N-CSRS 1 a2160796zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21682 ----------------- BB&T Variable Insurance Funds ----------------------------- (Exact name of registrant as specified in charter) 3435 Stelzer Road Columbus, OH 43219 ------------------------------------------- (Address of principal executive offices) (Zip code) BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219 ---------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (800) 228-1872 -------------------- Date of fiscal year end: December 31, 2005 --------------------------- Date of reporting period: June 30, 2005 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. BB&T VARIABLE INSURANCE FUNDS SUMMARY OF PORTFOLIO HOLDINGS JUNE 30, 2005 (UNAUDITED) THE BB&T VARIABLE INSURANCE FUNDS PORTFOLIO COMPOSITION IS AS FOLLOWS AT JUNE 30, 2005:
PERCENTAGE OF NET ASSETS ------------- BB&T LARGE CAP VALUE VIF Consumer Discretionary 8.4% Consumer Staples 5.8 Energy 12.9 Financials 27.9 Health Care 9.7 Industrials 7.6 Information Technology 7.6 Materials 4.8 Repurchase Agreement 3.4 Telecommunication Services 5.9 Utilities 5.6 ------------- 99.6% ============= BB&T MID CAP GROWTH VIF Consumer Discretionary 22.6% Consumer Staples 1.5 Energy 11.0 Financials 6.0 Health Care 18.7 Industrials 6.1 Information Technology 22.5 Materials 2.8 Repurchase Agreement 4.5 Telecommunication Services 4.0 ------------- 99.7% ============= BB&T LARGE COMPANY GROWTH VIF Consumer Discretionary 13.9% Consumer Staples 12.9 Energy 1.9 Exchange Traded Funds 4.5 Financials 5.5 Health Care 24.1 Industrials 9.2 Information Technology 23.7 Telecommunication Services 0.2 Repurchase Agreement 4.2 ------------- 100.1% ============= BB&T CAPITAL MANAGER EQUITY VIF Equity Index 12.6% International Equity 13.8 Large Company Equity 50.5 Mid Cap Equity 11.9 Money Market 3.5 Small Cap Equity 7.8 ------------- 100.1% ============= BB&T SPECIAL OPPORTUNITIES EQUITY VIF Commercial Services 6.9% Consumer Discretionary 21.9 Energy 10.8 Financials 8.2 Health Care 16.6 Industrials 3.7 Information Technology 23.6 Insurance 2.6 Repurchase Agreement 7.0 ------------- 101.3% ============= BB&T TOTAL RETURN BOND VIF Corporate Bonds 19.5% Fedral Farm Credit Bank 1.7 Federal Home Loan Bank 7.5 Federal Home Loan Mortgage Corporation 10.0 Federal National Mortgage Association 42.8 Repurchase Agreement 2.7 U.S. Treasury Notes 15.0 ------------- 99.2% =============
EXPENSE EXAMPLES JUNE 30, 2005 (UNAUDITED) As a shareholder of the BB&T Variable Insurance Funds, you incur two types of costs: (1) transaction costs; (2) ongoing costs, including management fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the BB&T Variable Insurance Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 1/1/05 6/30/05 1/1/05 - 6/30/05 1/1/05 - 6/30/05 ------------- ------------- ---------------- ---------------- BB&T Large Cap Value VIF $ 1,000.00 $ 1,013.90 $ 3.94 0.79% BB&T Mid Cap Growth VIF 1,000.00 1,013.10 3.89 0.78% BB&T Large Company Growth VIF 1,000.00 988.00 4.04 0.82% BB&T Capital Manager Equity VIF 1,000.00 1,004.90 1.64 0.33% BB&T Special Opportunities Equity VIF 1,000.00 1,033.00 6.45 1.28% BB&T Total Return Bond VIF 1,000.00 1,024.10 5.72 1.14%
---------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each BB&T Variable Insurance Funds' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 1/1/05 6/30/05 1/1/05 - 6/30/05 1/1/05 - 6/30/05 ------------- ------------- ---------------- ---------------- BB&T Large Cap Value VIF $ 1,000.00 $ 1,020.88 $ 3.96 0.79% BB&T Mid Cap Growth VIF 1,000.00 1,020.93 3.91 0.78% BB&T Large Company Growth VIF 1,000.00 1,020.73 4.11 0.82% BB&T Capital Manager Equity VIF 1,000.00 1,023.16 1.66 0.33% BB&T Special Opportunities Equity VIF 1,000.00 1,018.45 6.41 1.28% BB&T Total Return Bond VIF 1,000.00 1,019.14 5.71 1.14%
---------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. BB&T LARGE CAP VALUE VIF SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2005 (UNAUDITED)
SHARES FAIR VALUE --------- ------------- COMMON STOCKS (96.2%): CONSUMER DISCRETIONARY (8.4%): 37,000 Gannett Company, Inc. $ 2,631,810 60,000 Mattel, Inc. (a) 1,098,000 26,400 May Department Stores Co. 1,060,224 20,475 V.F. Corp. 1,171,580 89,000 Walt Disney Co. (The) 2,241,020 16,100 Whirlpool Corp. 1,128,771 ------------- 9,331,405 ------------- CONSUMER STAPLES (5.8%): 55,400 Albertson's, Inc. 1,145,672 29,000 Altria Group, Inc. 1,875,140 34,000 Kimberly-Clark Corp. 2,128,060 67,452 Sara Lee Corp. 1,336,224 ------------- 6,485,096 ------------- ENERGY (12.9%): 26,000 Anadarko Petroleum Corp. 2,135,900 9,000 Burlington Resources, Inc. 497,160 50,800 ChevronTexaco Corp. 2,840,736 67,400 ConocoPhillips 3,874,826 27,632 Exxon Mobil Corp. 1,588,011 38,500 Royal Dutch Petroleum Co. -- NY Shares 2,498,650 12,000 Schlumberger, Ltd. 911,280 ------------- 14,346,563 ------------- FINANCIALS (27.9%): 8,000 American International Group, Inc. 464,800 63,000 Bank of America Corp. 2,873,430 30,000 Bank of New York Co., Inc. 863,400 62,333 Citigroup, Inc. 2,881,655 15,000 Equity Residential, REIT 552,300 22,000 Fannie Mae 1,284,800 17,500 Franklin Resources, Inc. 1,347,150 44,677 ING Groep NV -- ADR 1,253,190 74,490 J.P. Morgan Chase & Co. 2,630,987 23,200 Lincoln National Corp. 1,088,544 30,000 Merrill Lynch & Company, Inc. 1,650,300 52,000 Northern Trust Corp. 2,370,680 45,000 Old Republic International Corp. 1,138,050 38,000 PNC Financial Services Group 2,069,480 61,600 St. Paul Companies, Inc. (The) 2,435,048 28,000 SunTrust Banks, Inc. 2,022,720 52,000 Washington Mutual, Inc. 2,115,880 32,000 Wells Fargo & Co. 1,970,560 ------------- 31,012,974 ------------- HEALTH CARE (9.7%): 29,200 Abbott Laboratories 1,431,092 12,500 Becton, Dickinson & Co. 655,875 43,600 Bristol-Myers Squibb Co. 1,089,128 22,000 Cigna Corp. 2,354,660 25,000 HCA, Inc. 1,416,750 15,400 Johnson & Johnson 1,001,000 59,000 Merck & Company, Inc. 1,817,200 38,000 Pfizer, Inc. 1,048,040 ------------- 10,813,745 ------------- INDUSTRIALS (7.6%): 20,000 CSX Corp. 853,200 18,500 Emerson Electric Co. 1,158,655 46,000 General Electric Co. 1,593,900 SHARES OR PRINCIPAL AMOUNT FAIR VALUE --------- ------------- COMMON STOCKS -- (CONTINUED) INDUSTRIALS -- (CONTINUED) 18,200 Norfolk Southern Corp. $ 563,472 18,900 Parker-Hannifin Corp. 1,171,989 25,600 Pitney Bowes, Inc. 1,114,880 50,000 Raytheon Co. 1,956,000 ------------- 8,412,096 ------------- INFORMATION TECHNOLOGY (7.6%): 47,424 Agilent Technologies, Inc. (a) 1,091,700 25,400 Automatic Data Processing, Inc. 1,066,038 30,000 First Data Corp. 1,204,200 94,200 Hewlett-Packard Co. 2,214,642 4,800 IBM Corp. 356,160 40,000 Microsoft Corp. (a) 993,600 87,000 Nokia Corp. -- ADR 1,447,680 ------------- 8,374,020 ------------- MATERIALS (4.8%): 17,000 Air Products & Chemicals, Inc. 1,025,100 41,000 Alcoa, Inc. 1,071,330 5,000 E.I. DuPont de Nemours & Co. 215,050 3,500 Phelps Dodge Corp. 323,750 39,800 Sonoco Products Co. 1,054,700 25,000 Weyerhaeuser Co. 1,591,250 ------------- 5,281,180 ------------- TELECOMMUNICATION SERVICES (5.9%): 12,830 AT&T Corp. 244,283 70,800 BellSouth Corp. 1,881,156 63,400 SBC Communications, Inc. 1,505,750 60,000 Sprint Corp. 1,505,400 81,000 Time Warner, Inc. 1,353,510 ------------- 6,490,099 ------------- UTILITIES (5.6%): 16,000 Dominion Resources, Inc. 1,174,240 30,000 Duke Energy Corp. 891,900 38,200 National Fuel Gas Co. 1,104,362 65,000 NiSource, Inc. 1,607,450 3,000 TXU Corp. 249,270 61,910 Xcel Energy, Inc. 1,208,483 ------------- 6,235,705 ------------- Total Common Stocks (Cost $88,699,056) 106,782,883 ------------- REPURCHASE AGREEMENT (3.4%): $ 3,732,801 U.S. Bank N.A., 2.80%, dated 6/30/05, maturing 7/1/05, with a maturing value of $3,733,091 (Collateralized fully by U.S. Government Agencies) 3,732,801 ------------- Total Repurchase Agreement (Cost $3,732,801) 3,732,801 ------------- Total Investments (Cost $92,431,857) -- 99.6% 110,515,684 Net Other Assets (Liabilities -- 0.4% 455,034 ------------- NET ASSTS -- 100.0% $ 110,970,718 =============
---------- (a)Represents non-income producing securities. ADR -- American Depositary Receipt. REIT -- Real Estate Investment Trust. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. BB&T MID CAP VALUE VIF SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2005 (UNAUDITED)
SHARES FAIR VALUE --------- ------------- COMMON STOCKS (95.2%): CONSUMER DISCRETIONARY (22.6%): 5,600 Abercrombie & Fitch Co. -- Class A $ 384,720 8,300 Advance Auto Parts, Inc. (a) 535,765 19,000 American Eagle Outfitters, Inc. 582,350 16,400 Chico's FAS, Inc. 562,192 22,200 Coach, Inc. (a) 745,254 6,900 Federated Department Stores, Inc. 505,632 5,700 Getty Images, Inc. (a) 423,282 3,625 Harman International Industries, Inc. 294,930 28,000 Hilton Hotels Corp. 667,800 27,000 Host Marriott Corp. 472,500 16,400 Staples, Inc. (a) 349,648 7,200 Starwood Hotels & Resorts Worldwide, Inc. (a) 421,704 6,250 Toll Brothers, Inc. (a) 634,688 17,500 Urban Outfitters, Inc. (a) 992,074 ------------- 7,572,539 ------------- CONSUMER STAPLES (1.5%): 16,600 United Natural Foods, Inc. (a) 504,142 ------------- ENERGY (11.0%): 8,900 Arch Coal, Inc. 484,783 7,200 Baker Hughes, Inc. 368,352 17,000 Chesapeake Energy Corp. 387,600 9,000 Massey Energy Co. 339,480 7,700 National-Oilwell Varco, Inc. (a) 366,058 5,300 Noble Corp. 326,003 18,000 Patterson-UTI Energy, Inc. 500,940 9,600 Peabody Energy Corp. 499,584 11,401 XTO Energy, Inc. 387,520 ------------- 3,660,320 ------------- FINANCIALS (6.0%): 2,400 Chicago Mercantile Exchange Holdings, Inc. 709,200 8,125 HDFC Bank, Ltd. -- ADR 377,894 5,400 Legg Mason, Inc. 562,194 5,500 T. Rowe Price Group, Inc. 344,300 ------------- 1,993,588 ------------- HEALTH CARE (18.7%): 8,300 Aetna Inc. 687,406 13,300 Caremark Rx, Inc. (a) 592,116 12,250 Celgene Corp. (a) 499,433 6,900 Cerner Corp. (a) 468,993 18,000 Community Health Systems, Inc. (a) 680,220 11,000 Covance, Inc. (a) 493,570 7,000 Coventry Health Care, Inc. (a) 495,250 8,000 Dade Behring Holdings, Inc. 520,080 7,200 Fisher Scientific International, Inc. (a) 467,280 8,800 Genzyme Corp. (a) 528,792 6,000 Kinetic Concepts, Inc. (a) 360,000 6,700 ResMed, Inc. (a) 442,133 ------------- 6,235,273 ------------- INDUSTRIALS (6.1%): 11,800 Canadian Pacific Railway, Ltd. 407,218 12,250 Gol-Linhas Aereas Inteligentes -- ADR 368,235 11,600 Pentair, Inc. 496,596 SHARES OR PRINCIPAL AMOUNT FAIR VALUE --------- ------------- COMMON STOCKS -- (CONTINUED) INDUSTRIALS -- (CONTINUED) 5,700 Precision Castparts Corp. $ 444,030 6,800 Rockwell Automation, Inc. 331,228 ------------- 2,047,307 ------------- INFORMATION TECHNOLOGY (22.5%): 11,000 Adobe Systems, Inc. 314,820 12,500 Amphenol Corp. -- Class A 502,125 22,500 AutoDesk, Inc. (a) 773,324 15,100 Cognizant Technology Solutions Corp. -- Class A (a) 711,663 24,700 Comverse Technology, Inc. (a) 584,155 10,500 F5 Networks, Inc. (a) 495,968 11,000 Harris Corp. 343,310 6,800 International Rectifier Corp. (a) 324,496 26,500 Intersil Corp. -- Class A 497,405 15,700 Jabil Circuit, Inc. (a) 482,461 16,500 Lam Research Corp. (a) 477,510 16,500 Marvell Technology Group, Ltd. (a) 627,660 37,000 MEMC Electronic Materials, Inc. (a) 583,490 19,000 Seagate Technology 333,450 17,000 VeriSign, Inc. (a) 488,920 ------------- 7,540,757 ------------- MATERIALS (2.8%): 8,000 Florida Rock Industries, Inc. 586,800 3,700 Potash Corporation of Saskatchewan, Inc. 353,646 ------------- 940,446 ------------- TELECOMMUNICATION SERVICES (4.0%): 18,400 American Tower Corp. -- Class A (a) 386,768 22,300 Nextel Partners, Inc. -- Class A (a) 561,291 5,300 SpectraSite, Inc. (a) 394,479 ------------- 1,342,538 ------------- Total Common Stocks (Cost $24,251,052) 31,836,910 ------------- REPURCHASE AGREEMENT (4.5%): $ 1,488,008 U.S. Bank N.A., 2.80%, dated 6/30/05, maturing 7/1/05, with a maturing value of $1,488,124 (Collateralized fully by U.S. Government Agencies) 1,488,008 ------------- Total Repurchase Agreement (Cost $1,488,008) 1,488,008 ------------- Total Investments (Cost $25,739,060) -- 99.7% 33,324,918 Net Other Assets (Liabilities) -- 0.3% 92,397 ------------- NET ASSETS -- 100.0% $ 33,417,315 =============
---------- (a) Represents non-income producing securities. ADR -- American Depositary Receipt. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. BB&T LARGE COMPANY GROWTH VIF SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2005 (UNAUDITED)
SHARES FAIR VALUE --------- ------------ COMMON STOCKS (91.4%): CONSUMER DISCRETIONARY (13.9%): 15,109 Chico's FAS, Inc. (a) $ 517,937 10,200 Coach, Inc. (a) 342,414 2,200 eBay, Inc. (a) 72,622 1,550 Getty Images, Inc. (a) 115,103 3,733 Hershey Foods Corp. 231,819 5,795 Home Depot, Inc. 225,426 6,294 Kohl's Corp. (a) 351,898 5,450 Starbucks Corp. (a) 281,547 9,650 Target Corp. 525,056 1,386 Toll Brothers, Inc. (a) 140,748 1,543 Viacom, Inc. -- Class B 49,407 3,578 Walt Disney Co. (The) 90,094 6,100 Williams-Sonoma, Inc. (a) 241,377 ------------ 3,185,448 ------------ CONSUMER STAPLES (12.9%): 10,397 Coca-Cola Co. 434,075 2,029 Colgate-Palmolive Co. 101,267 10,032 CVS Corp. 291,630 9,650 Estee Lauder Co., Inc. (The) -- Class A 377,605 11,808 PepsiCo, Inc. 636,805 11,901 Procter & Gamble Co. 627,778 8,725 Sysco Corp. 315,758 3,492 Wal-Mart Stores, Inc. 168,314 ------------ 2,953,232 ------------ ENERGY (1.9%): 1,850 Anadarko Petroleum Corp. 151,978 1,800 Apache Corp. 116,280 600 Baker Hughes, Inc. 30,696 1,200 Devon Energy Corp. 60,816 930 Valero Energy Corp. 73,572 ------------ 433,342 ------------ FINANCIALS (5.5%): 8,575 American Express Co. 456,447 3,801 American International Group, Inc. 220,838 1,235 Citigroup, Inc. 57,095 1,471 Franklin Resources, Inc. 113,238 3,125 J.P. Morgan Chase & Co. 110,375 4,413 Morgan Stanley 231,550 1,400 PNC Financial Services Group 76,244 ------------ 1,265,787 ------------ HEALTH CARE (24.1%): 7,760 Abbott Laboratories 380,318 5,273 Amgen, Inc. (a) 318,806 3,570 Caremark Rx, Inc. (a) 158,936 4,940 Eli Lilly & Co. 275,207 2,400 Genentech, Inc. (a) 192,672 2,785 Genzyme Corp. (a) 167,351 5,172 Gilead Sciences, Inc. (a) 227,516 4,230 GlaxoSmithKline plc -- ADR 205,197 4,778 HCA, Inc. 270,769 6,690 Health Management Associates, Inc. -- Class A 175,144 13,600 Johnson & Johnson 884,000 7,000 Medtronic, Inc. 362,530 SHARES OR PRINCIPAL AMOUNT FAIR VALUE --------- ------------ COMMON STOCKS -- (CONTINUED) HEALTH CARE -- (CONTINUED) 20,038 Pfizer, Inc. $ 552,648 4,000 St. Jude Medical, Inc. (a) 174,440 12,813 UnitedHealth Group, Inc. 668,070 5,410 WellPoint, Inc. (a) 376,752 2,750 Wyeth 122,375 ------------ 5,512,731 ------------ INDUSTRIALS (9.2%): 5,509 Boeing Co. 363,594 1,200 Danaher Corp. 62,808 2,578 FedEx Corp. 208,844 19,927 General Electric Co. 690,471 3,200 Honeywell International, Inc. 117,216 2,250 Illinois Tool Works, Inc. 179,280 2,500 Masco Corp. 79,400 3,542 Tyco International, Ltd. 103,425 5,800 United Technologies Corp. 297,830 ------------ 2,102,868 ------------ INFORMATION TECHNOLOGY (23.7%): 6,836 Adobe Systems, Inc. 195,646 7,000 Affiliated Computer Services, Inc. -- Class A (a) 357,700 3,000 Analog Devices, Inc. 111,930 41,454 Cisco Systems, Inc. (a) 792,186 14,303 Dell, Inc. (a) 565,112 13,400 Flextronics International, Ltd. (a) 177,014 2,300 IBM Corp. 170,660 29,438 Intel Corp. 767,154 30,900 Microsoft Corp. 767,556 22,407 Motorola, Inc. 409,152 29,500 Oracle Corp. (a) 389,400 2,925 QUALCOMM, Inc. 96,554 5,720 SAP -- ADR 247,676 13,263 Texas Instruments, Inc. 372,292 ------------ 5,420,032 ------------ TELECOMMUNICATION SERVICES (0.2%): 1,454 Nextel Communications, Inc. -- Class A (a) 46,979 ------------ Total Common Stocks (Cost $18,977,252) 20,920,419 ------------ EXCHANGE TRADED FUNDS (4.5%): 21,194 iShares Russell 1000 Growth Index Fund 1,017,313 ------------ Total Exchange Traded Funds (Cost $995,566) 1,017,313 ------------ REPURCHASE AGREEMENT (4.2%): $ 962,816 U.S. Bank N.A., 2.80%, dated 6/30/05, maturing 7/1/05, with a maturing value of $962,891 (Collateralized fully by U.S. Government Agencies) 962,816 ------------ Total Repurchase Agreement (Cost $962,816) 962,816 ------------ Total Investments (Cost $20,935,634) -- 100.1% 22,900,548 Net Other Assets (Liabilities) -- (0.1)% (17,329) ------------ NET ASSETS -- 100.0% $ 22,883,219 ============
---------- (a) Represents non-income producing securities. ADR -- American Depositary Receipt. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. BB&T CAPITAL MANAGER EQUITY VIF SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2005 (UNAUDITED)
SHARES FAIR VALUE --------- ------------ INVESTMENT COMPANIES (100.1%): 417,216 BB&T Equity Index Fund -- Class A $ 3,341,896 406,615 BB&T International Equity Fund -- Institutional Class 3,675,801 606,321 BB&T Large Company Growth Fund -- Institutional Class 5,432,637 423,490 BB&T Large Company Value Fund -- Institutional Class 7,982,789 97,832 BB&T Mid Cap Growth Fund -- Institutional Class (a) 1,283,555 106,279 BB&T Mid Cap Value Fund -- Institutional Class 1,871,568 58,419 BB&T Small Company Growth Fund -- Institutional Class (a) 823,119 78,167 BB&T Small Company Value Fund -- Institutional Class $ 1,246,770 940,805 BB&T U.S. Treasury Money Market Fund -- Institutional Class 940,805 ------------ Total Investment Companies (Cost $24,851,189) 26,598,940 ------------ Total Investments in Affiliates (Cost $24,851,189) -- 100.1% 26,598,940 Net Other Assets (Liabilities) -- (0.1)% (19,015) ------------ NET ASSETS -- 100.0% $ 26,579,925 ============
---------- (a) Represents non-income producing securities. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. BB&T SPECIAL OPPORTUNITIES EQUITY VIF SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2005 (UNAUDITED)
SHARES FAIR VALUE --------- ------------ COMMON STOCKS (94.3%): COMMERCIAL SERVICES (6.9%): 40,000 Cendant Corp. $ 894,800 29,900 WCI Communities, Inc. (a) 957,697 ------------ 1,852,497 ------------ CONSUMER DISCRETIONARY (21.9%): 19,000 Anheuser-Busch Companies, Inc. 869,250 16,500 Costco Wholesale Corp. 739,530 36,700 Hain Celestial Group, Inc. (a) 715,650 13,800 Lexmark International Group, Inc. 894,654 51,840 News Corp. -- Class A 838,771 36,500 Smithfield Foods, Inc. (a) 995,355 16,200 YUM! Brands, Inc. 843,696 ------------ 5,896,906 ------------ ENERGY (10.8%): 15,000 Apache Corp. 969,000 21,100 Pioneer Natural Resources Co. 887,888 18,062 Weatherford International Ltd. (a) 1,047,235 ------------ 2,904,123 ------------ FINANCIALS (8.2%): 5,400 Allstate Corp. 322,650 16,000 MBIA, Inc. 948,960 15,200 Wells Fargo & Co. 936,016 ------------ 2,207,626 ------------ HEALTH CARE (16.6%): 14,500 Coventry Health Care, Inc. (a) 1,025,875 17,000 Laboratory Corporation of America Holdings (a) 848,300 20,050 Manor Care, Inc. 796,587 36,799 MedCath Corp. (a) 1,022,644 26,500 Watson Pharmaceuticals, Inc. (a) 783,340 ------------ 4,476,746 ------------ SHARES OR PRINCIPAL AMOUNT FAIR VALUE --------- ------------ COMMON STOCKS -- (CONTINUED) INDUSTRIALS (3.7%): 13,200 L-3 Communications Holdings, Inc. $ 1,010,856 ------------ INFORMATION TECHNOLOGY (23.6%): 14,000 Activision, Inc. (a) 231,280 157,280 ARM Holdings PLC -- ADR 965,699 42,000 ATI Technologies, Inc. (a) 497,700 31,750 Comcast Corp. -- Class A (a) 974,725 40,300 Digital Insight Corp. (a) 963,976 24,300 Fair Issac Corp. 886,950 23,740 First Data Corp. 952,923 36,000 VERITAS Software Corp. (a) 878,400 ------------ 6,351,653 ------------ INSURANCE (2.6%): 2,100 Markel Corp. (a) 711,900 ------------ Total Common Stocks (Cost $22,039,683) 25,412,307 ------------ REPURCHASE AGREEMENT (7.0%): $ 1,899,161 U.S. Bank N.A., 2.80%, dated 6/30/05, maturing 7/1/05, with a maturing value of $1,899,309 (Collateralized fully by U.S. Government Agencies) 1,899,161 ------------ Total Repurchase Agreement (Cost $1,899,161) 1,899,161 ------------ Total Investments (Cost $23,938,844) -- 101.3% 27,311,468 Net Other Assets (Liabilities) -- (1.3)% (351,589) ------------ NET ASSETS -- 100.0% $ 26,959,879 ============
---------- (a) Represents non-income producing securities. ADR -- American Depositary Receipt. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. BB&T TOAL RETURN BOND VIF SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2005 (UNAUDITED)
PRINCIPAL AMOUNT FAIR VALUE --------- ------------ CORPORATE BONDS (19.5%): BANKING & FINANCIAL SERVICES (0.9%): $ 150,000 Ford Motor Credit Co., 6.50%, 1/25/07 $ 151,077 ------------ CONSUMER DISCRETIONARY (1.8%): 300,000 Target Corp., 5.50%, 4/1/07 307,759 ------------ CONSUMER STAPLES (0.9%): 150,000 Kraft Foods, Inc., 5.25%, 10/1/13 156,089 ------------ FINANCIALS (3.5%): 300,000 Citigroup, Inc., 6.75%, 12/1/05 303,560 300,000 Goldman Sachs Group, Inc., 4.125%, 1/15/08 299,828 ------------ 603,388 ------------ HEALTH CARE (5.1%): 300,000 Abbott Laboratories, 5.625%, 7/1/06 305,018 250,000 Boston Scientific Corp., 5.125%, 1/12/17 254,243 300,000 Caremark Rx, Inc., 7.375%, 10/1/06 309,941 ------------ 869,202 ------------ INFORMATION TECHNOLOGY (2.3%): 300,000 IBM Corp., 4.875%, 10/1/06 303,197 100,000 SunGard Data Systems, Inc.,4.875%, 1/15/14 80,000 ------------ 383,197 ------------ MATERIALS (1.4%): 200,000 Alcoa, Inc., 7.375%, 8/1/10 227,509 ------------ TELECOMMUNICATION SERVICES (1.8%): 300,000 Verizon Global Funding Corp., 6.125%, 6/15/07 311,077 ------------ UTILITIES (1.8%): 300,000 Carolina Power & Light, 6.80%, 8/15/07 315,285 ------------ Total Corporate Bonds (Cost $3,347,532) 3,324,583 ------------ MORTGAGE-BACKED SECURITIES (34.0%): FEDERAL NATIONAL MORTGAGE ASSOC. (34.0%): 2,309,578 4.50%, 10/1/18, Pool #752030 2,300,413 1,739,420 5.50%, 1/1/34, Pool #757571 1,764,266 1,737,603 5.50%, 3/1/35, Pool #787561 1,762,423 ------------ Total Mortgage-Backed Securities (Cost $5,811,391) 5,827,102 ------------ U.S. GOVERNMENT AGENCIES (28.0%): FEDERAL FARM CREDIT BANK (1.7%): $ 300,000 2.625%, 12/15/05 $ 298,697 ------------ FEDERAL HOME LOAN BANK (7.5%): 1,300,000 2.50%, 3/13/06 1,289,032 ------------ FEDERAL HOME LOAN MORTGAGE CORP. (10.0%): 1,150,000 4.875%, 3/15/07 1,170,929 500,000 5.875%, 3/21/11 539,111 ------------ 1,710,040 ------------ FEDERAL NATIONAL MORTGAGE ASSOC. (8.8%): 1,500,000 5.50%, 7/18/12 1,501,479 ------------ Total U.S. Government Agencies (Cost $4,839,064) 4,799,248 ------------ U.S. TREASURY NOTES (15.0%): 400,000 6.25%, 8/15/23 498,484 1,750,000 5.375%, 2/15/31 (a) 2,065,000 ------------ Total U.S. Treasury Notes (Cost $2,283,986) 2,563,484 ------------ REPURCHASE AGREEMENT (2.7%): 463,580 U.S. Bank N.A., 2.80%, dated 6/30/05, maturing 7/1/05, with a maturing value of $463,616 (Collateralized fully by U.S. Government Agencies) 463,580 ------------ Total Repurchase Agreement (Cost $463,580) 463,580 ------------ Total Investments (Cost $16,745,553) -- 99.2% 16,977,997 Net Other Assets (Liabilities) -- 0.8% 142,782 ------------ NET ASSETS -- 100.0% $ 17,120,779 ============
---------- (a) At June 30, 2005 all or part of this security was pledged as collateral for securities purchased on a when-issued basis. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. BB&T VARIABLE INSURANCE FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (UNAUDITED)
BB&T BB&T BB&T BB&T BB&T CAPITAL SPECIAL BB&T LARGE CAP MID CAP LARGE COMPANY MANAGER OPPORTUNITIES TOTAL RETURN VALUE VIF GROWTH VIF GROWTH VIF EQUITY VIF EQUITY VIF BOND VIF -------------- ------------ ------------- ------------ ------------- ------------ ASSETS: Investments: Investments, at cost $ 88,699,056 $ 24,251,052 $ 19,972,818 $ -- $ 22,039,683 $ 16,281,973 Investment in affiliates, at cost -- -- -- 24,851,189 -- -- Unrealized appreciation (depreciation) 18,083,827 7,585,858 1,964,914 1,747,751 3,372,624 232,444 -------------- ------------ ------------- ------------ ------------- ------------ Investments, at fair value 106,782,883 31,836,910 21,937,732 26,598,940 25,412,307 16,514,417 Repurchase agreements, at amortized cost 3,732,801 1,488,008 962,816 -- 1,899,161 463,580 Interest and dividends receivable 185,902 15,237 16,245 64,048 11,292 199,909 Receivable for investments sold 1,098,596 96,615 -- -- 60,391 -- Deferred offering costs -- -- -- -- 759 759 Prepaid expenses 1,175 179 105 218 39 75 -------------- ------------ ------------- ------------ ------------- ------------ Total Assets 111,801,357 33,436,949 22,916,898 26,663,206 27,383,949 17,178,740 -------------- ------------ ------------- ------------ ------------- ------------ LIABILITIES: Dividends payable 519,516 -- 19,668 80,721 -- 47,132 Payable for investments purchased 243,526 -- -- -- 399,191 -- Accrued expenses and other payables: Investment advisory fees 46,126 12,311 8,525 -- 17,458 5,118 Administration fees 11,550 3,419 2,370 -- 2,727 1,749 Transfer agency and fund accounting fees 1,845 547 379 439 436 280 Trustee fees 538 156 106 124 114 77 Other 7,538 3,201 2,631 1,997 4,144 3,605 -------------- ------------ ------------- ------------ ------------- ------------ Total Liabilities 830,639 19,634 33,679 83,281 424,070 57,961 -------------- ------------ ------------- ------------ ------------- ------------ NET ASSETS: Capital 97,028,827 24,633,620 21,295,153 25,285,920 22,624,524 16,838,010 Accumulated net investment income (loss) 10,552 (44,488) (280) (2) (70,430) 44,894 Accumulated realized gains (losses) from investment transactions (4,152,488) 1,242,325 (376,568) (453,744) 1,033,161 5,431 Net unrealized appreciation (depreciation) of investments 18,083,827 7,585,858 1,964,914 1,747,751 3,372,624 232,444 -------------- ------------ ------------- ------------ ------------- ------------ Net Assets $ 110,970,718 $ 33,417,315 $ 22,883,219 $ 26,579,925 $ 26,959,879 $ 17,120,779 -------------- ------------ ------------- ------------ ------------- ------------ Outstanding Units of Beneficial Interest (Shares) 8,276,278 2,408,153 2,287,657 2,660,154 2,153,728 1,682,820 ============== ============ ============= ============ ============= ============ Net Asset Value -- offering and redemption price per share $ 13.41 $ 13.88 $ 10.00 $ 9.99 $ 12.52 $ 10.17 ============== ============ ============= ============ ============= ============
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
BB&T BB&T BB&T BB&T BB&T CAPITAL SPECIAL BB&T LARGE CAP MID CAP LARGE COMPANY MANAGER OPPORTUNITIES TOTAL RETURN VALUE VIF GROWTH VIF GROWTH VIF EQUITY VIF EQUITY VIF BOND VIF ------------ ------------ -------------- ------------ -------------- ------------ INVESTMENT INCOME: Interest income $ 43,010 $ 24,892 $ 10,209 $ -- $ 11,141 $ 334,685 Dividend income 1,445,470 54,905 120,120 -- 71,690 -- Dividend income from affiliates -- -- -- 171,194 -- -- ------------ ------------ -------------- ------------ -------------- ------------ Total Investment Income 1,488,480 79,797 130,329 171,194 82,831 334,685 ------------ ------------ -------------- ------------ -------------- ------------ EXPENSES: Investment advisory fees 408,299 117,641 81,670 32,036 95,571 48,412 Administration, transfer agency, and fund accounting fees (See Note 4) 93,267 38,338 31,486 14,888 32,320 27,649 Administration fees (See Note 4) 22,205 6,459 4,529 5,245 5,138 3,353 Fund accounting fees (See Note 4) 2,222 901 740 440 791 781 Transfer agency fees (See Note 4) 4,338 1,076 695 446 792 379 Custodian fees 6,223 2,057 1,513 1,537 1,574 1,094 Professional fees 33,932 11,101 8,155 8,376 10,976 8,293 Trustee fees 6,988 2,023 1,379 1,610 1,510 990 Other 9,788 1,109 184 2,647 4,589 4,110 ------------ ------------ -------------- ------------ -------------- ------------ Total expenses before waivers 587,262 180,705 130,351 67,225 153,261 95,061 Less expenses waived by the Investment Advisor (95,858) (56,420) (39,851) (19,409) -- (3,268) Less expenses waived by the Administrator and its affiliates (54,844) -- -- (5,245) -- -- ------------ ------------ -------------- ------------ -------------- ------------ Net Expenses 436,560 124,285 90,500 42,571 153,261 91,793 ------------ ------------ -------------- ------------ -------------- ------------ Net Investment Income (Loss) 1,051,920 (44,488) 39,829 128,623 (70,430) 242,892 ------------ ------------ -------------- ------------ -------------- ------------ REALIZED/UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains on written options -- -- -- -- 24,517 -- Net realized gains (losses) from investment securities 2,407,323 1,512,175 442,401 -- 582,706 (17,116) Net realized losses on investments with affiliates -- -- -- (2,392) -- -- Change in unrealized appreciation/ depreciation from investments (1,950,017) (1,023,203) (743,541) 18,997 327,831 178,283 ------------ ------------ -------------- ------------ -------------- ------------ Net realized/unrealized gains (losses) on investments 457,306 488,972 (301,140) 16,605 935,054 161,167 ------------ ------------ -------------- ------------ -------------- ------------ Change in net assets from operations $ 1,509,226 $ 444,484 $ (261,311) $ 145,228 $ 864,624 $ 404,059 ============ ============ ============== ============ ============== ============
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS. STATEMENTS OF CHANGES IN NET ASSETS
BB&T BB&T LARGE CAP MID CAP VALUE VIF GROWTH VIF ------------------------------------- ------------------------------------- FOR THE FOR THE SIX MONTHS FOR THE YEAR SIX MONTHS FOR THE YEAR ENDED ENDED ENDED ENDED JUNE 30, 2005 DECEMBER 31, 2004 JUNE 30, 2005 DECEMBER 31, 2004 -------------- -------------------- -------------- -------------------- (UNAUDITED) (UNAUDITED) FROM INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 1,051,920 $ 1,778,050 $ (44,488) $ (117,831) Net realized gains (losses) from investment transactions 2,407,323 890,277 1,512,175 1,562,831 Change in unrealized appreciation/depreciation from investments (1,950,017) 10,154,949 (1,023,203) 3,098,166 -------------- -------------------- -------------- -------------------- Change in net assets from operations 1,509,226 12,823,276 444,484 4,543,166 -------------- -------------------- -------------- -------------------- DIVIDENDS TO SHAREHOLDERS: Net investment income (1,041,329) (1,778,089) -- -- -------------- -------------------- -------------- -------------------- Change in net assets from shareholder dividends (1,041,329) (1,778,089) -- -- -------------- -------------------- -------------- -------------------- CAPITAL TRANSACTIONS: Proceeds from shares issued 1,584,593 8,206,444 1,684,916 5,075,670 Dividends reinvested 1,071,518 1,648,020 -- -- Value of shares redeemed (3,765,274) (3,970,967) (1,119,415) (1,114,583) -------------- -------------------- -------------- -------------------- Change in net assets from capital transactions (1,109,163) 5,883,497 565,501 3,961,087 -------------- -------------------- -------------- -------------------- Change in net assets (641,266) 16,928,684 1,009,985 8,504,253 -------------- -------------------- -------------- -------------------- NET ASSETS: Beginning of period 111,611,984 94,683,300 32,407,330 23,903,077 -------------- -------------------- -------------- -------------------- End of period $ 110,970,718 $ 111,611,984 $ 33,417,315 $ 32,407,330 ============== ==================== ============== ==================== SHARE TRANSACTIONS: Issued 119,616 657,552 126,458 415,359 Reinvested 80,381 134,624 -- -- Redeemed (283,178) (322,025) (84,520) (93,117) -------------- -------------------- -------------- -------------------- Change in Shares (83,181) 470,151 41,938 322,242 ============== ==================== ============== ==================== Accumulated net investment income (loss) $ 10,552 $ (39) $ (44,488) $ -- ============== ==================== ============== ====================
---------- (a) Period from commencement of operations. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
BB&T BB&T LARGE COMPANY CAPITAL MANAGER GROWTH VIF EQUITY VIF ------------------------------------- ------------------------------------- FOR THE FOR THE SIX MONTHS FOR THE YEAR SIX MONTHS FOR THE YEAR ENDED ENDED ENDED ENDED JUNE 30, 2005 DECEMBER 31, 2004 JUNE 30, 2005 DECEMBER 31, 2004 -------------- -------------------- -------------- -------------------- (UNAUDITED) (UNAUDITED) FROM INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 39,829 $ 93,252 $ 128,623 $ 169,566 Net realized gains (losses) from investment transactions 442,401 1,043,147 (2,392) 17,252 Change in unrealized appreciation/depreciation from investments (743,541) 62,677 18,997 2,482,753 -------------- -------------------- -------------- -------------------- Change in net assets from operations (261,311) 1,199,076 145,228 2,669,571 -------------- -------------------- -------------- -------------------- DIVIDENDS TO SHAREHOLDERS: Net investment income (40,114) (93,247) (128,625) (169,566) -------------- -------------------- -------------- -------------------- Change in net assets from shareholder dividends (40,114) (93,247) (128,625) (169,566) -------------- -------------------- -------------- -------------------- CAPITAL TRANSACTIONS: Proceeds from shares issued 1,185,488 3,514,255 1,178,107 3,400,142 Dividends reinvested 112,011 1,683 119,365 134,465 Value of shares redeemed (412,547) (786,493) (344,985) (1,029,876) -------------- -------------------- -------------- -------------------- Change in net assets from capital transactions 884,952 2,729,445 952,487 2,504,731 -------------- -------------------- -------------- -------------------- Change in net assets 583,527 3,835,274 969,090 5,004,736 -------------- -------------------- -------------- -------------------- NET ASSETS: Beginning of period 22,299,692 18,464,418 25,610,835 20,606,099 -------------- -------------------- -------------- -------------------- End of period $ 22,883,219 $ 22,299,692 $ 26,579,925 $ 25,610,835 ============== ==================== ============== ==================== SHARE TRANSACTIONS: Issued 120,325 363,360 119,489 369,676 Reinvested 11,123 179 12,017 14,730 Redeemed (41,958) (81,015) (35,092) (112,905) -------------- -------------------- -------------- -------------------- Change in Shares 89,490 282,524 96,414 271,501 ============== ==================== ============== ==================== Accumulated net investment income (loss) $ (280) $ 5 $ (2) $ -- ============== ==================== ============== ==================== BB&T BB&T SPECIAL OPPORTUNITIES TOTAL RETURN EQUITY VIF BOND VIF ------------------------------------- ------------------------------------- FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD SIX MONTHS JULY 22, 2004 SIX MONTHS JULY 22, 2004 ENDED THROUGH ENDED THROUGH JUNE 30, 2005 DECEMBER 31, 2004 (a) JUNE 30, 2005 DECEMBER 31, 2004 (a) -------------- --------------------- -------------- --------------------- (UNAUDITED) (UNAUDITED) FROM INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (70,430) $ (57,905) $ 242,892 $ 157,989 Net realized gains (losses) from investment transactions 607,223 480,367 (17,116) 51,592 Change in unrealized appreciation/depreciation from investments 327,831 3,044,793 178,283 54,161 -------------- -------------------- -------------- -------------------- Change in net assets from operations 864,624 3,467,255 404,059 263,742 -------------- -------------------- -------------- -------------------- DIVIDENDS TO SHAREHOLDERS: Net investment income -- -- (243,632) (144,938) -------------- -------------------- -------------- -------------------- Change in net assets from shareholder dividends -- -- (243,632) (144,938) -------------- -------------------- -------------- -------------------- CAPITAL TRANSACTIONS: Proceeds from shares issued 5,274,933 17,578,780 1,111,276 15,425,182 Dividends reinvested -- -- 232,307 109,130 Value of shares redeemed (223,416) (2,297) (35,826) (521) -------------- -------------------- -------------- -------------------- Change in net assets from capital transactions 5,051,517 17,576,483 1,307,757 15,533,791 -------------- -------------------- -------------- -------------------- Change in net assets 5,916,141 21,043,738 1,468,184 15,652,595 -------------- -------------------- -------------- -------------------- NET ASSETS: Beginning of period 21,043,738 -- 15,652,595 -- -------------- -------------------- -------------- -------------------- End of period $ 26,959,879 $ 21,043,738 $ 17,120,779 $ 15,652,595 ============== ==================== ============== ==================== SHARE TRANSACTIONS: Issued 435,933 1,736,446 110,366 1,542,200 Reinvested -- -- 23,037 10,818 Redeemed (18,448) (203) (3,549) (52) -------------- -------------------- -------------- -------------------- Change in Shares 417,485 1,736,243 129,854 1,552,966 ============== ==================== ============== ==================== Accumulated net investment income (loss) $ (70,430) $ -- $ 44,894 $ 45,634 ============== ==================== ============== ====================
BB&T VARIABLE INSURANCE FUNDS FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES -------------------------------------------- NET ASSET NET REALIZED/ VALUE, NET UNREALIZED GAINS TOTAL FROM BEGINNING INVESTMENT (LOSSES) ON INVESTMENT OF PERIOD INCOME (LOSS) INVESTMENTS ACTIVITIES --------- ------------- ---------------- ---------- BB&T LARGE CAP VALUE VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 13.35 0.13 0.06 0.19 Year Ended December 31, 2004 $ 12.00 0.22 1.35 1.57 Year Ended December 31, 2003 $ 9.88 0.19 2.12 2.31 Year Ended December 31, 2002 $ 12.50 0.17 (2.62) (2.45) Year Ended December 31, 2001 $ 12.66 0.17 (0.16) 0.01 Year Ended December 31, 2000 $ 12.46 0.39 0.63 1.02 BB&T MID CAP GROWTH VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 13.70 (0.02) 0.20 0.18 Year Ended December 31, 2004 $ 11.69 (0.05) 2.06 2.01 Year Ended December 31, 2003 $ 8.56 (0.06) 3.19 3.13 Year Ended December 31, 2002 $ 10.70 (0.09) (2.05) (2.14) October 15, 2001 to December 31, 2001 (a) $ 10.00 (0.01) (0.71) 0.70 BB&T LARGE COMPANY GROWTH VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 10.14 0.02 (0.14) (0.12) Year Ended December 31, 2004 $ 9.64 0.04 0.50 0.54 Year Ended December 31, 2003 $ 7.53 (0.02) 2.13 2.11 Year Ended December 31, 2002 $ 10.83 (0.06) (3.24) (3.30) October 15, 2001 to December 31, 2001 (a) $ 10.00 (0.01) 0.84 0.83 BB&T CAPITAL MANAGER EQUITY VIF*** For the Six Months Ended June 30, 2005 (Unaudited) $ 9.99 0.05 0.00(b) 0.05 Year Ended December 31, 2004 $ 8.99 0.07 1.00 1.07 Year Ended December 31, 2003 $ 7.19 0.03 1.80 1.83 Year Ended December 31, 2002 $ 9.28 0.01 (1.98) (1.97) May 1, 2001 to December 31, 2001 (a) $ 10.00 0.01 (0.72) (0.71) BB&T SPECIAL OPPORTUNITIES EQUITY VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 12.12 (0.04) 0.44 0.40 July 22, 2004 to December 31, 2004 (a) $ 10.00 (0.04) 2.16 2.12 BB&T TOTAL RETURN BOND VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 10.08 0.15 0.09 0.24 July 22, 2004 to December 31, 2004 (a) $ 10.00 0.10 0.08 0.18
---------- * During the period certain fees were reduced. If such reductions had not occurred, the ratios would have been as indicated. ** Total return ratios are based on a share outstanding throughout the period and assume reinvestment of distributions at a net asset value. Total return ratios do not reflect charges persuant to the terms of the insurance contracts funded by separate accounts that invest in the Fund's shares. *** The expense ratios exclude the impact of fees/expenses paid indirectly at the underlying fund level. (a) Period from commencement of operations. (b) Amount is less than $0.005. (c) Not annualized for periods less than one year. (d) Annualized for periods less than one year. SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
DISTRIBUTIONS ---------------------------------------------------- NET ASSET NET NET REALIZED VALUE, INVESTMENT RETURN OF GAINS ON TOTAL END OF TOTAL INCOME CAPITAL INVESTMENTS DISTRIBUTIONS PERIOD RETURN** (c) ---------- --------- ------------ ------------- --------- ------------ BB&T LARGE CAP VALUE VIF For the Six Months Ended June 30, 2005 (Unaudited) (0.13) -- -- (0.13) $ 13.41 1.39% Year Ended December 31, 2004 (0.22) -- -- (0.22) $ 13.35 13.18% Year Ended December 31, 2003 (0.19) (0.00)(b) -- (0.19) $ 12.00 23.62% Year Ended December 31, 2002 (0.17) -- -- (0.17) $ 9.88 (19.64)% Year Ended December 31, 2001 (0.17) -- -- (0.17) $ 12.50 0.16% Year Ended December 31, 2000 (0.42) -- (0.40) (0.82) $ 12.66 8.45% BB&T MID CAP GROWTH VIF For the Six Months Ended June 30, 2005 (Unaudited) -- -- -- -- $ 13.88 1.31% Year Ended December 31, 2004 -- -- -- -- $ 13.70 17.19% Year Ended December 31, 2003 -- -- -- -- $ 11.69 36.57% Year Ended December 31, 2002 -- -- -- -- $ 8.56 (20.00)% October 15, 2001 to December 31, 2001 (a) -- -- -- -- $ 10.70 7.00% BB&T LARGE COMPANY GROWTH VIF For the Six Months Ended June 30, 2005 (Unaudited) (0.02) -- -- (0.02) $ 10.00 (1.20)% Year Ended December 31, 2004 (0.04) -- -- (0.04) $ 10.14 5.63% Year Ended December 31, 2003 -- -- -- -- $ 9.64 28.02% Year Ended December 31, 2002 -- -- -- -- $ 7.53 (30.47)% October 15, 2001 to December 31, 2001 (a) -- -- -- -- $ 10.83 8.30% BB&T CAPITAL MANAGER EQUITY VIF*** For the Six Months Ended June 30, 2005 (Unaudited) (0.05) -- -- (0.05) $ 9.99 0.49% Year Ended December 31, 2004 (0.07) -- -- (0.07) $ 9.99 11.91% Year Ended December 31, 2003 (0.03) -- -- (0.03) $ 8.99 25.47% Year Ended December 31, 2002 (0.01) -- (0.11) (0.12) $ 7.19 (21.25)% May 1, 2001 to December 31, 2001 (a) (0.01) -- -- (0.01) $ 9.28 (7.08)% BB&T SPECIAL OPPORTUNITIES EQUITY VIF For the Six Months Ended June 30, 2005 (Unaudited) -- -- -- -- $ 12.52 3.30% July 22, 2004 to December 31, 2004 (a) -- -- -- -- $ 12.12 21.20% BB&T TOTAL RETURN BOND VIF For the Six Months Ended June 30, 2005 (Unaudited) (0.15) -- -- (0.15) $ 10.17 2.41% July 22, 2004 to December 31, 2004 (a) (0.10) -- -- (0.10) $ 10.08 1.76% RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------------------- RATIO OF NET RATIO OF INVESTMENT RATIO OF NET ASSETS, EXPENSES TO INCOME (LOSS) EXPENSES TO END OF AVERAGE TO AVERAGE AVERAGE PORTFOLIO PERIOD (000) NET ASSETS (d) NET ASSETS (d) NET ASSETS* (d) TURNOVER (c) ------------ -------------- -------------- --------------- ------------ BB&T LARGE CAP VALUE VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 110,971 0.79% 1.91% 1.06% 11.73% Year Ended December 31, 2004 $ 111,612 0.81% 1.77% 1.10% 12.91% Year Ended December 31, 2003 $ 94,683 0.88% 1.82% 1.17% 13.96% Year Ended December 31, 2002 $ 63,667 0.84% 1.57% 1.13% 15.24% Year Ended December 31, 2001 $ 77,796 0.86% 1.17% 1.15% 14.47% Year Ended December 31, 2000 $ 60,675 0.86% 3.13% 1.13% 25.46% BB&T MID CAP GROWTH VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 33,417 0.78% (0.28)% 1.14% 54.40% Year Ended December 31, 2004 $ 32,407 0.83% (0.44)% 1.22% 135.55% Year Ended December 31, 2003 $ 23,903 0.98% (0.78)% 1.37% 113.75% Year Ended December 31, 2002 $ 10,864 1.23% (1.05)% 1.62% 96.89% October 15, 2001 to December 31, 2001 (a) $ 10,713 1.19% (0.55)% 1.58% 3.82% BB&T LARGE COMPANY GROWTH VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 22,883 0.82% 0.36% 1.18% 34.95% Year Ended December 31, 2004 $ 22,300 0.86% 0.46% 1.26% 119.90% Year Ended December 31, 2003 $ 18,464 1.04% (0.32)% 1.44% 90.57% Year Ended December 31, 2002 $ 9,328 1.31% (0.73)% 1.71% 93.65% October 15, 2001 to December 31, 2001 (a) $ 10,876 1.19% (0.32)% 1.59% 16.20% BB&T CAPITAL MANAGER EQUITY VIF*** For the Six Months Ended June 30, 2005 (Unaudited) $ 26,580 0.33% 1.00% 0.52% 0.70% Year Ended December 31, 2004 $ 25,611 0.34% 0.75% 0.54% 1.09% Year Ended December 31, 2003 $ 20,606 0.56% 0.40% 0.66% 10.06% Year Ended December 31, 2002 $ 14,804 0.64% 0.15% 0.74% 3.47% May 1, 2001 to December 31, 2001 (a) $ 16,295 0.54% 0.18% 0.63% 9.18% BB&T SPECIAL OPPORTUNITIES EQUITY VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 26,960 1.28% (0.59)% 1.28% 12.66% July 22, 2004 to December 31, 2004 (a) $ 21,044 1.45% (0.76)% 1.45% 13.81% BB&T TOTAL RETURN BOND VIF For the Six Months Ended June 30, 2005 (Unaudited) $ 17,121 1.14% 3.01% 1.18% 13.91% July 22, 2004 to December 31, 2004 (a) $ 15,653 1.29% 2.34% 1.29% 36.74%
BB&T VARIABLE INSURANCE FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 (UNAUDITED) 1. ORGANIZATION: The BB&T Variable Insurance Funds (the "Trust") was organized on November 8, 2004, and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company established as a Massachusetts business trust. The Trust commenced operations on May 1, 2005 and the Trust presently offers shares of the BB&T Large Cap Value VIF, the BB&T Mid Cap Growth VIF, the BB&T Large Company Growth VIF, the BB&T Capital Manager Equity VIF, the BB&T Special Opportunities Equity VIF, and the BB&T Total Return Bond VIF (referred to individually as a "Fund" and collectively as the "Funds"). The Trust is authorized to issue an unlimited number of shares of beneficial interest without par value. Shares of the Funds are offered through variable annuity contracts offered through the separate accounts of participating insurance companies. The BB&T Capital Manager Equity VIF (the "Fund of Fund") invests in other Fund Portfolios as opposed to individual securities. Prior to May 1, 2005 the Funds operated as a separate series of the Variable Insurance Funds, an investment company organized as a Massachusetts business trust and registered under the 1940 Act as a diversified, open-end management investment company. Under the Funds' organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds may enter into contracts with their vendors and others that provide for general indemnifications. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund of Fund seeks its investment objective of capital appreciation by investing solely in a diversified portfolio of mutual funds (the "Underlying Funds"). The Fund purchases shares of the Underlying Funds at net asset value and without sales charge. SECURITIES VALUATION--Investments in common stocks, commercial paper, corporate bonds, municipal securities, U.S. Government securities, and U.S. Government agency securities, the principal market for which is a securities exchange or an over-the-counter market, are valued at their latest available sale price (except for those securities that are traded on NASDAQ, which will be valued at the NASDAQ official closing price) or in the absence of such a price, by reference to the latest available bid quotations in the principal market in which such securities are normally traded. The Funds may also use an independent pricing service approved by the Board of Trustees to value certain securities. Such prices reflect fair values which may be established through the use of electronic and matrix techniques. Short-term obligations that mature in 60 days or less are valued at either amortized cost or original cost plus interest, which approximates fair value. Investments in open-end investment companies, including the Fund of Fund, are valued at their respective net asset values as reported by such companies. Investments in closed-end investment companies are valued at their fair values based upon the latest available bid prices in the principal market in which such securities are normally traded. The differences between cost and fair values of investments are reflected as either unrealized appreciation or depreciation. Securities for which market quotations are not readily available will be valued at fair value using methods determined in good faith by the Pricing Committee under the supervision of the Board of Trustees. Fair value pricing may be used for significant events, such as securities whose trading has been suspended, whose price has become stale or for which there is no currently available price. SECURITIES TRANSACTIONS AND RELATED INCOME--Securities transactions are accounted for no later than one business day after trade date. However, for financial reporting purposes, security transactions are accounted for on trade date. Interest income is recognized on the accrual basis and includes, where applicable, the pro-rata amortization/accretion of premium or discount. Dividend income is recorded on the ex-dividend date. Gains or losses realized from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds. WHEN-ISSUED--The Funds, may purchase securities on a "when-issued" basis. The Funds record when-issued securities on the trade date and pledge assets with a value equal to the purchase commitment for payment of the securities purchased. The value of the securities underlying when-issued securities and any subsequent fluctuation in their fair value, is taken into account when determining the net asset value of the Funds commencing with the date the Funds agree to purchase the securities. The Funds held no when-issued securities at June 30, 2005. REPURCHASE AGREEMENTS--The Funds may acquire repurchase agreements from member banks of the Federal Deposit Insurance Corporation and from registered broker/dealers that BB&T Asset Management, Inc. ("BB&T") deems creditworthy under guidelines approved by the Board of Trustees, subject to the seller's agreement to repurchase such securities at a mutually agreed-upon date and price. The repurchase price generally equals the price paid by the Funds plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying collateral. The seller under a repurchase agreement is required to maintain the value of collateral held pursuant to the agreement at not less than the repurchase price, including accrued interest. Securities subject to repurchase agreements are held by the Funds' custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. OPTION CONTRACTS--The funds may write or purchase option contracts. These transactions are to hedge against changes in interest rates, security prices, currency fluctuations, and other market developments, or for the purposes of earning additional income (i.e. speculation). The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Funds bear the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as other securities owned. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options are decreased by premiums paid. In writing an option, the Funds contract with a specified counterparty to purchase (written put option) or sell (written call option) a specified quantity (notional amount) of an underlying asset at a specified price during a specified period upon demand of the counterparty. The risk associated with writing an option is that the Funds bear the market risk of an unfavorable change in the price of an underlying asset, and may be required to buy or sell an underlying asset under the contractual terms of the option at a price different from the current fair value. The following is a summary of option activity for the period ended June 30, 2005:
BB&T SPECIAL OPPORTUNITIES EQUITY VIF ------------------------ COVERED CALL OPTIONS CONTRACTS PREMIUMS -------------------- --------- --------- Balance at beginning of period 291 $ 43,616 Options written 584 24,943 Options closed 90 6,030 Options expired 429 19,208 Options exercised 356 43,321 --------- --------- Balance at end of period -- $ -- ========= =========
DIVIDENDS AND DISTRIBUTIONS--Dividends from net investment income are declared and paid quarterly for the Funds, with the exception of the Total Return Bond Fund, in which case dividends from net investment income are declared daily and paid monthly. Distributable net realized gains, if any, are declared and distributed at least annually. The character of income and gains distributed are determined in accordance with federal income tax regulations, which may differ from the accounting principles generally accepted in the United States of America. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (i.e. reclass of market discounts, gain/loss, paydowns and distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends to shareholders which exceed net investment income and net realized gains for tax purposes are reported as distributions of capital. FEDERAL INCOME TAXES--It is the Funds' policy to continue to comply with the requirement of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains to shareholders. Therefore, no federal income tax provision is required. OTHER--Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among all Funds daily in relation to the net assets of each Fund or on another reasonable basis. Expenses which are attributable to more than one Trust are allocated across the BB&T Variable Insurance Funds and BB&T Funds Trusts, based upon relative net assets or on another reasonable basis. 3. PURCHASES AND SALES OF SECURITIES: Purchases and sales of securities (excluding short-term and U.S. Government securities) for the period ended June 30, 2005 are as follows:
PURCHASES SALES ------------ ------------ BB&T Large Cap Value VIF $ 12,622,313 $ 14,835,169 BB&T Mid Cap Growth VIF 18,160,130 16,472,621 BB&T Large Company Growth VIF 7,899,765 7,369,229 BB&T Capital Manager Equity VIF 1,005,000 7,000 BB&T Special Opportunities Equity VIF 6,820,320 2,992,346 BB&T Total Return Bond VIF 3,151,177 2,186,246
Purchases and sales of long-term U.S. Government Securities for the period ended June 30, 2005 for the BB&T Total Return Bond VIF were $487,250 and $0, respectively. 4. RELATED PARTY TRANSACTIONS: Investment advisory services are provided to the Funds by BB&T. Under the terms of the Investment Advisory Agreement, BB&T is entitled to receive fees based on a percentage of the average daily net assets of the Funds. These fees are accrued daily and payable on a monthly basis. Information regarding these transactions is as follows for the period ended June 30, 2005:
FEE RATE AFTER CONTRACTUAL CONTRACTUAL FEE RATE WAIVERS ----------- -------------- BB&T Large Cap Value VIF 0.74% 0.50% BB&T Mid Cap Growth VIF 0.74% 0.50% BB&T Large Company Growth VIF 0.74% 0.50% BB&T Capital Manager Equity VIF 0.25% 0.00% BB&T Special Opportunities Equity VIF 0.80% 0.80% BB&T Total Return Bond VIF 0.60% 0.50%
Pursuant to a sub-advisory agreement with BB&T, Scott & Stringfellow, Inc. serves as the sub-advisor to the BB&T Special Opportunities Equity VIF, subject to the general supervision of the Trusts' Board of Trustees and BB&T. Effective July 11, 2005, pursuant to a Sub-Advisory agreement with BB&T, Sterling Capital Management LLC will serve as the Sub-Advisor to the BB&T Total Return Bond VIF, subject to the general supervision of the Trusts' Board of Trustees and BB&T. For their services, the Sub-Advisors are entitled to a fee payable by BB&T. For the period ended June 30, 2005, the Funds' paid $11,190 in brokerage fees to Scott & Stringfellow, Inc., a wholly owned subsidiary of BB&T Corporation, on the execution of purchases and sales of the Funds' portfolio investments. Effective May 1, 2005, BB&T serves the Funds as administrator. BB&T receives compensation for providing administration services at a rate of 0.12% of the BB&T Variable Insurance Funds and BB&T Funds aggregate average daily net assets up to $5 billion, and a rate of 0.08% of the average daily net assets in excess of $5 billion. This fee is accrued daily and payable on a monthly basis. Expenses incurred are reflected on the Statements of Operations as "Administration Fees." During the period, BB&T waived administration fees of $5,245 for the Capital Manager Equity VIF. Pursuant to a Sub-Administration Agreement with BB&T, BISYS serves as sub-administrator to the Trust subject to the general supervision of the Trusts' Board of Trustees and BB&T. For these services, BISYS is entitled to a fee payable by BB&T. BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"), an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio") are subsidiaries of the BISYS Group, Inc. BISYS, with whom certain officers of the Funds are affiliated, serves the Funds as distributor. BISYS Ohio served the Funds as fund accountant and transfer agent. Prior to May 1, 2005, BISYS and BISYS Ohio received compensation for providing administration, fund accounting and transfer agency services fees computed daily as a percentage of the average net assets of Funds. The fee was accrued daily and payable on a monthly basis. During the period, BISYS waived administration fees of $54,844 for the BB&T Large Cap Value VIF. BISYS provided an employee to serve as Chief Compliance Officer for the Funds including providing certain related services for which it received an additional fee. Effective May 1, 2005, BISYS Ohio serves the Funds as fund accountant and transfer agent. BISYS Ohio receives compensation for providing fund accounting and transfer agency services at a rate of 0.02% (0.01% for each service) of the average daily net assets of each Fund. The fee is accrued daily and payable on a monthly basis. In addition, BISYS provides an employee to serve as Chief Compliance Officer for the Funds including providing certain related services for which it receives an additional fee. The Trust has adopted a Variable Contract Owner Servicing Plan (the "Service Plan") under which the Funds may pay a fee computed daily and paid monthly, at an annual rate of up to 0.25% of the average daily net assets of the Funds. A servicing agent may periodically waive all or a portion of its servicing fees. For the period ended June 30, 2005, the Funds did not participate in any service plans. Certain Officers and Trustees of the Trust are affiliated with the adviser, the administrator, or the sub-administrator. Such Officers and Trustees receive no compensation from the Funds for serving in their respective roles, except the Chief Compliance Officer. Each of the 5 non-interested Trustees who serve both on the Board and the audit committee are compensated $1,750 ($14,500 in total) for meeting and retainer fees, plus reimbursement for certain expenses. 5. FEDERAL INCOME TAX INFORMATION As of the latest tax year end of December 31, 2004, the following Funds had net realized loss carryforwards to offset future net realized gains, if any, to the extent provided by the Treasury regulations. To the extent that these carryforwards are used to offset future capital gains, it is probable that the gains that are offset will not be distributed to shareholders.
AMOUNT EXPIRES ----------- ------- BB&T Large Cap Value VIF $ 1,429,625 2009 BB&T Large Cap Value VIF 3,680,446 2010 BB&T Large Cap Value VIF 1,449,740 2011 BB&T Mid Cap Growth VIF 261,557 2010 BB&T Large Company Growth VIF 658,956 2010 BB&T Large Company Growth VIF 69,106 2011 BB&T Capital Manager Equity VIF 101,476 2010 BB&T Capital Manager Equity VIF 338,725 2011
At June 30, 2005 the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows:
NET TAX TAX UNREALIZED UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------- ------------- ------------- BB&T Large Cap Value VIF $ 92,451,399 $ 20,235,930 $ (2,171,645) $ 18,064,285 BB&T Mid Cap Growth VIF 25,771,386 7,791,281 (237,749) 7,553,532 BB&T Large Company Growth VIF 21,029,264 2,480,956 (609,672) 1,871,284 BB&T Capital Manager Equity VIF 24,863,802 1,959,058 (223,920) 1,735,138 BB&T Special Opportunities Equity VIF 23,938,844 3,861,461 (488,837) 3,372,624 BB&T Total Return Bond VIF 16,794,247 325,359 (141,609) 183,750
6. BOARD CONSIDERATION OF ADVISORY AND SUB-ADVISORY ARRANGEMENTS The Board of Trustees approved the Investment Advisory Agreement and the Sub-Advisory Agreement at a meeting held on February 28, 2005. In determining whether it was appropriate to approve the Investment Advisory Agreement and Sub-Advisory Agreement, the Board of Trustees requested information, provided by BB&T Asset Management and the Sub-Adviser, that it believed to be reasonably necessary to reach its conclusion. The Board of Trustees carefully evaluated this information, and was advised by legal counsel with respect to its deliberations. Based on its review of the information requested and provided, the Board of Trustees determined that the Investment Advisory Agreement and the Sub-Advisory Agreement is consistent with the best interests of each Fund to which it applies and its shareholders, and enables each Fund to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Funds and their shareholders. The Board of Trustees made these determinations on the basis of the following considerations, among others: - The investment advisory fees payable to BB&T Asset Management and the Sub-Adviser under the Investment Advisory Agreement and the Sub-Advisory Agreement are fair and reasonable in light of the services to be provided, the anticipated costs of these services, the profitability of BB&T Asset Management's and the Sub-Adviser's relationship with the Funds, and the comparability of the proposed fees to fees paid by comparable mutual funds; - The Investment Advisory Agreement and the Sub-Advisory Agreement did not increase current investment advisory fees or overall operating expenses of each then operational Fund to which it applies over historical fee and expense levels; - The continuity of each then operational Fund's current portfolio manager and other persons responsible for management of the Fund, which should help ensure continuity of management and consistency of performance; - The nature, quality and extent of the investment advisory services provided by BB&T Asset Management and the Sub-Adviser, in light of the high quality services provided to the then operational Funds in the past and the other mutual funds advised by BB&T Asset Management and the Sub-Adviser and the then operational Funds' historic performance, including achievement of stated investment objectives; - BB&T Asset Management's and the Sub-Adviser's representations regarding its staffing and capabilities to manage the Funds, including the retention of personnel with significant portfolio management experience; - BB&T Asset Management's and the Sub-Adviser's entrepreneurial commitment to the management and success of the Funds, which could entail a substantial commitment of resources to the successful operation of the Funds; - The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of BB&T Asset Management and the Sub-Adviser. Accordingly, in light of the above considerations and such other factors and information it considered relevant, the Board of Trustees unanimously approved the Investment Advisory Agreement and the Sub-Advisory Agreement. 7. OTHER INFORMATION A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1-800-228-1872 and (ii) on the Securities and Exchange Commission's website at http://www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 1-800-228-1872 and (ii) on the Commission's website at http://www.sec.gov. Schedules of Portfolio Investments for quarters ending March 31 and September 30 are available without charge, on the Securities and Exchange Commission's website at http://www.sec.gov. ITEM 2. CODE OF ETHICS. Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. The registrant must briefly describe the nature of any amendment, during the period covered by the report, to a provision of its code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item. The registrant must file a copy of any such amendment as an exhibit pursuant to Item 12(a)(1), unless the registrant has elected to satisfy paragraph (f) of this Item by posting its code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by undertaking to provide its code of ethics to any person without charge, upon request, pursuant to paragraph (f)(3) of this Item. If the registrant has, during the period covered by the report, granted a waiver, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more items set forth in paragraph (b) of this Item, the registrant must briefly describe the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. (a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state. (b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees. NOT APPLICABLE. ITEM 6. SCHEDULE OF INVESTMENTS. File Schedule I - Investments in securities of unaffiliated issuers as of the close of the reporting period as set forth in Section 210.12-12 of Regulation S-X, unless the schedule is included as part of the report to shareholders filed under Item 1 of this Form. NOT APPLICABLE. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. If the registrant is a closed-end management investment company that is filing an annual report on this Form N-CSR, provide the information specified in paragraphs (a) and (b) of this Item with respect to portfolio managers. NOT APPLICABLE. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. If the registrant is a closed-end management investment company, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the registrant or any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant's equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781). NOT APPLICABLE. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. DURING THE PERIOD COVERED BY THE REPORT, WITH RESPECT TO THE REGISTRANT'S PROCEDURES BY WHICH SHAREHOLDERS MAY RECOMMEND NOMINEES TO THE REGISTRANT'S BOARD OF DIRECTORS, THERE HAVE BEEN NO AMENDMENTS TO, NOR ANY WAIVERS GRANTED FROM, A PROVISION THAT RELATES TO ANY ELEMENTS OF THIS ITEM 10. ITEM 11. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES AS CONDUCTED WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT THESE DISCLOSURE CONTROLS AND PROCEDURES ARE ADEQUATELY DESIGNED AND ARE OPERATING EFFECTIVELY TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS (i) ACCUMULATED AND COMMUNICATED TO THE INVESTMENT COMPANY'S MANAGEMENT, INCLUDING ITS CERTIFYING OFFICERS, TO ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE; AND (ii) RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE TIME PERIODS SPECIFIED IN THE SECURITIES AND EXCHANGE COMMISSION'S RULES AND FORMS. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE SECOND FISCAL QUARTER OF THE PERIOD COVERED BY THIS REPORT THAT HAVE MATERIALLY AFFECTED OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING. ITEM 12. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2). CERTIFICATIONS PURSUANT TO RULE 30A-2(a) ARE ATTACHED HERETO. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. NOT APPLICABLE. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by rule 30a-2(b) under the Act as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant incorporates it by reference. CERTIFICATIONS PURSUANT TO RULE 30A-2(b) ARE FURNISHED HEREWITH. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) BB&T Variable Insurance Funds --------------------------------------------------------------- By (Signature and Title)* /s/Troy A. Sheets, Treasurer -------------------------------------------------- Troy A. Sheets, Treasurer Date August 26, 2005 ------------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Keith F. Karlawish, President -------------------------------------------------- Keith F. Karlawish, President Date August 26, 2005 ------------------------------------ By (Signature and Title)* /s/Troy A. Sheets, Treasurer -------------------------------------------------- Troy A. Sheets, Treasurer Date August 26, 2005 ------------------------------------