ANNUAL
................................................................................
FINANCIAL REPORT
................................................................................
STI CLASSIC HIGH INCOME FUND
March 31, 2000
(LOGO) [GRAPHIC OMITTED]
<PAGE>
<PAGE>
Dear Shareholder:
The STI Classic Mutual Fund Family is pleased to be welcoming the shareholders
of the ESC Strategic Income Fund to the STIClassic Fund complex. The March 28,
2000 merger of the Funds will provide former ESC shareholders with the depth of
resources and investment management strengths that have been the hallmark of the
STI Classic Fund Family. Regardless of whether a fund has an equity, money
market, income or international investment objective, as a Classic Fund it is
managed with a disciplined investment approach. The STI Classic Funds are one of
the largest and most successful proprietary mutual fund complexes in the U.S.
The STI Classic High Income Fund seeks to provide investors a high level of
current income with total return as a secondary objective. The Fund invests
primarily in a diversified portfolio of higher yielding, lower-rated income
producing securities of non-U.S. and U.S. issuers. Recent increases in interest
rates and the relative yield on corporate versus government securities has
increased the attractiveness of this sector, and we are actively reviewing new
investments for the Fund.
On behalf of the entire team of the Fund advisor, thank you for your confidence
and the opportunity to help you achieve your investment objectives.
Sincerely,
/S/Signature omitted
Douglas S. Phillips, CFA
President, Chief Investment Officer
Trusco Capital Management, Inc.
1
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STI CLASSIC HIGH INCOME FUND
----------------------------
The STI Classic High Income Fund commenced operations on March 28th, 2000 when
it merged with the ESC Strategic Income Fund. The Fund seeks a high level of
current income, with a secondary objective of total return. The Fund seeks to
achieve its investment objective by investing primarily in high yield debt
instruments of U.S. and Foreign issuers that are rated below investment grade.
(Prior to September 30, 1998, this Fund primarily invested in a diversified
portfolio of corporate, government and other debt instruments of U.S. issuers.)
Market volatility and investor preference for aggressive equity funds resulted
in flows out of income funds in the past year, and this Fund was no
exception.Transaction costs associated with meeting substantial outflows hurt
the Fund's performance relative to its benchmark. For the fiscal year ended
March 31, 2000, the total return for the Fund was -10.84% versus -1.81% for the
Lehman U.S. Corporate HighYield Bond Index. The Index is not actively managed,
and does not include expenses.
The Fund's position in liquid assets was increased to meet withdrawals and to
facilitate the merger, but we anticipate a more stable asset base in the future.
Furthermore, the liquid assets will provide an opportunity to reinvest in
securities with better underlying fundamental trends and return opportunities
that are consistent with the STI Classic Fund Advisor's investment strategy. We
will use a "bottom up" investment approach, identifying investment opportunities
based on the underlying financial and economic fundamentals of the specific
issuer.
Sincerely,
/S/ Signature omitted
Agnes G. Pampush, CFA
Vice President
2
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[GRAPH OMITTED]
FLEX SHARES
One Year Annualized Annualized Annualized Cumulative
Return 3 Year 5 Year Inception Inception
Return Return to Date to Date
----------------------------------------------------------------------
-10.84% 0.63% 2.65% 3.14% 20.03%
----------------------------------------------------------------------
-12.47% with load
-------------
COMPARISON OF CHANGE IN THE VALUE
OF A $10,000 INVESTMENT
[PLOT POINTS FOLLOWS]
STI Cl High Income Lehman U.S. Corporate High Yield
5/31/94 10000 10000
3/95 10559 10766
3/96 11369 12322
3/97 11813 13631
3/98 12780 15713
3/99 13500 15773
3/00 12037 15487
(1) Returns prior to March 27, 2000 represent the performance of the ESC
Strategic Income Fund, Class A Shares.
3
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SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND MARCH 31, 2000
STI CLASSIC HIGH INCOME FUND
--------------------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATION (51.7%)
U.S. Treasury Bill
5.978%, 09/07/00 $925 $ 901
------
TOTAL U.S. TREASURY OBLIGATION
(COST $901) 901
------
CORPORATE OBLIGATIONS (44.2%)
Canandaigua Brands, Inc.
8.50%, 03/01/09
callable 03/01/04 @ 104.25 100 93
Finlay Fine Jewelry Corporation
8.375%, 05/01/08
callable 05/01/03 @ 104.19 100 89
Greyhound Lines
11.50%, 04/15/07
callable 04/15/02 @ 105.75 290 203
Hollywood Park/Operating
Series B
9.50%, 08/01/07
callable 08/01/02 @ 104.75 100 99
NBTY, Inc.
Series B
8.625%, 09/15/07
callable 09/15/02 @ 104.31 100 88
--------------------------------------------------------------------------------
FACE AMOUNT MARKET
(000)/SHARES VALUE (000)
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
Rural Cellular Corporation
Series B
9.625%, 05/15/08
callable 05/15/03 @ 104.81 $100 $ 99
Stone Container Corporation
9.875%, 02/01/01
callable 04/28/00 @ 100.00 100 100
------
TOTAL CORPORATE OBLIGATIONS
(COST $903) 771
------
CASH EQUIVALENT (4.1%)
SEI Daily Income Trust
Prime Obligation Fund 71,381 71
TOTAL CASH EQUIVALENT
(COST $71) 71
------
TOTAL INVESTMENTS (100.0%)
(COST $1,875) $1,743
======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND MARCH 31, 2000
HIGH INCOME
FUND
------------
ASSETS:
Investments at value (Cost $1,875) ........................ $1,743
Cash .. ................................................ 2
Accrued income ......................................... 27
Receivable for portfolio shares purchased .............. 261
------
Total Assets ........................................... 2,033
------
LIABILITIES:
Distributions payable .................................. 1
------
Total liabilities ......................................... 1
------
Net Assets ................................................ $2,032
======
NET ASSETS:
Fund shares of the Flex Class (unlimited
authorization -- no par value) based on
254,716 outstanding shares of beneficial interest ...... 2,933
Accumulated net realized loss on investments .............. (769)
Net unrealized depreciation on investments ................ (132)
------
Total Net Assets .......................................... $2,032
======
Net Asset Value, Offering and Redemption Price
Per Share -- Flex Shares (1) ............................ $ 7.98
======
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A
POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
STATEMENT OF OPERATIONS (000)
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND FOR THE YEAR ENDED MARCH 31, 2000
HIGH
INCOME FUND
-----------
04/01/99-
03/31/00
---------
Interest Income ............................................. $ 643
-----
Expenses:
Investment Advisory Fees ................................. 60
Less: Investment Advisory Fees Waived .................... (60)
Reimbursement of expenses from Advisor ................... (14)
Administrator Fees ....................................... 9
Transfer Agent Fees & Expenses ........................... 19
Fund Accounting Fees ..................................... 30
Custody Fees ............................................. 9
Professional Fees ........................................ 14
Registration Fees ........................................ 16
Distribution Fees ........................................ 18
Insurance and Other Fees ................................. 6
-----
Total Expenses ........................................... 107
-----
Net Investment Income ....................................... 536
-----
Net Realized and Unrealized Loss on Investments:
Net Realized Loss on Securities Sold ..................... (768)
Net Change in Unrealized Depreciation on Investments ..... (130)
-----
Total Net Realized and Unrealized Loss
on Investments ............................................ (898)
-----
Net Decrease in Net Assets from Operations .................. $(362)
=====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
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STATEMENT OF CHANGES IN NET ASSETS (000)
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND FOR THE PERIODS ENDED MARCH 31,
HIGH INCOME FUND
------------------------
04/01/99- 04/01/98-
03/31/00 03/31/99
--------- ---------
Operations:
Net Investment Income ................................ $ 536 $ 852
Net Realized (Loss) Gain on Investments .............. (768) 57
Net Change in Unrealized Depreciation
on Investments ..................................... (130) (194)
------- ---------
(Decrease) Increase in Net Assets from Operations (362) 715
------- ---------
Distributions to Shareholders:
Net Investment Income:
Flex (Formerly Class A) Shares ..................... (479) (759)
Class D Shares ..................................... (39) (33)
Tax Return of Capital:
Flex (Formerly Class A) Shares ..................... -- (77)
Class D Shares ..................................... -- (3)
Capital Gains:
Flex (Formerly Class A) Shares ..................... -- (105)
Class D Shares ..................................... -- (9)
------- ---------
Total Distributions .................................. (518) (986)
------- ---------
Capital Share Transactions:
Flex (Formerly Class A):
Value of Shares Issued ............................. 851 926
Value of Shares Issued in Connection with Merger ... 352 --
Reinvestment of Cash Distributions ................ 463 894
Cost of Shares Repurchased ........................ (6,073) (18,743)
------- ---------
Decrease in Net Assets From Flex (Formerly
Class A) Share Transactions ................ (4,407) (16,923)
------- ---------
Class D:
Proceeds from Shares Issued ........................ 42 156
Reinvestment of Cash Distributions ................. 42 41
Value of Shares Exchanged in Connection with Merger (352) --
Cost of Shares Repurchased ......................... (191) (461)
------- ---------
Decrease in Net Assets From Class D Share Transactions (459) (264)
------- ---------
Decrease in Net Assets From Share Transactions ..... (4,866) (17,187)
------- ---------
Total Decrease in Net Assets ..................... (5,746) (17,458)
------- ---------
Net Assets:
Beginning of Period .................................. 7,778 25,236
------- ---------
End of Period ........................................ $ 2,032 $ 7,778
======= =========
Shares Issued and Redeemed:
Flex (Formerly Class A):
Shares Issued ...................................... 99 94
Shares Issued in Connection with Merger ............ 44 --
Shares Issued in Lieu of Cash Distributions ........ 50 90
Shares Redeemed .................................... (678) (1,888)
------- ---------
Net Flex Share Transactions .......................... (485) (1,704)
------- ---------
Class D:
Shares Issued ...................................... 5 16
Shares Exchanged in Connection with Merger ......... (44) --
Shares Issued in Lieu of Cash Distributions ........ 4 4
Shares Redeemed .................................... (21) (46)
------- ---------
Net Class D Transactions ............................. (56) (26)
------- ---------
Net Change in Capital Shares ......................... (541) (1,730)
------- ---------
Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
7
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND FOR THE YEARS ENDED MARCH 31,
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS
VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS FROM TAX NET ASSET
BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED RETURN OF VALUE END
OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS CAPITAL OF PERIOD
----------- ---------- ---------------- ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
HIGH INCOME FUND
Flex (Formerly Class A) Shares
2000 $9.77 $0.87 $(1.85) $(0.81) $ -- $ -- $7.98
1999 9.99 0.51 0.04 (0.57) (0.15) (0.05) 9.77
1998 9.73 0.34 0.44 (0.52) -- -- 9.99
1997 9.89 0.60 (0.16) (0.60) -- -- 9.73
1996 9.94 0.59 0.16 (0.59) (0.21) -- 9.89
Class D Shares (1)
1999 $9.99 $0.50 $ 0.01 $(0.46) $(0.15) $(0.05) $9.84
1998 9.73 0.28 0.45 (0.47) -- -- 9.99
1997 9.89 0.50 (0.16) (0.50) -- -- 9.73
1996 9.94 0.54 0.16 (0.54) (0.21) -- 9.89
<FN>
(1) The Class D Shares were exchanged for Flex Shares in connection with the
merger of the ESC Strategic Funds and the STI Classic Funds on March 27, 2000.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
8
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<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME TO
NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO
TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
------ ------------ ------------------ ------------------ ------------------- ------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
HIGH INCOME FUND
Flex (Formerly Class A) Shares
2000 (10.84)% $ 2,032 1.73% 8.94% 2.95% 7.72% 24%
1999 5.64 7,230 1.91 5.09 2.22 4.78 95
1998 8.18 24,413 1.87 5.27 1.87 5.27 130
1997 3.91 32,506 1.65 5.49 1.70 5.44 123
1996 7.67 36,891 1.70 5.87 1.75 5.82 138
Class D Shares (1)
1999 5.23% $ 548 2.44% 5.03% 2.96% 4.51% 95%
1998 7.64 823 2.37 4.77 2.37 4.77 130
1997 3.39 1,420 2.15 4.99 2.21 4.93 123
1996 7.11 1,446 2.20 5.37 2.25 5.32 138
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND MARCH 31, 2000
1. ORGANIZATION:
The STI Classic Funds (the "Trust") was organized as a Massachusetts business
trust under a Declaration of Trust dated January 15, 1992. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with thirty-five portfolios as of March 31, 2000:
the Balanced Fund, the Capital Appreciation Fund, the Core Equity Fund, the
E-Commerce OpportunityFund, the Growth and Income Fund, the International Equity
Fund, the International Equity Index Fund, the Life Vision Balanced Portfolio,
the Life Vision Growth and Income Portfolio, the Life Vision Maximum Growth
Portfolio, the Mid-Cap Equity Fund, the Small Cap Value Equity Fund, the Small
Cap Growth Stock Fund, the Tax Sensitive Growth Stock Fund, the Value Income
Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund,
the Georgia Tax-Exempt Bond Fund, the High Income Fund, Investment Grade Bond
Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal
Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond
Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government
Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia
Municipal Bond Fund, (collectively the "Fixed Income Funds" or the "Funds"), the
Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free
Money Market Fund, the U.S. Government Securities, the U.S. Treasury Money
Market Fund (collectively the "Retail Money Market Funds"), the Classic
Institutional Cash Management Money Market Fund, the Classic Institutional U.S.
Government Securities Money Market Fund and the Classic Institutional U.S.
Treasury Securities Money Market Fund, (collectively the "Institutional Money
Market Funds"). The assets of each portfolio are segregated, and a shareholder's
interest is limited to the fund in which shares are held. Each fund's prospectus
provides a description of the fund's investment objectives, policies and
strategies. The financial statements presented herein are those of the High
Income Fund (the "Fund"). Subsequent to March 31, 2000, the Fund's fiscal year
end was changed to May 31, in order to be consistent with the year end of each
of the other STI Classic Funds. On February 15, 2000 and December 9, 1999,
respectively, the Board of Trustees of the STI Classic Funds Inc. and Board of
Directors of the ESCStrategic Funds Inc. approved an Agreement and Plan of
Reorganization (the "Reorganization Agreement") providing for the transfer of
all assets and liabilities of the ESCStrategic Income Fund in exchange for the
issuance of shares in the STIClassic High Income Fund in a tax-free
reorganization that took place at the close of business on March 27, 2000. The
STI Classic High Income Fund had not commenced operations prior to this merger.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Trust:
BASIS OF PRESENTATION OF STATEMENTS -- As more fully described above, the
STI Classic High Income Fund acquired the ESCStrategic Income Fund in a
tax-free business combination. While this Fund now exists as a STI Classic
Fund, the surviving fund for accounting purposes is the ESCStrategic Income
Fund. In accordance with generally accepted accounting principles, the
financial statements presented herein represent those of the accounting
survivor.
SECURITY VALUATION -- Investment securities held by the Fund that are
listed on a securities exchange for which market quotations are available
are valued at the last quoted sales price each business day. If there is no
such reported sale, these securities and unlisted securities for which
market quotations are readily available are valued at the most recently
quoted bid price. Debt obligations with sixty days or less remaining until
maturity may be valued at their amortized cost. Securities for which market
quotations are not readily available are valued at Fair Value as determined
in good faith by, or in accordance with procedures approved by the Board of
Trustees.
FEDERAL INCOME TAXES -- It is the Fund's intention to qualify as a
regulated investment company for Federal income tax purposes and distribute
all of its taxable income and net capital gains. Accordingly, no provisions
for Federal income taxes are required.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on an accrual basis. Costs used in
determining net realized gains and losses on the sales of investment
securities are those of the specific securities sold adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding period. Purchase discounts and premiums on securities
held
10
<PAGE>
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by the Fund is accreted and amortized to maturity using the scientific
interest method, which approximates the effective interest method.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters into
an insolvency proceeding, realization of the collateral by the funds may be
delayed or limited.
NET ASSET VALUE PER SHARE -- The net asset value per share of the Fund is
calculated each business day, by dividing the total value of the Fund's
assets, less liabilities, by the number of shares outstanding.
Flex Shares of the Fund may be purchased at the net asset value. Shares
redeemed within the first year after purchase will be subject to a
contingent deferred sales charge ("CDSC") equal to 2.00% of the net asset
value of the shares at the time of redemption. The CDSC will not apply to
shares redeemed after such time.
OTHER -- Expenses that are directly related to a specific fund are charged
to that Fund. Prior to March 27, 2000, class specific expenses were borne
by that class. Other operating expenses of the Trust are pro-rated to the
Funds on the basis of relative net assets. Fund expenses are pro-rated to
the respective classes on the basis of relative net assets. Distributions
from net investment income for the High Income Fund are declared daily and
paid monthly. Any net realized capital gains on sales of securities are
distributed to shareholders at least annually.
RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and
characterization of certain income and capital gains distributions are
determined annually in accordance with federal tax regulations which may
differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions during such period. These book/tax differences may be
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise. Accordingly, the following permanent differences, primarily
attributable to the classification of short-term capital gains and ordinary
income for tax purposes related to the other funds, has been reclassified
to/from the following accounts during the fiscal year ended March 31, 2000:
UNDISTRIBUTED
PAID-IN NET INVESTMENT
CAPITAL INCOME (LOSS)
(000) (000)
------- --------------
High Income Fund $ (33) $ 33
These reclassifications have no effect on net assets or net asset values
per share.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers of the Trust are also officers of the Administrator and/or SEI
Investments Distribution Co. (the "Distributor"). Such officers are paid no fees
by the Trust for serving as officers of the Trust.
4. ADMINISTRATION, TRANSFER AGENCY SERVICING AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an Administration Agreement dated
May 29, 1995, as amended November 19, 1997 and March 1, 1999, under which the
Administrator provides administrative services for an annual fee (expressed as a
percentage of the combined average daily net assets of the Trust and STI Classic
Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on
the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion.
Prior to March 27, 2000, administrative and accounting services were provided to
the ESCStrategic Income Fund by BISYS Fund Services Limited Partnership who was
entitled to receive a fee at an annual rate of .15% of the average daily net
assets of the ESCStrategic Income Fund.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND MARCH 31, 2000
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated May 14, 1994 under which Federated Services Company
provides transfer agency services to the Trust. Prior to March 27, 2000,
transfer and dividend disbursing agent services were provided to the ESC
Strategic Income Fund by BISYS Fund Services Inc. for which it received a fee of
$15 per account per year subject to a minimum fee of $15,000.
The Trust and the Distributor are parties to a Distribution Agreement dated May
29, 1995 regarding the Flex Shares. The Distributor receives amounts, pursuant
to a Distribution and Service Plan, as outlined in the table in footnote 5 under
the column titled "Distribution Fee".
Prior to March 27, 2000, BISYS Fund Services served as distributor pursuant to
an agreement with the ESCStrategic Income Fund.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Trust and Trusco Capital Management ("Trusco") have entered into an advisory
agreement dated June 15, 1993.
Under terms of the agreement, the Fund is charged the following annual fees
based upon average daily net assets:
MAXIMUM
MAXIMUM FLEX SHARE FLEX
ANNUAL DISTRIBUTION SHARE
ADVISORY AND MAXIMUM
FEE SERVICE FEE EXPENSE
-------- ------------ -------
HIGH INCOME FUND: .80% 1.00% 1.40%
The Investment Advisor, the Administrator and the Distributor have voluntarily
agreed to waive all or a portion of their fees (and to reimburse funds'
expenses) in order to limit operating expenses to an amount as outlined in the
table above. Fee waivers and expense reimbursements are voluntary and may be
terminated at any time.
Prior to March 27, 2000 SunTrust Equitable Securities Corporation ("STES")
provided investment advisory services to the ESCStrategic Income Fund. STES was
paid for advisory services at an annual rate of 1.00% of average daily net
assets of the Fund, and agreed to waive and reimburse their fee in order to
limit operating expenses to a maximum of 2.00% of average daily net assets of
the Class A shares, and 2.50% of the Class D shares.
SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the
Fund. Fees of the Custodian are paid on the basis of net assets of the Fund. The
Custodian plays no role in determining the investment policies of the Trust or
which securities are to be purchased or sold in the fund.
6. INVESTMENT TRANSACTIONS:
The cost of purchases and the proceeds from sales of securities, excluding
short-term investments and U.S. Government securities (of which there were
none), for the period ended March 31, 2000, were as follows:
PURCHASES SALES
(000) (000)
----------- --------
High Income Fund $1,170 $6,001
At March 31, 2000, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the fund
at March 31, 2000, were as follows:
AGGREGATE AGGREGATE NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION DEPRECIATION
(000) (000) (000)
------------ ------------ -------------
High Income Fund $ -- $(132) $(132)
Subsequent to October 31, 1999, the Fund recognized net capital losses for tax
purposes that have been deferred to 2000 and can be used to offset future
capital gains at March 31, 2000. The Fund also had capital loss carryforwards at
March 31, 2000 as follows:
POST 10/31
EXPIRES 2008 DEFERRED LOSS
(000) (000)
------------ -------------
High Income Fund $61 $7075
For tax purposes, the losses in the Fund can be carried forward for a maximum of
eight years to offset any net realized capital gains.
7. CONCENTRATION OF CREDIT RISK:
Funds that invest in high yield instruments are subject to certain credit and
market risks. The yields of high debt obligations reflect, among other things,
perceived credit risk. The Funds' investment in securities rated below
investment grade typically involve risks not associated with higher rated
securities including, among others, greater risks of timely and ultimate payment
of interest and principal, greater market price volatility and less liquid
secondary market trading.
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
STI CLASSIC HIGH INCOME FUND MARCH 31, 2000
To the Shareholders and Board of Trustees of
STI Classic Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of STI Classic High Income Fund (the "Fund") as of
March 31, 2000, and related statement of operations, changes in net assets, and
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended March 31, 1999, and financial highlights for the periods
prior to March 31, 2000 were audited by other auditors whose report dated May
14, 1999, expressed an unqualified opinion on this information.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 2000, by correspondence with
the custodian and the application of alternative auditing procedures with
respect to unsettled securities transactions. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of STI
Classic High Income Fund as of March 31, 2000, the results of its operations,
changes in its net assets, and financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
May 12, 2000
13
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NOTICE TO SHAREHOLDERS
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STI CLASSIC HIGH INCOME FUND MARCH 31, 2000 UNAUDITED
For shareholders that do not have a March 31, 2000 tax year end, this notice is
for informational purposes only. For shareholders with a March 31, 2000 tax year
end, please consult your tax advisor as to the pertinence of this notice. For
the fiscal year ended March 31, 2000, the High Income Fund designates 100% of
the distributions paid as ordinary income distributions. No portion of the
ordinary income distributions represent qualifying dividends for the corporate
dividends received deduction.
14
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NOTES
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<PAGE>
NOTES
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<PAGE>
<PAGE>
INVESTMENT ADVISOR
Trusco Capital Management, Inc.
STI Classic Funds are not deposits, are
not insured or guaranteed by the FDIC or
any other government agency, and are not
endorsed by and do not constitute
obligations of SunTrust Banks, Inc. or
any other of its affiliates. Investment
in the Funds involves risk, including
the possible loss of principal. There is
no guarantee that any STI Classic Fund
will achieve its investment objective.
The STI Classic Funds are advised by
affiliates of SunTrust Banks, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
This information must be preceded or accompanied by
a current prospectus for each Fund described.
