ANNUAL
FINANCIAL REPORT
STI CLASSIC VARIABLE TRUST
[LOGO OMITTED]
[GRAPHIC OF PILLARS OMITTED]
DECEMBER 31, 1997
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STI Classic Variable Trust
--------------------------
<PAGE>
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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RETURNS.
</FN>
</TABLE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
================================================================================
- -------------------------------------------------------------
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
<PAGE>
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
<PAGE>
THIS PAGE LEFT INTENTIONALLY BLANK
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
================================================================================
STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
-------------
INTERNATIONAL
EQUITY
FUND
-------------
Assets:
<S> <C>
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
=======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
STATEMENT OF OPERATIONS (000)
================================================================================
STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
INCOME MID-CAP SMALL CAP CAPITAL INVESTMENT INTERNATIONAL
STOCK EQUITY EQUITY GROWTH GRADE EQUITY
FUND FUND FUND (1) FUND BOND FUND FUND
------- ------ --------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
======= ====== ==== ======= ==== ====
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The Small Cap Equity Fund commenced operations on October 22, 1997.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
================================================================================
STI CLASSIC VARIABLE TRUST FUNDS
<TABLE>
<CAPTION>
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
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
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
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
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
--------- ----------
<S> <C> <C>
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
======= ======
<FN>
*Commencement of Operations
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26 & 27
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIODS ENDED THROUGH DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED AND
NET ASSET VALUE INVESTMENT UNREALIZED GAINS (LOSSES) DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME
------------------- ------------- ------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
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
---------------------- --------- ------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
------------------- ------------------- --------- ----------
<S> <C> <C> <C> <C> <C>
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
<FN>
(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.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28 & 29
<PAGE>
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
<PAGE>
================================================================================
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
<PAGE>
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
<PAGE>
================================================================================
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
