 -33,770.52
----------------------------------------
----------------------------------------
</TABLE>
DISTRIBUTION
<TABLE>
<CAPTION>
ESC Income Fund
----------------------
Avg Net Assets High Income BPS ESC Income Fund STI High Income Difference
---------------------- ---------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flex 16,695,685.00 1.00% 45,452.00 166,956.85 121,504.85
Total
-----------------
121,504.85
-----------------
-----------------
</TABLE>
T/A FEES
ADMINISTRATION
<TABLE>
<CAPTION>
ESC Income Fund
----------------------
Avg Net Assets High Income BPS ESC Income Fund STI High Income Difference
---------------------- ---------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
16,695,685.00 0.07% 62,048.00 11,686.98 -50,361.02
------------------
-50,361.02
------------------
------------------
</TABLE>
and allocated pro-rata amongst the funds.
ADVISORY & 12B-1 WAIVERS
<TABLE>
<CAPTION>
Advisory 12b-1 FLEX
<S> <C> <C> <C>
Total Expenses 357,000 Adj Total Exp Bps 2.138%
Less Class Specific Incremental adv w 25,044
Fund Expenses 357,000
Avg Net Assets 16,695,685 12b-1 Fee Bps 0.000%
Fund Expenses BPS 2.138% Advisory Waiver 0.150%
Trust Class T/A Fee BPS Net Exp Before W 1.988%
Adj Total Expenses BPS 2.138% Base Cap 1.400%
Less Base Cap -1.400% 12b-1 Waiver Bps 0.588%
Advisory Waiver BPS 0.150% 12b-1 Waiver 98,216.88
Advisory Waiver 25,044
ADJ to 65 BPS 25,044
</TABLE>
Avg Net Assets
<TABLE>
<CAPTION>
TOTAL TRUST INVESTOR FLEX
<S> <C> <C> <C> <C>
Flex Income Fund 16,695,685.00 16,695,685
---------------------- ---------------------------------------------------------------------
STI High Income Flex 16,695,685 0 0 16,695,685
---------------------- ---------------------------------------------------------------------
---------------------- ---------------------------------------------------------------------
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
Fee Table Year
<S> <C> <C>
Fund: 1 507
A= Sales Load 2
B= Total fund operating expenses 3 787
C= Redemption fee 4
D= Years CDSC is applicable 5 1087
Actuals 6
A= 3.75% 7
B= 1.35% 8
C= 0.00% 9
D= - 10 1938
</TABLE>
<TABLE>
<CAPTION>
5%
less
Amount Sales Beginning Expense Ending Average Expense Annual
Year Invested - Load = Value + Ratio = Value Value x Ratio = Expenses
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10000 375 9625 351.31 9976.31 9800.656 1.35% 132.31
2 9976.313 364.14 10340.45 10158.38 1.35% 137.14
3 10340.45 377.43 10717.87 10529.16 1.35% 142.14
4 10717.87 391.20 11109.08 10913.48 1.35% 147.33
5 11109.08 405.48 11514.56 11311.82 1.35% 152.71
6 11514.56 420.28 11934.84 11724.7 1.35% 158.28
7 11934.84 435.62 12370.46 12152.65 1.35% 164.06
8 12370.46 451.52 12821.98 12596.22 1.35% 170.05
9 12821.98 468.00 13289.99 13055.98 1.35% 176.26
10 13289.99 485.08 13775.07 13532.53 1.35% 182.69
<CAPTION>
Total
Amounts
Aggregate Redemption for Fee
Year Expenses + Fee = Table
<S> <C> <C> <C>
1 507.31 0.00 507.31
2 137.14 0.00 644.45
3 142.14 0.00 786.59
4 147.33 0.00 933.92
5 152.71 0.00 1086.63
6 158.28 0.00 1244.92
7 164.06 0.00 1408.98
8 170.05 0.00 1579.03
9 176.26 0.00 1755.28
10 182.69 0.00 1937.97
</TABLE>
Page 9
<PAGE>
STI FUNDS
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- --------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI SMALL CAP GROWTH EQUITY
Trust Class 206,080,503 16.23 12,700,058 16.226738
Investor Shares - - - #DIV/0!
Flex Shares 6,926,039 16.04 431,730 16.042510
Total 213,006,542 13,131,788
- -------------------------------------------------------------------------------------------
ESC STRATEGIC SMALL CAP
Class A 45,102,729 16.95 2,660,246 16.954344
Class D 14,397,619 16.56 869,339 16.561562
Total 59,500,348 3,529,586
- -------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 206,080,503 16.23 12,700,057.54 16.226738
Investor Shares 45,102,729 16.23 2,778,972.85 16.230000
Flex Shares 21,323,658 16.04 1,329,337.57 16.040815
Total 272,506,890 16,808,368
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- --------------------------------- ------------------ --- --------------
STI SMALL CAP GROWTH EQUITY
<S> <C> <C> <C> <C>
Trust Class 206,080,503 16.23 12,700,058 16.226738
Investor Shares - - - #DIV/0!
Flex Shares 6,926,039 16.04 431,730 16.042510
Total 213,006,542 13,131,788
- -------------------------------------------------------------------------------------------
ESC STRATEGIC SMALL CAP II
Class A 10,581,977 10.21 1,036,008 10.214186
Class D 5,262,760 10.09 521,754 10.086677
Total 15,844,737 1,557,761
- -------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 206,080,503 16.23 12,700,057.54 16.226738
Investor Shares 10,581,977 16.23 652,001.06 16.230000
Flex Shares 12,188,799 16.04 759,832.65 16.041426
Total 228,851,279 14,111,891
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- --------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI INTERNATIONAL EQUITY
Trust Class 563,543,423 13.30 42,362,691 13.302824
Investor Shares 13,209,257 13.19 1,001,173 13.193777
Flex Shares 15,294,295 12.81 1,193,659 12.812954
Total 592,046,975 44,557,523
- -------------------------------------------------------------------------------------------
ESC STRATEGIC INTERNATIONAL
Class A 6,020,136 9.25 650,674 9.252152
Class D 1,497,878 8.87 168,965 8.865025
Total 7,518,015 819,639
- -------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 563,543,423 13.30 42,362,691 13.302824
Investor Shares 19,229,394 13.19 1,457,590 13.192594
Flex Shares 16,792,173 12.81 1,310,589 12.812690
Total 599,564,990 45,130,870
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND NET ASSETS (000'S) NAV SHARES (000'S)
- --------------------------------- ------------------ --- --------------
<S> <C> <C> <C> <C>
STI GROWTH AND INCOME
Trust Class 679,408,422 15.36 44,243,039 15.356279
Investor Shares 38,878,160 15.47 2,512,324 15.474978
Flex Shares 49,931,771 15.33 3,256,380 15.333521
Total 768,218,353 50,011,743
- -------------------------------------------------------------------------------------------
ESC STRATEGIC APPRECIATION
Class A 13,084,430 10.45 1,252,499 10.446658
Class D 3,574,626 10.09 354,329 10.088435
Total 16,659,056 1,606,828
- -------------------------------------------------------------------------------------------
COMBINED FUNDS
Trust Shares 679,408,422 15.36 44,243,039 15.356279
Investor Shares 51,962,590 15.47 3,358,118 15.473724
Flex Shares 53,506,397 15.33 3,489,559 15.333286
Total 784,877,409 51,090,715
- -------------------------------------------------------------------------------------------
</TABLE>
Page 10
<PAGE>
<TABLE>
<CAPTION>
-------------------------------
STI Small Cap
Growth Stock Fund
- -----------------------------------------------------------------------------------------------------------
Shares / Face
Security Amount Value (000)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks--98.5%
Basic Materials--8.9%
Alpha Industries* 23,000 801
Astec Industries* 23,660 884
Bel Fuse, Cl A* 25,800 851
Boise Cascade 37,000 1,466
Centex Construction Products 23,020 826
Dal-Tile International, Inc.*
Florida Rock Industries 10,000 399
Granite Construction 24,000 673
International Comfort Products Corp.*
Jacobs Engineering Group* 10,300 383
LTV 45,000 276
NCI Building Systems* 47,570 1,201
Nordson Corp.
Pameco Corp.*
Quanex Corp.
Solutia 35,000 785
Stillwater Mining* 36,500 1,166
US Liquids* 20,900 376
U.S. Plastic Lumber* 90,000 816
Total Basic Materials 10,903
Capital Goods--17.5%
AFC Cable Systems* 37,085 1,275
American Woodmark 18,000 664
Anaren Microwave* 38,400 823
Avondale Industries* 20,000 730
Borg-Warner Automotive 13,000 721
Briggs & Stratton 11,800 737
Compucom Systems, Inc.*
Concord Communications* 21,000 934
Corsair Communications* 20,000 91
Crane 15,000 451
DM Management* 25,000 403
Dycom Industry* 29,475 1,422
Elcor 19,130 772
Elder-Beerman Stores Corp.*
Electro Scientific Industries, Inc.*
Genesis Microchip* 58,100 1,053
Group Maintenance America Corp.*
Intervoice* 93,000 1,035
Kellstrom Industries* 14,000 254
Kulicke & Soffa Industries, Inc.*
Manitowoc 20,723 705
Miami Computer Supply* 39,550 744
Mobile Mini* 68,000 897
Motivepower Industries* 27,150 460
National R.V. Holdings* 31,470 808
Navistar International* 30,000 1,481
Newpark Resources, Inc.*
PCD, Inc.*
Plexus Corp.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Power-One, Inc.*
Regis Corp.
Safety Kleen Corp.*
Simpson Manufacturing* 19,500 865
Sps Technologies* 12,070 511
Syncor International* 32,000 1,088
Transwitch* 27,500 1,272
UNIFAB International* 49,000 505
United Stationers* 33,000 619
Universal Corp. 15,000 392
USG 7,775 440
Varian Medical Associates* 15,000 282
Varlen 39,176 1,479
Wackenhut Corp., Class B
Whole Foods Market, Inc.*(a)
Total Capital Goods 23,913
Communication Services--1.9%
Broadvision* 20,000 1,040
Flashnet Communications * 11,000 217
Genesys Telecom Labs* 52,000 1,202
Gilat Communications Limited* 54,500 804
Polycom* 61,695 1,581
Total Communication Services 4,844
Consumer Cyclicals--24.1%
Aaron Rents, Inc.
American Eagle Outfitters* 27,000 1,102
Analytical Surveys* 25,500 625
Ann Taylor Stores* 26,500 1,144
Arvin Industries 23,000 903
Benchmark Electronics, Inc.*
Brinker International* 22,985 645
Buckle* 54,865 1,519
Cash America International, Inc.
CDW Computer Centers* 19,000 826
Centex 18,000 667
Chattem, Inc.*
Chicos* 50,000 1,134
Claire's Stores 35,000 1,024
Consolidated Graphics* 16,310 752
Copart, Inc.
Cost Plus * 25,000 934
Craftmade International 46,640 624
Cutter & Buck* 25,760 763
DR Horton 75,800 1,289
Delia's* 19,000 252
Dollar Tree Stores* 29,000 975
Empi* 12,000 294
First Years 24,010 384
Foodmaker* 20,000 540
Fossil* 32,530 1,364
Gentex* 27,000 811
Jakks Pacific * 30,000
K-Swiss, Cl A 46,740 2,682
Kroll-O'Gara Co.*
La-Z-Boy 26,800 533
Labor Ready* 29,500 1,051
Liberty Property Trust 25,270 610
Mohawk Industries* 36,115 1,052
Monaco Coach* 37,510 1,125
Movado Group 9,175 221
Oshkosh B'gosh, Cl A 16,655 327
Oshkosh Truck 6,000 238
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Pre Paid Legal Services* 10,000 266
Programmer's Paradise * 8,000 86
Quiksilver* 34,000 969
Racing Champions* 64,000 1,096
Rare Hospitality International* 24,000 552
Rexall Sundown, Inc.*
Salton/Maxim Housewares 21,500 919
Sonic Automotive, Inc.*
Southdown 24,900 1,578
Speedway Motorsports, Inc.*
Standard Pacific 54,145 711
Steven Madden Ltd* 81,365 870
Superior Industries International 27,000 673
Tarrant Apparel Group* 33,330 1,010
Triumph Group* 23,395 716
United Natural Foods, Inc.*
Urs* 28,325 697
Wet Seal, Cl A* 17,000 472
Wynn's International, Inc.
Winnebago Industries 54,000 891
Worthington Foods, Inc.
Zale* 28,000 1,080
Total Consumer Cyclicals 39,827
Consumer Staples--3.0%
Canandaigua Wine, Cl A* 13,100 652
Earthgrains 20,000 469
Flowers Industries 44,600 992
Mail-Well* 65,000 963
Papa John's International* 38,900 1,537
Rent-A-Center * 35,000 903
Smithfield Foods* 43,000 1,148
Suiza Foods* 25,000 916
Total Consumer Staples 7,580
Energy--2.3%
Eagle Geophysical * 1,280 4
National-Oilwell, Inc.*
Oceaneering International* 50,000 772
Rowan Cos., Inc.*
Santa Fe Snyder Corp* 80,000 680
Seacor Holdings* 3,000 149
Seitel* 40,000 632
Transocean Offshore 61,800 1,522
Veritas DGC, INC.*
Total Energy 3,759
Financials--7.2%
Allied Capital Corp.
American Heritage 39,300 914
Amerin* 21,057 566
Amresco, Inc.*(a)
Annuity & Life Re Holdings 12,000 309
Bank of Commerce/San Diego 16,000 312
Corporate Executive Board* 17,000 498
Cullen/Frost Bankers 9,550 537
Dime Community Bancorp 35,200 779
Doral Financial 42,000 709
E.W. Blanch Holdings 16,900 1,082
Enhance Financial Services Group 30,000 587
Financial Security Assurance Holdings 7,385 419
Finova Group, Inc.
FPIC Insurance Group, Inc.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Fremont General 55,000 1,165
Investment Technology Group* 16,881 748
NVR* 13,975 673
PFF Bancorp* 32,000 580
Pilgrim America Cap Corp* 19,600 390
Protective Life 38,000 1,375
Ryland Group 16,165 450
Total Financials 12,093
Health Care--9.0%
Alpharma, Cl A 24,000 640
Barr Laboratories* 18,475 609
Biomatrix* 28,000 857
Capital Senior Living* 70,000 761
Colorado Medtech* 65,340 923
D&K Healthcare Resources* 24,400 576
Dura Pharmaceuticals, Inc.*
Endosonics Corp.*
Interim Services* 35,000 763
Ivax* 40,000 537
Laser Vision Centers* 15,000 855
Liposome* 78,000 1,116
Meditis Pharmaceutical Corp., Class A*
Natrol, Inc.*
Optical Coating Laboratories 3,000 195
Osteotech* 23,917 849
Rehabcare Group* 33,000 710
Res-Care Inc.*
Resmed* 43,000 1,207
Roberts Pharmaceutical* 63,000 1,197
Steris* 25,000 414
Trigon Healthcare* 15,000 572
Twinlab Corp.*
United Payors & United Providers, Inc.*
Varian 15,000 150
Total Health Care 12,931
Real Estate--2.0%
Intrawest Corp.
Prison Realty Corp.
Total Real Estate
Technology--17.9%
Activision, Inc.*
ADE Corp.*
American Management Systems* 25,000 794
Apex PC Solutions, Inc.*
Armor Holdings, Inc. Delaware*
Asyst Technologies, Inc.*
Business Objects ADR* 30,000 862
Checkpoint Software* 20,000 885
Ciber* 52,230 1,120
CMI Corp., Class A
Commscope* 50,000 1,313
Computer Network Technology* 29,000 732
Cordant Technologies 18,000 873
Cybex Computer Products* 61,944 1,405
Datastream Systems, Inc.*
Electronic Arts* 16,000 783
Fair Isaac 5,000 164
FEI CO.*
Flextronics International* 7,000 350
4front Technologies* 60,000 600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Henry (Jack) & Associates 7,000 247
Herley Industries * 52,000 673
Hyperion Telecommunications, Cl A* 60,000 1,013
Insight Enterprises* 38,557 978
Javelin Systems * 60,000 776
Kronos* 29,200 1,081
Landmark Systems* 24,000 231
Mastech* 62,900 1,207
Maxtor Corp.*
Metamor Worldwide* 27,000 739
Micros Systems* 40,000 1,250
Overland Data * 65,000 423
Pinnacle Systems* 19,000 984
Perot Systems, Cl A* 14,800 401
Powerhouse Technologies* 15,000 278
Power Intergrations, Inc.*
Progress Software* 66,930 1,744
Quantum* 20,000 396
Sunquest* 44,000 578
Sybase* 55,000 533
Sykes Enterprises* 10,435 325
T-HQ* 46,290 1,091
Talk.com * 25,000 259
Technomatrix Technologies* 51,000 854
Timberline Software 54,000 918
USWeb* 25,000 634
Varian Semiconductor Equipment* 15,000 187
Xircom* 52,000 1,313
Zebra Technologies Corp.*
Zomax* 41,000 1,081
Total Technology 30,075
Transportation--3.9%
Aeroflex* 61,000 888
Alaska Airgroup* 10,000 415
American Freightways* 82,500 1,444
Amtran Inc* 14,525 341
Atlas Air* 48,000 1,290
Eagle USA Airfreight* 9,000 424
Forward Air* 10,000 274
Frontier Airlines* 62,000 961
Landstar System* 10,000 376
Skywest 38,680 899
Swift Transportation* 45,000 823
USFreightways 43,300 1,706
Total Transportation 9,841
Utilities--0.8%
El Paso Electric* 80,000 685
Kinder Morgan Energy Partners 18,000 671
Public Service of New Mexico 20,000 415
Public Service of North Carolina 5,000 145
Total Utilities 1,916
Total Common Stocks (Cost $241,425) 157,682
Floating Rate Note--1.0%
Merrill Lynch & Co., 5.40%, 2/28/2000, MTN
Total Floating Rate Note (Cost $2,500)
Repurchase Agreements--5.7%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase
price $4,658,357 (collateralized by various FNMA obligations: total
market value $4,767,582) 4,656 4,656
Lehman Brothers Triparty Agreement 5.25%, 4/1/1999
Total Repurchase Agreements (Cost $14,624)
CASH SWEEP ACCOUNT-1.6%
Union Bank of California
Total Cash Sweep Account(Cost $4,180)
Total Investments--106.8% (Cost $262,729) 162,338
Other Assets and Liabilities, Net---(6.8%) (3,890)
Total Net Assets--100.0% 158,448
</TABLE>
<TABLE>
<CAPTION>
--------------------------------
ESC Strategic
Small Cap
- -----------------------------------------------------------------------------------------------------------
Shares / Face
Security Amount Value (000)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks--98.5%
Basic Materials--8.9%
Alpha Industries*
ASTEC INDUSTRIES* 150,000 4,631
Bel Fuse, Cl A*
Boise Cascade
Centex Construction Products
Dal-Tile International, Inc.* 204,800 1,856
Florida Rock Industries
Granite Construction
International Comfort Products Corp.* 301,100 2,371
Jacobs Engineering Group*
LTV
NCI Building Systems*
Nordson Corp. 20,000 1,115
Pameco Corp.* 113,700 654
Quanex Corp. 75,000 1,163
Solutia
Stillwater Mining*
US Liquids*
U.S. Plastic Lumber*
Total Basic Materials 11,790
Capital Goods--17.5%
AFC Cable Systems*
American Woodmark
Anaren Microwave*
Avondale Industries*
Borg-Warner Automotive
Briggs & Stratton
Compucom Systems, Inc.* 311,000 914
Concord Communications*
Corsair Communications*
Crane
DM Management*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Dycom Industry*
Elcor
Elder-Beerman Stores Corp.* 55,000 474
Electro Scientific Industries, Inc.* 64,200 2,985
Genesis Microchip*
Group Maintenance America Corp.* 180,000 2,048
Intervoice*
Kellstrom Industries*
Kulicke & Soffa Industries, Inc.* 100,000 2,525
Manitowoc
Miami Computer Supply*
Mobile Mini*
Motivepower Industries*
National R.V. Holdings*
Navistar International*
Newpark Resources, Inc.* 146,200 1,060
PCD, Inc.* 125,300 1,136
Plexus Corp.* 36,100 1,006
Power-One, Inc.* 193,000 1,303
Regis Corp. 90,000 2,396
Safety Kleen Corp.* 100,000 1,325
Simpson Manufacturing*
Sps Technologies*
Syncor International*
Transwitch*
UNIFAB International*
United Stationers*
Universal Corp.
USG
Varian Medical Associates*
Varlen
Wackenhut Corp., Class B 143,600 2,441
Whole Foods Market, Inc.*(a) 37,200 1,279
Total Capital Goods 20,892
Communication Services--1.9%
Broadvision*
Flashnet Communications *
Genesys Telecom Labs*
Gilat Communications Limited*
Polycom*
Total Communication Services
Consumer Cyclicals--24.1%
Aaron Rents, Inc. 111,600 1,744
American Eagle Outfitters*
Analytical Surveys*
Ann Taylor Stores*
Arvin Industries
Benchmark Electronics, Inc.* 83,600 2,508
Brinker International*
Buckle*
Cash America International, Inc. 100,000 1,288
CDW Computer Centers*
Centex
Chattem, Inc.* 29,600 925
Chicos*
Claire's Stores
Consolidated Graphics*
Copart, Inc. 144,400 2,166
Cost Plus *
Craftmade International
Cutter & Buck*
DR Horton
Delia's*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Dollar Tree Stores*
Empi*
First Years
Foodmaker*
Fossil*
Gentex*
Jakks Pacific *
K-Swiss, Cl A
Kroll-O'Gara CU.* 67,800 1,839
La-Z-Boy
Labor Ready*
Liberty Property Trust
Mohawk Industries*
Monaco Coach*
Movado Group
Oshkosh B'gosh, Cl A
Oshkosh Truck
Pre Paid Legal Services*
Programmer's Paradise *
Quiksilver*
Racing Champions*
Rare Hospitality International*
Rexall Sundown, Inc.* 100,000 1,919
Salton/Maxim Housewares*
Sonic Automotive, Inc.* 70,000 1,085
Southdown
Speedway Motorsports, Inc.* 61,700 2,545
Standard Pacific
Steven Madden Ltd*
Superior Industries International
Tarrant Apparel Group*
Triumph Group*
United Natural Foods, Inc.* 100,000 2,338
Urs*
Wet Seal, Cl A*
Wynn's International, Inc. 132,000 2,302
Winnebago Industries
Worthington Foods, Inc. 105,666 1,202
Zale*
Total Consumer Cyclicals 21,861
Consumer Staples--3.0%
Canandaigua Wine, Cl A*
Earthgrains
Flowers Industries
Mail-Well*
Papa John's International*
Rent-A-Center *
Smithfield Foods*
Suiza Foods*
Total Consumer Staples
Energy--2.3%
Eagle Geophysical *
National-Oilwell, Inc.* 90,000 1,041
Oceaneering International*
Rowan Cos., Inc.* 10,000 127
Santa Fe Snyder Corp*
Seacor Holdings*
Seitel*
Transocean Offshore
Veritas DGC, Inc.* 71,500 1,014
Total Energy 2,182
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Financials--7.2%
Allied Capital Corp. 139,800 2,569
American Heritage
Amerin*
Amresco, Inc.* 100,000 769
Annuity & Life Re Holdings
Bank of Commerce/San Diego
Corporate Executive Board*
Cullen/Frost Bankers
Dime Community Bancorp
Doral Financial
E.W. Blanch Holdings
Enhance Financial Services Group
Financial Security Assurance Holdings
Finova Group, Inc. 16,340 848
FPIC Insurance Group, Inc.* 50,000 2,075
Fremont General
Investment Technology Group*
NVR*
PFF Bancorp*
Pilgrim America Cap Corp*
Protective Life
Ryland Group 6,261
Total Financials
Health Care--9.0%
Alpharma, Cl A
Barr Laboratories*
Biomatrix*
Capital Senior Living*
Colorado Medtech*
D&K Healthcare Resources*
Dura Pharmaceuticals, Inc.* 140,000 1,978
Endosonics Corp.* 130,000 845
Interim Services*
Ivax*
Laser Vision Centers*
Liposome*
Meditis Pharmaceutical Corp., Class A* 57,300 1,719
Natrol, Inc.* 120,000 728
Optical Coating Laboratories
Osteotech*
Rehabcare Group*
Res-Care Inc.* 100,000 2,256
Resmed*
Roberts Pharmaceutical*
Steris*
Trigon Healthcare*
Twinlab Corp.* 143,800 1,348
United Payors & United Providers, Inc.* 50,000 1,153
Varian
Total Health Care 10,027
Real Estate--2.0%
Intrawest Corp. 183,700 3,099
Prison Realty Corp. 111,750 1,949
Total Real Estate 5,048
Technology--17.9%
Activision, Inc.* 130,000 1,609
ADE Corp.* 150,000 1,425
American Management Systems*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Apex PC Solutions, Inc.* 55,000 767
Armor Holdings, Inc. Delaware* 100,000 1,369
Asyst Technologies, Inc.* 108,100 1,486
Business Objects ADR*
Checkpoint Software*
Ciber*
CMI Corp., Class A 167,600 1,047
Commscope*
Computer Network Technology*
Cordant Technologies
Cybex Computer Products*
Datastream Systems, Inc.* 110,000 949
Electronic Arts*
Fair Isaac
FEI Co.* 192,100 1,608
Flextronics International*
4front Technologies*
Henry (Jack) & Associates
Herley Industries *
Hyperion Telecommunications, Cl A*
Insight Enterprises*
Javelin Systems *
Kronos*
Landmark Systems*
Mastech*
Maxtor Corp.* 125,200 884
Metamor Worldwide*
Micros Systems*
Overland Data *
Pinnacle Systems*
Perot Systems, Cl A*
Powerhouse Technologies*
Power Intergrations, Inc.* 78,500 2,491
Progress Software*
Quantum*
Sunquest*
Sybase*
Sykes Enterprises*
T-HQ*
Talk.com *
Technomatrix Technologies*
Timberline Software
USWeb*
Varian Semiconductor Equipment*
Xircom*
Zebra Technologies Corp.* 81,600 1,937
Zomax*
Total Technology 15,572
Transportation--3.9%
Aeroflex*
Alaska Airgroup*
American Freightways*
Amtran Inc*
Atlas Air*
Eagle USA Airfreight*
Forward Air*
Frontier Airlines*
Landstar System*
Skywest
Swift Transportation*
USFreightways
Total Transportation
Utilities--0.8%
El Paso Electric*
Kinder Morgan Energy Partners
Public Service of New Mexico
Public Service of North Carolina
Total Utilities
Total Common Stocks (Cost $241,425)
Floating Rate Note--1.0%
Merrill Lynch & Co., 5.40%, 2/28/2000, MTN 2,500,000 2,500
Total Floating Rate Note (Cost $2,500)
Repurchase Agreements--5.7%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase price
$4,658,357 (collateralized by various FNMA obligations: total market
value $4,767,582)
Lehman Brothers Triparty Agreement 5.25%, 4/1/1999 9,967,809 9,968
Total Repurchase Agreements (Cost $14,624)
Cash Sweep Account-1.6%
Union Bank of California 4,180,116 4,180
Total Cash Sweep Account(Cost $4,180)
Total Investments--106.8% (Cost $262,729)
Other Assets and Liabilities, Net---(6.8%)
Total Net Assets--100.0%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
Pro Forma Combined
STI Small Cap
Growth Stock Fund
- ---------------------------------------------------------------------------------------------------------
Shares / Face
Security Amount Value (000)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks--98.5%
Basic Materials--8.9%
Alpha Industries* 23,000 801
Astec Industries* 173,660 5,515
Bel Fuse, Cl A* 25,800 851
Boise Cascade 37,000 1,466
Centex Construction Products 23,020 826
Dal-Tile International, Inc.* 204,800 1,856
Florida Rock Industries 10,000 399
Granite Construction 24,000 673
International Comfort Products Corp.* 301,100 2,371
Jacobs Engineering Group* 10,300 383
LTV 45,000 276
NCI Building Systems* 47,570 1,201
Nordson Corp. 20,000 1,115
Pameco Corp.* 113,700 654
Quanex Corp. 75,000 1,163
Solutia 35,000 785
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Stillwater Mining* 36,500 1,166
US Liquids* 20,900 376
U.S. Plastic Lumber* 90,000 816
Total Basic Materials 22,693
Capital Goods--17.5%
AFC Cable Systems* 37,085 1,275
American Woodmark 18,000 664
Anaren Microwave* 38,400 823
Avondale Industries* 20,000 730
Borg-Warner Automotive 13,000 721
Briggs & Stratton 11,800 737
Compucom Systems, Inc.* 311,000 914
Concord Communications* 21,000 934
Corsair Communications* 20,000 91
Crane 15,000 451
DM Management* 25,000 403
Dycom Industry* 29,475 1,422
Elcor 19,130 772
Elder-Beerman Stores Corp.* 55,000 474
Electro Scientific Industries, Inc.* 64,200 2,985
Genesis Microchip* 58,100 1,053
Group Maintenance America Corp.* 180,000 2,048
Intervoice* 93,000 1,035
Kellstrom Industries* 14,000 254
Kulicke & Soffa Industries, Inc.* 100,000 2,525
Manitowoc 20,723 705
Miami Computer Supply* 39,550 744
Mobile Mini* 68,000 897
Motivepower Industries* 27,150 460
National R.V. Holdings* 31,470 808
Navistar International* 30,000 1,481
Newpark Resources, Inc.* 146,200 1,060
PCD, Inc.* 125,300 1,136
Plexus Corp.* 36,100 1,006
Power-One, Inc.* 193,000 1,303
Regis Corp. 90,000 2,396
Safety Kleen Corp.* 100,000 1,325
Simpson Manufacturing* 19,500 865
Sps Technologies* 12,070 511
Syncor International* 32,000 1,088
Transwitch* 27,500 1,272
Unifab International* 49,000 505
United Stationers* 33,000 619
Universal Corp. 15,000 392
USG 7,775 440
Varian Medical Associates* 15,000 282
Varlen 39,176 1,479
Wackenhut Corp., Class B 143,600 2,441
Whole Foods Market, Inc.*(a) 37,200 1,279
Total Capital Goods 44,805
Communication Services--1.9%
Broadvision* 20,000 1,040
Flashnet Communications * 11,000 217
Genesys Telecom Labs* 52,000 1,202
Gilat Communications Limited* 54,500 804
Polycom* 61,695 1,581
Total Communication Services 4,844
Consumer Cyclicals--24.1%
Aaron Rents, Inc. 111,600 1,744
American Eagle Outfitters* 27,000 1,102
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Analytical Surveys* 25,500 625
Ann Taylor Stores* 26,500 1,144
Arvin Industries 23,000 903
Benchmark Electronics, Inc.* 83,600 2,508
Brinker International* 22,985 645
Buckle* 54,865 1,519
Cash America International, Inc. 100,000 1,288
CDW Computer Centers* 19,000 826
Centex 18,000 667
Chattem, Inc.* 29,600 925
Chicos* 50,000 1,134
Claire's Stores 35,000 1,024
Consolidated Graphics* 16,310 752
Copart, Inc. 144,400 2,166
Cost Plus * 25,000 934
Craftmade International 46,640 624
Cutter & Buck* 25,760 763
DR Horton 75,800 1,289
Delia's* 19,000 252
Dollar Tree Stores* 29,000 975
Empi* 12,000 294
First Years 24,010 384
Foodmaker* 20,000 540
Fossil* 32,530 1,364
Gentex* 27,000 811
Jakks Pacific * 30,000 831
K-Swiss, Cl A 46,740 2,682
Kroll-O'Gara Co.* 67,800 1,839
La-Z-Boy 26,800 533
Labor Ready* 29,500 1,051
Liberty Property Trust 25,270 610
Mohawk Industries* 36,115 1,052
Monaco Coach* 37,510 1,125
Movado Group 9,175 221
Oshkosh B'gosh, Cl A 16,655 327
Oshkosh Truck 6,000 238
Pre Paid Legal Services* 10,000 266
Programmer's Paradise * 8,000 86
Quiksilver* 34,000 969
Racing Champions* 64,000 1,096
Rare Hospitality International* 24,000 552
Rexall Sundown, Inc.* 100,000 1,919
Salton/Maxim Housewares* 21,500 919
Sonic Automotive, Inc.* 70,000 1,085
Southdown 24,900 1,578
Speedway Motorsports, Inc.* 61,700 2,545
Standard Pacific 54,145 711
Steven Madden Ltd* 81,365 870
Superior Industries International 27,000 673
Tarrant Apparel Group* 33,330 1,010
Triumph Group* 23,395 716
United Natural Foods, Inc.* 100,000 2,338
Urs* 28,325 697
Wet Seal, Cl A* 17,000 472
Wynn's International, Inc. 132,000 2,302
Winnebago Industries 54,000 891
Worthington Foods, Inc. 105,666 1,202
Zale* 28,000 1,080
Total Consumer Cyclicals 61,688
Consumer Staples--3.0%
Canandaigua Wine, Cl A* 13,100 652
Earthgrains 20,000 469
Flowers Industries 44,600 992
Mail-Well* 65,000 963
Papa John's International* 38,900 1,537
Rent-A-Center * 35,000 903
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Smithfield Foods* 43,000 1,148
Suiza Foods* 25,000 916
Total Consumer Staples 7,580
Energy--2.3%
Eagle Geophysical * 1,280 4
National-Oilwell, INC.* 90,000 1,041
Oceaneering International* 50,000 772
Rowan Cos., Inc.* 10,000 127
Santa Fe Snyder Corp* 80,000 680
Seacor Holdings* 3,000 149
Seitel* 40,000 632
Transocean Offshore 61,800 1,522
Veritas DGC, Inc.* 71,500 1,014
Total Energy 5,941
Financials--7.2%
Allied Capital Corp. 139,800 2,569
American Heritage 39,300 914
Amerin* 21,057 566
Amresco, Inc.* 100,000 769
Annuity & Life Re Holdings 12,000 309
Bank of Commerce/San Diego 16,000 312
Corporate Executive Board* 17,000 498
Cullen/Frost Bankers 9,550 537
Dime Community Bancorp 35,200 779
Doral Financial 42,000 709
E.W. Blanch Holdings 16,900 1,082
Enhance Financial Services Group 30,000 587
Financial Security Assurance Holdings 7,385 419
Finova Group, Inc. 16,340 848
FPIC Insurance Group, Inc.* 50,000 2,075
Fremont General 55,000 1,165
Investment Technology Group* 16,881 748
NVR* 13,975 673
PFF Bancorp* 32,000 580
Pilgrim America Cap Corp* 19,600 390
Protective Life 38,000 1,375
Ryland Group 16,165 450
Total Financials 18,354
Health Care--9.0%
Alpharma, Cl A 24,000 640
Barr Laboratories* 18,475 609
Biomatrix* 28,000 857
Capital Senior Living* 70,000 761
Colorado Medtech* 65,340 923
D&K Healthcare Resources* 24,400 576
Dura Pharmaceuticals, Inc.* 140,000 1,978
Endosonics Corp.* 130,000 845
Interim Services* 35,000 763
Ivax* 40,000 537
Laser Vision Centers* 15,000 855
Liposome* 78,000 1,116
Meditis Pharmaceutical Corp., Class A* 57,300 1,719
Natrol, Inc.* 120,000 728
Optical Coating Laboratories 3,000 195
Osteotech* 23,917 849
Rehabcare Group* 33,000 710
Res-Care Inc.*(a) 100,000 2,256
Resmed* 43,000 1,207
Roberts Pharmaceutical* 63,000 1,197
Steris* 25,000 414
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Trigon Healthcare* 15,000 572
Twinlab Corp.* 143,800 1,348
United Payors & United Providers, Inc.* 50,000 1,153
Varian 15,000 150
Total Health Care 22,958
Real Estate--2.0%
Intrawest Corp. 183,700 3,099
Prison Realty Corp. 111,750 1,949
Total Real Estate 5,048
Activision, Inc.* 130,000 1,609
ADE Corp.* 150,000 1,425
American Management Systems* 25,000 794
Apex PC Solutions, Inc.* 55,000 767
Armor Holdings, Inc. Delaware* 100,000 1,369
Asyst Technologies, Inc.* 108,100 1,486
Business Objects ADR* 30,000 862
Checkpoint Software* 20,000 885
Ciber* 52,230 1,120
CMI Corp., Class A 167,600 1,047
Commscope* 50,000 1,313
Computer Network Technology* 29,000 732
Cordant Technologies 18,000 873
Cybex Computer Products* 61,944 1,405
Datastream Systems, Inc.* 110,000 949
Electronic Arts* 16,000 783
Fair Isaac 5,000 164
FEI Co.* 192,100 1,608
Flextronics International* 7,000 350
4front Technologies* 60,000 600
Henry (Jack) & Associates 7,000 247
Herley Industries * 52,000 673
Hyperion Telecommunications, Cl A* 60,000 1,013
Insight Enterprises* 38,557 978
Javelin Systems * 60,000 776
Kronos* 29,200 1,081
Landmark Systems* 24,000 231
Mastech* 62,900 1,207
Maxtor Corp.* 125,200 884
Metamor Worldwide* 27,000 739
Micros Systems* 40,000 1,250
Overland Data * 65,000 423
Pinnacle Systems* 19,000 984
Perot Systems, Cl A* 14,800 401
Powerhouse Technologies* 15,000 278
Power Intergrations, Inc.* 78,500 2,491
Progress Software* 66,930 1,744
Quantum* 20,000 396
Sunquest* 44,000 578
Sybase* 55,000 533
Sykes Enterprises* 10,435 325
T-HQ* 46,290 1,091
Talk.com * 25,000 259
Technomatrix Technologies* 51,000 854
Timberline Software 54,000 918
USWeb* 25,000 634
Varian Semiconductor Equipment* 15,000 187
Xircom* 52,000 1,313
Zebra Technologies Corp.* 81,600 1,937
Zomax* 41,000 1,081
Total Technology 45,647
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Transportation--3.9%
Aeroflex* 61,000 888
Alaska Airgroup* 10,000 415
American Freightways* 82,500 1,444
Amtran Inc* 14,525 341
Atlas Air* 48,000 1,290
Eagle USA Airfreight* 9,000 424
Forward Air* 10,000 274
Frontier Airlines* 62,000 961
Landstar System* 10,000 376
Skywest 38,680 899
Swift Transportation* 45,000 823
USFreightways 43,300 1,706
Total Transportation 9,841
Utilities--0.8%
El Paso Electric* 80,000 685
Kinder Morgan Energy Partners 18,000 671
Public Service of New Mexico 20,000 415
Public Service of North Carolina 5,000 145
Total Utilities 1,916
Total Common Stocks (Cost $241,425) 93,633 251,315
Floating Rate Note--1.0%
Merrill Lynch & Co., 5.40%, 2/28/2000, MTN 2,500,000 2,500
Total Floating Rate Note (Cost $2,500) 2,500
Repurchase Agreements--5.7%
Morgan Stanley 4.80%, dated 05/28/99, matures 06/01/99, repurchase
price $4,658,357 (collateralized by various FNMA obligations: total
market value $4,767,582) 4,656 4,656
Lehman Brothers Triparty Agreement 5.25%, 4/1/1999 9,967,809 9,968
Total Repurchase Agreements (Cost $14,624) 14,624
Cash Sweep Account-1.6%
Union Bank of California 4,180,116 4,180
Total Cash Sweep Account(Cost $4,180) 4,180
Total Investments--106.8% (Cost $262,729) 110,281 272,619
Other Assets and Liabilities, Net--(6.8%) (13,466) (17,356)
Total Net Assets--100.0% 255,263 255,263
ADR American Depository Receipt
Cl Class
FNMA Federal National Mortgage Association
* Non-income producing security
</TABLE>
Page 11
<PAGE>
STI CLASSIC FUNDS (SMALL CAP GROWTH)
Notes to Pro Forma Financial Statements
March 24, 2000
1. BASIS OF COMBINATION
The unaudited Pro Forma Combining Schedule of Investments, Pro Forma Combining
Statements of Assets and Liabilities and Pro Forma Combining Statements of
Operations give effect to the proposed merger of the ESC Strategic Small Cap
Equity Fund into the STI Small Cap Growth Stock Fund. The proposed merger will
be accounted for by the method of accounting for tax free mergers of investment
companies (sometimes referred to as the pooling without restatement method). The
Merger will be accomplished by an exchange of all outstanding shares of the
Class A and Class D of the ESC Strategic Small Cap Equity Fund in exchange for
shares of the Investor, and Flex shares of the Small Cap Growth Equity Fund.
The pro forma combining statements should be read in conjunction with the
historical financial statements of the constituent funds and the notes thereto
incorporated by reference in the Statement of Additional Information.
The STI Classic Funds is an open-end management investment company registered
under the Investment Company Act of 1940, as amended.
PRO FORMA ADJUSTMENTS:
a) The Pro Forma combining statements of assets and liabilities assume the
issuance of additional shares of the respective STI Classic Fund as if the
reorganization had taken place on May 31, 1999 and are based on the net
asset value of the acquiring fund. In addition, the Small Cap Equity Growth
Stock Fund is the surviving fund for accounting purposes and legal entity
surviving. The performance history of the Small Cap Equity Stock Fund will
be carried forward.
b) The Pro forma adjustments reflect the impact of applying the contractual
fees in place for the legally surviving Small Cap Equity Growth Fund for
Advisor, Administration and Distribution as well as the expected savings in
other expenses due to the combination of the funds.
Page 12
<PAGE>
STI CLASSIC FUNDS (HIGH INCOME)
Notes to Pro Forma Financial Statements
March 24, 2000
1. BASIS OF COMBINATION
The unaudited Pro Forma Combining Statements of Assets and Liabilities and Pro
Forma Combining Statements of Operations give effect to the proposed merger of
the ESC Strategic Income Fund into the shell of the STI High Income Fund. The
proposed merger will be accounted for by the method of accounting for tax free
mergers of investment companies (sometimes referred to as the pooling without
restatement method). The Merger will be accomplished by an exchange of all
outstanding shares of the Class A and Class D of the ESC Strategic Income Fund
in exchange for shares of the Flex shares of the STI High Income Fund.
The pro forma combining statements should be read in conjunction with the
historical financial statements of the constituent funds and the notes thereto
incorporated by reference in the Statement of Additional Information.
The STI Classic Funds is an open-end management investment company registered
under the Investment Company Act of 1940, as amended.
PRO FORMA ADJUSTMENTS:
a) The Pro Forma combining statements of assets and liabilities assume the
issuance of additional shares of the respective STI Classic Fund as if the
reorganization had taken place on March 31, 1999 and are based on the net
asset value of the ESC Strategic Income Fund. In addition, the STI High
Income Fund is the surviving fund for accounting purposes and legal entity
surviving. The performance history of the ESC Strategic Class A Income Fund
will be carried forward.
b) The Pro forma adjustments reflect the impact of applying the contractual
fees in place for the legally surviving STI High Income Fund for Advisor,
Administration and Distribution as well as the expected savings in other
expenses due to the combination of the funds.
Page 13
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Income Fund - Class D
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Income Fund (the "Fund") of ESC Strategic
Funds, Inc. (the "Corporation") to be held in the offices of BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22, 2000,
at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting") all
shares of the Fund that the undersigned would be entitled to vote if personally
present at the Meeting ("Shares") on the proposal set forth below respecting the
proposed Agreement and Plan of Reorganization (the "Reorganization Agreement")
between the Corporation, on behalf of the Fund, and STI Classic Funds (the
"Trust"), on behalf of the corresponding series of the Trust set forth below in
the Proposal, and on any other matters properly brought before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Income Fund and the STI High Income Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Income Fund - Class A
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Income Fund (the "Fund") of ESC Strategic
Funds, Inc. (the "Corporation") to be held in the offices of BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22, 2000,
at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting") all
shares of the Fund that the undersigned would be entitled to vote if personally
present at the Meeting ("Shares") on the proposal set forth below respecting the
proposed Agreement and Plan of Reorganization (the "Reorganization Agreement")
between the Corporation, on behalf of the Fund, and STI Classic Funds (the
"Trust"), on behalf of the corresponding series of the Trust set forth below in
the Proposal, and on any other matters properly brought before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Income Fund and the STI High Income Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Appreciation Fund - Class D
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Appreciation Fund (the "Fund") of ESC
Strategic Funds, Inc. (the "Corporation") to be held in the offices of BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22,
2000, at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting")
all shares of the Fund that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposal set forth below
respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Strategic Appreciation Fund and the STI Growth and
Income Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE SIMPLE
RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Appreciation Fund - Class A
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Appreciation Fund (the "Fund") of ESC
Strategic Funds, Inc. (the "Corporation") to be held in the offices of BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22,
2000, at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting")
all shares of the Fund that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposal set forth below
respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Strategic Appreciation Fund and the STI Growth and Income Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic International Equity Fund - Class D
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic International Equity Fund (the "Fund") of ESC
Strategic Funds, Inc. (the "Corporation") to be held in the offices of BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22,
2000, at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting")
all shares of the Fund that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposal set forth below
respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates
to the ESC International Equity Fund and the STI
International Equity Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE
ENCLOSED, POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic International Equity Fund - Class A
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic International Equity Fund (the "Fund") of ESC
Strategic Funds, Inc. (the "Corporation") to be held in the offices of BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22,
2000, at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting")
all shares of the Fund that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposal set forth below
respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
International Equity Fund and the STI International Equity Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Small Cap II Fund - Class D
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Small Cap II Fund (the "Fund") of ESC
Strategic Funds, Inc. (the "Corporation") to be held in the offices of BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22,
2000, at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting")
all shares of the Fund that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposal set forth below
respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to
the ESC Strategic Small Cap II Fund and the STI Small
Cap Growth Stock Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE
ENCLOSED, POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Small Cap II Fund - Class A
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Small Cap II Fund (the "Fund") of ESC
Strategic Funds, Inc. (the "Corporation") to be held in the offices of BISYS
Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22,
2000, at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting")
all shares of the Fund that the undersigned would be entitled to vote if
personally present at the Meeting ("Shares") on the proposal set forth below
respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL.
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Strategic Small Cap II Fund and the STI Small Cap Growth Stock Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE
ENCLOSED, POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY,YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Small Cap Fund - Class D
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Small Cap Fund (the "Fund") of ESC Strategic
Funds, Inc. (the "Corporation") to be held in the offices of BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22, 2000,
at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting") all
shares of beneficial interest of the Fund that the undersigned would be entitled
to vote if personally present at the Meeting ("Shares") on the proposal set
forth below respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL:
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Strategic Small Cap Fund and the STI Small Cap Growth Stock Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
ESC STRATEGIC FUNDS, INC.
ESC Strategic Small Cap Fund - Class A
Special Meeting of the Shareholders
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MARCH 22, 2000
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints Jeff Young and Paige Hodgin as proxies and each
of them, each with full power of substitution, to vote at the Special Meeting of
Shareholders of the ESC Strategic Small Cap Fund (the "Fund") of ESC Strategic
Funds, Inc. (the "Corporation") to be held in the offices of BISYS Fund
Services, 3435 Stelzer Road, Columbus, Ohio 43219, on Wednesday, March 22, 2000,
at 3:00 p.m. (Eastern Time), and any adjournments thereof (the "Meeting") all
shares of beneficial interest of the Fund that the undersigned would be entitled
to vote if personally present at the Meeting ("Shares") on the proposal set
forth below respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Corporation, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below in the Proposal, and on any other matters properly brought
before the Meeting.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" THE PROPOSAL:
( X Please mark your choices like this on the Proposal )
--
Proposal: Approve the Reorganization Agreement as it relates to the ESC
Strategic Small Cap Fund and the STI Small Cap Growth Stock
Fund:
____For ____Against ____Abstain
This proxy will, when properly executed, be voted as directed herein by
the signing Shareholder(s). If no contrary direction is given when the duly
executed Proxy is returned, this Proxy will be voted FOR the foregoing proposal
and will be voted in the appointed proxies' discretion upon such other business
as may properly come before the Meeting.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement/Prospectus. Your signature(s)
on this Proxy should be exactly as your name(s) appear on this Proxy. If the
Shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact,
executors, administrators, trustees or guardians should indicate the full title
and capacity in which they are signing.
Dated: , 2000
------------------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
YOU CAN VOTE BY MAIL, PHONE, INTERNET, OR IN PERSON.
o TO VOTE BY MAIL, PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
o YOU MAY VOTE BY PHONE BY CALLING TOLL-FREE (1-800) 690-6903, ENTERING
YOUR 12 DIGIT CONTROL NUMBER LOCATED ON THIS CARD, AND FOLLOWING THE
SIMPLE RECORDED INSTRUCTIONS.
o YOU MAY ALSO SUBMIT YOUR VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM.
o FINALLY, YOU MAY VOTE IN PERSON BY ATTENDING THE MEETING ON MARCH 22, 2000.
<PAGE>
Morgan, Lewis & Bockius LLP
1800 M Street NW
Washington, DC 20036
January 28, 2000
BY EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: STI Classic Funds (File Nos. 33-93175 and 811-0657)
Filing Pursuant to Rule 497(c)
Ladies and Gentlemen:
On behalf of our client, STI Classic Funds (the "Trust"), we are filing,
pursuant to Rule 497(c) under the Securities Act of 1933, the prospectus/proxy
statement, Statement of Additional Information, and other materials mailed to
shareholders with respect to the reorganization of each series of the ESC
Strategic Funds with and into corresponding series of the Trust.
Please call me at (202) 467-7342 if you have any questions. Thank you.
Sincerely,
/s/ Holly Hunter
Holly Hunter
Investment Company Specialist
