-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vgc8L5R8Ua7pvbK5dLntmKAPP9tWGMPmrVc1fwcDFqcDLbSsIgQT/5g+KnRjmDyC CCyWEZNUnvc/gCVSybbevg== 0000935069-98-000033.txt : 19980302 0000935069-98-000033.hdr.sgml : 19980302 ACCESSION NUMBER: 0000935069-98-000033 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980227 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STI CLASSIC FUNDS CENTRAL INDEX KEY: 0000883939 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06557 FILM NUMBER: 98551778 BUSINESS ADDRESS: STREET 1: 2 OLIVER STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6109896602 MAIL ADDRESS: STREET 1: 530 E SWEDESFORD ROAD CITY: WAYNE STATE: PA ZIP: 19087-1693 N-30D 1 STI CLASSIC VARIABLE TRUST ANNUAL REPORT ANNUAL FINANCIAL REPORT STI CLASSIC VARIABLE TRUST [LOGO OMITTED] [GRAPHIC OF PILLARS OMITTED] DECEMBER 31, 1997 -------------------------- STI Classic Variable Trust -------------------------- Dear STI Classic Variable Trust Shareholders: The following 1997 Annual Financial Report provides you a detailed summary of each of the STI Classic Variable Trust Funds. The STI Classic Funds and the STI Classic Variable Funds have presented investors exposure to a variety of investment opportunities since 1992. The six STI Classic Variable Trust Funds were developed specifically to meet the rapidly changing needs of today's investor. Each of these funds offers an investment discipline that identifies a specific mix of risk and return. Together, the STI Classic Variable Trust Funds complement one another, providing access to different segments of the stock and bond markets. The combination of these funds is intended to offer the ideal investment program for almost any investor.
- --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST FUNDS (UNAUDITED) NET OF FEES PERFORMANCE AS OF DECEMBER 31, 1997 - --------------------------------------------------------------------------------------------------------------------------- THREE SINCE INCEPTION INCEPTION MONTHS ONE YEAR TWO YEARS (ANNUALIZED) DATE - --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST VALUE INCOME STOCK FUND 0.51% 26.82% 22.66% 23.77% 10/2/95 - --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST MID-CAP EQUITY FUND -1.34% 22.23% 19.10% 18.48% 10/2/95 - --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST SMALL CAP EQUITY FUND N/A N/A N/A -10.09% 10/22/97 - --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST CAPITAL GROWTH FUND 4.45% 36.54% 29.99% 30.14% 10/2/95 - --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST INVESTMENT GRADE BOND FUND 2.84% 8.84% 5.51% 6.60% 10/2/95 - --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC VARIABLE TRUST INTERNATIONAL EQUITY FUND -5.94% 16.84% N/A 16.21% 11/7/96 - --------------------------------------------------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RETURNS.
The STI Classic Variable Trust is a well-established family of mutual funds, nationally recognized for the diversity and quality of investment options that they provide. As the advisor to the STI Classic Variable Trust, STI Capital Management is committed to providing you quality investment products which will aid you in achieving your investment objectives. I hope you will find the information on the following pages useful. It is intended to give you a better understanding of how our portfolio managers are investing your money. Thank you for your interest and participation in the STI Classic Variable Trust. We look forward to many successful years of investing in the future. Sincerely, /S/Signature Anthony R. Gray Chief Executive Officer and Chief Investment Officer STI Capital Management, N.A. VALUE INCOME STOCK FUND ----------------------- The Value Income Stock Fund (the "Fund") seeks to provide current income with a secondary goal of achieving capital appreciation through investment in equity assets of high yielding, undervalued companies. The Fund's investment philosophy is a very structured, methodical approach to purchasing stocks. The bottom-up approach has three key factors to consider in all investment decisions -- minimum dividend yield criteria, low historical relative valuation, and a fundamental catalyst which could upwardly value the individual security. Most securities in the Fund's portfolio have a dividend yield of at least the average stock held in the S&P 500 market index. By screening for only high yielding securities, the Fund is ensured a high dividend component for the total return. Stocks are then screened on a relative historical valuation basis. Quantitative review is conducted on the price/book, price/earnings, price/cash flow and yield data for the past several years. Only stocks trading in the bottom third of their historical range (based on certain acceptable criteria) have the potential to be added to the portfolio. Finally, traditional fundamental analysis is applied to determine a catalyst which could, when recognized by other investors, revalue the stock positively. Only securities which appear to have a reason for attracting investor attention are then selected to be held in the Fund's portfolio. The Fund's return for 1997 was 26.82%. The Fund underperformed its index, the S&P 500/Barra Value, by 3.16% for the year. We believe this underperformance was a result of the Fund's underweighting in the financial sector, a sector that performed strongly in 1997. Another reason was its overweighting in the basic materials sector, a sector that did not perform as strongly. In 1998 we believe the successful regional telephone companies will team up with long-distance companies such as AT&T, rather than trying to enter the long-distance business single handedly and may provide good value opportunity. On the downside, the commodity companies -- the metals, papers and chemicals -- had a very tough fourth quarter in 1997, as the Asian financial crisis reduced demand for these products and cooled inflation fears. Of the three, we think that the paper group is most likely to post stronger earnings in 1998 than 1997. Shown immediately following the Advisor's Discussion of Fund Performance are three line graphs depicting the growth (including reinvestment of dividends and capital gains) of a hypothetical investment of $10,000 as compared with the growth of a hypothetical investment of $10,000 in the Fund's benchmarks. [line graph omitted -- plot points as follows] COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Variable Trust S&P 500/BARRA Lipper Equity Date Value Income Stock Fund Value Index Income Funds Average 10/31/95 $10,000 $10,000 $10,000 12/95 10,828 10,816 10,703 12/96 12,846 13,194 12,781 12/97 16,292 17,149 16,297 One Year Annualized Inception Return to Date 26.82% 23.77% Past performance is no indication of future performance. 2 MID-CAP EQUITY FUND -------------------- The Mid-Cap Equity Fund (the "Fund") seeks to provide capital appreciation by investing in a diversified portfolio of equity assets of small to mid-size companies with above-average growth of earnings. Mid-cap securities, between $500 million to $5 billion market capitalization, with a strong growth history are the primary consideration for this investment philosophy. These companies are evaluated relative to their industry sector and the market in general. Each industry sector is considered in relation to the business cycle, and the portfolio maintains large positions in the sectors which appear to perform best in the given cycle. Stocks that fall within favored sectors are analyzed based on fundamentals -- the quality of earnings, dependability of growth rates, and relative attractiveness of price/earnings ratios and the yield of the security. The Fund begins with securities presenting strong earnings growth relative to historical numbers. Then, business cycle analysis, sector rotation, and stock selection are applied in trading the portfolio. By evaluating the relative value of the various industry sectors at different points in the business cycle, sectors are identified that will perform well in a given environment. Stocks that fall within favored sectors are analyzed based on fundamentals -- the quality of earnings, dependability of growth rates, relative attractiveness of price/earnings ratios and the yield of the security. The Fund's return for 1997 was 22.23%. The Fund underperformed its index, S&P 400 Mid-Cap , by 10.00%. We believe the Fund's underperformance was a result of sector weightings. The Fund was underweighted in both the financial and electrical sectors; both of those sectors performed well. The Fund was also overweighted in technology stocks, a sector that did not perform well. In addition, the Fund held several individual stocks that proved disappointing. The biggest wildcard for 1998 is corporate earnings, and investors continue to be jittery when a company disappoints. For instance, our largest holding, U.S. Filter, missed their third quarter profit forecast by one penny. Even though the company`s earnings were up 38% from the year-ago quarter, the stock price fell from $40 to $27 on the news. Fortunately, these dips are often buying opportunities because the stocks generally recover. Shown immediately following the Advisor's Discussion of Fund Performance are two line graphs depicting the growth (including reinvestment of dividends and capital gains) of a hypothetical investment of $10,000 as compared with the growth of a hypothetical investment of $10,000 in the Fund's benchmark. [line graph omitted -- plot points as follows] COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Variable Trust S&P 400 Date Mid-Cap Equity Fund Mid-Cap Index 10/31/95 $10,000 $10,000 12/95 10,226 10,408 12/96 11,868 12,408 12/97 14,506 16,408 One Year Annualized Inception Return to Date 22.23% 18.48% Past performance is no indication of future performance. 3 SMALL CAP EQUITY FUND --------------------- The Small Cap Equity Fund (the "Fund") seeks to provide capital appreciation with a secondary goal of achieving current income. The Fund primarily invests in a diversified portfolio of equity securities of undervalued companies with market capitalization under $1 billion. The Fund may invest in securities of foreign issuers and options. 4 CAPITAL GROWTH FUND ------------------- The investment objective of the Capital Growth Fund (the "Fund") is to provide capital appreciation by investing in a portfolio of equity assets which in the advisor's opinion are undervalued in the marketplace at the time of purchase. Large capitalization stocks with a strong growth history are the primary consideration for this investment philosophy. Out of this universe of companies, a security is selected for the portfolio when it appears undervalued based on the relative earnings ratios. In order to make this relative value comparison, each stock is compared to its own historical price / earnings ratio range, to other stocks in the sector, and to the stock market as measured by indices such as the Standard & Poor's 500 Composite Index. The Fund focuses on business cycle analysis, sector rotation and stock selection when trading the portfolio. By evaluating the relative value of the various industry sectors at different points in the business cycle, sectors are identified that will perform well in a given environment. Stocks that fall within favored sectors are analyzed based on fundamentals -- the quality of earnings, dependability of growth rates, relative attractiveness of price/earnings ratios and the yield of the security. The Fund held true to form in the volatile market environment of 1997, focusing on the larger growth companies in each of the best performing industry sectors. A large weighting in the technology and healthcare industries, as well as energy, financial and leisure, all led to adequate exposure to the growth of the equity markets. Underexposure to automotive, aerospace and the cyclicals limited the downside exposure of the slowing U.S. economy. The Fund's return for 1997 was 36.54%. The Fund outperformed its index, the S&P 500 Composite, by 3.18%. We believe the reason for the Fund's outperformance was a result of one main factor: the cash component. The cash component averaged 7% of the Fund, therefore causing the Fund to outperform. Our outlook for 1998 is cautious because of the uncertainty surrounding corporate profits. However, it must be remembered that the stock market has had its best three-year run in history. Even if 1998 turned out to be a flat to mildly down year, the nineties would still be considered an excellent decade for investors. Shown immediately following the Advisor's Discussion of Fund Performance are three line graphs depicting the growth (including reinvestment of dividends and capital gains) of a hypothetical investment of $10,000 as compared with the growth of a hypothetical investment of $10,000 in the Fund's benchmarks. [line graph omitted -- plot points as follows] COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Variable Trust S&P 500 Lipper Growth Date Capital Growth Fund Composite Index Funds Average 10/31/95 $10,000 $10,000 $10,000 12/95 10,632 10,640 10,387 12/96 13,157 13,081 12,423 12/97 17,964 17,445 15,566 One Year Annualized Inception Return to Date 36.54% 30.14% Past performance is no indication of future performance. 5 INVESTMENT GRADE BOND FUND -------------------------- The Investment Grade Bond Fund (the "Fund") seeks to provide a high level of total return through current income and capital appreciation as is consistent with the preservation of capital primarily through investment in investment grade fixed income securities. The Fund seeks to utilize an investment philosophy which minimizes risk, while outperforming selected market indices. The core portfolio is structured around the composition of the Lehman Government/Corporate Bond Index. The composition of the index is reviewed and quantitative historical data is analyzed to determine the optimal spread ranges of the different market sectors. Once the optimum market sectors are selected, an over- or under-weighting is developed in different sectors by investing in well-valued issues. All securities purchased are carefully reviewed for value. Yield curve analysis and credit ratings are an important part of this process. A level of technical analysis is then applied to assist in duration structure, keeping the portfolio within 15% of the duration of the Lehman Government/Corporate Bond Index. By aggressively applying this investment philosophy to the fixed income markets, the Fund strives to provide at or above market returns while keeping portfolio risk well below the market indicators and most fixed income managers. The past year's economy was in a slow growth mode which was positive for the fixed income markets. Growth rates in corporate earnings and industrial production remained in check throughout 1997, keeping inflationary pressures down and allowing fixed income securities to appreciate. The result was a less volatile trading environment centered around a moderately flat yield curve. The Fund's 1997 return was 8.84%. The Fund outperformed its index, the Lipper Intermediate Investment Grade Debt Average, by .27%. We believe this outperformance was because of two reasons: longer duration and owning more corporates. Our higher percentage of corporates resulted in a more spread product. Our belief is that interest rates are still likely to fall and the yield curve to steepen, which would generate more relative capital appreciation for mid-range securities. That was certainly a good strategy during the fourth quarter of 1997, and we believe it will continue in early 1998. Another strategy is to reduce our weighting in mortgages, and boost our allocation to corporate bonds. Since we do not believe that the economy will slow to the point of a recession, we believe that corporate credits are not unduly risky -- and they offer significantly more yield than U.S. Treasury bonds. Shown immediately following the Advisor's Discussion of Fund Performance are three line graphs depicting the growth (including reinvestment of dividends and capital gains) of a hypothetical investment of $10,000 as compared with the growth of a hypothetical investment of $10,000 in the Fund's benchmarks. [line graph omitted -- plot points as follows] COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Variable Trust Lehman Government/ Lipper Intermediate Investment Grade Bond Fund Corporate Bond Index Investment Grade Date Debt Average 10/31/95 $10,000 $10,000 $10,000 12/95 10,295 10,314 10,273 12/96 10,531 10,615 10,602 12/97 11,462 11,649 11,510 One Year Annualized Inception Return to Date 8.84% 6.60% Past performance is no indication of future performance. 6 INTERNATIONAL EQUITY FUND ------------------------- The International Equity Fund (the "Fund") invests in a diversified portfolio of equity securities of foreign issuers and seeks to provide long term capital appreciation. The Fund focuses on company fundamentals, specifically looking for companies which exhibit top managements, quality products and sound financial positions. Our goal is to find companies which fit the above criteria but are selling at a discount to their global peers. For the 1997 fiscal year, the Fund returned 16.84% compared to the MSCI EAFE Index1 return of 1.78% and the Lipper International Fund Index return of 7.26%. During this period, the Fund's underweighting in the Japanese market and its relative overweighting in the European markets contributed to the strong return. On a sector basis, the Fund's overweight position in consumer goods was a positive factor in its relative outperformance. Our current stock selection process leads us to overweight the financial and the drug sectors based on bottom up company analysis. Our other weightings which deviate from the index averages include services and energy, where we are underweighted. Geographically our largest exposure remains Europe. As we view the world on an industry and regional basis, we continue to find financially solid companies with appealing valuations in Europe. Emerging markets stock values have dropped significantly after the fallout of the Asian crisis. We are selectively adding to positions as we continue to monitor government policy decisions and company fundamentals in the aftermath. The Fund's largest market weighting deviation continues to be underweight in the Japanese market. While the Japanese economy appears to be showing signs of life, and some companies have improved their competitive position by moving manufacturing offshore, we continue to believe that on valuation measures, the Japanese market remains expensive to its global industry peers, and thus we remain underweight. Shown immediately following the Advisor's Discussion of Fund Performance are two line graphs depicting the growth (including reinvestment of dividends and capital gains) of a hypothetical investment of $10,000 as compared with the growth of a hypothetical investment of $10,000 in the Fund's benchmark. [line graph omitted -- plot points as follows] COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT STI Classic Variable Trust Date International Equity Fund MSCI EAFE Index 11/30/96 $10,000 $10,000 12/96 10,200 9,871 12/97 11,918 10,047 One Year Annualized Inception Return to Date 16.84% 16.21% Past performance is no indication of future performance. 1 "MSCI EAFE Index" is a registered service mark of Morgan Stanley Capital International which does not sponsor, and is in no way affiliated with, the International Equity Fund. 7 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 VALUE INCOME STOCK FUND - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- COMMON STOCK (89.6%) BASIC MATERIALS (14.1%) Allegheny Teledyne 29,300 $ 758 Armstrong World Industries 3,400 254 B.F. Goodrich 21,900 907 Consolidated Papers 10,300 550 Eastman Chemical 11,600 691 Engelhard 40,100 697 Georgia Pacific 8,100 492 Georgia Pacific (Timber Group)* 8,100 184 Hercules 16,000 801 International Flavors & Fragrances 14,000 721 Nalco Chemical 17,300 684 PPG Industries 10,600 606 Reynolds Metals 18,300 1,098 Union Camp 12,000 644 Weyerhaeuser 14,100 692 Worthington Industries 27,500 454 ------- 10,233 ------- CAPITAL GOODS (13.1%) AMP 17,700 743 Cooper Industries 13,400 657 Federal Signal 25,100 543 Foster Wheeler 8,000 217 General Signal 16,500 696 Johnson Controls 15,500 740 Mallinckrodt 23,700 901 National Service Industries 15,000 743 Pall 44,100 912 Tecumseh Products, Cl A 11,100 541 Tenneco 35,800 1,414 Thomas & Betts 19,600 926 Tomkins PLC ADR 27,600 528 ------- 9,561 ------- COMMUNICATION SERVICES (5.2%) Alltel 18,400 756 BellSouth 9,400 529 Frontier 22,000 529 - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- COMMUNICATION SERVICES (CONTINUED) GTE 15,300 $ 799 Harris 13,100 601 Southern New England Telecommunications 11,700 589 ------- 3,803 ------- CONSUMER CYCLICALS (12.9%) American Greetings, Cl A 20,400 798 Echlin 23,000 832 Genuine Parts 22,300 757 H & R Block 17,800 798 ITT Industries 37,700 1,183 J.C. Penney 14,900 899 May Department Stores 19,200 1,012 McGraw-Hill 9,700 718 Mercantile Stores 5,400 329 Sears Roebuck 18,000 814 Shaw Industries 48,400 563 TRW 12,200 651 ------- 9,354 ------- CONSUMER STAPLES (15.2%) Anheuser Busch 17,500 770 CPC International 7,000 756 Crown Cork & Seal 23,400 1,173 Food Lion, Cl A 67,300 568 Giant Food, Cl A 15,400 519 Hormel Foods 18,200 596 Kelly Services, Cl A 5,900 177 Kimberly-Clark 24,900 1,228 McCormick 19,000 532 Philip Morris 17,200 779 R.R. Donnelley & Sons 19,400 723 Rubbermaid 36,500 912 Seagram 27,200 879 Sonoco Products 21,400 742 Whitman 26,600 693 ------- 11,047 ------- 8 ================================================================================ - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- ENERGY (6.7%) Amoco 8,500 $ 724 Kerr-McGee 13,700 867 Mobil 11,700 845 Murphy Oil 12,600 683 Scana 25,000 748 Unocal 27,100 1,052 ------- 4,919 ------- FINANCIALS (11.0%) American Financial Group 14,500 585 American General 14,300 773 AmSouth Bancorp 8,300 451 BankBoston 4,600 432 Beneficial 9,100 756 Cigna 4,200 727 Crestar Financial 8,700 496 Hibernia, Cl A 27,400 515 Jefferson-Pilot 6,800 530 Magna Group 9,800 448 Safeco 14,800 722 TIG Holdings 15,500 514 Union Planters 9,000 611 Willis Corroon Public Limited 35,400 436 ------- 7,996 ------- HEALTH CARE (4.4%) American Home Products 10,100 773 C.R. Bard 25,500 798 Pharmacia Upjohn ADR 44,200 1,619 ------- 3,190 ------- TRANSPORTATION (0.9%) Illinois Central 19,600 668 ------- UTILITIES (6.1%) Enron 34,700 1,442 Pacificorp 26,700 729 Questar 13,200 589 - ------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- UTILITIES (CONTINUED) Sonat 20,600 $ 942 Southern 28,400 735 ------- 4,437 ------- Total Common Stock (Cost $59,701) 65,208 ------- REPURCHASE AGREEMENT (9.4%) Morgan Stanley 6.580%, dated 12/31/97, matures 01/02/98, repurchase price $6,841,600 (collateralized by FNMA obligations: market value $7,393,466) $6,839 6,839 ------- Total Repurchase Agreement (Cost $6,839) 6,839 ------- Total Investments (99.0%) (Cost $66,540) 72,047 ------- OTHER ASSETS AND LIABILITIES, NET (1.0%) 700 ------- NET ASSETS: Portfolio Shares (unlimited authorization -- no par value) based on 4,781,817 outstanding shares of beneficial interest 60,287 Accumulated net realized gain on investments 6,728 Net unrealized appreciation on investments 5,507 Undistributed net investment income 225 ------- Total Net Assets (100.0%) $72,747 ======= Net Asset Value, Offering and Redemption Price Per Share $15.21 ======= * NON-INCOME PRODUCING SECURITY ADR -- AMERICAN DEPOSITORY RECEIPT CL -- CLASS FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION PLC -- PUBLIC LIMITED CORPORATION THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 MID-CAP EQUITY FUND - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- COMMON STOCK (90.9%) CAPITAL GOODS (17.4%) Allied Waste Industries* 22,700 $ 529 Danka Business Systems ADR 10,400 166 Fisher Scientific International 5,200 248 Herman Miller 4,700 256 Perkin Elmer 3,900 277 Philip Services* 19,200 276 Sawtek* 18,200 480 Solectron* 11,600 482 Sundstrand 7,300 368 U.S. Filter* 29,300 877 Watsco 8,000 197 ------- 4,156 ------- COMMUNICATION SERVICES (2.1%) LCI International* 16,200 498 ------- CONSUMER CYCLICALS (15.4%) Barnes & Noble* 6,100 204 Dollar General 12,296 446 Harley-Davidson 16,000 438 International Speedway* 9,900 233 Men's Wearhouse* 12,200 424 Office Depot* 17,100 409 Ralph Lauren* 12,600 306 Royal Caribbean Cruises 5,700 304 Saks Holdings* 13,500 279 Staples* 9,000 250 West Marine* 17,300 387 ------- 3,680 ------- CONSUMER STAPLES (12.2%) BJ's Wholesale Club* 10,700 336 Cracker Barrel Old Country Stores 12,900 431 Dial 17,100 356 Hannaford Brothers 5,500 239 Interstate Bakeries 8,400 314 - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) Papa John's International* 10,800 $ 377 Samsonite* 17,900 566 Wendy's International 12,400 298 ------- 2,917 ------- ENERGY (5.8%) Anadarko Petroleum 7,100 431 EEX 30,400 276 Valero Energy 10,100 318 Western Atlas* 5,000 370 ------- 1,395 ------- FINANCIALS (12.9%) Colonial Bancgroup 9,500 327 Dime Bancorp 7,800 236 First Security 10,425 437 First Virginia Banks 3,900 202 Hartford Life, Cl A 9,400 426 Hibernia, Cl A 14,400 271 North Fork Bancorporation 8,400 282 PMI Group 3,000 217 Trustmark 8,300 384 Union Planters 4,500 306 ------- 3,088 ------- HEALTH CARE (10.1%) Acuson Corp* 21,000 348 Allergan 5,050 169 Biogen* 6,300 229 DePuy* 8,800 253 Jones Medical Industries 5,100 195 Medpartners* 19,300 432 Teva Pharmaceuticals ADR 3,600 170 Vencor* 7,300 178 Watson Pharmaceuticals* 13,400 435 ------- 2,409 ------- 10 ================================================================================ - ------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- TECHNOLOGY (14.0%) ADC Telecommunications* 12,200 $ 509 Atmel* 9,500 176 Fiserv* 7,900 388 Flextronics International* 12,100 417 Harbinger* 11,200 315 Kemet* 13,000 252 Networks Associates* 13,083 692 Teradyne* 18,900 605 ------- 3,354 ------- UTILITIES (1.0%) Southwest Gas 13,100 245 ------- Total Common Stock (Cost $19,476) 21,742 ------- CONVERTIBLE BOND (1.0%) Lam Research, CV to 11.3935 shares (A) 5.000%, 09/01/02 $ 290 241 ------- Total Convertible Bond (Cost $290) 241 ------- REPURCHASE AGREEMENT (8.6%) Morgan Stanley 6.180%, dated 12/31/97, matures 01/02/98, repurchase price $2,060,818 (collateralized by U.S. Treasury Note: market value $2,114,829) 2,060 2,060 ------- Total Repurchase Agreement (Cost $2,060) 2,060 ------- Total Investments (100.5%) (Cost $21,826) 24,043 ------- OTHER ASSETS AND LIABILITIES, NET (-0.5%) (130) ------- - ------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------- NET ASSETS: Portfolio Shares (unlimited authorization -- no par value) based on 1,711,185 outstanding shares of beneficial interest $19,413 Accumulated net realized gain on investments 2,283 Net unrealized appreciation on investments 2,217 ------- Total Net Assets (100.0%) $23,913 ======= Net Asset Value, Offering and Redemption Price Per Share $13.97 ======= * NON-INCOME PRODUCING SECURITY ADR -- AMERICAN DEPOSITORY RECEIPT CL -- CLASS CV -- CONVERTIBLE (A) -- PRIVATE PLACEMENT SECURITY THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 SMALL CAP EQUITY FUND - ------------------------------------------------------------- MARKET SHARES VALUE (000) - ------------------------------------------------------------- COMMON STOCK (92.1%) BASIC MATERIALS (9.3%) Norrell 1,800 $ 35 Columbus McKinnon 2,100 51 Commonwealth Industries 4,900 71 General Chemical Group 4,000 107 H.B. Fuller 2,100 104 Jannock Limited 5,200 67 Lilly Industries, Cl A 5,400 111 Texas Industries 3,500 158 ------ 704 ------ CAPITAL GOODS (15.9%) A.M. Castle 3,000 69 American Woodmark 2,500 55 DT Industries 2,300 78 Fluke 2,600 68 Kaman 5,300 87 Nash Finch 3,800 72 Regal Beloit 7,400 219 Toro 1,400 60 Valmont Industries 4,000 78 Watts Industries, Cl A 5,100 144 Wausau-Mosinee Paper 3,100 62 Zurn Industries 6,700 210 ------ 1,202 ------ CONSUMER CYCLICALS (24.9%) Ameron 1,100 70 Angelica 4,100 93 Belden 2,100 74 Brown Group 6,700 90 Bush Industries 3,700 96 Guilford Mills 6,500 178 Hardinge 1,300 49 Harman International 4,100 174 K2 6,900 157 Libbey 4,100 155 LSI Industries 2,900 53 - ------------------------------------------------------------- MARKET SHARES VALUE (000) - ------------------------------------------------------------- CONSUMER CYCLICALS (CONTINUED) Movado Group 4,700 $ 108 Rock Tenn, Cl A 3,500 72 Smith (A.O.) 1,700 71 Sotheby's Holdings, Cl A 8,600 159 Springs Industries, Cl A 2,800 146 Standard Register 4,000 139 ------ 1,884 ------ CONSUMER STAPLES (12.5%) ABM Industries 2,400 73 Banta 5,200 140 Bowne & Company 2,200 88 Chemed 1,400 58 Earthgrains 1,500 71 Furon 3,800 79 Ingles Markets, Cl A 4,800 68 John H. Harland 6,800 143 Universal Foods 4,100 173 York Group 2,100 51 ------ 944 ------ ENERGY (4.7%) Giant Industries 7,600 144 Quaker State 14,900 212 ------ 356 ------ FINANCIALS (8.0%) Banco Latinamericano de Exportaciones 1,700 70 Klamath First Bancorp 2,400 52 Lawyers Title 1,600 50 National Bancorp of Alaska 400 51 Seacoast Banking of Florida 1,300 50 Student Loan 1,100 54 Westcorp 4,600 78 Westerfed Financial 3,500 90 Willis Corroon Public Limited 9,200 113 ------ 608 ------ 12 ================================================================================ - ------------------------------------------------------------- MARKET SHARES VALUE (000) - ------------------------------------------------------------- HEALTH CARE (4.5%) Invacare 3,200 $ 70 London International Group 5,300 70 Vital Signs 5,500 107 West Company 3,100 92 ------ 339 ------ TECHNOLOGY (3.6%) Innovex 3,500 80 Interface 6,500 189 ------ 269 ------ TRANSPORTATION (5.0%) Knightsbridge Tankers Limited* 2,400 68 Pittston Burlington 5,100 134 Sea Containers 4,500 144 Western Star Truck Holdings 1,600 36 ------ 382 ------ UTILITIES (3.7%) Northwest Natural Gas 2,400 74 Nui 3,000 86 TNP Enterprises 2,100 70 United Water Resources 2,600 51 ------ 281 ------ Total Common Stock (Cost $7,035) 6,969 ------ PREFERRED STOCK (1.4%) BASIC MATERIALS (1.4%) Coeur D'Alene Mines, CV to 0.8260 shares, Callable 03/15/99 @ 21.622 8,500 103 ------ Total Preferred Stock (Cost $140) 103 ------ - ------------------------------------------------------------- FACE MARKET AMOUNT (000) VALUE (000) - ------------------------------------------------------------- REPURCHASE AGREEMENT (8.5%) Lehman Brothers 5.580%, dated 12/31/97, matures 01/02/98, repurchase price $642,332 (collateralized by U.S. Treasury Note: market value $660,241) $642 $ 642 ------ Total Repurchase Agreement (Cost $642) 642 ------ Total Investments (102.0%) (Cost $7,817) 7,714 ------ OTHER ASSETS AND LIABILITIES, NET (-2.0%) (151) ------ NET ASSETS: Portfolio Shares (unlimited authorization -- no par value) based on 774,297 outstanding shares of beneficial interest 7,646 Accumulated net realized gain on investments 20 Net unrealized depreciation on investments (103) ------ Total Net Assets (100.0%) $7,563 ====== Net Asset Value, Offering and Redemption Price Per Share $9.77 ====== * NON-INCOME PRODUCING SECURITY CL -- CLASS CV -- CONVERTIBLE THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 13 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 CAPITAL GROWTH FUND - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- COMMON STOCK (88.3%) BASIC MATERIALS (3.2%) Aluminum Company of America 1,900 $ 134 Betzdearborn 6,000 366 Hercules 5,800 290 Imperial Chemical Industries ADR 5,200 338 Morton International 9,100 313 Praxair 11,700 526 ------- 1,967 ------- CAPITAL GOODS (14.0%) Allied Signal 24,800 966 Allied Waste Industries* 5,400 126 Avery Dennison 1,200 54 Boeing 7,000 343 Emerson Electric 4,100 231 General Dynamics 3,000 259 General Electric 21,200 1,556 Honeywell 9,500 651 Lockheed Martin 3,800 374 Molten Metal Technology* 5,600 1 Nokia ADR 3,500 245 Sundstrand 2,500 126 Tenneco 3,000 118 Textron 9,000 563 Tyco International 22,820 1,028 United Technologies 13,700 998 USA Waste Services* 10,500 412 U.S. Filter* 3,000 90 W.W. Grainger 5,100 496 ------- 8,637 ------- COMMUNICATION SERVICES (1.5%) Dover 10,000 361 Ericsson Telephone ADR 4,300 160 MCI Communications 9,300 398 ------- 919 ------- - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- CONSUMER CYCLICALS (15.5%) American Stores 8,500 $ 175 Carnival 13,600 753 Cendant 16,706 574 Chevron 4,000 308 Chrysler 9,500 334 Costco* 8,900 397 Dayton-Hudson 3,000 202 Dollar General 4,000 145 Ecolab 4,300 238 Federated Department Stores* 12,800 551 Gannett 11,600 717 Hasbro 9,000 283 Hilton Hotels 8,600 256 Home Depot 10,850 639 Interpublic Group 7,000 349 Lear* 6,800 323 Limited 6,300 161 Lowe's 6,000 286 Masco 5,200 265 Mattel 7,000 261 New York Times, Cl A 8,500 562 Office Depot* 11,700 280 Sherwin-Williams 13,200 366 Staples* 12,000 333 Tandy 9,000 347 Wal-Mart Stores 13,000 513 ------- 9,618 ------- CONSUMER STAPLES (11.6%) American Standard* 7,000 268 Avon Products 6,900 423 CVS 16,700 1,070 Colgate-Palmolive 4,000 294 ConAgra 10,000 328 International Home Foods* 3,000 84 JP Foodservice* 5,000 185 Kellogg 9,000 447 14 ================================================================================ - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) PepsiCo 9,000 $ 328 Philip Morris 19,700 893 Ralston Purina 5,900 548 Rite Aid 7,700 452 Safeway* 10,700 677 Sara Lee 10,300 580 Walgreen 10,000 314 Wendy's International 11,300 272 ------- 7,163 ------- ENERGY (6.5%) Baker Hughes 7,000 305 British Petroleum ADR 5,000 398 Diamond Offshore Drilling 1,800 87 EVI* 5,800 300 Halliburton 9,100 473 Mobil 8,300 599 Schlumberger 1,300 105 Texaco 10,400 565 Transocean Offshore 5,800 279 Unilever ADR 7,800 487 Union Pacific Resources Group 6,901 167 Unocal 7,000 272 ------- 4,037 ------- FINANCIALS (15.2%) American International Group 9,600 1,044 Banc One 5,560 302 BankAmerica 8,500 620 BankBoston 5,000 470 Barnett Banks 11,000 791 Chase Manhattan Bank 10,900 1,194 Conseco 5,900 268 CoreStates Financial 3,000 240 Equifax 7,000 248 FHLMC 8,400 352 First Commerce 5,000 336 - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- FINANCIALS (CONTINUED) First Security 4,000 $ 168 First Union 6,800 348 General Re 2,300 488 Household International 4,400 561 Jefferson-Pilot 5,000 389 MBNA 7,000 191 Nationsbank 4,000 243 PNC Bank 5,000 285 Quick & Reilly Group 2,700 116 Travelers 6,499 350 Washington Mutual 6,420 410 ------- 9,414 ------- HEALTH CARE (11.0%) Abbott Laboratories 8,000 525 American Home Products 13,900 1,063 Baxter International 13,200 666 Becton Dickinson 8,200 410 Bergen Brunswig, Cl A 11,000 463 Beverly Enterprises* 7,700 100 Boston Scientific* 7,847 360 Bristol-Myers Squibb 9,200 871 Eli Lilly 2,500 174 Healthsouth* 26,402 733 Medpartners* 14,300 320 Merck 3,000 319 Pfizer 2,000 149 Pharmerica* 3,504 36 Tenet Healthcare* 6,300 209 Warner Lambert 3,100 384 ------- 6,782 ------- TECHNOLOGY (8.9%) Bell & Howell* 5,000 121 Ceridian* 1,500 69 Cisco Systems* 12,000 669 Compaq Computer 3,962 224 15 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 CAPITAL GROWTH FUND--CONCLUDED - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- TECHNOLOGY (CONTINUED) EMC Corporation Mass* 8,000 $ 219 First Data 13,100 383 IBM 9,100 952 Intel 10,400 731 Lucent Technologies 4,193 335 Microsoft* 6,500 840 Motorola 1,800 103 Oracle* 4,850 108 3Com* 2,600 91 Xerox 9,400 694 ------- 5,539 ------- TRANSPORTATION (0.8%) Burlington Northern Santa Fe 2,300 214 Continental Airlines, Cl B* 1,500 72 Delta Air Lines 1,600 190 ------- 476 ------- UTILITIES (0.1%) Sonat 2,000 92 ------- Total Common Stock (Cost $48,418) 54,644 ------- PREFERRED STOCKS (1.6%) CONSUMER STAPLES (0.6%) Ralston Purina, CV to 1.6394 shares 5,000 348 ------- FINANCIAL (0.4%) Newell Financial, CV to 0.9865 shares, Callable 12/01/01 @ 51.580 (C) 5.250%, 12/31/49 5,000 256 ------- - ------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- TECHNOLOGY (0.6%) Microsoft, Ser A, CV to 1 share 4,000 $ 360 ------- Total Preferred Stocks (Cost $879) 964 ------- CONVERTIBLE BONDS (1.6%) Hewlett Packard, CV to 5.4300 shares, Callable 10/14/00 @ 59.029 (A) (B) (C) 0.000%, 10/14/17 $1,500 786 Office Depot, CV to 29.2635 shares, Callable 12/11/98 @ 64.116 (A) (C) 0.000%, 12/11/07 300 212 ------- Total Convertible Bonds (Cost $1,003) 998 ------- REPURCHASE AGREEMENT (13.1%) Morgan Stanley 6.580%, dated 12/31/97, matures 01/02/98, repurchase price $8,139,257 (collateralized by various FMAC and FNMA obligations: total market value $8,307,918) 8,136 8,136 ------- Total Repurchase Agreement (Cost $8,136) 8,136 ------- Total Investments (104.6%) (Cost $58,436) 64,742 ------- 16 ================================================================================ - ------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-4.6%) Investment securities purchased payable $(3,972) Other assets and liabilities, net 1,107 ------- TOTAL OTHER ASSETS AND LIABILITIES (2,865) ------- NET ASSETS: Portfolio Shares (unlimited authorization -- no par value) based on 3,582,558 outstanding shares of beneficial interest $47,669 Accumulated net realized gain on investments 7,842 Net unrealized appreciation on investments 6,306 Undistributed net investment income 60 ------- Total Net Assets (100.0%) $61,877 ======= Net Asset Value, Offering and Redemption Price Per Share $17.27 ======= * NON-INCOME PRODUCING SECURITY ADR -- AMERICAN DEPOSITORY RECEIPT CL -- CLASS CV -- CONVERTIBLE FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FMAC -- FEDERAL MORTGAGE ACCEPTANCE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION (A) -- ZERO COUPON BOND (B) -- PRIVATE PLACEMENT SECURITY (C) -- PUT AND DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE INSTRUMENT PRIOR TO MATURITY. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 17 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 INVESTMENT GRADE BOND FUND - ------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (39.2%) U.S. Treasury Bonds 7.500%, 11/15/16 $ 550 $ 642 8.125%, 08/15/19 1,100 1,376 6.125%, 11/15/27 375 385 U.S. Treasury Notes 5.875%, 11/30/01 500 502 7.250%, 08/15/04 250 270 5.875%, 11/15/05 700 704 ------- Total U.S. Treasury Obligations (Cost $3,670) 3,879 ------- CORPORATE OBLIGATIONS (45.9%) FINANCIALS (28.0%) Aristar 6.750%, 05/15/99 500 504 General Motors Acceptance 7.125%, 05/01/01 300 308 General Motors Acceptance, MTN 6.250%, 01/16/01 100 100 6.750%, 11/04/04 200 203 Great Western Financial 8.600%, 02/01/02 100 107 Homeside Lending, MTN 6.875%, 05/15/00 335 339 Korea Development Bank 7.125%, 09/17/01 150 122 RHG Finance 8.875%, 10/01/05 200 226 Salomon 6.500%, 03/01/00 350 352 Service International 7.375%, 04/15/04 250 263 SunAmerica 6.200%, 10/31/99 250 251 ------- 2,775 ------- - ------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- INDUSTRIAL (13.9%) American Home Products 7.700%, 02/15/00 $125 $ 129 7.900%, 02/15/05 300 326 Bausch & Lomb 6.750%, 12/15/04 150 151 Ikon Capital, MTN 6.150%, 09/22/99 100 100 6.730%, 06/15/01 150 152 Lockheed Martin 6.550%, 05/15/99 50 50 Philip Morris 7.250%, 09/15/01 300 308 7.500%, 04/01/04 150 157 ------- 1,373 ------- UTILITIES (4.0%) AT&T Capital, MTN 6.410%, 08/13/99 250 250 General Electric Capital, Callable 05/01/00 @ 100 (A) (B) 6.660%, 05/01/18 150 152 ------- 402 ------- Total Corporate Obligations (Cost $4,508) 4,550 ------- U.S. GOVERNMENT AGENCY MORTGAGE- BACKED BONDS (8.7%) FHLMC 7.500%, 09/01/03 244 250 FNMA 7.000%, 10/01/03 599 608 ------- Total U.S. Government Agency Mortgage-Backed Bonds (Cost $853) 858 ------- 18 ================================================================================ - ------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- BANK NOTE (1.8%) Capital One 6.530%, 11/26/99 $175 $ 175 ------- Total Bank Note (Cost $175) 175 ------- REPURCHASE AGREEMENT (2.8%) Lehman Brothers 5.580%, dated 12/31/97, matures 01/02/98, repurchase price $277,329 (collateralized by U.S. Treasury Note: market value $285,061) 277 277 ------- Total Repurchase Agreement (Cost $277) 277 ------- Total Investments (98.4%) (Cost $9,483) 9,739 ------- OTHER ASSETS AND LIABILITIES, NET (1.6%) 163 ------- - ------------------------------------------------------------- VALUE (000) - ------------------------------------------------------------- NET ASSETS: Portfolio Shares (unlimited authorization -- no par value) based on 971,816 outstanding shares of beneficial interest $9,662 Accumulated net realized loss on investments (16) Net unrealized appreciation on investments 256 ------- Total Net Assets (100.0%) $9,902 ======= Net Asset Value, Offering and Redemption Price Per Share $10.19 ======= FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION MTN -- MEDIUM TERM NOTE (A) -- VARIABLE RATE SECURITY. THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON DECEMBER 31, 1997. (B) -- PUT AND DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE INSTRUMENT PRIOR TO MATURITY. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 19 SCHEDULE OF INVESTMENTS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 INTERNATIONAL EQUITY FUND - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- FOREIGN COMMON STOCKS (92.3%) ARGENTINA (0.6%) YPF Sociedad Anonima, Cl D, ADR 2,500 $ 85 ------ AUSTRALIA (4.3%) Australian & New Zealand Banking Group 18,700 124 QBE Insurance 40,811 184 Telstra Installment Receipts 139,000 293 ------ 601 ------ AUSTRIA (0.5%) Boehler-Uddeholm 1,250 73 ------ CANADA (1.0%) Suncor 4,000 137 ------ CZECH REPUBLIC (0.6%) SPT Telecom* 750 80 ------ DENMARK (0.8%) Sydbank 2,000 114 ------ FINLAND (3.3%) Cultor, Series 2 2,000 108 Finnlines 700 28 Metra, Cl B 2,200 52 Nokia ADR 1,800 126 UPM-Kymmene 1,600 32 Valmet 8,500 117 ------ 463 ------ FRANCE (8.3%) Accor 1,195 222 AXA 2,900 224 Credit Local de France 1,250 145 Elf Aquitaine 1,800 209 Isis 500 55 - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- FRANCE (CONTINUED) Lyonnaise des Eaux 700 $ 77 Technip 2,100 222 ------ 1,154 ------ GERMANY (5.9%) Bayer 7,300 271 Buderus 225 101 Commerzbank 1,300 51 Hoechst 3,400 118 Veba 1,500 102 Volkswagen 300 168 ------ 811 ------ GREECE (1.1%) Greek Telecom 7,544 155 ------ HONG KONG (1.8%) Asia Satellite 24,000 41 HSBC Holdings 6,465 159 National Mutual Asia 46,000 46 ------ 246 ------ INDONESIA (0.1%) Modern Photo Film, F 62,000 18 ------ ISRAEL (4.7%) ECI Telecom 8,700 222 Israel Chemicals 81,000 110 Technomatrix Technologies Limited* 4,300 145 Teva Pharmaceuticals ADR 3,800 180 ------ 657 ------ ITALY (4.7%) Banca Popolare di Milano 25,800 162 ENI 24,600 140 20 ================================================================================ - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- ITALY (CONTINUED) Istituto Bancario san Paolo di Torino 22,100 $ 211 Saipem 26,500 139 ------ 652 ------ JAPAN (6.4%) Canon 6,000 140 Fuji Photo Film 4,000 153 Honda Motor 6,000 220 Sony 400 36 Sony ADR 1,200 109 TDK 1,000 75 Terumo 10,000 147 ------ 880 ------ NETHERLANDS (5.6%) Akzo 1,000 172 Gist Brocade 7,600 189 Hollandsche Beton Groep 3,110 58 Ing Groep 5,498 232 Phillips Electronics 2,000 120 ------ 771 ------ NEW ZEALAND (0.2%) Fletcher Challenge Building 14,219 29 ------ NORWAY (1.6%) Union Bank of Norway 6,050 215 ------ PANAMA (0.9%) Banco Latinamericano de Exportaciones 2,900 120 ------ PERU (0.8%) CPT Telefoncia del Peru 3,000 70 Credicorp 2,200 40 ------ 110 ------ - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- PORTUGAL (0.4%) Banco Espirito Santo 1,800 $ 54 ------ SINGAPORE (0.6%) Elec & Eltek International 18,700 86 ------ SOUTH AFRICA (0.9%) Rembrandt Group 7,900 58 Sasol 6,000 63 ------ 121 ------ SPAIN (2.4%) Repsol 4,200 179 Telefonica de Espana 5,200 149 ------ 328 ------ SWEDEN (6.0%) Astra, Cl A 5,000 87 Castellum AB* 10,800 107 Gettinge, Cl B 6,700 106 Haldex AB 8,900 132 Munters 8,700 75 Skandia Forsakrings 4,100 193 Volvo, Cl B 4,800 129 ------ 829 ------ SWITZERLAND (8.1%) Asea Brown Boveri Group 105 132 Nestle 175 262 Novartis 185 300 Swiss Bank 725 225 Zurich Insurance 415 198 ------ 1,117 ------ 21 SCHEDULE OF INVESTMENTS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 INTERNATIONAL EQUITY FUND--CONCLUDED - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- UNITED KINGDOM (20.7%) Avis Europe 78,000 $ 222 Bank of Ireland 19,630 301 Bass 19,800 307 BTP 28,900 170 Caradon 55,015 160 Compass Group 16,000 195 FKI 51,000 161 Gallaher Group 16,700 89 Imperial Tobacco Group 9,000 57 LucasVarity 62,500 221 Morgan Crucible 16,200 122 National Westminster 3,000 50 Powerscreen International 1,000 10 Reckit & Colman 5,742 90 Siebe 10,800 212 Smith & Nephew 55,500 164 SmithKline Beecham 20,012 205 Storehouse 34,700 135 ------- 2,871 ------- Total Foreign Common Stocks (Cost $12,264) 12,777 ------- - ------------------------------------------------------------- SHARES VALUE (000) - ------------------------------------------------------------- FOREIGN PREFERRED STOCKS (1.2%) GERMANY (1.2%) Man 750 $ 170 ------- Total Foreign Preferred Stocks (Cost $184) 170 ------- Total Investments (93.5%) (Cost $12,448) $12,947 ======= * NON-INCOME PRODUCING SECURITY ADR -- AMERICAN DEPOSITORY RECEIPT CL -- CLASS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 22 THIS PAGE LEFT INTENTIONALLY BLANK STATEMENT OF ASSETS AND LIABILITIES (000) ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD ENDED DECEMBER 31, 1997
------------- INTERNATIONAL EQUITY FUND ------------- Assets: Investments at Market Value (Cost $12,448) .......................... $12,947 Cash and Foreign Currency ........................................... 809 Receivables for Investment Securities Sold .......................... 32 Receivables for Portfolio Shares Sold ............................... 49 Other Assets ........................................................ 41 ------- Total Assets ........................................................ 13,878 ------- Liabilities: Accrued Expenses .................................................... 31 ------- Total Liabilities ................................................... 31 ------- Net Assets: Portfolio Shares (Unlimited Authorization -- No Par Value) Based on 1,166,998 Outstanding Shares of Beneficial Interest ...... 13,215 Undistributed Net Investment Income ................................. 32 Accumulated Net Realized Gain on Investments ........................ 113 Accumulated Net Realized Loss on Foreign Currency Transactions ...... (12 Net Unrealized Appreciation on Investments .......................... 499 ------- Total Net Assets .................................................... $13,847 ======= Net Asset Value, Offering and Redemption Price Per Share ............... $11.87 =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 24 STATEMENT OF OPERATIONS (000) ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD ENDED DECEMBER 31, 1997
VALUE INCOME MID-CAP SMALL CAP CAPITAL INVESTMENT INTERNATIONAL STOCK EQUITY EQUITY GROWTH GRADE EQUITY FUND FUND FUND (1) FUND BOND FUND FUND ------- ------ --------- ------- ---------- ------------- Investment Income: Interest Income ....................................... $ 208 $ 88 $ 8 $ 261 $557 $ 40 Dividend Income ....................................... 1,412 115 26 558 -- 131 Less: Foreign Taxes Withheld .......................... -- -- -- -- -- (10) ------- ------ ---- ------- ---- ---- Total Investment Income ........................... 1,620 203 34 819 557 161 ------- ------ ---- ------- ---- ---- Expenses: Investment Advisory Fees .............................. 426 217 13 508 63 100 Less: Investment Advisory Fees Waived ................. (151) (118) (13) (198) (63) (100) Less: Reimbursement from Advisor ...................... -- -- (4) -- (8) (6) Administrator Fees .................................... 63 63 12 63 63 75 Custody Fees .......................................... 37 14 1 29 -- 11 Transfer Agent Fees ................................... 26 9 1 21 2 11 Professional Fees ..................................... 63 23 1 51 5 8 Trustee Fees .......................................... 6 2 -- 5 1 1 Registration Fees ..................................... 8 1 2 7 -- 7 Printing Expenses ..................................... 23 3 1 18 (2) 4 Pricing Fees .......................................... 2 1 -- 2 -- 13 Insurance and Other Fees .............................. -- -- -- -- 1 -- Amortization of Deferred Organization Costs ........... 2 2 -- 2 2 4 ------- ------ ---- ------- ---- ---- Total Expenses .................................... 505 217 14 508 64 128 ------- ------ ---- ------- ---- ---- Net Investment Income (Loss) .................... 1,115 (14) 20 311 493 33 ------- ------ ---- ------- ---- ---- Net Realized Gain on Securities Sold .................. 6,730 2,335 20 7,858 24 113 Net Realized Loss on Foreign Currency Transactions .... -- -- -- -- -- (12) Net Unrealized Appreciation (Depreciation) on Investments ....................... 4,177 1,514 (103) 4,911 220 484 ------- ------ ---- ------- ---- ---- Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency ............. 10,907 3,849 (83) 12,769 244 585 ------- ------ ---- ------- ---- ---- Increase (Decrease) in Net Assets from Operations ....... $12,022 $3,835 $(63) $13,080 $737 $618 ======= ====== ==== ======= ==== ==== Amounts designated as "--" are either $0 or have been rounded to $0. (1) The Small Cap Equity Fund commenced operations on October 22, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 25 STATEMENT OF CHANGES IN NET ASSETS (000) ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS
VALUE INCOME STOCK SMALL CAP FUND MID-CAP EQUITY FUND EQUITY FUND ----------------------- ----------------------- -------------- 01/01/97- 01/01/96- 01/01/97- 01/01/96- 10/22/97*- 12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 --------- --------- --------- --------- ---------- Investment Activities: Net Investment Income (Loss) .................................... $ 1,115 $ 361 $ (14) $ 47 $ 20 Net Realized Gain (Loss) on Investments and Foreign Currency Transactions ......................................... 6,730 1,122 2,335 702 20 Net Unrealized Appreciation (Depreciation) on Investments ....... 4,177 1,133 1,514 637 (103) ------- ------- ------- ------- ------- Increase in Net Assets Resulting from Operations ................ 12,022 2,616 3,835 1,386 (63) ------- ------- ------- ------- ------- Distributions to Shareholders: Net Investment Income ........................................... (1,121) (355) (13) (47) (20) Capital Gains ................................................... (904) -- (736) -- -- ------- ------- ------- ------- ------- Total Distributions ............................................. (2,025) (355) (749) (47) (20) ------- ------- ------- ------- ------- Capital Transactions: Proceeds from Shares Issued ..................................... 32,879 24,660 9,159 9,578 7,626 Reinvestment of Cash Distributions .............................. 2,025 355 749 47 20 Cost of Shares Repurchased ...................................... (3,370) (75) (3,375) (79) -- ------- ------- ------- ------- ------- Increase in Net Assets from Capital Transactions ................ 31,534 24,940 6,533 9,546 7,646 ------- ------- ------- ------- ------- Total Increase in Net Assets .................................... 41,531 27,201 9,619 10,885 7,563 ------- ------- ------- ------- ------- Net Assets: Beginning of Period ............................................. 31,216 4,015 14,294 3,409 -- ------- ------- ------- ------- ------- End of Period ................................................... $72,747 $31,216 $23,913 $14,294 $ 7,563 ======= ======= ======= ======= ======= Shares Issued and Redeemed: Shares Issued ................................................... 2,358 2,116 708 877 772 Shares Issued in Lieu of Cash Distributions ..................... 138 30 55 4 2 Shares Redeemed ................................................. (230) (6) (257) (7) -- ------- ------- ------- ------- ------- Net Share Transactions .......................................... 2,266 2,140 506 874 774 ======= ======= ======= ======= ======= INVESTMENT GRADE BOND CAPITAL GROWTH FUND FUND ----------------------- ----------------------- 01/01/97- 01/01/96- 01/01/97- 01/01/96- 12/31/97 12/31/96 12/31/97 12/31/96 --------- --------- --------- --------- Investment Activities: Net Investment Income (Loss) .................................... $ 311 $ 139 $ 493 $ 325 Net Realized Gain (Loss) on Investments and Foreign Currency Transactions ......................................... 7,858 1,357 24 (40) Net Unrealized Appreciation (Depreciation) on Investments ....... 4,911 1,199 220 (34) ------- ------- ------- ------- Increase in Net Assets Resulting from Operations ................ 13,080 2,695 737 251 ------- ------- ------- ------- Distributions to Shareholders: Net Investment Income ........................................... (312) (138) (493) (325) Capital Gains ................................................... (1,300) -- -- -- ------- ------- ------- ------- Total Distributions ............................................. (1,612) (138) (493) (325) ------- ------- ------- ------- Capital Transactions: Proceeds from Shares Issued ..................................... 27,091 18,759 4,194 5,002 Reinvestment of Cash Distributions .............................. 1,612 139 493 325 Cost of Shares Repurchased ...................................... (3,483) (44) (3,068) (329) ------- ------- ------- ------- Increase in Net Assets from Capital Transactions ................ 25,220 18,854 1,619 4,998 ------- ------- ------- ------- Total Increase in Net Assets .................................... 36,688 21,411 1,863 4,924 ------- ------- ------- ------- Net Assets: Beginning of Period ............................................. 25,189 3,778 8,039 3,115 ------- ------- ------- ------- End of Period ................................................... $61,877 $25,189 $ 9,902 $ 8,039 ======= ======= ======= ======= Shares Issued and Redeemed: Shares Issued ................................................... 1,771 1,567 421 506 Shares Issued in Lieu of Cash Distributions ..................... 100 11 49 33 Shares Redeemed ................................................. (216) (4) (309) (33) ------- ------- ------- ------- Net Share Transactions .......................................... 1,655 1,574 161 506 ======= ======= ======= ======= INTERNATIONAL EQUITY FUND ----------------------- 01/01/97- 11/07/96*- 12/31/97 12/31/96 --------- ---------- Investment Activities: Net Investment Income (Loss) .................................... $ 33 $ 1 Net Realized Gain (Loss) on Investments and Foreign Currency Transactions ......................................... 101 1 Net Unrealized Appreciation (Depreciation) on Investments ....... 484 14 ------- ------ Increase in Net Assets Resulting from Operations ................ 618 16 ------- ------ Distributions to Shareholders: Net Investment Income ........................................... (1) (1) Capital Gains ................................................... -- -- ------- ------ Total Distributions ............................................. (1) (1) ------- ------ Capital Transactions: Proceeds from Shares Issued ..................................... 12,992 979 Reinvestment of Cash Distributions .............................. 1 1 Cost of Shares Repurchased ...................................... (758) -- ------- ------ Increase in Net Assets from Capital Transactions ................ 12,235 980 ------- ------ Total Increase in Net Assets .................................... 12,852 995 ------- ------ Net Assets: Beginning of Period ............................................. 995 -- ------- ------ End of Period ................................................... $13,847 $ 995 ======= ====== Shares Issued and Redeemed: Shares Issued ................................................... 1,136 98 Shares Issued in Lieu of Cash Distributions ..................... -- -- Shares Redeemed ................................................. (67) -- ------- ------ Net Share Transactions .......................................... 1,069 98 ======= ====== *Commencement of Operations Amounts designated as "--" are either $0 or have been rounded to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 26 & 27 FINANCIAL HIGHLIGHTS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIODS ENDED THROUGH DECEMBER 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET NET REALIZED AND NET ASSET VALUE INVESTMENT UNREALIZED GAINS (LOSSES) DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME ------------------- ------------- ------------------------- --------------------- VALUE INCOME STOCK FUND 1997 $12.41 $ 0.28 $ 3.02 $(0.28) 1996 10.67 0.23 1.74 (0.23) 1995 (1) 10.00 0.06 0.67 (0.06) MID-CAP EQUITY FUND (A) 1997 $11.86 $(0.01) $ 2.64 $(0.01) 1996 10.27 0.06 1.59 (0.06) 1995 (1) 10.00 0.05 0.27 (0.05) SMALL CAP EQUITY FUND 1997 (3) $10.00 $ 0.03 $(0.23) $(0.03) CAPITAL GROWTH FUND 1997 $13.06 $ 0.10 $ 4.63 $(0.10) 1996 10.66 0.12 2.40 (0.12) 1995 (1) 10.00 0.04 0.66 (0.04) INVESTMENT GRADE BOND FUND 1997 $ 9.92 $ 0.58 $ 0.27 $(0.58) 1996 10.25 0.54 (0.33) (0.54) 1995 (1) 10.00 0.13 0.25 (0.13) INTERNATIONAL EQUITY FUND 1997 $10.16 $ 0.03 $ 1.68 $ -- 1996 (2) 10.00 0.01 0.16 (0.01) RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT DISTRIBUTIONS FROM VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO REALIZED CAPITAL GAINS OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS ---------------------- --------- ------ ------------ ------------------ ------------------ VALUE INCOME STOCK FUND 1997 $(0.22) $15.21 26.82% $72,747 0.95% 2.09% 1996 -- 12.41 18.64 31,216 0.95 2.45 1995 (1) -- 10.67 7.31* 4,015 0.95 2.98 MID-CAP EQUITY FUND (A) 1997 $(0.51) $13.97 22.23% $23,913 1.15% (0.07)% 1996 -- 11.86 16.05 14,294 1.15 0.58 1995 (1) -- 10.27 3.19* 3,409 1.15 2.22 SMALL CAP EQUITY FUND 1997 (3) $ -- $ 9.77 (2.05)%* $ 7,563 1.20% 1.62% CAPITAL GROWTH FUND 1997 $(0.42) $17.27 36.54% $61,877 1.15% 0.70% 1996 -- 13.06 23.75 25,189 1.15 1.15 1995 (1) -- 10.66 6.96* 3,778 1.15 1.69 INVESTMENT GRADE BOND FUND 1997 $ -- $10.19 8.84% $ 9,902 0.75% 5.81% 1996 -- 9.92 2.29 8,039 0.75 5.54 1995 (1) -- 10.25 3.68* 3,115 0.75 5.04 INTERNATIONAL EQUITY FUND 1997 $ -- $11.87 16.84% $13,847 1.60% 0.41% 1996 (2) -- 10.16 1.70* 995 1.60 1.83 RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO AVERAGE (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER COMMISSION AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE RATE(4) ------------------- ------------------- --------- ---------- VALUE INCOME STOCK FUND 1997 1.23% 1.81% 104.84% $0.0536 1996 1.95 1.45 79.80 0.0540 1995 (1) 5.72 (1.79) 7.17 n/a MID-CAP EQUITY FUND (A) 1997 1.77% (0.69)% 138.98% $0.0322 1996 2.79 (1.06) 139.60 0.0530 1995 (1) 6.34 (2.97) 13.29 n/a SMALL CAP EQUITY FUND 1997 (3) 2.66% 0.16% 4.11% $0.0320 CAPITAL GROWTH FUND 1997 1.60% 0.25% 195.86% $0.0503 1996 2.43 (0.13) 148.48 0.0530 1995 (1) 6.18 (3.34) 8.05 n/a INVESTMENT GRADE BOND FUND 1997 1.58% 4.98% 219.22% n/a 1996 2.78 3.51 303.30 n/a 1995 (1) 6.05 (0.26) 108.55 n/a INTERNATIONAL EQUITY FUND 1997 2.93% (0.92)% 99.14% $0.0248 1996 (2) 31.39 (27.96) -- 0.0620 (1) Commenced operations on October 2, 1995. All ratios for the period have been annualized. (2) Commenced operations on November 7, 1996. All ratios for the period have been annualized. (3) Commenced operations on October 22, 1997. All ratios for the period have been annualized. (4) Average commission rate paid per share for security purchases and sales during the period. Presentation of the rate is only required for fiscal years beginning after September 1, 1995. * Returns are for the period indicated and have not been annualized. (A) During the fiscal year ended December 31, 1996, the Aggressive Growth Fund changed its name to the Mid-Cap Equity Fund. Amounts designated as "--" are either $0 or rounded to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 28 & 29 NOTES TO FINANCIAL STATEMENTS ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 1. Organization The STI Classic Variable Trust (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated April 18, 1995. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with six funds: the Value Income Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth Fund, the International Equity Fund (collectively "the Equity Funds") and the Investment Grade Bond Fund. The assets of each Fund are segregated, and a shareholder's interest is limited to the Fund in which shares are held. The Fund's prospectus provides a description of each Fund's investment objective policies and strategies. 2. Significant Accounting Policies The following is a summary of significant accounting policies followed by the Trust. These policies are in conformity with generally accepted accounting principles. SECURITY VALUATION -- Investments in equity securities that are traded on a national securities exchange (or reported on the NASDAQ national market system) are valued at the last quoted sales price, if readily available for such equity securities, on 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. Foreign securities in the International Equity Fund are valued based upon quotations from the primary market in which they are traded. Debt obligations exceeding sixty days to maturity for which market quotations are readily available are valued at the most recently quoted bid price. Debt obligations with sixty days or less until maturity may be valued either at the most recently quoted bid price or at their amortized cost. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the trade date of the security purchase or sale. Dividend income is recognized on ex-dividend date, and interest income is recognized on an accrual basis and includes, where applicable, the pro rata amortization of premium or accretion of discount. The cost used in determining net realized capital gains and losses on the sale of securities are those of the specific securities sold, adjusted for the accretion and amortization of purchase discounts and premiums during the applicable holding period. Purchase discounts and premiums on securities held by the Investment Grade Bond and the Equity Funds are 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 repurchase 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 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 each Fund is calculated on each business day. In general, it is computed by dividing the assets of each Fund, less its liabilities, by the number of outstanding shares of the respective class of the Fund. The offering price per share for 30 ================================================================================ the shares of the Investment Grade Bond and Equity Funds is the net asset value per share. FOREIGN CURRENCY TRANSACTIONS -- With respect to the International Equity Fund, the books and records are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: [BULLET] market value of investment securities, assets and liabilities at the current rate of exchange; and [BULLET] purchases and sales of investment securities, income, and expenses at the relevent rates of exchange prevailing on the respective dates of such transactions. The International Equity Fund does not isolate the portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to change in market prices of equity securities. The International Equity Fund reports certain foreign currency-related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. OTHER -- Distributions from net investment income for the Investment Grade Bond Fund are declared daily and paid monthly to shareholders. Distributions from net investment income for the Value Income Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund and the Capital Growth Fund are declared and paid quarterly to shareholders. Distributions from net investment income for the International Equity Fund are declared and paid annually to shareholders. Any net realized capital gains are distributed to shareholders at least annually. Expenses related to a specific Fund are charged to that Fund. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. 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 a net operating loss in the Mid-Cap Equity Fund and the classification of short-term capital gains and ordinary income for tax purposes related to the other funds, have been reclassified to/from the following accounts: UNDISTRIBUTED ACCUMULATED NET INVESTMENT REALIZED GAIN INCOME (000) (000) ------------- -------------- Value Income Stock Fund $(225) $225 Mid-Cap Equity Fund (27) 27 Capital Growth Fund (60) 60 These reclassifications have no effect on net assets or net asset values per share. 31 NOTES TO FINANCIAL STATEMENTS (Concluded) ================================================================================ STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1997 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. Administration and Distribution Agreements The Trust and SEI Fund Resources (the "Administrator") are parties to an administration agreement (the "Administration Agreement") dated August 18, 1995 as amended November 19, 1997. Under the terms of the Administration Agreement the Administrator is entitled to a fee, subject to a minimum, (expressed as a percentage of the combined average daily net assets of the Trust and the STI Classic Funds) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion, and .06% for over $10 billion. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated August 2, 1995 under which Federated Services Company provides transfer agency services to the Trust. The Trust and SEI Investments Distribution Co. ("the Distributor") are parties to a Distribution Agreement dated August 2, 1995. The Distributor receives no fees for its services under this agreement. 4. Investment Advisory Agreement Investment advisory services are provided to the Trust by STI Capital Management, N.A. ("STI Capital"). Under the terms of the investment advisory agreements, STI Capital is entitled to receive a fee from the Fund, computed daily and paid monthly, at an annual rate of .74%, 1.15%, .80%, 1.15%, 1.15% and 1.25% of the average daily net assets of the Investment Grade Bond Fund, Capital Growth Fund, Value Income Stock Fund, Mid-Cap Equity Fund, Small Cap Equity Fund and International Equity Fund, respectively. STI Capital has voluntarily agreed to waive all or a portion of its fees (and to reimburse Funds' expenses) in order to limit operating expenses. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. SunTrust Bank, Atlanta acts as Custodian for all the Funds except the International Equity Fund which has a custodian agreement with the Bank of New York. Fees of the Custodian are paid on the basis of net assets. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 5. Organizational Costs and Transactions with Affiliates The Trust incurred organization costs of approximately $55,566. These costs have been deferred in the accounts of the Funds and are being amortized on a straight line basis over a period of sixty months commencing with operations. The costs include legal fees of approximately $44,153 for organizational work performed by a law firm of which two officers of the Trust are partners. In the event any of the initial shares of the Trust are redeemed by any holder thereof during the period that the Trust is amortizing its organizational costs, the redemption proceeds payable to the holder thereof by the Trust will be reduced by the unamortized organizational cost in the same ratio as the number of initial shares being redeemed bears to the number of initial shares outstanding at the time of redemption. Certain officers of the Trust are also officers of the Administrator and/or the Distributor. Such officers are paid no fees by the Trust for serving as officers of the Trust. 32 ================================================================================ 6. Investment Transactions The cost of security purchases and the proceeds from security sales, excluding short-term investments, for the period ended December 31, 1997 were as follows: U.S. GOVT. U.S. GOVT. PURCHASES SALES PURCHASES SALES (000) (000) (000) (000) --------- -------- --------- --------- Value Income Stock Fund $75,585 $51,313 $ -- $ -- Mid-Cap Equity Fund 29,295 24,286 -- -- Small Cap Equity Fund 7,395 241 -- -- Capital Growth Fund 99,913 78,380 -- -- Investment Grade Bond Fund 7,439 6,010 11,789 11,576 International Equity Fund 18,768 7,145 -- -- At December 31, 1997, the total cost of securities and the net realized gains or losses on securities sold for Federal income tax purposes was not materially different from amounts reported for financial reporting purposes. The aggregate gross unrealized appreciation and depreciation for securities held by the Investment Grade Bond and Equity Funds at December 31, 1997 was as follows: NET UNREALIZED APPRECIATED DEPRECIATED APPRECIATION/ SECURITIES SECURITIES DEPRECIATION (000) (000) (000) ----------- ----------- -------------- Value Income Stock Fund $6,482 $ (975) $5,507 Mid-Cap Equity Fund 3,304 (1,087) 2,217 Small Cap Equity Fund 225 (328) (103) Capital Growth Fund 7,081 (775) 6,306 Investment Grade Bond Fund 284 (28) 256 International Equity Fund 992 (493) 499 7. Concentration of Credit Risk The Investment Grade Bond Fund invests primarily in investment grade obligations rated at least BBB or better by S & P or Baa or better by Moody's. Changes by recognized rating agencies in the ratings of any fixed income security or in the ability of an issuer to make payments of interest and principal may affect the value of these investments. 8. Consent of Sole Shareholder On October 20, 1997, the sole shareholder of the Small Cap Equity Fund (the "Fund") approved the following appointments: SEI Fund Resources to serve as administrator of the Fund, STI Capital Management, N.A. to serve as investment advisor to the assets of the Fund and SEI Investments Distribution Co. to serve as distributor of the shares of the Fund. 33 NOTICE TO SHAREHOLDERS Unaudited OF STI CLASSIC VARIABLE TRUST FUNDS For shareholders that do not have a December 31, 1997 tax year end, this notice is for informational purposes only. For shareholders with a December 31, 1997 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended December 31, 1997, each portfolio is designating the following items with regard to distributions paid during the year: (A) (B) (C) LONG TERM ORDINARY CAPITAL GAINS INCOME TOTAL DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) - --------- ------------- ------------- ------------- Value Income Stock Fund 3% 97% 100% Mid-Cap Equity Fund 6% 94% 100% Small Cap Equity Fund 0% 0% 0% Capital Growth Fund 4% 96% 100% Investment Grade Bond Fund 0% 100% 100% International Equity Fund 0% 100% 100% (D) (E) QUALIFYING TAX-EXEMPT PORTFOLIO DIVIDENDS (1) INTEREST - --------- ------------- ---------- Value Income Stock Fund 63% 0% Mid-Cap Equity Fund 14% 0% Small Cap Equity Fund 26% 0% Capital Growth Fund 0% 0% Investment Grade Bond Fund 0% 0% International Equity Fund 0% 0% - ---------------- (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. * Items (A) and (B) are based on a percentage of each portfolio's total distributions. ** Item (D) is based on the net income of the portfolio. *** Item (E) is based on the gross income of the portfolio. 34 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Trustees of STI Classic Variable Trust: We have audited the accompanying statements of net assets of the Value Income Stock, Mid-Cap Equity, Small Cap Equity, Capital Growth, Investment Grade Bond and International Equity Funds of STI Classic Variable Trust (the "Trust") as of December 31, 1997, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securites 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Value Income Stock, Mid-Cap Equity, Small Cap Equity, Capital Growth, Investment Grade Bond and International Equity Funds of STI Classic Variable Trust as of December 31, 1997, the results of their operations, changes in their net assets, and financial highlights for the periods presented, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, PA January 30, 1998 35 Investment Advisor: STI Capital Management, N.A. STI Classic Variable Trust 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 Variable Trust Fund will achieve its investment objective. The STI Classic Variable Trust Funds are advised by an affiliate of SunTrust Banks, Inc. Distributor: SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. -----END PRIVACY-ENHANCED MESSAGE-----