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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 15
SIGNATURE GARY TENKMAN
TITLE DIRECTOR
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<NAME> VARIABLE INSURANCE FUNDS
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<NAME> BB&T GROWTH AND INCOME FUND
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</TABLE>
To the Shareholders and
Board of Directors of
the BB&T Growth and Income Fund
of the Variable Insurance Funds:
In planning and performing our audit of the financial
statements and financial highlights of BB&T Growth and
Income Fund of the Variable Insurance Funds
(the "Fund") for the year ended December 31, 1998, we
considered its internal control, including control activities
for safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our
opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on
internal control.
The management of the Fund is responsible for establishing
and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management
are required to assess the expected benefits and related costs
of controls. Generally, controls that are relevant to an audit
pertain to the entity's objective of preparing financial
statements for external purposes that are fairly presented in
conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or
fraud may occur and not be detected. Also, projection of any
evaluation of internal control to future periods is subject
to the risk that it may become inadequate because of
changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or
operation of one or more of the internal control components
does not reduce to a relatively low level the risk that
misstatements caused by error or fraud in amounts that
would be material in relation to the financial statements
and financial highlights being audited may occur and not
be detected within a timely period by employees in
the normal course of performing their assigned
functions. However, we noted no matters involving
internal control and its operation, including controls for
safeguarding securities, that we consider to be material
weaknesses as defined above as of December 31, 1998.
This report is intended solely for the information and use
of management and the Board of Directors of the Fund
and the Securities and Exchange Commission.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 11, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
The AmSouth Equity Income Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, and the related
statements of operations and changes in net assets, and the financial
highlights present fairly, in all material respects, the financial
position of the AmSouth Equity Income Fund, (hereafter referred
to as the "the Fund") at December 31, 1998, the results of their
operations, the changes in their net assets, and the financial highlights
for each of the periods presented, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Funds' management; our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audit, which included confirmation and verification by
examination of securities at December 31, 1998 by correspondence
with the custodian and brokers, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 11, 1999
To the Shareholders and
Board of Directors of
the AmSouth Equity Income Fund
of the Variable Insurance Funds:
In planning and performing our audit of the financial
statements and financial highlights of AmSouth
Equity Income Fund of the Variable Insurance Funds
(the "Fund") for the year ended December 31, 1998,
we considered its internal control, including control
activities for safeguarding securities, in order to
determine our auditing procedures for the purpose
of expressing our opinion on the financial statements
and to comply with the requirements of Form N-SAR,
not to provide assurance on internal control.
The management of the Fund is responsible for establishing
and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management
are required to assess the expected benefits and related costs
of controls. Generally, controls that are relevant to an
audit pertain to the entity's objective of preparing financial
statements for external purposes that are fairly presented in
conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or
fraud may occur and not be detected. Also, projection of
any evaluation of internal control to future periods is
subject to the risk that it may become inadequate because
of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or
operation of one or more of the internal control components
does not reduce to a relatively low level the risk that
misstatements caused by error or fraud in amounts that
would be material in relation to the financial statements
and financial highlights being audited may occur and not
be detected within a timely period by employees in
the normal course of performing their assigned functions.
However, we noted no matters involving internal control
and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as
defined above as of December 31, 1998.
This report is intended solely for the information and use
of management and the Board of Directors of the
Fund and the Securities and Exchange Commission.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 11, 1999
