ANNUAL
FINANCIAL REPORT
STI Classic Variable Trust
December 31, 1998
STI Classic Variable Trust
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.
MKT 408-8
<PAGE>
Dear STI Classic Variable Trust Shareholders:
The following 1998 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 Trust 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, 1998
- --------------------------------------------------------------------------------------------------------------
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 13.04% 9.69% 17.95% 19.25% 10/2/95
- --------------------------------------------------------------------------------------------------------------
STI Classic Variable Trust
Mid-Cap Equity Fund 24.40% 7.16% 14.45% 14.86% 10/2/95
- --------------------------------------------------------------------------------------------------------------
STI Classic Variable Trust
Small Cap Equity Fund 11.16% (12.18%) n/a (11.85%) 10/22/97
- --------------------------------------------------------------------------------------------------------------
STI Classic Variable Trust
Capital Growth Fund 22.64% 28.97% 32.70% 29.78% 10/2/95
- --------------------------------------------------------------------------------------------------------------
STI Classic Variable Trust
Investment Grade Bond Fund (.44%) 9.38% 9.11% 7.45% 10/2/95
- --------------------------------------------------------------------------------------------------------------
STI Classic Variable Trust
International Equity Fund 16.62% 10.80% 13.78% 13.66% 11/7/96
- --------------------------------------------------------------------------------------------------------------
</TABLE>
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/ Anthony R. Gray
----------------------------------------------------
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's (the "Fund") return for the year was 9.69%. The
fund underperformed its index, the S&P 500/Barra Value Index, by 4.99%.
We believe that the Fund underperformed its index largely because of the energy
sector, which performed very poorly. Our investments in Unocal and Atlantic
Richfield reflected the slide in oil prices. In retailing, JC Penney continued
to disappoint, as the company's inventory and merchandise systems compare poorly
to competitors. However, the company's drug store division continues to do
extremely well, and the stock pays a very high dividend, so we continue to be
patient. Stanley Works, a maker of hardware tools, performed poorly, as the new
CEO's promise to deliver earnings continues to be pushed further into the
future.
Investors gravitate toward value stocks when they're concerned about valuation
and fundamentals. Indeed, we were roughly even with the market year to date at
the end of the third quarter. But we lagged in the fourth quarter, as investors
returned to growth stocks.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust Lipper Equity
Income Stock Income Funds S&P 500/BARRA
Fund Average Value Index
-------------- ------------- -------------
10/31/95 10000 10000 10000
12/95 10828 10816 10691
12/96 12846 13194 12752
12/97 16292 17149 16169
12/98 17871 19667 17930
One Annualized Annualized
Year 3 Year Inception
Return Return to Date
------ ---------- ----------
9.69% 18.18% 19.25%
Past performance is no indication of future performance.
2
<PAGE>
Mid-Cap Equity Fund
-------------------
The Mid-Cap Equity Fund's (the "Fund") performance for the year was 7.16%. The
fund underperformed its index, the S&P 400 Mid-Cap Index, by 11.96%.
We believe this underperformance was largely because the bigger names tended to
perform better in 1998 and we hold market cap restrictions of $500 million to $5
billion. In general, the mid-cap names did not have the benefit of doubt from
investors. A little bad news and many of these stocks would go down drastically.
The Fund's top producers were technology stocks, which bounced back with a
vengeance in the fourth quarter after taking a drubbing in the third. Stocks
such as Flextronics, Teradyne and Immunex doubled in value.
For 1999, the Y2K computer problem is a potential stumbling block as companies
spend money to upgrade their systems, spending that is unproductive in the sense
that it does not produce more profits. Another potential concern is the new euro
currency, which may put pressure on companies with international operations,
particularly if it shifts some advantage to European countries. Because earnings
growth will be hard to come by, companies that can deliver earnings will look
good compared to the overall market.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust
Mid-Cap Equity S&P 400
Fund Mid-Cap Index
-------------- -------------
10/31/95 10000 10000
12/95 10226 10408
12/96 11868 12408
12/97 14506 16408
12/98 15568 19545
One Annualized Annualized
Year 3 Year Inception
Return Return to Date
------ ---------- ----------
7.16% 14.98% 14.86%
Past performance is no indication of future performance.
3
<PAGE>
Small Cap Equity Fund
---------------------
The Small Cap Equity Fund's (the "Fund") return for the year was -12.18%. The
Fund underperformed its index, the Frank Russell 2000, by 9.63%.
We believe the Fund's underperformance was because, in general, growth
outperformed value. In addition, last year we believed capital goods and basic
industries to be cheap. We became weighted more heavily in these areas, but they
continued to become cheaper.
The gaps in performance between large cap and small cap, and between value and
growth, were the widest in memory during 1998. However, many stocks that had
been beaten down during the prior few quarters snapped back to life. Those
include Mentor Corp., a medical products company, Beldon Wire, which had been
knocked down on recession fears, Pittston Bax, an air-freight service selling at
five times earnings and Four Seasons, which has 20% of its hotels in Asia.
We were able to play the Internet indirectly through our investment in Sotheby's
which rose 50% when the auction house moved to conduct some auctions over the
Internet, after which point we sold the stock. We continue to own Bowne, a
financial printer, which designs web sites for Fortune 500 companies and
provides electronic filings for companies when they file their SEC documents.
Unlike many pure Internet companies, Bowne's Internet activities are profitable.
Yet the stock sells for only about 10 times earnings.
From a valuation perspective, small cap value stocks as a whole look extremely
attractive. However, the question is when investors will begin to shift away
from large cap growth and buy small cap value.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust
Small Cap Equity S&P 400
Fund Mid-Cap Index
---------------- -------------
12/31/97 10000 10000
12/97 10214 10109
12/98 8970 9851
Annualized
One Year Inception
Return to Date
-------- ----------
-12.18% -11.85%
Past performance is no indication of future performance.
4
<PAGE>
Capital Growth Fund
-------------------
The Capital Growth Fund's return for the year was 28.97%, which slightly
outperformed its index, the S&P 500 Composite Index, by 0.37%.
We believe this outperformance was because of our broad diversification during
the market correction.
However, the stock market's performance for the year was extremely uneven.
Although the S&P 500 was up 27% for the year, the median stock was only up 2%.
While it was a tough year for value and small cap managers, it was another great
year for growth. In addition to winners in large cap technology, such as
Microsoft, Intel, IBM, Cisco, Sun Microsystems and Texas Instruments, specialty
retailers like Costco and Office Depot have done extremely well. This contrasted
with general retailers and department stores, which performed poorly.
As we enter 1999, stocks in the financial services industry seem to be
attractive. Banks are trading at a 45% discount to the market, yet their
earnings will likely be better than the market as a whole. Our favorite regional
bank is U.S. Bancorp, a Minneapolis-based bank that recently completed a major
merger.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust
Capital Growth Lipper Growth S&P 500
Fund Funds Average Composite Index
-------------- ------------- ---------------
10/31/95 10000 10000 10000
12/95 10632 10640 10392
12/96 13157 13081 12459
12/97 17964 17444 15605
12/98 23168 22433 19180
One Annualized Annualized
Year 3 Year Inception
Return Return to Date
------ ---------- ----------
28.97% 29.65% 29.78%
Past performance is no indication of future performance.
5
<PAGE>
Investment Grade Bond Fund
--------------------------
The Investment Grade Bond Fund's (the "Fund") performance for the year was
9.38%. The Fund slightly underperformed its index, the Lehman
Government/Corporate Bond Index by 0.09%.
We believe this underperformance was because we were slightly underweighted in
corporates.
We expect mortgages to perform relatively well in 1999, primarily because their
yield spreads are so wide. For the same reason, we believe that corporates will
also do fairly well, although we think the return/risk ratio for mortgages is
better than corporates right now. In any case, yield will be very important in
1999. Given that Treasury's portfolio offers an average yield of 4.75%, an
additional 100 basis points via mortgages and corporates will be a big
contributor to total return.
The past year has been very good for bonds, with the Lehman Government/Corporate
Bond Index returning nearly 9.50% in total return. We believe that 1999 will be
another good year for bonds, as interest rates continue to decline, the Federal
Reserve continues to ease and economic growth moderates.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust Lipper Intermediate
Investment Grade Lehman Government/ Investment Grade
Bond Fund Corporate Bond Index Debt Average
---------------- -------------------- -------------------
10/31/95 10000 10000 10000
12/95 10295 10314 10273
12/96 10531 10615 10608
12/97 11462 11649 11520
12/98 12537 12753 12355
One Annualized Annualized
Year 3 Year Inception
Return Return to Date
------ ---------- ----------
9.38% 6.79% 7.45%
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 that exhibit top management, quality products and services, and sound
financial positions. Our goal is to find companies that fit the above criteria
but are selling at a discount to their global peers.
For the 1998 calendar year, the Fund returned 10.80% compared to the Lipper
International Fund Index return of 13.05% and the Morgan Stanley MSCI EAFE Index
of 20.00%. The relatively strong performance of the Morgan Stanley MSCI EAFE was
a direct result of its lack of exposure to Latin America, which experienced a
difficult year. During this period, the Fund's underweighting in the Japanese
market and its relative overweighting in the European markets contributed to its
overall return. On a sector basis, the Fund's overweight position in
telecommunications was a positive factor in the fourth quarter; however, this
was offset by an underweight position in financials, which rebounded strongly.
Our current selection process leads us to continue to overweight the
telecommunication industry and underweight the energy sector. We remain neutral
to positive on the financial sector.
Geographically, our largest exposure remains Europe. As we view the world on a
regional and an industry basis, we continue to find financially solid companies
with appealing valuations in Europe. Emerging market stocks had another
difficult year after the debacles in both Russia and Brazil. We have started to
add to positions in Latin America as well as Asia where we see value. We are
selectively adding to positions as we continue to monitor government policy
decisions and company fundamentals.
The Fund's largest market weighting deviation continues to be an underweight
position in Japan. Japanese officials are beginning to implement the correct
policies and the economy is showing some signs of life. However, in terms of
offering attractive valuations as well as shareholder value, we continue to find
little to invest in. The Japanese market remains expensive compared to its
global industrial peers, and thus we remain underweighted.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust
International Equity Morgan Stanley
Fund MSC/EAFE Index
-------------------- --------------
11/30/96 10000 10000
12/96 10200 9871
12/97 11918 10047
12/98 13205 12056
One Year Annualized Inception
Return to Date
-------- --------------------
10.80% 13.66%
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, 1998
Value Income Stock Fund
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks (89.3%)
Basic Materials (12.9%)
Allegheny Teledyne 57,900 $ 1,183
B.F. Goodrich 30,100 1,080
Boise Cascade 36,500 1,131
Consolidated Papers 26,300 723
Engelhard 35,800 698
Hercules 25,100 687
Minnesota Mining &
Manufacturing 13,400 953
Morton International 38,800 951
Parker Hannifin 23,800 779
Reynolds Metals 23,400 1,233
Sonoco Products 36,530 1,082
Union Camp 11,600 783
Weyerhaeuser 13,800 701
Witco Chemical 18,700 298
Worthington Industries 38,800 485
-------
12,767
-------
Capital Goods (11.2%)
Cooper Industries 25,800 1,230
Corning 13,000 585
Crown Cork & Seal 35,500 1,094
Harris 31,200 1,143
Johnson Controls 20,600 1,215
National Service Industries 28,000 1,064
Pall 41,800 1,058
Tecumseh Products, Cl A 10,400 485
Tenneco 31,000 1,056
Thomas & Betts 26,300 1,139
Volvo* 40,400 942
-------
11,011
-------
Communication Services (3.8%)
Alltel 25,900 1,549
Frontier 15,300 520
GTE 25,100 1,631
-------
3,700
-------
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Consumer Cyclicals (9.0%)
American Greetings, Cl A 24,400 $ 1,002
Genuine Parts 27,000 903
H&R Block 40,300 1,813
ITT Industries 9,700 386
J.C. Penney 40,000 1,875
Masco 38,500 1,107
Stanley Works 47,100 1,307
TRW 9,700 545
-------
8,938
-------
Consumer Staples (14.9%)
Bestfoods 17,500 932
ConAgra 64,300 2,025
Dean Foods 23,300 951
Flowers Industries 31,700 759
Food Lion, Cl A 42,900 456
Fortune Brands 31,800 1,006
General Mills 17,900 1,392
Hormel Foods 14,600 478
International Flavors &
Fragrances 32,500 1,436
Kimberly Clark 40,100 2,185
McCormick 22,800 771
Newell 13,400 553
Seagram 27,200 1,034
Wallace Computer Services 28,900 762
-------
14,740
-------
Energy (9.0%)
Atlantic Richfield 29,200 1,905
Baker Hughes 63,900 1,130
Conoco* 47,300 987
Fort James Corp. 26,400 1,056
Kerr-McGee 24,300 929
Murphy Oil 22,600 932
Unocal 65,500 1,912
-------
8,851
-------
8
<PAGE>
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Financials (15.5%)
American Financial Group 20,000 $ 877
American General 12,600 983
AmSouth Bancorp 10,400 475
Bank One 42,300 2,160
BankBoston 24,700 962
Cigna 24,300 1,879
Hibernia, Cl A 39,400 685
KeyCorp 35,200 1,126
Paine Webber Group 22,400 865
PNC Bank 21,600 1,169
Safeco 31,500 1,353
Summit Bancorp 27,000 1,180
Transamerica 8,100 936
Union Planters 14,536 659
-------
15,309
-------
Health Care (7.4%)
Abbott Laboratories 20,700 1,014
American Home Products 30,200 1,701
Baxter International 36,500 2,347
C.R. Bard 13,700 678
Mallinckrodt 15,400 475
Pharmacia Upjohn ADR 19,700 1,116
-------
7,331
-------
Technology (0.9%)
EG&G 33,700 937
-------
Utilities (4.7%)
Consolidated Natural Gas 25,200 1,361
GPU 20,800 919
Questar 38,600 748
Scana 25,500 822
Sonat 29,000 785
-------
4,635
-------
Total Common Stocks
(Cost $85,565) 88,219
-------
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreement (10.4%)
Morgan Stanley
4.85%, dated 12/31/98,
matures 1/4/99, repurchase
price $10,265,163 (collateralized
by U.S. Agency Obligations:
market value $10,581,654) $10,260 $10,260
-------
Total Repurchase Agreement
(Cost $10,260) 10,260
-------
Total Investments (99.7%)
(Cost $95,825) 98,479
-------
Other Assets and Liabilities, Net (0.3%) 280
-------
Net Assets:
Portfolio Shares (unlimited
authorization -- no par value)
based on 6,548,342 outstanding
shares of beneficial interest 87,378
Accumulated net realized gain
on investments 8,502
Net unrealized appreciation
on investments 2,654
Undistributed net investment income 225
-------
Total Net Assets (100.0%) $98,759
=======
Net Asset Value, Offering and
Redemption Price Per Share $15.08
=======
* Non-income producing security
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks (91.5%)
Capital Goods (10.9%)
Allied Waste Industries* 48,700 $ 1,150
Herman Miller 24,100 648
Motivepower Industries 10,000 322
U.S. Filter* 40,000 915
Watsco 20,700 347
-------
3,382
-------
Consumer Cyclicals (19.4%)
BJ's Wholesale Club* 11,000 509
Borders Group* 39,200 978
Ethan Allen Interiors 12,800 525
Family Dollar Stores 38,100 838
Harley-Davidson 21,400 1,014
Just for Feet* 37,250 647
Men's Wearhouse* 28,150 894
Ralph Lauren* 15,800 303
Staff Leasing* 27,700 322
-------
6,030
-------
Consumer Staples (12.8%)
Avis Rent A Car* 30,400 735
Cracker Barrel Old Country Stores 25,200 587
Dial 11,700 338
Flowers Industries 18,500 443
Interstate Bakeries 24,600 650
Norrell 19,000 280
Papa John's International* 13,900 613
US Foodservice* 6,800 333
-------
3,979
-------
Energy (1.6%)
Anadarko Petroleum 4,400 136
Ensearch Exploration Inc* 17,466 122
National-Oilwell Inc* 22,600 253
-------
511
-------
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Financials (11.2%)
Colonial Bancgroup 27,300 $ 328
Dime Bancorp 15,700 415
First Security 18,637 436
First Virginia Banks 8,100 381
Hibernia, Cl A 24,200 420
North Fork Bancorporation 23,100 553
Peoples Heritage Financial Group 16,000 320
Trustmark 16,600 376
Western Bancorp 8,100 237
-------
3,466
-------
Health Care (15.0%)
Acuson Corp* 12,400 184
Centocor* 11,400 514
Curative Technologies* 16,000 536
Forest Laboratories* 8,500 452
Immunex* 5,300 667
Jones Pharmaceuticals 5,000 182
Mylan Laboratories 18,600 586
Quintiles Transnational* 12,700 678
Watson Pharmaceuticals* 13,600 855
-------
4,654
-------
Technology (19.4%)
ADC Telecommunications* 19,500 678
Fiserv* 14,850 764
Flextronics International* 12,400 1,062
Intuit* 6,300 457
Nova* 15,587 541
Sanmina* 18,900 1,181
Sawtek* 28,700 502
Teradyne* 20,100 852
-------
6,037
-------
Transportation (1.2%)
CNF Transportation 10,000 376
-------
Total Common Stocks
(Cost $24,829) 28,435
-------
10
<PAGE>
- --------------------------------------------------------------------------------
Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreement (5.2%)
Morgan Stanley
4.60%, dated 12/31/98, matures
01/04/99, repurchase price
$1,612,874 (collateralized by a
U.S. Treasury Note: market
value $1,652,834) $1,612 $ 1,612
-------
Total Repurchase Agreement
(Cost $1,612) 1,612
-------
Total Investments (96.7%)
(Cost $26,441) 30,047
-------
Other Assets and Liabilities, Net (3.3%) 1,028
-------
Net Assets:
Portfolio Shares (unlimited
authorization -- no par value)
based on 2,290,850 outstanding
shares of beneficial interest 27,086
Accumulated net realized gain
on investments 378
Net unrealized appreciation
on investments 3,606
Undistributed net investment income 5
-------
Total Net Assets (100.0%) $31,075
=======
Net Asset Value, Offering and Redemption
Price Per Share $13.56
=======
* Non-income producing security
Cl -- Class
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
Small Cap Equity Fund
- --------------------------------------------------------------------------------
Market
Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks (97.3%)
Basic Materials (12.1%)
Carpenter Technology 7,600 $ 258
Commonwealth Industries 12,500 117
H. B. Fuller 2,900 140
Lilly Industries Incorporated, Cl A 12,000 239
Madeco ADR 10,900 91
Quimica y Minera Chile ADR 6,600 222
Texas Industries 9,500 256
Titanium Metals 12,800 109
Wausau-Mosinee Paper 9,300 164
-------
1,596
-------
Capital Goods (15.7%)
A.M. Castle 6,400 96
Ameron 3,500 129
Belden 6,500 138
DT Industries 2,800 44
Furon 7,900 135
Gerber Scientific 6,600 157
Hardinge 2,200 41
Kaman 10,000 161
Kaydon 3,200 128
Lindberg 6,800 62
LSI Industries 6,100 137
Pittway, Cl A 6,800 225
Precision Castparts 3,900 173
Regal Beloit 8,500 195
Smith (A.O.) 5,100 125
Valmont Industries 8,200 114
-------
2,060
-------
Consumer Cyclicals (25.0%)
American Woodmark 5,500 188
Angelica 5,600 104
Bush Industries 15,400 192
Chemed 3,700 124
Guilford Mills 11,800 197
Harman International 7,800 297
Interface 24,200 225
- --------------------------------------------------------------------------------
Market
Shares Value (000)
- --------------------------------------------------------------------------------
Consumer Cyclicals (continued)
Jannock Limited 9,300 $ 87
K2 12,800 132
Kimball International* 12,400 236
Midas 5,200 162
Pep Boys 19,200 301
Pillowtex 7,500 201
Polaroid 21,100 394
Ritchie Bros. Auctioneers* 4,900 132
Springs Industries, Cl A 1,600 66
Sturm Ruger 6,500 78
Toro 5,800 165
-------
3,281
-------
Consumer Staples (16.8%)
Banta 4,500 123
Bowne & Company 8,400 150
Heilig-Meyers 35,400 237
Ingles Markets, Cl A 7,900 86
Nash Finch 6,900 98
Norrell 27,900 411
Standard Register 10,400 322
Universal Foods 11,900 326
WD-40 4,000 114
Wolverine World Wide 19,700 261
York Group 8,400 80
-------
2,208
-------
Energy (1.2%)
Giant Industries 17,400 163
------
Financials (8.9%)
Administradora de Fondos de
Pensiones Provida ADR* 6,500 87
Alfa 5,100 124
Annuity & Life Re Holdings* 4,800 130
Banco Latinamericano de
Exportaciones 4,700 78
Chicago Title 3,000 141
Klamath First Bancorp 5,100 99
12
<PAGE>
- --------------------------------------------------------------------------------
Market
Shares Value (000)
- --------------------------------------------------------------------------------
Financials (continued)
Scottish Annuity & Life* 9,500 $ 131
Seacoast Banking of Florida 2,200 62
Stirling Cooke Brown Holdings 4,200 73
Student Loan 2,900 130
Westerfed Financial 6,200 112
-------
1,167
-------
Health Care (6.3%)
Block Drug, Cl A 2,972 129
London International Group ADR 2,400 26
Medeva PLC ADR 22,800 184
Mentor 15,100 354
Vital Signs 7,500 131
-------
824
-------
Technology (1.6%)
Innovex 9,100 125
Pioneer-Standard Electronics 9,800 92
-------
217
-------
Transportation (6.2%)
Bandag 5,700 228
Knightsbridge Tankers Limited* 5,800 121
Pittston Burlington 14,700 164
Sea Containers 9,300 278
Western Star Truck Holdings 1,600 21
-------
812
-------
Utilities (3.5%)
Northwest Natural Gas 3,700 96
NUI 5,300 142
TNP Enterprises 2,500 95
United Water Resources 5,400 129
-------
462
-------
Total Common Stocks
(Cost $14,403) 12,790
-------
- --------------------------------------------------------------------------------
Shares/Face Market
Amount (000) Value (000)
- --------------------------------------------------------------------------------
Preferred Stock (0.3%)
Basic Materials (0.3%)
Coeur D'Alene Mines,
CV to 0.8260 Share,
Callable 03/15/99 @ 21.622 $6,300 $ 43
-------
Total Preferred Stock
(Cost $93) 43
-------
Repurchase Agreement (5.4%)
Morgan Stanley
4.50%, dated 12/31/98, matures
01/04/99, repurchase price
$709,002 (collateralized by a
U.S. Treasury Note: market
value $725,797) 709 709
-------
Total Repurchase Agreement
(Cost $709) 709
-------
Total Investments (103.0%)
(Cost $15,205) 13,542
-------
Other Assets and Liabilities (-3.0%)
Investment securities
purchased payable (784)
Other assets and liabilities, net 387
-------
Total Other Assets
and Liabilities (397)
-------
Net Assets:
Portfolio Shares (unlimited authorization --
no par value) based on 1,550,937
outstanding shares of beneficial interest 15,321
Accumulated net realized loss on investments (532)
Net unrealized depreciation on investments (1,663)
Undistributed net investment income 20
-------
Total Net Assets (100.0%) $13,146
=======
Net Asset Value, Offering and Redemption
Price Per Share $8.48
=======
* Non-income producing security
ADR -- American Depository Receipt
Cl -- Class
CV -- Convertible
PLC -- Public Limited Corporation
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
Capital Growth Fund
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks (91.7%)
Basic Materials (2.2%)
Air Products & Chemicals 38,900 $ 1,556
Imperial Chemical ADR 5,600 196
Monsanto 3,100 147
Morton International 14,900 365
Praxair 1,400 49
-------
2,313
-------
Capital Goods (13.1%)
Allied Signal 8,200 363
Allied Waste Industries* 14,500 343
AMP 4,400 229
Eastern Environmental Services* 20,000 592
Emerson Electric 3,800 230
General Electric 38,600 3,940
Honeywell 14,500 1,092
Lockheed Martin 7,100 602
Newell 3,500 144
Republic Services, Cl A* 16,300 301
Textron 4,900 372
Thermo Electron* 6,400 108
Tyco International 24,109 1,819
U.S. Filter* 24,712 565
United Technologies 13,500 1,468
Waste Management Inc* 35,357 1,648
-------
13,816
-------
Communication Services (3.0%)
America Online* 300 48
Century Telephone Enterprises 10,300 695
Ericsson Telephone ADR 7,900 189
Fox Entertainment Group, Cl A* 9,800 247
GTE 11,400 741
MCI WorldCom* 17,312 1,242
-------
3,162
-------
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Consumer Cyclicals (17.0%)
American Greetings 18,800 $ 772
Automatic Data Processing 9,000 722
Carnival 42,200 2,026
Consolidated Stores* 5,200 105
Costco* 19,600 1,415
CVS 26,800 1,474
Dollar General 12,100 286
Federated Department Stores* 10,700 466
Hasbro 17,500 632
Lear* 17,500 674
Lowe's Companies 46,400 2,375
Masco 52,900 1,521
Mattel 29,700 678
McGraw-Hill 7,100 723
New York Times, Cl A 3,800 132
Office Depot* 43,800 1,618
Promus Hotel* 3,300 107
Republic Industries* 4,000 59
Saks Inc* 12,200 385
Service International 17,600 670
SPX* 2,800 188
Starwood Lodging Trust REIT 7,400 168
Tandy 19,200 791
-------
17,987
-------
Consumer Staples (14.4%)
Avon Products 18,000 796
Bestfoods 5,200 277
Campbell Soup 1,000 55
Cendant* 42,406 808
Coca-Cola 4,300 154
Colgate-Palmolive 5,400 501
ConAgra 14,119 445
Flowers Industries 17,600 421
Fort James Corp. 13,900 556
Fred Meyer* 7,500 452
Gillette 5,000 242
14
<PAGE>
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Consumer Staples (continued)
Hershey Foods 8,200 $ 510
McDonald's 3,000 230
PepsiCo 7,300 299
Philip Morris 19,200 1,027
Procter & Gamble 8,500 776
Ralston Purina 35,000 1,133
Rite Aid 34,800 1,725
Rubbermaid 19,200 604
Safeway* 9,400 573
Sara Lee 47,900 1,350
Tele-Communications, Cl A* 16,300 902
US Foodservice* 12,900 632
Viacom, Cl B* 6,900 511
William Wrigley Jr. 2,300 206
-------
15,185
-------
Energy (3.1%)
Amoco 600 35
British Petroleum ADR 4,734 450
Conoco* 10,700 223
Halliburton 15,400 456
Mobil 3,300 287
Niagara Mohawk Power* 12,000 193
Texaco 17,500 925
Union Pacific Resources Group 15,401 140
Unocal 9,300 271
Weatherford International* 11,300 219
Williams 1,500 47
-------
3,246
-------
Financials (12.8%)
Allstate 1,100 42
American International Group 3,200 309
Associates First Capital 10,200 432
Atlantic Richfield 1,300 85
Bank One 22,860 1,167
Bank United, Cl A 4,600 181
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Financials (continued)
BankAmerica 15,542 $ 934
BankBoston 5,100 199
Citigroup 1 --
Chubb 4,400 285
Colonial Bancgroup 3,900 47
Compass Bancshares 5,000 190
Conseco 21,600 660
FHLMC 11,900 767
First American of Tennessee 2,900 129
First Union 1,200 73
FNMA 9,300 688
Household International 19,966 791
KeyCorp 10,000 320
Lincoln National 300 25
Mellon Bank 19,500 1,341
MGIC Investment 9,500 378
PNC Bank 19,400 1,050
Regions Financial 3,100 125
SouthTrust 1,900 70
Sunamerica 18,600 1,509
Torchmark 22,900 809
U.S. Bancorp 5,800 206
Waddell & Reed Financial, Cl A* 7 --
Waddell & Reed Financial, Cl B* 5,191 121
Washington Mutual 11,168 426
Wells Fargo 5,000 200
-------
13,559
-------
Health Care (11.5%)
Abbott Laboratories 23,300 1,142
Allegiance 9,600 448
Alza* 2,200 115
American Home Products 7,900 445
Arterial Vascular Engineering* 2,000 105
Baxter International 7,200 463
Becton Dickinson 11,000 470
Boston Scientific* 16,100 432
15
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
Capital Growth Fund--concluded
- --------------------------------------------------------------------------------
Shares Value (000)
- --------------------------------------------------------------------------------
Health Care (continued)
Bristol-Myers Squibb 23,200 $ 3,104
Eli Lilly 2,900 258
Forest Laboratories* 5,500 293
Healthsouth* 30,302 468
Johnson & Johnson 2,400 201
Merck 14,600 2,156
Tenet Healthcare* 26,100 685
Warner Lambert 17,700 1,331
-------
12,116
-------
Technology (13.8%)
3Com* 6,900 309
Ceridian* 17,300 1,208
Cisco Systems* 23,500 2,181
Compaq Computer 10,724 450
EMC* 10,800 918
HBO 9,500 273
Hewlett Packard 5,300 362
IBM 12,700 2,346
Intel 7,400 877
Microsoft* 15,100 2,094
Networks Associates* 17,208 1,140
Northern Telecom 6,400 321
Sun Microsystems* 7,500 642
Texas Instruments 5,600 479
W.W. Grainger 8,700 362
Xerox 5,500 649
-------
14,611
-------
Transportation (0.8%)
Burlington Northern Santa Fe 9,000 304
Delta Air Lines 8,200 426
Trans World Air* 3,300 125
-------
855
-------
Total Common Stocks
(Cost $77,720) 96,850
-------
- --------------------------------------------------------------------------------
Shares/Face
Amount (000) Value (000)
- --------------------------------------------------------------------------------
Preferred Stocks (0.5%)
Consumer Staples (0.1%)
Suiza Capital Trust II, CV to
0.6390 Share, Callable
04/02/01 @ 51.719* 2,400 $ 104
--------
Technology (0.4%)
Microsoft, CV to 1 Share 4,000 391
--------
Total Preferred Stocks
(Cost $420) 495
--------
Convertible Bonds (0.9%)
Elan Finance, CV to 6.875 Shares
Callable 12/14/03 @ 61.657,
0.000%, 12/14/18 (A) (B) (C) $1,000 565
Potomac Electric Power
CV to 29.5 Shares
Callable 03/15/99 @ 95.644 350 338
--------
Total Convertible Bonds
(Cost $859) 903
--------
Regulated Investment Company (0.2%)
Dollar General, STRYPES* 6,900 246
--------
Total Regulated Investment Company
(Cost $272) 246
--------
Repurchase Agreement (7.3%)
Morgan Stanley
4.85%, dated 12/31/98, matures
01/04/99, repurchase price
$7,739,646 (collateralized by
U.S. Agency Obligations:
market value $7,895,204) 7,735 7,735
--------
Total Repurchase Agreement
(Cost $7,735) 7,735
--------
Total Investments (100.6%)
(Cost $87,006) $106,229
--------
16
<PAGE>
- --------------------------------------------------------------------------------
Value (000)
- --------------------------------------------------------------------------------
Other Assets and Liabilities, Net (-0.6%) $ (669)
--------
Net Assets:
Portfolio Shares (unlimited
authorization -- no par value)
based on 5,266,489 outstanding
shares of beneficial interest 78,704
Accumulated net realized gain
on investments 7,573
Net unrealized appreciation
on investments 19,223
Undistributed net investment income 60
--------
Total Net Assets (100.0%) $105,560
========
Net Asset Value, Offering and
Redemption Price Per Share $20.04
========
* Non-income producing security
ADR -- American Depository Receipt
Cl -- Class
CV -- Convertible
STRYPES -- Structured Yield Product Exchange Securities
(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, 1998
Investment Grade Bond Fund
- ------------------------------------------------------------------
Face
Amount (000) Value (000)
- ------------------------------------------------------------------
U.S. Treasury Obligations (25.5%)
U.S. Treasury Bonds
7.500%, 11/15/16 $ 750 $ 931
8.125%, 08/15/19 1,800 2,404
U.S. Treasury Notes
6.250%, 10/31/01 1,500 1,564
--------
Total U.S. Treasury Obligations
(Cost $4,512) 4,899
--------
Corporate Obligations (38.2%)
Finance (22.5%)
Bank of Boston
6.625%, 12/01/05 100 104
Bear Stearns
6.250%, 07/15/05 200 201
Conseco
6.800%, 06/15/05 200 187
6.400%, 06/15/11 300 291
Countrywide Home Loan, MTN
6.510%, 02/11/05 300 301
Finova Capital
6.250%, 11/01/02 250 251
Ford Motor Credit
6.500%, 02/28/02 300 309
Great Western Financial
8.600%, 02/01/02 100 107
Household Finance
6.500%, 11/15/08 150 156
Liberty Property, MTN
6.600%, 06/05/02 200 205
Merrill Lynch
6.875%, 11/15/18 150 156
Merrill Lynch, MTN
6.060%, 10/15/01 625 633
Morgan Stanley, MTN
6.090%, 03/09/01 250 253
Provident
7.000%, 07/15/18 350 361
- ------------------------------------------------------------------
Face
Amount (000) Value (000)
- ------------------------------------------------------------------
Finance (continued)
Salomon
7.300%, 05/15/02 $250 $ 262
Salomon Smith Barney
6.250%, 01/15/05 250 253
Sprint Capital
6.125%, 11/15/08 300 306
--------
4,336
--------
Industrial (15.7%)
American Home Products
7.900%, 02/15/05 300 335
Bausch & Lomb
6.150%, 08/01/01 400 402
6.750%, 12/15/04 150 154
Dillards
6.430%, 08/01/04 450 457
Ikon Capital, MTN
6.730%, 06/15/01 150 151
Philip Morris
7.250%, 09/15/01 300 313
7.500%, 04/01/04 150 160
Praxair
6.900%, 11/01/06 175 182
Western Resources
6.250%, 08/15/03 200 205
Worldcom
6.125%, 08/15/01 650 660
--------
3,019
--------
Total Corporate Obligations
(Cost $7,241) 7,355
--------
U.S. Government Agency Obligations (25.8%)
FHLMC
7.500%, 09/01/03 118 120
FNMA
7.000%, 10/01/03 354 362
18
<PAGE>
- ------------------------------------------------------------------
Face
Amount (000) Value (000)
- ------------------------------------------------------------------
U.S. Government Agency Obligations (continued)
GNMA
8.000%, 12/15/22 $2,196 $ 2,282
7.000%, 12/15/28 2,150 2,202
--------
Total U.S. Government Agency Obligations
(Cost $4,959) 4,966
--------
Repurchase Agreement (9.2%)
Morgan Stanley
4.60%, dated 12/31/98, matures
01/04/99, repurchase price
$1,765,979 (collateralized by
U.S. Treasury Note: market
value $1,810,123) 1,765 1,765
--------
Total Repurchase Agreement
(Cost $1,765) 1,765
--------
Total Investments (98.7%)
(Cost $18,477) 18,985
--------
Other Assets and Liabilities, Net (1.3%) 251
--------
- ------------------------------------------------------------------
Value (000)
- ------------------------------------------------------------------
Net Assets
Portfolio Shares (unlimited
authorization--no par value)
based on 1,818,882 outstanding
shares of beneficial interest $ 18,479
Accumulated net realized gain
on investments 252
Net unrealized appreciation
on investments 507
Distributions in excess of net investment
income (2)
--------
Total Net Assets (100.0%) $ 19,236
========
Net Asset Value, Offering and
Redemption Price Per Share $10.58
========
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
MTN -- Medium Term Note
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SCHEDULE OF INVESTMENTS
- ------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
International Equity Fund
- ------------------------------------------------------------------
Shares Value (000)
- ------------------------------------------------------------------
Foreign Common Stocks (92.7%)
Australia (2.2%)
AMP Limited 4,200 $ 53
Australia & New Zealand
Banking Group 26,066 170
National Australia Bank 3,600 54
QBE Insurance 34,292 142
---------
419
---------
Austria (0.9%)
Erste Bank 3,300 176
---------
Brazil (0.2%)
Tele Norte Leste
Participacoes ADR 3,500 44
---------
Canada (0.2%)
Power Corporation of Canada 2,000 43
---------
Denmark (1.0%)
Novo Nordisk, Cl B 1,420 187
---------
France (12.7%)
AXA 900 130
Dexia France 2,790 429
Elf Aquitaine 500 58
France Telecom 6,149 488
Groupe Danone 900 257
Lafarge 605 57
Lagardere SCA 6,925 294
Suez Lyonnaise des Eaux 1,870 384
Vivendi 1,200 311
---------
2,408
---------
Germany (8.9%)
Bayer 2,250 94
Buderus 320 116
DaimlerChrysler 2,000 197
Hoechst 1,100 46
Mannesmann 2,400 275
- ------------------------------------------------------------------
Shares Value (000)
- ------------------------------------------------------------------
Germany (continued)
Preussag 635 $ 287
RWE 7,500 410
Veba 4,328 259
---------
1,684
---------
Greece (1.5%)
Hellenic Telecom
Organization 7,480 199
Hellenic Telecom
Organization ADR 6,500 86
---------
285
---------
Hong Kong (0.3%)
National Mutual Asia 69,400 52
---------
Indonesia (0.0%)
Modern Photo Film, F 60,000 4
---------
Ireland (4.0%)
Allied Irish Banks 13,200 235
Bank of Ireland 22,988 505
CRH 700 12
---------
752
---------
Italy (7.1%)
INA 88,600 234
San Paolo-IMI 16,430 290
Telecom Italia 79,520 679
Unione Immobiliare 268,000 140
---------
1,343
---------
Japan (11.9%)
Canon 8,000 171
Eisai 13,000 253
Fuji Photo Film 5,000 186
Honda Motor 6,000 197
Nintendo 800 78
Nippon Telegraph & Telephone 51 394
Ricoh 7,000 65
20
<PAGE>
- ------------------------------------------------------------------
Shares Value (000)
- ------------------------------------------------------------------
Japan (continued)
Sankyo 7,000 $ 153
Takefuji 2,400 175
TDK 2,300 210
Terumo 15,300 360
---------
2,242
---------
Netherlands (4.8%)
Ahold 6,500 240
ING Groep 3,213 196
KPN 9,608 480
---------
916
---------
New Zealand (3.7%)
Fernz 68,400 210
Fletcher Challenge Building 91,338 141
Telecom Corporation of
New Zealand 80,800 350
---------
701
---------
Norway (2.9%)
Christiania Bank 21,000 73
Orkla, Cl A 6,100 91
Petroleum Geo Services ADR 5,500 87
Sparebanken NOR 15,210 296
---------
547
---------
Panama (0.4%)
Banco Latinamericano
de Exportaciones 4,600 76
---------
Portugal (2.0%)
Banco Espirito Santo 4,235 131
Electricidade de Portugal 5,500 121
Portugal Telecom ADR 2,950 132
---------
384
---------
- ------------------------------------------------------------------
Shares Value (000)
- ------------------------------------------------------------------
Spain (3.6%)
Argentaria 12,000 $ 311
Endesa 11,350 301
Repsol 1,200 64
---------
676
---------
Sweden (2.4%)
Castellum 12,300 133
Drott, Cl B 11,000 101
Volvo, Cl B 9,700 222
---------
456
---------
Switzerland (3.4%)
Novartis, Registered 331 651
---------
United Kingdom (18.6%)
Allied Zurich 27,350 408
Bass 16,060 234
British Aerospace 28,447 241
British Energy PLC 8,600 98
Diageo 20,632 235
General Electric 38,650 348
Glaxo Wellcome 4,100 141
Ladbroke Group 28,840 116
Lloyds TSB Group 14,100 200
LucasVarity 36,158 121
National Westminster Bank 13,553 261
Railtrack Group 3,750 98
Reckitt & Colman 13,400 177
Rolls-Royce 69,300 287
Royal & Sun Alliance 133 1
Smithkline Beecham 19,640 274
Storehouse 33,130 75
Tomkins 41,572 196
---------
3,511
---------
Total Foreign Common Stocks
(Cost $15,965) 17,557
---------
21
<PAGE>
SCHEDULE OF INVESTMENTS
- ------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
International Equity Fund--concluded
- ------------------------------------------------------------------
Shares Value (000)
- ------------------------------------------------------------------
Foreign Preferred Stock (1.0%)
Germany (1.0%)
GEA 7,570 $ 181
---------
Total Foreign Preferred Stock
(Cost $245) 181
---------
Total Investments (93.7%)
(Cost $16,210) $ 17,738
=========
* Non-income producing security
ADR -- American Depository Receipt
Cl -- Class
F -- Foreign Shares
PLC -- Public Limited Corporation
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
This Page Left Intentionally Blank
23
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
<TABLE>
<CAPTION>
-------------
International
Equity
Fund
-------------
Assets:
<S> <C>
Investments at Market Value (Cost $16,210) $17,738
Cash and Foreign Currency 1,085
Receivables for Investment Securities Sold 93
Other Assets 52
-------
Total Assets 18,968
-------
Liabilities:
Payables for Portfolio Shares Redeemed 2
Accrued Expenses 40
-------
Total Liabilities 42
-------
Net Assets:
Portfolio Shares (unlimited authorization -- no par value)
Based on 1,450,151 Outstanding shares of beneficial interest 17,034
Undistributed net investment income 119
Accumulated net realized gain on investments 270
Accumulated net realized loss on foreign currency transactions (27)
Net unrealized appreciation on forward foreign currency contracts,
foreign currency, and translation of other assets
and liabilities in foreign currency 2
Net unrealized appreciation on investments 1,528
-------
Total Net Assets $18,926
=======
Net Asset Value, Offering and Redemption Price Per Share $ 13.05
=======
</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 Year Ended December 31, 1998
<TABLE>
<CAPTION>
Value
Income Mid-Cap Small Cap Capital Investment International
Stock Equity Equity Growth Grade Equity
Fund Fund Fund Fund Bond Fund Fund
------ ------- --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest Income $ 414 $ 118 $ 46 $ 429 $ 861 $ 57
Dividend Income 2,128 118 236 885 -- 358
Less: Foreign Taxes Withheld -- -- -- -- -- (34)
------ ------ ------- ------- ------ ---------
Total Investment Income 2,542 236 282 1,314 861 381
------ ------ ------- ------- ------ ---------
Expenses:
Investment Advisory Fees 715 317 133 961 107 214
Less: Investment Advisory Fees Waived (144) (105) (81) (218) (85) (81)
Administrator Fees 62 62 62 62 62 75
Custody Fees 47 7 5 34 5 32
Transfer Agent Fees 35 7 4 28 5 4
Professional Fees 75 14 9 51 7 11
Trustee Fees 7 2 1 6 1 2
Registration Fees -- -- -- -- -- --
Printing Expenses 42 9 4 28 5 5
Pricing Fees 2 1 -- 2 -- 8
Insurance and Other Fees 3 -- 1 2 -- --
Amortization of Deferred Organization Costs 2 2 1 2 2 3
------ ------ ------- ------- ------ ---------
Total Expenses 846 316 139 958 109 273
------ ------ ------- ------- ------ ---------
Net Investment Income (Loss) 1,696 (80) 143 356 752 108
------ ------ ------- ------- ------ ---------
Net Realized Gain (Loss) on Securities Sold 8,551 485 (532) 7,815 268 270
Net Realized Loss on Foreign Currency Transactions -- -- -- -- -- (15)
Net Unrealized Appreciation
(Depreciation) on Investments (2,853) 1,389 (1,561) 12,917 251 1,029
Net Unrealized Appreciation on Forward
Currency Contracts, Foreign Currency,
and Translation of Other Assets
and Liabilities in Foreign Currency -- -- -- -- -- 2
------ ------ ------- ------- ------ ---------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency 5,698 1,874 (2,093) 20,732 519 1,286
------ ------ ------- ------- ------ ---------
Increase (Decrease) in Net Assets from Operations $7,394 $1,794 $(1,950) $21,088 $1,271 $ 1,394
====== ====== ======= ======= ====== =========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
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 Mid-Cap
Stock Fund Equity Fund
-------------------------- --------------------------
01/01/98- 01/01/97- 01/01/98- 01/01/97-
12/31/98 12/31/97 12/31/98 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ 1,696 $ 1,115 $ (80) $ (14)
Net Realized Gain (Loss) on Investments and Foreign
Currency Transactions 8,551 6,730 485 2,335
Net Unrealized Appreciation (Depreciation) on Investments (2,853) 4,177 1,389 1,514
Net Unrealized Appreciation on Forward Foreign
Currency Contracts, Foreign Currency, and
Translation of Other Assets and Liabilities in
Foreign Currency -- -- -- --
-------- -------- -------- --------
Increase (Decrease) in Net Assets Resulting from Operations 7,394 12,022 1,794 3,835
-------- -------- -------- --------
Distributions to Shareholders:
Net Investment Income (1,696) (1,121) -- (13)
Capital Gains (6,777) (904) (2,305) (736)
-------- -------- -------- --------
Total Distributions (8,473) (2,025) (2,305) (749)
-------- -------- -------- --------
Capital Transactions:
Proceeds from Shares Issued 23,136 32,879 7,168 9,159
Reinvestment of Cash Distributions 8,473 2,025 2,305 749
Cost of Shares Repurchased (4,518) (3,370) (1,800) (3,375)
-------- -------- -------- --------
Increase in Net Assets from Capital Transactions 27,091 31,534 7,673 6,533
-------- -------- -------- --------
Total Increase in Net Assets 26,012 41,531 7,162 9,619
-------- -------- -------- --------
Net Assets:
Beginning of Period 72,747 31,216 23,913 14,294
-------- -------- -------- --------
End of Period $ 98,759 $ 72,747 $ 31,075 $ 23,913
======== ======== ======== ========
Shares Issued and Redeemed:
Shares Issued 1,451 2,358 509 708
Shares Issued in Lieu of Cash Distributions 622 138 216 55
Shares Redeemed (307) (230) (145) (257)
-------- -------- -------- --------
Net Share Transactions 1,766 2,266 580 506
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Capital Growth
Equity Fund Fund
----------------------- -----------------------
01/01/98- 10/22/97*- 01/01/98- 01/01/97-
12/31/98 12/31/97 12/31/98 12/31/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ 143 $ 20 $ 356 $ 311
Net Realized Gain (Loss) on Investments and Foreign
Currency Transactions (532) 20 7,815 7,858
Net Unrealized Appreciation (Depreciation) on Investments (1,561) (103) 12,917 4,911
Net Unrealized Appreciation on Forward Foreign
Currency Contracts, Foreign Currency, and
Translation of Other Assets and Liabilities in
Foreign Currency -- -- -- --
--------- --------- --------- ---------
Increase (Decrease) in Net Assets Resulting from Operations (1,950) (63) 21,088 13,080
--------- --------- --------- ---------
Distributions to Shareholders:
Net Investment Income (143) (20) (356) (312)
Capital Gains -- -- (8,084) (1,300)
--------- --------- --------- ---------
Total Distributions (143) (20) (8,440) (1,612)
--------- --------- --------- ---------
Capital Transactions:
Proceeds from Shares Issued 8,463 7,626 26,149 27,091
Reinvestment of Cash Distributions 143 20 8,440 1,612
Cost of Shares Repurchased (931) -- (3,554) (3,483)
--------- --------- --------- ---------
Increase in Net Assets from Capital Transactions 7,675 7,646 31,035 25,220
--------- --------- --------- ---------
Total Increase in Net Assets 5,582 7,563 43,683 36,688
--------- --------- --------- ---------
Net Assets:
Beginning of Period 7,563 -- 61,877 25,189
--------- --------- --------- ---------
End of Period $ 13,145 $ 7,563 $ 105,560 $ 61,877
========= ========= ========= =========
Shares Issued and Redeemed:
Shares Issued 868 772 1,374 1,771
Shares Issued in Lieu of Cash Distributions 16 2 510 100
Shares Redeemed (107) -- (200) (216)
--------- --------- --------- ---------
Net Share Transactions 777 774 1,684 1,655
========= ========= ========= =========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Grade Bond International
Fund Equity Fund
----------------------- -----------------------
01/01/98- 01/01/97- 01/01/98- 01/01/97-
12/31/98 12/31/97 12/31/98 12/31/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ 752 $ 493 $ 108 $ 33
Net Realized Gain (Loss) on Investments and Foreign
Currency Transactions 268 24 255 101
Net Unrealized Appreciation (Depreciation) on Investments 251 220 1,029 484
Net Unrealized Appreciation on Forward Foreign
Currency Contracts, Foreign Currency, and
Translation of Other Assets and Liabilities in
Foreign Currency -- -- 2 --
--------- --------- --------- ---------
Increase (Decrease) in Net Assets Resulting from Operations 1,271 737 1,394 618
--------- --------- --------- ---------
Distributions to Shareholders:
Net Investment Income (754) (493) (21) (1)
Capital Gains -- -- (113) --
--------- --------- --------- ---------
Total Distributions (754) (493) (134) (1)
--------- --------- --------- ---------
Capital Transactions:
Proceeds from Shares Issued 9,749 4,194 5,290 12,992
Reinvestment of Cash Distributions 755 493 134 1
Cost of Shares Repurchased (1,687) (3,068) (1,605) (758)
--------- --------- --------- ---------
Increase in Net Assets from Capital Transactions 8,817 1,619 3,819 12,235
--------- --------- --------- ---------
Total Increase in Net Assets 9,334 1,863 5,079 12,852
--------- --------- --------- ---------
Net Assets:
Beginning of Period 9,902 8,039 13,847 995
--------- --------- --------- ---------
End of Period $ 19,236 $ 9,902 $ 18,926 $ 13,847
========= ========= ========= =========
Shares Issued and Redeemed:
Shares Issued 936 421 406 1,136
Shares Issued in Lieu of Cash Distributions 72 49 11 --
Shares Redeemed (161) (309) (134) (67)
--------- --------- --------- ---------
Net Share Transactions 847 161 283 1,069
========= ========= ========= =========
</TABLE>
*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.
27
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS For the Years 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 Distributions from
Beginning of Period Income (Loss) on Investments Net Investment Income Realized Capital Gains
------------------- ------------- ------------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Value Income Stock Fund
1998 $15.21 $ 0.27 $ 1.02 $(0.28) $(1.14)
1997 12.41 0.28 3.02 (0.28) (0.22)
1996 10.67 0.23 1.74 (0.23) --
1995 (1) 10.00 0.06 0.67 (0.06) --
Mid-Cap Equity Fund (A)
1998 $13.97 $ 0.00 $ 0.70 -- $(1.11)
1997 11.86 (0.01) 2.64 (0.01) (0.51)
1996 10.27 0.06 1.59 (0.06) --
1995 (1) 10.00 0.05 0.27 (0.05) --
Small Cap Equity Fund
1998 $ 9.77 $ 0.12 $(1.30) $(0.11) $ --
1997 (2) 10.00 0.03 (0.23) (0.03) --
Capital Growth Fund
1998 $17.27 $ 0.07 $ 4.54 $(0.08) $(1.76)
1997 13.06 0.10 4.63 (0.10) (0.42)
1996 10.66 0.12 2.40 (0.12) --
1995 (1) 10.00 0.04 0.66 (0.04) --
Investment Grade Bond Fund
1998 $10.19 $ 0.54 $ 0.39 $(0.54) $ --
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
1998 $11.87 $ 0.10 $ 1.17 $(0.01) $(0.08)
1997 10.16 0.03 1.68 -- --
1996 (3) 10.00 0.01 0.16 (0.01) --
(1) Commenced operations on October 2, 1995. All ratios for the period have
been annualized.
(2) Commenced operations on October 22, 1997. All ratios for the period have
been annualized.
(3) Commenced operations on November 7, 1996. All ratios for the period have
been annualized.
* 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.
28
<CAPTION>
Ratio of
Net Asset Net Assets Ratio of Net Investment
Value End Total End of Expenses to Income (Loss) to
of Period Return Period (000) Average Net Assets Average Net Assets
--------- ------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Value Income Stock Fund
1998 $15.08 9.69% $ 98,759 0.95% 1.90%
1997 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)
1998 $13.56 7.16% $ 31,075 1.15% (0.29)%
1997 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
1998 $ 8.48 (12.18)% $ 13,145 1.20% 1.23%
1997 (2) 9.77 (2.05)* 7,563 1.20 1.62
Capital Growth Fund
1998 $20.04 28.97% $105,560 1.15% 0.43%
1997 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
1998 $10.58 9.38% $19,236 0.75% 5.19%
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
1998 $13.05 10.80% $18,926 1.60% 0.63%
1997 11.87 16.84 13,847 1.60 0.41
1996 (3) 10.16 1.70* 995 1.60 1.83
<CAPTION>
Expenses to Income (Loss) to
Average Net Assets Average Net Assets Portfolio
(Excluding Waivers (Excluding Waivers Turnover
and Reimbursements) and Reimbursements) Rate
------------------- ------------------- -----------
<S> <C> <C> <C> <C>
Value Income Stock Fund
1998 1.11% 1.74% 76.36%
1997 1.23 1.81 104.84
1996 1.95 1.45 79.80
1995 (1) 5.72 (1.79) 7.17
Mid-Cap Equity Fund (A)
1998 1.53% (0.67)% 92.27%
1997 1.77 (0.69) 138.98
1996 2.79 (1.06) 139.60
1995 (1) 6.34 (2.97) 13.29
Small Cap Equity Fund
1998 1.89% 0.54% 49.10%
1997 (2) 2.66 0.16 4.11
Capital Growth Fund
1998 1.41% 0.17% 219.17%
1997 1.60 0.25 195.86
1996 2.43 (0.13) 148.48
1995 (1) 6.18 (3.34) 8.05
Investment Grade Bond Fund
1998 1.34% 4.60% 183.13%
1997 1.58 4.98 219.22
1996 2.78 3.51 303.30
1995 (1) 6.05 (0.26) 108.55
International Equity Fund
1998 2.07% 0.16% 128.93%
1997 2.93 (0.92) 99.14
1996 (3) 31.39 (27.96) --
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS December 31, 1998
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 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. It is computed by dividing the assets of
each Fund, less its liabilities, by the number of outstanding shares. The
offering price per share for the shares of the Investment Grade Bond and
Equity Funds is the net asset value per share.
30
<PAGE>
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:
o market value of investment securities, assets and liabilities at the
current rate of exchange; and
o purchases and sales of investment securities, income, and expenses at
the relevant 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 in the Small Cap Equity Fund, have been reclassified to/from the
following accounts:
Undistributed
Accumulated Net Investment
Realized Gain Income
(000) (000)
------------- --------------
Mid-Cap Equity Fund $ (85) $ 85
Small Cap Equity Fund (20) 20
These reclassifications have no effect on net assets or net asset values
per share.
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts
of revenues and expenses during the reporting period. Actual amounts could
differ from these estimates.
3. Administration and Distribution Agreements
The Trust and SEI Investments Mutual Fund Services (the "Administrator") are
parties to an administration agreement (the "Administration
31
<PAGE>
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.
6. Investment Transactions
The cost of security purchases and the proceeds from security sales, excluding
short-term investments, for the year ended December 31, 1998 were as follows:
U.S. Govt. U.S. Govt.
Purchases Sales Purchases Sales
(000) (000) (000) (000)
--------- ------- ---------- ----------
Value Income Stock Fund $ 79,417 $ 62,106 $ -- $ --
Mid-Cap Equity Fund 27,965 23,387 -- --
Small Cap Equity Fund 13,121 5,253 -- --
Capital Growth Fund 189,306 168,068 -- --
Investment Grade
Bond Fund 8,904 6,440 22,042 17,230
International Equity Fund 23,789 20,297 -- --
32
<PAGE>
At December 31, 1998, 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, 1998 was as follows:
Net Unrealized
Appreciated Depreciated Appreciation/
Securities Securities (Depreciation)
(000) (000) (000)
----------- ----------- --------------
Value Income Stock Fund $ 9,562 $ (6,908) $ 2,654
Mid-Cap Equity Fund 6,438 (2,832) 3,606
Small Cap Equity Fund 728 (2,392) (1,664)
Capital Growth Fund 22,353 (3,130) 19,223
Investment Grade Bond Fund 530 (23) 507
International Equity Fund 2,392 (864) 1,528
Subsequent to October 31, 1998, the Funds recognized net capital losses for tax
purposes that have been deferred to 1999 and can be used to offset future
capital gains at December 31, 1998. The Funds also had capital loss
carryforwards at December 31, 1998 as follows:
Capital Post
Carryover Expires 10/31
12/31/98 2006 Deferred
(000) (000) Loss
--------- -------- --------
Mid-Cap Equity Fund $-- $-- $ 381
Small Cap Equity Fund 388 388 129
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
The Capital Growth Fund had cumulative wash sales at December 31, 1998 amounting
to $1,147,920. These wash sale losses cannot be used for Federal income tax
purposes in the current year and deferred for use in future years.
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.
33
<PAGE>
Unaudited
NOTICE TO SHAREHOLDERS
OF
STI CLASSIC VARIABLE TRUST FUNDS
For shareholders that do not have a December 31, 1998 tax year end, this notice
is for informational purposes only. For shareholders with a December 31, 1998
tax year end, please consult your tax advisor as to the pertinence of this
notice. For the fiscal year ended December 31, 1998, each portfolio is
designating the following items with regard to distributions paid during the
year:
(A)
Long Term (B) (C)
(20% Rate) Ordinary
Capital Gains Income Total
Distributions Distributions Distributions
Portfolio (Tax Basis) (Tax Basis) (Tax Basis)
- -------- ------------- ------------- -------------
Value Income Stock Fund 14.88% 85.12% 100.00%
Mid-Cap Equity Fund 14.99% 85.01% 100.00%
Small Cap Equity Fund 0.00% 100.00% 100.00%
Capital Growth Fund 7.33% 92.67% 100.00%
Investment Grade Bond Fund 0.16% 99.84% 100.00%
International Equity Fund 0.00% 100.00% 100.00%
(D) (E)
Qualifying Tax-Exempt
Portfolio Dividends (1) Interest
- -------- ------------- ----------
Value Income Stock Fund 57.81% 0.00%
Mid-Cap Equity Fund 14.00% 0.00%
Small Cap Equity Fund 76.96% 0.00%
Capital Growth Fund 0.28% 0.00%
Investment Grade Bond Fund 0.00% 0.00%
International Equity Fund 0.00% 0.00%
- -----------
(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, and Investment Grade
Bond Funds, and the statement of assets and liabilities, including the schedule
of investments, of the International Equity Fund of STI Classic Variable Trust
(the "Trust") as of December 31, 1998, 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and the application of alternative auditing procedures with respect to unsettled
securities transactions. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
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 the
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, 1998, 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 29, 1999
